http://www.zerohedge.com/fullrss2.xml/component/option%2Ccom_docman/Itemid%2C200023/gid%2C397/BoomBustBlog/BoomBustBlog/BoomBustBlog/BoomBustBlog/Is-this-the-Breaking-of-the-Bear.html/feed en In The New Paranormal, Junk Bonds Are A "Haven Asset" http://www.zerohedge.com/news/2015-05-05/new-paranormal-junk-bonds-are-haven-asset <p><span style="font-size: 1em; line-height: 1.3em;">"What's even more dangerous than the actual stock market is the high yield market,” Carl Icahn (who is perhaps talking his book) <a href="http://www.zerohedge.com/news/2015-05-04/junk-bonds-even-more-dangerous-stocks-icahn-says">recently warned</a>, before saying he “feels sorry” for all of those throwing their money into junk bonds in a desperate search for yield. We have of course long warned that a half decade of easy money policies have had the unfortunate side effect of allowing otherwise insolvent companies (most notably energy producers) to stay afloat by keeping rates artificially low, thus creating demand for HY debt while simultaneously ensuring that borrowing costs for issuers remain (very) favorable. Indeed, HY issuance is quite clearly correlated with successive rounds of QE as the following charts show:</span></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/04/QEHYIssuance.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/04/QEHYIssuance.jpg" width="555" height="216" /></a></p> <p>&nbsp;</p> <p>More specifically, UBS notes that “the picture is crystal clear: In both periods, issuance was $130bn more than average, or about 50% greater than the average amount expected, over an 11 month period. The main drivers were lower yields, sharp drops in yields (we find that the speed of yield changes plays a significant role in impacting issuance), and strong inflows.”</p> <p>Over time, this has had the effect of, in Citi’s words, destroying creative destruction by creating a legion of zombie companies which have continued to produce when they likely should have been long buried, contributing to a global supply glut and ultimately, to <a href="http://www.zerohedge.com/news/2015-04-26/when-qe-leads-deflation-look-confounding-global-supply-glut">deflation</a>.</p> <p>Unfortunately, this dynamic will persist as long as the Fed keeps rates suppressed, as investors have virtually no alternative but to look for yield wherever they can find it, especially when many risk-free assets have a negative carry. It’s no surprise then that <a href="http://www.bloomberg.com/news/articles/2015-05-04/in-land-of-negative-yields-junk-bonds-are-the-new-haven-assets">Bloomberg is out calling</a> junk bonds “the new haven asset”:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong><em>The new fixed-income haven is, of all things, the market for junk bonds.</em></strong></p> <p>&nbsp;</p> <p><em>With government bonds in Germany to Japan yielding less than nothing, money is pouring into exchange-traded funds that buy speculative-grade debt, traditionally the riskiest of fixed-income assets.</em></p> <p>&nbsp;</p> <p><strong><em>The pace is staggering. So far this year, about $9 billion has flowed into the funds globally, a significant chunk for the $44.4 billion market in junk-debt ETFs.</em></strong></p> <p>&nbsp;</p> <p><em>In the land of negative yields, even the most conservative firms such as Zurich Insurance Group AG and Assicurazioni Generali SpA, the biggest Swiss and Italian insurers, are planning to invest in sub-investment grade debt for the first time. One of the bond market’s brightest luminaries, Jeffrey Gundlach, says you’re better off in junk because the only money to be made on German bunds is from betting against them.</em></p> <p>&nbsp;</p> <p><em>While last week’s sudden selloff in euro sovereign debt gives investors all the more reason to crowd into high-yield assets, the lingering concern is that buyers are exposing themselves to even greater losses. And with the European Central Bank’s bond purchases still keeping government yields close to historic lows, many bond investors have few other options.</em></p> <p>&nbsp;</p> <p><em><strong>“Investors are being forced by the central bank to assume more risk,”</strong> Jens Vanbrabant, a money manager at ECM Asset Management, which oversees $6.5 billion, said from London. “They’re trying to adapt their investment parameters to the new situation of zero or negative yields.”</em></p> </blockquote> <p>While all of this may be true, the simple fact is that HY is HY for a reason — from a fundamental perspective, the issuers are not as sound as their IG counterparts. Combine this with the fact that in a pinch, HY will be the first to suffer and holders will be selling into a secondary market with no liquidity, and you have a scenario that could quickly turn into a rout. This is especially true for HY energy names which, as Barclays notes, look particularly overbought:&nbsp;</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>High yield E&amp;P bond prices have disconnected with commodity prices. High yield E&amp;P bonds have been among the best-performing sectors in high yield, up 6.4% YTD through April 27, compared with a 3.9% return for the overall high yield market. At a current yield of 8.9%, the HY E&amp;P sector presents a 300bp pickup to the high yield market’s 5.9% yield, but well below the 469bp premium offered on December 16, 2014, when WTI oil prices hovered $2/bbl above current levels (chart).&nbsp;</em></p> <p>&nbsp;</p> <p><em><strong>Management teams have been quicker to respond to the downturn, so we continue to expect defaults to be modest in 2015, but they could accelerate in 2016 if oil prices do not rebound.</strong> High yield producers have cut costs aggressively, lowered spending by over 40% y/y, and have aggressively raised capital. Year-to-date, new issuance in High yield energy has been robust, with $15bn through April 9, 2015, compared with an average of $9bn in 1Q over 2007-14. Equity issuance has also been strong, with over $11bn YTD from all North American independent oil and gas producers.&nbsp;</em></p> <p>&nbsp;</p> <p><em>We think there are four main risks to investing in HY E&amp;P bonds today. <strong>First, we do not think debt/EBITDA of over 4x is sustainable in a capital-intensive industry</strong>. In our coverage universe, we forecast that over one-third will have leverage above 4x in 2015. Second, about 42% of the high yield peer group’s 2015 production is hedged at oil prices of $88-92/bbl, providing downside protection this year but negative cash flow decrements in out years absent material price or production gains. Third, we think there is risk to priming of unsecured bonds with secured debt. As we and our credit strategy colleagues discussed in Don’t Get them While They’re Hot, April 10, 2015), we think more producers will look to first- and second-lien issuance to shore up balance sheets, which in most cases has led to significant underperformance of existing bonds given priming concerns. Finally, if equity prices begin to reflect valuations closer to current strip prices, bond performance could also be negatively affected, given the high correlation between high yield bonds and equities, especially for higher-beta producers.</em></p> </blockquote> <div>So while everything is currently awesome (S&amp;P energy sector is now trading at <a href="http://www.zerohedge.com/news/2015-05-05/energy-stocks-hit-6-month-high-valuations-spike-1999-peaks">28X forward earnings</a>, the highest level since 1999), we would be cautious about following the crowd into what one asset manager told Bloomberg is the "best strategy to generate total return in today's low rate environment," because when the cycle turns, there will be quite a few people trying to exit through a very narrow doorway.&nbsp;</div> <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="205" height="115" alt="" src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/JunkBonds.jpg?1430848080" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-05/new-paranormal-junk-bonds-are-haven-asset#comments Barclays Bond Borrowing Costs Carl Icahn Germany Gundlach High Yield Japan Secured Debt Sovereign Debt Zurich Tue, 05 May 2015 18:15:11 +0000 Tyler Durden 505985 at http://www.zerohedge.com Blogger Ben's Basically Full Of It http://www.zerohedge.com/news/2015-05-05/blogger-bens-basically-full-it <p><a href="http://davidstockmanscontracorner.com/blogger-bens-basically-full-of-it/"><em>Submitted by David Stockman via Contra Corner blog</em></a>,</p> <p><strong>Ben Bernanke&rsquo;s skin is as thin, apparently,&nbsp;as is his comprehension of honest economics. </strong>The emphasis is on the &ldquo;honest&rdquo; part because he is a fount of the kind of&nbsp;Keynesian drivel that passes for economics in the financially deformed world that the Bernank did so much to bring about.</p> <p>Just recall that he first joined the Fed way back on 2002 after an academic career of scribbling historically superficial and&nbsp;blatantly misleading monographs about the&nbsp;1930s. These&nbsp;were essentially zeroxed from Milton Friedman&rsquo;s&nbsp;monumental error about the cause of the Great Depression. In a word, Friedman and Bernanke pilloried the Fed for not going on a bond buying spree during 1930-1932 and thereby stopping the shrinkage of money and credit.</p> <p>In fact, excess reserves in the banking system soared by 12X during those four years, interest rates were at rock bottom and the US economy was saturated with idle cash. So there was no financial stringency&mdash;&mdash;not the remotest aspect of a great monetary policy error.</p> <p>Instead, what&nbsp;actually happened was that the US banking system was massively insolvent after a 12-year credit boom fueled by the Fed&rsquo;s printing presses. This first great credit bubble&nbsp;arose&nbsp;initially from the Fed&rsquo;s maneuvers&nbsp;to fund the&nbsp;massive war production&nbsp;surge of 1915-1919 and then&nbsp;from its&nbsp;fostering of a&nbsp;vast domestic and international credit bubble during&nbsp;the Roaring Twenties.</p> <p>Alas, none of the Fed governors during the 1930-1932 credit contraction had graced the lecture halls of Princeton. But to nearly a man they knew you can&rsquo;t push on a string, and that a healthy economy&nbsp;requires that busted loans and soured speculations must be&nbsp;purged from the financial system in order for&nbsp;sustainable growth to resume.</p> <p><strong>Bernanke has never had a clue about this truth.</strong> As I showed in <em><strong>The Great Deformation</strong></em>, what he got wrong about the early 1930&rsquo;s&mdash;&ndash; he replicated in spades after the September 2008 financial crisis:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Upon becoming chairman of the Fed, Bernanke then foisted the Fisher-Thomas-Friedman deflation theory upon the nation&rsquo;s economy in a panicked response to the Wall Street meltdown of September 2008. Yet monetary deflation was no more the cause of the 2008 crisis than it had been the cause of the Great Depression.</p> <p>&nbsp;</p> <p>The monetary populists of the 1920s and 1930s, including Professor Fisher, had &ldquo;cause and effect&rdquo; backward. The sharp reduction after 1929 in the money supply was an inexorable consequence of the liquidation of bad debt, not an avoidable cause of the depression. The measured money supply (M1) even in those times consisted mostly of bank deposit money rather than hand-to-hand currency. And checking account money had declined sharply as an arithmetic consequence of the collapse of what had previously been a fifteen-year buildup of bad loans and speculative credit. During 1929&ndash;1933 commercial bank loans outstanding declined from&nbsp;$36 billion to $16 billion. Not surprisingly, as customer loan balances fell&nbsp;sharply, so did checking accounts or what can be termed &ldquo;bank deposit money&rdquo; as opposed to currency in circulation. The latter actually grew by&nbsp;$1.1 billion during the four years after 1929, to about $5.5 billion.</p> <p>&nbsp;</p> <p>By contrast, it was the loan-driven checking account portion of M1 which dried up, declining from $25 billion to $17 billion over the same period. And the reason was no mystery: the way banks create demand deposits is to first issue loan credits to their customers. Indeed, in the modern world money supply follows credit, and rarely do central bankers inordinately restrict the growth of the latter.</p> <p>&nbsp;</p> <p>In truth, loan balances and checking account money rose to inordinate heights during the financial bubble preceding the 1929 crash and unavoidably declined thereafter. This had nothing to do with causing the depression. The real reason the American economy was stalled in the early 1930s is that it had lost its foreign customers.</p> <p>&nbsp;</p> <p>The reduction of M1 owing to the liquidation of bad credit, by contrast, was a sign of returning financial health. Indeed, the major component of bank credit shrinkage had been the virtual evaporation of the $9 billion of margin loans against stock prices that had reached lunatic levels before the crash. In blaming the Fed for the Great Depression, therefore, Professors Friedman and Bernanke implicitly held that the Fed should have underwritten the margin-loan-based speculative mania of 1926&ndash;1929 in order to keep M1 from shrinking!</p> </blockquote> <p><strong>That&rsquo;s the essence of the matter. Bernanke thought the 2008 crisis was a replay of the fictional world of his so-called Great Depression scholarship</strong>. Given half the chance by the clueless White House pols&mdash;-so-called conservatives&nbsp;who appointed a thorough-going Keynesian to the most powerful economic job in the world&mdash;&mdash;-this time he did underwrite the speculative mania that preceded the crash. So doing, he took the Fed balance sheet into the netherworld of monetary crankdom.</p> <p>Had the 1930 Fed actually followed Bernanke&rsquo;s spurious advice, the experiment back then would have been short-lived.&nbsp;There was only about $17 billion of public debt outstanding in 1929 or about 18% of that year&rsquo;s GDP. In no time, the Fed would have owned 100% of the public debt, the chastened survivors of the crash would have been petrified by the central banks repudiation of all known rules of sound finance, and the economy would have remained mired in depression. The&nbsp;problem back then, like in 2008,&nbsp;was mountains of bad credit and massive over-investment, not a deficiency of that after-the-fact Keynesian chimera called &ldquo;aggregate demand&rdquo;.</p> <p><strong>Unfortunately, three decades of free lunch fiscal policy had left Uncle Sam with plenty of debt to monetize&nbsp;by September 2008, and Bernanke&rsquo;s specious&nbsp;alarmism about an imminent&nbsp;Great Depression 2.0 resulted in a further&nbsp;$1.5 trillion fiscal eruption within the space of 5 months (TARP and the Obama Stimulus). So there was nothing to stop the money printing&nbsp;experiment this time around, thereby enabling an academic scribbler to act out the Friedmanite fantasy.</strong></p> <p>The extent of the calamity will be evident soon enough. Bernanke&rsquo;s&nbsp;monetary snake oil has been embraced by nearly every central bank in the world, meaning that the global financial system is flying blind on a perilous diet of massive liquidity, rampant&nbsp;speculation and a nearly obscene inflation of financial asset valuations that has showered the 0.1% with a stupendous windfall of unearned riches.</p> <p>It&nbsp;is only a matter of time, of course,&nbsp;before Bernanke&rsquo;s&nbsp; monumentally misbegotten experiment in defying the laws of sound finance and common sense alike comes crashing down. In the meanwhile, he appears to be taking every possible opportunity to insult our intelligence by using his new blog to proclaim&nbsp;prophylactically that the next crash&nbsp;is none of his doing; and, in fact, that the $3.5 trillion of fraudulent central bank credit conjured from thin air&nbsp;which the Fed has injected into the financial system is actually working.</p> <p>Thus, in response to the Wall Street Journal&rsquo;s devastating critique of his money printing mayhem at the Fed, Bernanke had the gall to argue that QE and ZIRP have been a roaring success for the working people of America. Indeed, according to the Bernank, the nirvana of full employment is nearly&nbsp;at hand:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&nbsp;The unemployment rate is a better indicator of cyclical conditions than the economic growth rate, and the relatively rapid decline in unemployment in recent years shows that the critical objective of putting people back to work is being met. Growth in output has been slow, despite solid job creation, because productivity gains have been slow&mdash;perhaps as the result of the financial crisis, which hammered new business formation and investment in research and development, perhaps for other reasons. But nobody claims that monetary policy can do much about productivity growth. <em><strong>Where it can be helpful is in supporting the return to full employment, and there the record has been reasonably good. Indeed, it seems clear that the Fed&rsquo;s aggressive actions are an important reason that job creation in the United States has outstripped that of other industrial countries by a wide margin.</strong></em></p> </blockquote> <p><em><strong>There is no point in mentioning that there are 102 million American adults who are not employed compared to about</strong> </em>75 million before Bernanke joined the Fed; that only about 43 million of them are retired on OASI benefits; that on a constant labor force participation basis the unemployment rate is still in the double digits; and that the median real household income at $53k is still barely at the level it attained in 1989&mdash;-not long after Bernanke got his PhD and began publishing spurious scholarship about the Great Depression and the wonders of central bank printing presses.</p> <p>Here&rsquo;s the thing. The Bernank thinks the Great Recession happened because teenage girls piled to the rafters in export company dormitories in China went on a savings binge.&nbsp;Purportedly, the&nbsp;Fed had nothing to do with expanding credit market debt outstanding by $22 trillion or nearly 6X the growth of nominal GDP&nbsp;during the short interval between the time he joined the Fed in 2002 and the massive Wall Street meltdown of 2008.</p> <p><strong>Accordingly, his madcap money printing spree after the Lehman bankruptcy&mdash;-during which the Fed balance sheet of $900 billion accumulated over its first 94 years was nearly tripled in the span of 13 weeks&mdash;-is held to&nbsp;represent some kind of Great Reset.</strong> That is, whatever happened before September 2008 is to be ignored because the crisis was caused by a debilitating&nbsp;global &ldquo;savings glut&rdquo; that only central bank wizards like Ben understood and had the &ldquo;courage&rdquo; to run the printing presses white hot to save the world.</p> <p>Well, that&rsquo;s self-serving poppycock.&nbsp;There was no Great Reset on his watch&mdash;-just a plunge into monetary madness. Accordingly, you can&rsquo;t measure &ldquo;success&rdquo; by starting at the bottom of the Great Recession in 2009; you need to measure from at least the begging of this century when the Fed&rsquo;s serial bubble-making got going in earnest.</p> <p>Likewise, and&nbsp;contrary to his Keynesian palaver, the US is not remotely approaching full employment, nor can any serious adult&nbsp;accept the idea that the one-job-one-vote statistics published by the BLS are a valid metric of economic success. For crying&nbsp;out loud,&nbsp;the BLS counts a&nbsp;10 hour per week lawn mowing&nbsp;gig and a $100,000 per year roughneck job in the shale patch as the same thing.</p> <p>Well, here&rsquo;s the real truth of the matter, and it comes from the government&rsquo;s own statistics mill.<em><strong> During the entire time since the turn of the century&mdash;&mdash;the era during which&nbsp;Bernanke was on the Fed&mdash;-there has been hardly a single net labor hour added to the nonfarm business economy.</strong></em></p> <p>You can look it up&mdash;&mdash;even if you are the former Chairmen of the Fed.</p> <p><img src="http://research.stlouisfed.org/fredgraph.jpg?hires=1&amp;type=image/jpeg&amp;chart_type=line&amp;recession_bars=on&amp;log_scales=&amp;bgcolor=%23e1e9f0&amp;graph_bgcolor=%23ffffff&amp;fo=verdana&amp;ts=12&amp;tts=12&amp;txtcolor=%23444444&amp;show_legend=yes&amp;show_axis_titles=yes&amp;drp=0&amp;cosd=2000-07-01&amp;coed=2014-10-01&amp;width=670&amp;height=445&amp;stacking=&amp;range=Custom&amp;mode=fred&amp;id=HOANBS&amp;transformation=lin&amp;nd=&amp;ost=-99999&amp;oet=99999&amp;lsv=&amp;lev=&amp;scale=left&amp;line_color=%234572a7&amp;line_style=solid&amp;lw=2&amp;mark_type=none&amp;mw=1&amp;mma=0&amp;fml=a&amp;fgst=lin&amp;fgsnd=2007-12-01&amp;fq=Quarterly&amp;fam=avg&amp;vintage_date=&amp;revision_date=" style="width: 601px; height: 399px;" /></p> <p><strong>That&rsquo;s right.&nbsp; When it comes to an honest measure of employment gains, there are been none for 15 years.&nbsp;Zero. Nichts. Nada.&nbsp;Yet Bernanke&nbsp;has the gall to claim that his&nbsp;monetary policy disaster has given rise to nigh onto &ldquo;full employment&rdquo;?</strong></p> <p>In fact, there are fewer breadwinner jobs in the US economy today than there were in the year 2000 when the Fed&rsquo;s balance sheet stood at a mere $500 billion. That is, a 9X expansion of the Fed&rsquo;s money printing fraud has accomplished nothing for main street&rsquo;s standard of living; it&rsquo;s just fostered&nbsp;serial financial bubbles on Wall Street.</p> <div class="wp-caption alignnone" id="attachment_47441"><a class="image-anchor" href="http://davidstockmanscontracorner.com/wp-content/uploads/2015/04/breadwinner.png" target="_blank"><img alt="Breadwinner Economy Jobs - Click to enlarge" class="size-medium wp-image-47441" src="http://davidstockmanscontracorner.com/wp-content/uploads/2015/04/breadwinner-480x301.png" style="height: 376px; width: 600px;" /></a><br /> <p class="wp-caption-text"><em>Breadwinner Economy Jobs &ndash; Click to enlarge</em></p> </div> <p><u><em><strong>So&nbsp;Blogger Ben has produced something that is &ldquo;full&rdquo;. Namely, a full&nbsp;load of self-serving economic&nbsp;BS.</strong></em></u></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="499" height="359" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150505_bern.jpg?1430845005" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-05/blogger-bens-basically-full-it#comments Ben Bernanke Ben Bernanke BLS Bond Central Banks China Excess Reserves Fisher Great Depression Lehman M1 Main Street Meltdown Milton Friedman Monetary Policy Money Supply NADA Nominal GDP None Recession TARP Unemployment Wall Street Journal White House Tue, 05 May 2015 17:51:50 +0000 Tyler Durden 505984 at http://www.zerohedge.com So Is This "Unambiguously Bad"? http://www.zerohedge.com/news/2015-05-05/so-unambiguously-bad <p><strong>Gas prices at the pump have not risen this dramatically at this time of year since 2007.</strong> The last 3 months have seen pump prices soar almost 30%. <em>The last 7 times that gas prices have accelerated this fast, stocks have corrected. </em>Given the plethora of excuse-makers saying hoiw low gas prices were "unequivocally good" for everyone, <strong><em>we can only assume that surging gas prices are "unequivocally bad" for everyone?</em></strong></p> <p>&nbsp;</p> <p><em>"unequivocally bad"?</em></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05/20150504_gas.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05/20150504_gas_0.jpg" width="600" height="513" /></a></p> <p>&nbsp;</p> <p>Yes, we know that gas prices are still 'relatively' low but that six months of 'tax cuts' did absolutely nothing for the average consumer's discretionary spending as they saved or spent it on surging healthcare costs. Now that prices are soaring again, how will that affect discretionary spending?</p> <p><strong>This is the fastest Q1 jump off the lows into the summer driving season since 2007...</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05/20150505_gas.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05/20150505_gas_0.jpg" width="600" height="301" /></a></p> <p>&nbsp;</p> <p>Hopefully, we are peaking with the seasonals.</p> <p>&nbsp;</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="975" height="833" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150504_gas.jpg?1430841020" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-05/so-unambiguously-bad#comments Tue, 05 May 2015 17:33:31 +0000 Tyler Durden 505983 at http://www.zerohedge.com Shale Stock Shambles http://www.zerohedge.com/news/2015-05-05/shale-stock-shambles <p>Despite the exuberant surge in crude oil prices (as Yemen-Saudi tensions rise), Energy stocks are tumbling off the opening squeeze. In a delayed reaction, <strong>Shale stocks are now all in shambles as Einhorn's presentation seems to be sinking in...</strong></p> <p>&nbsp;</p> <p>Energy stocks have decoupled from oil prices...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05/20150505_shambles1.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05/20150505_shambles1.jpg" width="600" height="314" /></a></p> <p>&nbsp;</p> <p>Led by Shale Stocks...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05/20150505_shambles.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05/20150505_shambles_0.jpg" width="600" height="429" /></a></p> <p>&nbsp;</p> <p>If we were conspiratorial, we would suggest that this morning's epic ramp in crude was 'designed' to squeeze shorts at stock market open allowing the big boys outs in the face of retail shorts.</p> <p>&nbsp;</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="959" height="502" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150505_shambles1.jpg?1430846157" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-05/shale-stock-shambles#comments Crude Crude Oil Tue, 05 May 2015 17:16:10 +0000 Tyler Durden 505982 at http://www.zerohedge.com Sanctions & Saber Rattling Doesn't Stop The US From Importing Russian Petroleum http://www.zerohedge.com/news/2015-05-05/sanctions-saber-rattling-doesnt-stop-us-importing-russian-petroleum <p><a href="http://srsroccoreport.com/u-s-sanctions-saber-rattling-doesnt-stop-the-u-s-from-importing-russian-petroleum/u-s-sanctions-saber-rattling-doesnt-stop-the-u-s-from-importing-russian-petroleum/"><em>Submitted by SRSrocco via SRSroccoReport.com</em></a>,</p> <p><strong>Americans would be quite surprised to know that even with all the U.S. Government sanctions and threats of war with Russia, we still import a significant amount of petroleum from the former communist country.</strong>&nbsp; How much petroleum does the United States import from Russia?&nbsp; Actually, a lot more when we focus on net imports.</p> <p>While the U.S. imports more oil from certain countries, we also export finished products in return.&nbsp; For example in January, the U.S. imported 831,000 barrels per day (bd) of crude oil and petroleum from Mexico, but also exported 787,000 bd of petroleum products for a net import of only 44,000 bd.</p> <p>So, what amount of net crude oil and petroleum did the U.S. import from Russia during January?&nbsp; Look at the chart below:</p> <p style="text-align: center;"><a href="http://srsroccoreport.com/wp-content/uploads/U.S.-Non-OPEC-Net-Petroleum-Imports-JAN-2015-1.png" rel="lightbox[8076]"><img alt="U.S. Non OPEC Net Petroleum Imports JAN 2015 #1" class="alignnone wp-image-8080" src="http://srsroccoreport.com/wp-content/uploads/U.S.-Non-OPEC-Net-Petroleum-Imports-JAN-2015-1.png" style="width: 601px; height: 412px;" /></a></p> <p><strong>As it turns out, Russia is the U.S. second largest non-OPEC source of net petroleum products in the month of January</strong>.&nbsp; As we can see, Canada is the largest at 2.9 million barrels per day, Russia at 389,000 bd, Columbia 264,000 bd, Chad 93,000 bd and Mexico at 44,000 bd.</p> <p><strong><span style="text-decoration: underline;">If we include OPEC countries net petroleum imports, Russia ranks 4th:</span></strong></p> <p style="padding-left: 30px;">Canada = 2,950,000 bd</p> <p style="padding-left: 30px;">Saudi Arabia = 816,000 bd</p> <p style="padding-left: 30px;">Venezuela = 597,000 bd</p> <p style="padding-left: 30px;">Russia = 389,000 bd</p> <p><span style="color: #800000;"><strong>Of the 4,825,000 bd of net U.S. crude oil and petroleum product imports in January, Russia&rsquo;s 389,000 bd accounted for 8% of the total.</strong></span>&nbsp; When I did the research, I was quite surprised that the U.S. imported this much petroleum from Russia.&nbsp; Which is also why I find articles such as this one quite hilarious:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong><a href="http://mondediplo.com/blogs/ukraine-why-the-eu-should-block-russian-oil" target="_blank">Ukraine: why the EU should block Russian oil imports</a></strong></p> <p>&nbsp;</p> <p>&ldquo;However, the West&rsquo;s heaviest economic weapon &mdash; a comprehensive embargo on oil imports from Russia &mdash; has not yet been employed, and is only sporadically discussed in public. The West is now intensively debating military-technological and training participation in Ukraine&rsquo;s defence against action by Russia&rsquo;s proxies.</p> <p>&nbsp;</p> <p>But there is little consideration of the entire gamut of available western economic means to end the war. This is all the more surprising as EU sanctions against oil imports from Russia would be less costly for European countries than is often assumed. The EU&rsquo;s large monthly purchases of Russian oil could be replaced by an increase of imports from other oil-exporting countries.&rdquo;</p> </blockquote> <p>The individual who wrote this article believes it&rsquo;s a good idea for the EU- European Union to put pressure on Russia&rsquo;s involvement in the Ukraine by cutting cut oil purchases.&nbsp;&nbsp; He continues with the following mind numbing wisdom:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>If the West did not trade with Russia as much as it still does, the Kremlin would not have the financial means to conduct its &ldquo;hybrid&rdquo; operations &mdash; military interventions, propaganda campaigns, political manipulations, etc, in Moldova, Georgia and Ukraine.</p> </blockquote> <p>I gather the author believes it&rsquo;s only Putin who is the BOOGEYMAN in this Ukrainian situation.&nbsp; Furthermore, does he realize the U.S. still imports a nice chunk of its petroleum from the Russian Bear??&nbsp; For some strange reason, the West seems to be suffering from serious BRAIN DAMAGE.&nbsp; <strong>While propaganda is taking place on both sides, it seems as if the West is dishing out a great deal more BS than Russia.</strong></p> <p>I make it an effort not to chat with people on this issue because they simply regurgitate what they hear or read from the MSM.&nbsp; According to information from the weekly John Batchelor-Prof Stephen Cohen interviews on Russia found on <a href="http://www.tfmetalsreport.com/podcast/6806/diplomacy-and-war-batchelor-and-cohen" target="_blank"><em><strong>TFmetalsReport</strong></em></a>, <strong>Putin has an 86% approval rating by its citizens while Obama comes in at 45%</strong>.</p> <p>Some may think those high Putin approval ratings are manipulated.&nbsp; However, the west also does polls in Russia and comes up with roughly the same approval ratings.</p> <p>That being said, I don&rsquo;t like to get into a political debate because it isn&rsquo;t based on sound REASON or LOGIC.&nbsp; It&rsquo;s based upon the misinformation, garbage or propaganda the MSM puts out on a daily basis.&nbsp; You cannot debate a person who is brainwashed in this fashion.</p> <p>Regardless of the collective BRAIN DAMAGE of the West, the United States after all its saber-rattling, shipping of weapons and military personal to Ukraine, sanctions and some of the worst anti-Russian propaganda seen since the Cold War, the U.S. still imports a significant amount of petroleum from Russia.</p> <p><strong>This is the world we live in today&hellip;. total and complete BULL EXCREMENT</strong>.&nbsp; Believe me you, I am not anti-American.&nbsp; I am just anti-BS.</p> <p>So, there you have it.&nbsp; I thought readers would find this information quite interesting.&nbsp; Nothing like the U.S. TALKING OUT OF BOTH SIDES OF ITS MOUTH to make ya feel right at home.&nbsp; We are living in interesting times.&nbsp; The amount of volatility in the markets is increasing and I fear the pressures will get so great, we will finally have our GREAT UNRAVELING sooner rather than later.</p> <p><em>If you think you are smarter than the markets and are holding onto your U.S. Dollars, U.S. Treasuries, 401k, IRA, CD&rsquo;s, or any other Wall Street issued paper garbage, waiting for the perfect time to get into physical gold and silver&hellip;. sorry, YOU AIN&rsquo;T.&nbsp;&nbsp; The folks in charge of the pulling the strings already know what&rsquo;s coming and when, and you and I aren&rsquo;t including in that group.</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="567" height="377" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150505_russ.jpg?1430840370" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-05/sanctions-saber-rattling-doesnt-stop-us-importing-russian-petroleum#comments Cohen Crude Crude Oil ETC European Union Mexico OPEC ratings Saudi Arabia Ukraine Volatility Tue, 05 May 2015 17:02:58 +0000 Tyler Durden 505981 at http://www.zerohedge.com Tepper Topples From Top 10 Highest-Earning Hedgies http://www.zerohedge.com/news/2015-05-05/tepper-topples-top-10-highest-earning-hedgies <p>For the first time in 4 years, Appaloosa Management&#39;s David Tepper is not the highest-earning hedge fund manager in the world. Plunging from No.1 to tied-for-11th (with a mere $400 million earned last year) <strong>Tepper appears to have suddenly found investing difficult now that The Fed has stopped printing money</strong> (up just 2.2%). What is more ironic, perhaps, is that the other alleged beneficiary of Fed largesse (and recent hirer or blogger Ben Bernanke) - <strong>Citadel tops the list with Ken Griffin making $1.3 billion last year</strong>.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>David Tepper relinquishes the top spot on the Rich List for the first time in three years after posting a disappointing 2.2 percent gain, the worst performance of anyone in the ranking.</strong> Still, the legendary investor - who has earned a total of nearly $15 billion in his 11 years on the list - is tied for No. 11 with $400 million in earnings thanks to the huge stockpile of his own cash in Appaloosa&rsquo;s funds.</p> <p>&nbsp;</p> <p><strong>Tepper is the only one of last year&rsquo;s three highest earners who even qualified for this year&rsquo;s ranking.</strong> Paulson, who finished third on the 2013 ranking with $2.3 billion, lost money in most of his funds last year. SAC Capital Advisors&rsquo; Steven Cohen, No. 2 last year with $2.4 billion, is no longer in the hedge fund business.</p> </blockquote> <p>So it seems unless you are cheating or just momo-leveraged blindly to the most-risky stuff with the Fed at your back.. it&#39;s not so easy.</p> <p><span style="text-decoration: underline;"><strong>Citadel top... Tepper not...</strong></span></p> <p><img height="372" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/05/20150505_hedge2.jpg" width="600" /></p> <p>&nbsp;</p> <p>Harsh memories of the global financial crisis pervaded Wall Street in 2014 &mdash; at least, for the highest-earning hedge fund managers.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Last year turned out to be the worst one for this elite group of investors since the stock market meltdown of 2008.</strong></p> <p>&nbsp;</p> <p>How bad was it? <strong>The 25 hedge fund managers on our 14th annual Rich List made a paltry $11.62 billion combined, barely half of the $21.15 billion the top 25 gained the previous year</strong> and roughly equal to what they took home during nightmarish 2008. The average earnings were just $467 million last year, down from $846 million in 2013, while the median earner made $400 million, down from $465 million the previous year.</p> </blockquote> <p><a href="http://www.institutionalinvestorsalpha.com/Article/3450284/The-2015-Rich-List-The-Highest-Earning-Hedge-Fund-Managers-of-the-Past-Year.html"><em>Source: Institutional Investor&#39;s Alpha</em></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="593" height="349" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150505_hedge1.jpg?1430832721" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-05/tepper-topples-top-10-highest-earning-hedgies#comments Ben Bernanke Ben Bernanke Citadel Cohen Ken Griffin Meltdown SAC Tue, 05 May 2015 16:41:31 +0000 Tyler Durden 505980 at http://www.zerohedge.com Crowning A New Bond King: Vanguard Fund Overtakes PIMCO For Bond Throne http://www.zerohedge.com/news/2015-05-05/crowning-new-bond-king-vanguard-fund-overtakes-pimco-bond-throne <p>No one stays on top forever, not even the world's most well-known bond investor, and to be sure, when Bill Gross' long reign at the top of the fixed income universe finally came to a sudden and rather unceremonious end last October, the race to lay claim to the inevitable outflows from PIMCO's Total Return Fund was on. The fund has seen 24 straight months of withdrawals and lost more than $100 billion last year alone, the majority of which flowed out in the wake of Gross' departure. </p> <p>As the old Bond King transitioned to Janus where he now manages a far more modest fund, the prevailing assumption was that DoubleLine's Jeff Gundlach would assume the throne by default. Not so. As <a href="http://www.wsj.com/articles/pimcos-total-return-loses-title-as-worlds-largest-bond-fund-1430769693">WSJ reports</a>, the new Bond King is in fact&nbsp;Joshua Barrickman, senior portfolio manager at Vanguard's Total Bond Market Index fund which, as of the end of last month, surpassed the Total Return Fund in AUM. Here's more:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>For almost two decades, Pacific Investment Management Co. has laid claim to the world’s largest bond fund.</em></p> <p>&nbsp;</p> <p><strong><em>On Monday, it lost that title to Vanguard Group, whose Total Bond Market Index fund ended April with $117.3 billion in assets under management, surpassing the Pimco Total Return fund, which closed the month with $110.4 billion, according to estimates from both companies.</em></strong></p> <p>&nbsp;</p> <p><em>A year ago, the two funds were more than $100 billion apart, demonstrating the remarkable turnabout in fortunes at Pimco in recent years that began with sagging performance of the fund and culminated in the striking departure of its star manager and co-founder Bill Gross.</em></p> </blockquote> <p>In many ways, the changing of the guard speaks to the allure of indexing versus active fund management:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>The toppling of Total Return marks a significant turning point for the industry as investors flock to plain-vanilla funds that follow market indexes rather than relying on star managers to pick winners.</em></p> <p>&nbsp;</p> <p><em>Another blow for Pimco was a trend away from fund managers such as Mr. Gross and toward so-called passive investments that mimic indexes and other benchmarks for a fraction of the cost of the typical mutual fund.</em></p> <p>&nbsp;</p> <p><em>“The indexing story helps,” said Joshua Barrickman, senior portfolio manager of Vanguard’s Total Bond Market Index fund, which tracks a version of the Barclays U.S. Aggregate Bond Index. <strong>“It continues to have a lot of momentum and people are starting to see that it makes sense.”</strong></em></p> <p>&nbsp;</p> </blockquote> <p><em><strong><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/04/NewBondKingWSJ.jpg" width="368" height="656" /></strong></em></p> <p>&nbsp;</p> <p>Barrickman claims to have taken the crown without ramping up marketing or employing the 'hard sell.' Rather, Vanguard says the shift is further validation that low-cost indexing beats actively managed portfolios over time. As WSJ notes, the Total Return Fund returned an average of 3.24% over three years, around 100bps more than the Total Bond Market Index fund. However, the PIMCO fund's expense ratio is nearly seven times the fees charged by Vanguard.&nbsp;<span style="font-size: 1em; line-height: 1.3em;">Barrickman's assessment of his ascendancy to the bond throne is a reflection of Vanguard's generally straightforward mentality: </span><strong style="font-size: 1em; line-height: 1.3em;">"Assets show up and that’s great."</strong></p> <p><strong>As for all of the active managers out there who fear their star may one day also fall in the face of the indexing coup, well, there's always the "<a href="http://www.zerohedge.com/news/2015-03-16/fund-managers-use-machines-smart-beta-dupe-dumb-retail-investors">smart beta</a>" route.</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="289" height="173" alt="" src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/NewBondKing.png?1430829528" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-05/crowning-new-bond-king-vanguard-fund-overtakes-pimco-bond-throne#comments Barclays Bill Gross Bond default fixed Gundlach Jeff Gundlach PIMCO Total Return Fund Tue, 05 May 2015 16:36:29 +0000 Tyler Durden 505979 at http://www.zerohedge.com Gold Withdrawals From NY Fed Vault Refuse To Stop: 200 Tons Of Gold Repatriated In Past Year http://www.zerohedge.com/news/2015-05-05/gold-withdrawals-fed-vault-refuse-stop-200-tons-gold-repatriated-past-year <p>One month ago, <a href="http://www.zerohedge.com/news/2015-03-31/gold-fed-vault-drops-under-6000-tons-first-time-after-10th-consecutive-month-redempt">when we commented </a>on the latest monthly withdrawal from the gold vault lying on New York's bedrock some 90 feet below the NY Fed building, which then saw another 10 tons quietly repatriated by unnamed foreign central bank(s) bringing the total held on behalf of foreign governments to below 6,000 tons for the first time in the 21st century, we made an observation:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>... it means that all of the 207 tons in Dutch and German withdrawals are now accounted for with a matched and offsetting "departure" at the Fed. <strong>Which is why the next monthly update of the Fed's earmarked gold will be especially interesting: if March data shows that the withdrawals continue, it will mean that either Germany, or some other sovereign, has continued to redeem their gold which for some reason they no longer trust is safe lying nearly 100 feet below street level on the Manhattan bedrock</strong>.</p> </blockquote> <p>As a reminder, for years it was anathema to even hint at distrust among "developed" central banks and thus to ask for one's gold, because the very currency of central banks in a fiat regime is faith: faith which has been evaporating in inverse proportion to the trillions (at last check some $22T) in asset purchases by central banks to pretend that all is well. As such, even one defector from this grand "game theoretical equilibrium" would be enough to raise a substantial question about the viability of the current economic system which rests on one fundamental premise: the full faith and credit of fiat currencies, and particularly the US dollar as the reserve. </p> <p>In any event, we now have the March data, and we can officially confirm that the gold redemptions from the world's (allegedly) largest gold vault have continued, and another 10 tons of gold was put on a ship (or plane) in March in an unknown direction. </p> <p>As a result, <strong>total earmarked gold at the NY Fed is now down to 5,979.2 tons, a level not seen in the current century</strong>. </p> <p>More worrying, since Germany and the Netherlands started repatriating a portion of their gold held in Manhattan, some 217 tons of gold has been redeemed starting in February 2014 and just under 200 tons in the past 12 months. Putting this in comparison, during the Great Financial Crisis a grand total of 230 tons of gold fled the US to fund sovereign nations close to default with sales of a "barbarous relic." Of course, all gold redemptions were promptly halted in November 2008... only to return with a vengeance since 2014.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/05/NY%20Fed%20gold_1.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/05/NY%20Fed%20gold_1_0.jpg" width="600" height="392" /></a></p> <p>But what is most interesting is that as we noted last month, the total expected gold redemptions by Germany and the Netherlands amounted to 207 tons. Thus, the March redemption means that either Germany is continuing to pull its gold, some 10 tons at a time, or some other central bank has joined the parade of gold repatriators.</p> <p>Finally, anyone who is unclear about the definition of "earmarked" gold is urged to read "<a href="http://www.zerohedge.com/news/2015-05-03/why-central-banks-hate-physical-love-earmarked-gold-and-what-difference">Why Central Banks Hate Physical, Love "Earmarked" Gold, And What Is The Difference</a>."</p> <p><em>Source: <a href="http://www.federalreserve.gov/econresdata/releases/intlsumm/forassets20150430.htm">Fed</a></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="1015" height="663" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/NY%20Fed%20gold.jpg?1430842556" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-05/gold-withdrawals-fed-vault-refuse-stop-200-tons-gold-repatriated-past-year#comments Central Banks default Germany Netherlands Tue, 05 May 2015 16:16:07 +0000 Tyler Durden 505978 at http://www.zerohedge.com Greek Deal In Limbo After "Serious Disagreement" Between EU, IMF http://www.zerohedge.com/news/2015-05-05/greek-deal-limbo-after-serious-disagreement-between-eu-imf <p>On Monday afternoon, news broke that the IMF <a href="http://www.zerohedge.com/news/2015-05-04/imf-splinters-rest-troika-threatens-cut-greek-funding">looked to be splintering</a> from the rest of the Troika over just what conditions must be met in order for Greece to receive a €7.2 billion tranche of aid the country desperately needs to pay salaries, pensions and, ironically, the IMF. According to FT, Christine Lagarde and company are set to demand that Athens’ European creditors write-off enough of their Greek debt to bring the country’s debt-to-GDP ratio down to a ‘sustainable’ (whatever that means in the Greek context) level over the next several years. Otherwise, the organization argues, disbursing aid to Athens is equivalent to throwing money into a black hole, as the country’s fiscal situation is still in dire need of reform. </p> <p>Of course much of what Greece owes in May is due to the IMF itself and so, as we remarked yesterday, <strong>“Greeks are expected to smile and nod knowingly at this latest hollow IMF threat, in which it is now unclear if Lagarde is the Troika's good cop (demands a debt haircut) or bad cop (refuses to pay Greece any more).”</strong></p> <p>Today, we get yet another indication that negotiations are now not only complicated by Greece’s unwillingness to cross Syriza’s “red line” campaign promises, but by friction between the country’s creditors who, in an irony of ironies, now appear to be at odds over their own set of "red lines."&nbsp;</p> <p>More via Bloomberg:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>EU, IMF failing to coordinate means compromise in Greek talks not possible, a Greek govt official&nbsp;<span style="font-size: 1em; line-height: 1.3em;">says in e-mail.</span><span style="font-size: 1em; line-height: 1.3em;">&nbsp;</span></em></p> <p>&nbsp;</p> <p><strong><em>EU, IMF have different red lines: IMF insists on pension system overhaul, labor market deregulation; EU Commission insists on primary deficit: Official</em></strong></p> <p>&nbsp;</p> <p><em>Serious disagreement between EU, IMF creates deadlock in negotiations</em></p> </blockquote> <p>This means it's now Greece's turn to <a href="http://www.reuters.com/article/2015/05/05/eurozone-greece-compromise-idUSA8N0WT01N20150505">blame creditors</a> for the intractability of the negotiations:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong><em>"Serious" policy differences between Greece's two major lenders - the European Union and the International Monetary Fund - are preventing the country from reaching a compromise with lenders, a Greek government official said on Tuesday.</em></strong></p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong><em>"The result is that the institutions have red lines everywhere: pension, labour (IMF), and primary surplus (Commission). Against this background there cannot be a compromise. The responsibility belongs exclusively to the institutions and their weakness in coordinating"...</em></strong></span></p> <p>&nbsp;</p> <p><em>The Greek official said the IMF was being insistent on pension and labour reforms that Athens opposes, while the European Commission was more leninent. The Europeans, on the other hand, were being strict on the target for a primary budget surplus while the IMF was less worried about that, the official said.</em></p> <p><em><br /></em></p> <p><em>&nbsp;</em></p> <p><em>The IMF also wants Greek debt to made viable through a writeoff of debt, while the European Commission is against such debt relief, the official said.</em></p> </blockquote> <p>Meanwhile, Tsipras is said to have spoken with both Lagarde and Angela Merkel over the phone even as Germany unleashed the Schaeuble who promptly <a href="http://www.bloomberg.com/news/articles/2015-05-05/schaeuble-says-he-s-skeptical-on-greek-financing-talks">threw still more cold water</a> on any remaining hope for an imminent breakthrough:&nbsp;</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>Greece may not be able complete the preparatory work needed for an agreement on financial aid before euro-area finance ministers meet in Brussels next week, German Finance Minister Wolfgang Schaeuble said.</em></p> <p>&nbsp;</p> <p><em>“The Eurogroup will take up these matters only on the basis of the comprehensive report by the institutions,” Schaeuble said at a press conference in Berlin Tuesday, referring to the European Commission, the European Central Bank and the IMF. <strong>“I’m rather skeptical that we can get there by Monday, but I’m not ruling it out.”</strong></em></p> </blockquote> <p><strong>As a reminder, Monday is D-Day, as Athens must make a €780 million payment to the IMF and unless the IMF agrees to effectively pay itself by loaning Greece more money, that payment will be missed at which point "</strong><a href="http://www.zerohedge.com/news/2015-04-16/greece-all-bets-are-literally-bookie-closes-grexit-market">all bets are off</a>."</p> <p>And Greek bonds not happy:</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/04/20150505_GGB10.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/04/20150505_GGB10_0.jpg" /></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="238" height="146" alt="" src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/GreeceTease.png?1430837990" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-05/greek-deal-limbo-after-serious-disagreement-between-eu-imf#comments Creditors European Central Bank European Union Germany Greece International Monetary Fund Tue, 05 May 2015 16:10:15 +0000 Tyler Durden 505974 at http://www.zerohedge.com What Happens If You Defy Curfew: A Shocking 90-Second Clip From The Streets Of Baltimore http://www.zerohedge.com/news/2015-05-05/what-happens-if-you-defy-curfew-shocking-90-second-clip-streets-baltimore <p><a href="http://libertyblitzkrieg.com/2015/05/04/this-is-what-happens-if-you-defy-curfew-a-shocking-90-second-video-from-the-streets-of-baltimore/"><em>Submitted by Mike Krieger via Liberty Blitzkrieg blog</em></a>,</p> <p>On Saturday night, a man whose name still seems to be unknown, but who was wearing a &ldquo;F##k the Police&rdquo; t-shirt, came out in front of police past the official curfew.<strong> This is what happened next:</strong></p> <p><iframe allowfullscreen="" frameborder="0" height="315" src="https://www.youtube.com/embed/zkehS8HPRHA" width="560"></iframe></p> <p>&nbsp;</p> <p>As Mike noted previously, the situation in Baltimore is very serious and all Americans should be paying very close attention; but <a href="http://libertyblitzkrieg.com/2015/04/30/baltimore-as-a-microcosm-of-america/"><span style="text-decoration: underline;"><em><strong>Baltimore is just a Microcosm of America.</strong></em></span></a></p> <p>Baltimore, Maryland is in many ways the perfect microcosm for&nbsp;these United States of America. If you still don&rsquo;t get&nbsp;that, you&rsquo;ll be in for a rude awakening in the years ahead.</p> <p><strong><span style="text-decoration: underline;"><em>A gradual erosion of the Constitution and the civil rights of the citizenry, the abuse of power by people in authority, perverse financial incentives that lead to horrible outcomes, zero accountability, and a ubiquitous surveillance state apparatus; Baltimore has it all. Yet all of these troubling traits have also come to characterize early 21st century America.</em></span></strong></p> <p>As tends to be the case, the populations that have been victimized the longest and most systemically &mdash; in Baltimore and across the U.S. &mdash; are&nbsp;the poor, weak and disenfranchised. &nbsp;Like a cancer, corruption, theft, and blatant abuse of the citizenry by the powerful will spread and spread until it consumes everything unless the tumor is removed. It has now spread so deeply and so dangerously throughout American life, the general public will soon have no choice but to confront it and do something about it, or face a total extinction of opportunity and suffer the same desperate&nbsp;fate&nbsp;as the people out in the streets of Baltimore.</p> <p>David Simon, creator of the excellent hit HBO series&nbsp;&ldquo;The Wire,&rdquo; recently sat down for an interview with former <em>New York Times</em> reporter Bill Keller to explain the situation in Baltimore as he sees it; its origins&nbsp;and what is needed to fix it. As you read, think about the&nbsp;many parallels to the U.S. economy in general; the endless criminal maneuverings within the centers of power in Washington D.C. and Wall Street, the forever spinning&nbsp;revolving door of corruption, the marauding gangs of&nbsp;cronies&nbsp;making impossibly large piles&nbsp;of money based on&nbsp;connections, fraud and rigged markets as opposed to adding value, the idiocy of the war on drugs, the fraudulent accounting, and the&nbsp;overbearing surveillance state. Increasingly, when America looks in the mirror Baltimore and Ferguson are staring right back. We just haven&rsquo;t admitted it yet.</p> <p>Now, <a href="https://www.themarshallproject.org/2015/04/29/david-simon-on-baltimore-s-anguish?ref=hp-1-111">from the <em>Marshall Project</em></a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>Bill Keller: What do people outside the city need to understand about what&rsquo;s going on there &mdash; the death of Freddie Gray and the response to it?</strong></em></p> <p>&nbsp;</p> <p><em>David Simon: I guess there&rsquo;s an awful lot to understand and I&rsquo;m not sure I understand all of it. The part that seems systemic and connected is that the drug war &mdash; which Baltimore waged as aggressively as any American city &mdash; was transforming in terms of police/community relations, in terms of trust, particularly between the black community and the police department. <strong>Probable cause was destroyed by the drug war. </strong></em></p> <p>&nbsp;</p> <p><em>Probable cause from a Baltimore police officer has always been a tenuous thing. It&rsquo;s a tenuous thing anywhere, but in Baltimore, in these high crime, heavily policed areas, it was even worse. When I came on, there were jokes about, &ldquo;You know what probable cause is on Edmondson Avenue? You roll by in your radio car and the guy looks at you for two seconds too long.&rdquo; Probable cause was whatever you thought you could safely lie about when you got into district court.</em></p> <p>&nbsp;</p> <p><em><strong>Then at some point when cocaine hit and the city lost control of a lot of corners and the violence was ratcheted up, there was a real panic on the part of the government. And they basically decided that even that loose idea of what the Fourth Amendment was supposed to mean on a street level, even that was too much. Now all bets were off.</strong> Now you didn&rsquo;t even need probable cause. The city council actually passed an ordinance that declared a certain amount of real estate to be drug-free zones. They literally declared maybe a quarter to a third of inner city Baltimore off-limits to its residents, and said that if you were loitering in those areas you were subject to arrest and search. Think about that for a moment: It was a permission for the police to become truly random and arbitrary and to clear streets any way they damn well wanted.</em></p> <p>&nbsp;</p> <p><em><strong>How does race figure into this? It&rsquo;s a city with a black majority and now a black mayor and black police chief, a substantially black police force.</strong></em></p> <p>&nbsp;</p> <p><em>What did Tom Wolfe write about cops? They all become Irish? That&rsquo;s a line in &ldquo;Bonfire of the Vanities.&rdquo;<strong> When Ed and I reported &ldquo;The Corner,&rdquo; it became clear that the most brutal cops in our sector of the Western District were black. The guys who would really kick your ass without thinking twice were black officers.</strong> If I had to guess and put a name on it, I&rsquo;d say that at some point, the drug war was as much a function of class and social control as it was of racism. I think the two agendas are inextricably linked, and where one picks up and the other ends is hard to say. But when you have African-American officers beating the dog-piss out of people they&rsquo;re supposed to be policing, and there isn&rsquo;t a white guy in the equation on a street level, it&rsquo;s pretty remarkable. But in some ways they were empowered. </em></p> <p>&nbsp;</p> <p><em>Back then, even before the advent of cell phones and digital cameras &mdash; which have been transforming in terms of documenting police violence &mdash; back then, you were much more vulnerable if you were white and you wanted to wail on somebody. You take out your nightstick and you&rsquo;re white and you start hitting somebody, it has a completely different dynamic than if you were a black officer. It was simply safer to be brutal if you were black, and I didn&rsquo;t know quite what to do with that fact other than report it. It was as disturbing a dynamic as I could imagine. Something had been removed from the equation that gave white officers &mdash; however brutal they wanted to be, or however brutal they thought the moment required &mdash; it gave them pause before pulling out a nightstick and going at it. Some African American officers seemed to feel no such pause.</em></p> </blockquote> <p>This is another fascinating microcosm considering how Barack Obama has done absolutely nothing to help the black community or poor in this country. It took a black President to so shamelessly hand everything to a handful of oligarchs and further oppress black communities.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>What the drug war did, though, was make this all a function of social control. This was simply about keeping the poor down, and that war footing has been an excuse for everybody to operate outside the realm of procedure and law. </em></p> <p>&nbsp;</p> <p><em>&ldquo;The drug war began it, certainly, but the stake through the heart of police procedure in Baltimore was Martin O&rsquo;Malley.&rdquo;</em></p> </blockquote> <p>In case you aren&rsquo;t aware, Martin O&rsquo;Malley was the ambitious Mayor of Baltimore who had his eyes dead set on the Governor&rsquo;s seat. So much so that he cooked the crime books of Baltimore to create a crime &ldquo;miracle,&rdquo; and destroyed city police work in the process. Mr. O&rsquo;Malley has recently discussed possibly running against Hillary in the 2016 Democrat primary.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>But that wasn&rsquo;t enough. O&rsquo;Malley needed to show crime reduction stats that were not only improbable, but unsustainable without manipulation.</strong> And so there were people from City Hall who walked over Norris and made it clear to the district commanders that crime was going to fall by some astonishing rates. Eventually, Norris got fed up with the interference from City Hall and walked, and then more malleable police commissioners followed, until indeed, the crime rate fell dramatically. On paper.</em></p> <p>&nbsp;</p> <p><em>How? There were two initiatives. First, the department began sweeping the streets of the inner city, taking bodies on ridiculous humbles, mass arrests, sending thousands of people to city jail, hundreds every night, thousands in a month. They actually had police supervisors stationed with printed forms at the city jail &ndash; forms that said, essentially, you can go home now if you sign away any liability the city has for false arrest, or you can not sign the form and spend the weekend in jail until you see a court commissioner. And tens of thousands of people signed that form.&nbsp;</em></p> </blockquote> <p>Unsurprisingly, the rule of law often dies at the hands of an ambitious politician.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>The situation you described has been around for a while. Do you have a sense of why the Freddie Gray death has been such a catalyst for the response we&rsquo;ve seen in the last 48 hours?</strong></em></p> <p>&nbsp;</p> <p><em><strong>Because the documented litany of police violence is now out in the open. There&rsquo;s an actual theme here that&rsquo;s being made evident by the digital revolution. It used to be our word against yours.</strong> It used to be said &mdash; correctly &mdash; that the patrolman on the beat on any American police force was the last perfect tyranny. Absent a herd of reliable witnesses, there were things he could do to deny you your freedom or kick your ass that were between him, you, and the street. <strong>The smartphone with its small, digital camera, is a revolution in civil liberties.</strong></em></p> <p>&nbsp;</p> <p><em>In these drug-saturated neighborhoods, they weren&rsquo;t policing their post anymore, they weren&rsquo;t policing real estate that they were protecting from crime. They weren&rsquo;t nurturing informants, or learning how to properly investigate anything. There&rsquo;s a real skill set to good police work. But no, they were just dragging the sidewalks, hunting stats, and these inner-city neighborhoods &mdash; which were indeed drug-saturated because that&rsquo;s the only industry left &mdash; become just hunting grounds. They weren&rsquo;t protecting anything. They weren&rsquo;t serving anyone. They were collecting bodies, treating corner folk and citizens alike as an Israeli patrol would treat Gaza, or as the Afrikaners would have treated Soweto back in the day. They&rsquo;re an army of occupation. And once it&rsquo;s that, then everybody&rsquo;s the enemy. The police aren&rsquo;t looking to make friends, or informants, or learning how to write clean warrants or how to testify in court without perjuring themselves unnecessarily. There&rsquo;s no incentive to get better as investigators, as cops. There&rsquo;s no reason to solve crime. In the years they were behaving this way, locking up the entire world, the clearance rate for murder dove by 30 percent. The clearance rate for aggravated assault &mdash; every felony arrest rate &ndash; took a significant hit. Think about that. If crime is going down, and crime&nbsp;is&nbsp;going down, and if we have less murders than ever before and we have more homicide detectives assigned, and better evidentiary technologies to employ how is the clearance rate for homicide now 48 percent when it used to be 70 percent, or 75 percent?</em></p> <p>&nbsp;</p> <p><em><strong>Because the drug war made cops lazy and less competent?</strong></em></p> <p>&nbsp;</p> <p><em>How do you reward cops? Two ways: promotion and cash. That&rsquo;s what rewards a cop. If you want to pay overtime pay for having police fill the jails with loitering arrests or simple drug possession or failure to yield, if you want to spend your municipal treasure rewarding that, well the cop who&rsquo;s going to court 7 or 8 days a month &mdash; and court is always overtime pay &mdash; you&rsquo;re going to damn near double your salary every month. On the other hand, the guy who actually goes to his post and investigates who&rsquo;s burglarizing the homes, at the end of the month maybe he&rsquo;s made one arrest. It may be the right arrest and one that makes his post safer, but he&rsquo;s going to court one day and he&rsquo;s out in two hours. <strong>So you fail to reward the cop who actually does police work. But worse, it&rsquo;s time to make new sergeants or lieutenants, and so you look at the computer and say: Who&rsquo;s doing the most work? And they say, man, this guy had 80 arrests last month, and this other guy&rsquo;s only got one. Who do you think gets made sergeant? And then who trains the next generation of cops in how not to do police work?</strong> I&rsquo;ve just described for you the culture of the Baltimore police department amid the deluge of the drug war, where actual investigation goes unrewarded and where rounding up bodies for street dealing, drug possession, loitering such &ndash; the easiest and most self-evident arrests a cop can make &ndash; is nonetheless the path to enlightenment and promotion and some additional pay. That&rsquo;s what the drug war built, and that&rsquo;s what Martin O&rsquo;Malley affirmed when he sent so much of inner city Baltimore into the police wagons on a regular basis.</em></p> </blockquote> <p>So much of what was said there characterizes the perverted culture in Washington D.C. and on Wall Street. People are financially incentivized to commit fraud, crime and deceive customers. Those people are then promoted and train the next class. And the beat goes on&hellip;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>The second thing Marty did, in order to be governor, involves the stats themselves. In the beginning, under Norris, he did get a better brand of police work and we can credit a legitimate 12 to 15 percent decline in homicides. Again, that was a restoration of an investigative deterrent in the early years of that administration. But it wasn&rsquo;t enough to declare a Baltimore Miracle, by any means.</em></p> <p>&nbsp;</p> <p><em>What can you do? You can&rsquo;t artificially lower the murder rate &ndash; how do you hide the bodies when it&rsquo;s the state health department that controls the medical examiner&rsquo;s office? But the other felony categories? Robbery, aggravated assault, rape? Christ, what they did with that stuff was jaw-dropping.</em></p> </blockquote> <p>Now for the accounting fraud. Looks like Baltimore authorities learned well from Wall Street.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>So they cooked the books.</strong></em></p> <p>&nbsp;</p> <p><em>Oh yeah. If you hit somebody with a bullet, that had to count. If they went to the hospital with a bullet in them, it probably had to count as an aggravated assault. But if someone just took a gun out and emptied the clip and didn&rsquo;t hit anything or they didn&rsquo;t know if you hit anything, suddenly that was a common assault or even an unfounded report. Armed robberies became larcenies if you only had a victim&rsquo;s description of a gun, but not a recovered weapon. And it only gets worse as some district commanders began to curry favor with the mayoral aides who were sitting on the Comstat data. In the Southwest District, a victim would try to make an armed robbery complaint, saying , &lsquo;I just got robbed, somebody pointed a gun at me,&rsquo; and what they would do is tell him, well, okay, we can take the report but the first thing we have to do is run you through the computer to see if there&rsquo;s any paper on you. Wait, you&rsquo;re doing a warrant check on me before I can report a robbery? Oh yeah, we gotta know who you are before we take a complaint. You and everyone you&rsquo;re living with? What&rsquo;s your address again? You still want to report that robbery?</em></p> <p>&nbsp;</p> <p><em><strong>They cooked their own books in remarkable ways. Guns disappeared from reports and armed robberies became larcenies. Deadly weapons were omitted from reports and aggravated assaults became common assaults.</strong> The Baltimore Sun did a fine job looking into the dramatic drop in rapes in the city. Turned out that regardless of how insistent the victims were that they had been raped, the incidents were being quietly unfounded. That tip of the iceberg was reported, but the rest of it, no. And yet there were many veteran commanders and supervisors who were disgusted, who would privately complain about what was happening. If you weren&rsquo;t a journalist obliged to quote sources and instead, say, someone writing a fictional television drama, they&rsquo;d share a beer and let you fill cocktail napkins with all the ways in which felonies disappeared in those years.</em></p> <p>&nbsp;</p> <p><em>I mean, think about it. How does the homicide rate decline by 15 percent, while the agg assault rate falls by more than double that rate. Are all of Baltimore&rsquo;s felons going to gun ranges in the county? Are they becoming better shots? Have the mortality rates for serious assault victims in Baltimore, Maryland suddenly doubled? Did they suddenly close the Hopkins and University emergency rooms and return trauma care to the dark ages?&nbsp;<strong>It makes no sense statistically until you realize that you can&rsquo;t hide a murder, but you can make an attempted murder disappear in a heartbeat, no problem.</strong></em></p> <p>&nbsp;</p> <p><strong><em>But these guys weren&rsquo;t satisfied with just juking their own stats. No, the O&rsquo;Malley administration also went back to the last year of the previous mayoralty and performed its own retroactive assessment of those felony totals, and guess what? It was determined from this special review that the preceding administration had underreported its own crime rate, which O&rsquo;Malley rectified by upgrading a good chunk of misdemeanors into felonies to fatten up the Baltimore crime rate that he was inheriting. Get it? How better than to later claim a 30 or 40 percent reduction in crime than by first juking up your inherited rate as high as she&rsquo;ll go. It really was that cynical an exercise.</em></strong></p> <p>&nbsp;</p> <p><em>So Martin O&rsquo;Malley proclaims a Baltimore Miracle and moves to Annapolis. And tellingly, when his successor as mayor allows a new police commissioner to finally de-emphasize street sweeps and mass arrests and instead focus on gun crime, that&rsquo;s when the murder rate really dives. That&rsquo;s when violence really goes down. When a drug arrest or a street sweep is suddenly not the standard for police work, when violence itself is directly addressed, that&rsquo;s when Baltimore makes some progress.</em></p> <p><em>But nothing corrects the legacy of a police department in which the entire rank-and-file has been rewarded and affirmed for collecting bodies, for ignoring probable cause, for grabbing anyone they see for whatever reason. And so, fast forward to Sandtown and the Gilmor Homes, where Freddie Gray gives some Baltimore police the legal equivalent of looking at them a second or two too long. He runs, and so when he&rsquo;s caught he takes an ass-kicking and then goes into the back of a wagon without so much as a nod to the Fourth Amendment.</em></p> <p>&nbsp;</p> <p><em><strong>So do you see how this ends or how it begins to turn around?</strong></em></p> <p>&nbsp;</p> <p><em><strong>We end the drug war. I know I sound like a broken record, but we end the fucking drug war. The drug war gives everybody permission to do anything.</strong> It gives cops permission to stop anybody, to go in anyone&rsquo;s pockets, to manufacture any lie when they get to district court. You sit in the district court in Baltimore and you hear, &lsquo;Your Honor, he was walking out of the alley and I saw him lift up the glassine bag and tap it lightly.&rsquo; No fucking dope fiend in Baltimore has ever walked out of an alley displaying a glassine bag for all the world to see. But it keeps happening over and over in the Western District court. The drug war gives everybody permission. And if it were draconian and we were fixing anything that would be one thing, but it&rsquo;s draconian and it&rsquo;s a disaster.</em></p> </blockquote> <p>This is true about the drug war, but even more true <strong><a href="http://libertyblitzkrieg.com/2015/02/20/the-war-on-terror-turns-inward-dhs-report-warns-of-right-wing-terror-threat/">about the &ldquo;war on terror.&rdquo;</a> </strong>Also endless, also used to justify anything.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>Medicalize the problem, decriminalize &mdash; I don&rsquo;t need drugs to be declared legal, but if a Baltimore State&rsquo;s Attorney told all his assistant state&rsquo;s attorneys today, from this moment on, we are not signing overtime slips for court pay for possession, for simple loitering in a drug-free zone, for loitering, for failure to obey, we&rsquo;re not signing slips for that: Nobody gets paid for that bullshit, go out and do real police work. If that were to happen, then all at once, the standards for what constitutes a worthy arrest in Baltimore would significantly improve. <strong>Take away the actual incentive to do bad or useless police work, which is what the drug war has become.</strong></em></p> </blockquote> <p>So much of what&rsquo;s been happening in Baltimore for decades is now also business as usual within the highest corridors of American power. As I&rsquo;ve said time and time again, incentives are the key variable here. If you&rsquo;re rewarded for fraud and white collar crime, you will get more of it. If you jail the perpetrators of it, you&rsquo;ll get less of it. TBTF Wall Street execs and private equity guys don&rsquo;t want to sit in a jail cell for a decade, believe me. They&rsquo;d&nbsp;sell 50 Picassos and 30 sharks soaked in formaldehyde before that ever happened.</p> <p><strong>The sad part is we aren&rsquo;t even trying to change the incentive structure of status quo criminality. </strong>This is because the current generation of power players were trained and molded by the same types before them. This is all they know. Money and power are their gods. Crime is their religion. We have no choice but to stop them.</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="244" height="179" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150505_bmore1.jpg?1430843583" /> </div> </div> </div> http://www.zerohedge.com/news/2015-05-05/what-happens-if-you-defy-curfew-shocking-90-second-clip-streets-baltimore#comments Barack Obama Corruption Fail New York Times Private Equity Real estate Rude Awakening Washington D.C. Tue, 05 May 2015 15:58:34 +0000 Tyler Durden 505977 at http://www.zerohedge.com