http://www.zerohedge.com/fullrss2.xml/article/article en Dow Hits New Record Intraday-High Ahead Of Fed & Scottish Uncertainty http://www.zerohedge.com/news/2014-09-16/dow-hits-new-record-intraday-high-ahead-fed-scottish-uncertainty <p><strong>Overnight weakness in Asia</strong> and Europe was shrugged off. The Dow hit all-time record highs (first since July) and the S&amp;P broke back above 2,000 following headlines proclaiming a &quot;stealth QE&quot; from China (which actually hit the news during the Asia session) and chatter from WSJ&#39;s Hilsenrath that The Fed will leave the words &quot;considerable period&quot; in the statement tomorrow. Early weakness in stocks was ripped 25 points higher in the S&amp;P on the back of a 97% correlation to <strong>AUDJPY </strong>(China-driven), the USD dumped to unch for the week (worst day since May), commodities all took off higher (led by Copper and Oil), and <strong>Treasuries flip-flopped to end steeper (5Y -5bps, 30Y +1bp on the week)</strong>. &quot;Most Shorted&quot; stocks squeezed higher. <strong>HY credit compressed with stocks rally but decoupled later in the day</strong>. The Nasdaq and Russell (nearing death-cross) remain red on the week despite today&#39;s exuberance. VIX was smashed back under 13 (which makes perfect sense because there is <strong>no</strong> uncertainty this week at all). <strong>S&amp;P closed below 2,000 and The Dow &quot;off the highs&quot;.</strong></p> <p>&nbsp;</p> <p>AUDJPY was all that matters today...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD9.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD9_0.jpg" style="width: 600px; height: 333px;" /></a></p> <p>&nbsp;</p> <p>Stocks ramped from the moment the China headline hit...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD10.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD10_0.jpg" style="width: 600px; height: 444px;" /></a></p> <p>&nbsp;</p> <p>With S&amp;P tagging 2,000...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD11.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD11_0.jpg" style="width: 600px; height: 482px;" /></a></p> <p>&nbsp;</p> <p>As &quot;Most Shorted&quot; was squeezed into lunch...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD13.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD13_0.jpg" style="width: 600px; height: 314px;" /></a></p> <p>&nbsp;</p> <p>But it was not enough to get Nasdaq and Russell green on the week... (note, just like yesterday, we had a sudden vertical ramp early in the morning before all the China/Fed exuberance)</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD12.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD12_0.jpg" style="width: 600px; height: 563px;" /></a></p> <p>&nbsp;</p> <p>With The Russell 2000 nearing the death-cross (50DMA crossing below the 200DMA)...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD6.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD6_0.jpg" style="width: 600px; height: 459px;" /></a></p> <p>&nbsp;</p> <p>US financials push on to new cycle highs (and the meme is that all is clear) except that financial credit is notably divergent and flashing orange for now (just as it did in 2007)</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD5.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD5_0.jpg" style="width: 600px; height: 305px;" /></a></p> <p>&nbsp;</p> <p>HY credit tracked stocks as they ramped higher but decoupled in the last hour...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD8.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD8_0.jpg" style="width: 600px; height: 314px;" /></a></p> <p>&nbsp;</p> <p>VIX also decoupled but to the upside...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD7.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD7_0.jpg" style="width: 600px; height: 431px;" /></a></p> <p>&nbsp;</p> <p>Treasuries were mixed with 5Y outperforming... but steepened on the week...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD3.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD3_0.jpg" style="width: 600px; height: 315px;" /></a></p> <p>&nbsp;</p> <p>As The Dollar tumbled on the China news... <strong>USD&#39;s worst day since May</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD2.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD2_0.jpg" style="width: 600px; height: 315px;" /></a></p> <p>&nbsp;</p> <p>And commodities surged... but PMs gave some back...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD3_1.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD3_1_0.jpg" style="width: 600px; height: 315px;" /></a></p> <p>&nbsp;</p> <p>With Brent-WTI collapsing to around $4 as WTI outperforms...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD4.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD4_0.jpg" style="width: 600px; height: 317px;" /></a></p> <p>&nbsp;</p> <p><strong>We leave it to Diapason&#39;s Sean Corrigan to put a different perspective</strong> (as the chart below suggests last time China did this)...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_QE8.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_QE8_0.jpg" style="width: 600px; height: 311px;" /></a></p> <p>...on today&#39;s exuberance about China QE...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>The <strong>commodity move today is more a testament to short term oversold condition</strong> and proximity of various key technical supports than anything real...</p> <p>&nbsp;</p> <p><strong>Note that news about this came out before Europe and US were out of bed (and pretty much while Shanghai equities were getting hosed - go figure!) </strong></p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD1.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_EOD1_0.jpg" style="width: 600px; height: 313px;" /></a></p> <p>&nbsp;</p> <p><strong>...but our markets only reacted to it when Goldman helpfully &#39;explained&#39; its supposed importance to the rest of us dullards....</strong></p> <p>&nbsp;</p> <p>Even if this WERE &#39;equivalent&#39; to a 50bps RRR cut, that might<strong> only be a domestic offset to the base money destroying FX-drain which has been underway for the last couple of months and so would only imply neutrality, not renewed stimulus.</strong></p> </blockquote> <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="906" height="503" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140916_EOD9.jpg?1410898118" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-16/dow-hits-new-record-intraday-high-ahead-fed-scottish-uncertainty#comments China Copper headlines NASDAQ Russell 2000 Tue, 16 Sep 2014 20:08:49 +0000 Tyler Durden 494432 at http://www.zerohedge.com President Obama Explains Why He Is Sending 10x More Troops To Fight Ebola Than ISIS - Live Feed http://www.zerohedge.com/news/2014-09-16/president-obama-explains-why-he-sending-10x-more-troops-fight-ebola-isis-live-feed <p><a href="http://www.zerohedge.com/news/2014-09-16/obama-send-3000-ebola-fighting-boots-ground-africa-cdc-warns-america-now-time-prepar">As we discussed earlier,</a> President Obama is sending 3,000 US combat troops into Ebola-fighting danger in West Africa (<strong>almost 10 times the number of non-combat troops being sent to Iraq and Syria to fight that other epidemic - ISIS</strong>). Speaking from the Centers for Disease Control &amp; Prevention, we wonder if the President will stick to the line that the USA is "safe" (despite scientists predicting a 20% chance of infection here by year-end), that it is contained (despite scientists proclaiming this unprecedented and out of control), and why is the CDC telling US health-workers "now is the time to prepare."</p> <p>One can only assume the reason to send "troops" is to monitor and mind 'stability' in these nations as The IMF steps up its bailout funding...</p> <p>&nbsp;</p> <p>President Obama is due to speak at 1605ET - plan accordingly...</p> <p><iframe src="//www.youtube.com/embed/90--c4EcvwY" width="560" height="315" frameborder="0"></iframe></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="550" height="552" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140916_ebola3.jpg?1410891766" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-16/president-obama-explains-why-he-sending-10x-more-troops-fight-ebola-isis-live-feed#comments Iraq President Obama Tue, 16 Sep 2014 20:00:36 +0000 Tyler Durden 494430 at http://www.zerohedge.com Preparing For All Out Iraq War: Joint Chiefs Of Staff Back US Troops In Combat "If Necessary" http://www.zerohedge.com/news/2014-09-16/preparing-all-out-iraq-war-joint-chiefs-staff-back-us-troops-combat-if-necessary <p><em>Who could have seen this coming?</em> In yet another example of untruthiness, it appears, according to Joint Chiefs of Staff Chairman Martin Dempsey, testifying before the Senate Armed Services Committee this morning, <strong>President Obama would back U.S. advisers accompanying Iraqi troops in battle to combat Islamic State militants if necessar</strong>y. For now, Dempsey noted, Iraqi security forces are "doing fine," but as Republican, Sen. Jim Inhofe noted, "it is <strong>foolhardy for the Obama administration to tie its hands and so firmly rule out the possibility of special operators on the ground</strong>." Following Hagel's remarks that the fight will "not be an easy or a brief effort," Dempsey said if it doesn’t succeed, he would not rule out advising Obama to use U.S. ground forces.</p> <p>&nbsp;</p> <p><iframe src="http://www.washingtonpost.com/posttv/c/embed/1e95f9e0-3dad-11e4-a430-b82a3e67b762" width="640" height="400" frameborder="0" scrolling="no"></iframe></p> <p>&nbsp;</p> <p><a href="http://www.politico.com/story/2014/09/chuck-hagel-isil-war-111002.html?hp=l1"><em>As Politico reports,</em></a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Defense Secretary Chuck Hagel emphasized on Tuesday the United States is at war with the Islamic State of Iraq and the Levant, warning Congress that the fight will<strong> “not be an easy or a brief effort.”</strong></p> <p>&nbsp;</p> <p>Appearing before the Senate Armed Services Committee, Hagel and Joint Chiefs Chairman Gen. Martin Dempsey defended the strategy announced last week by President Barack Obama. Dempsey said the approach <strong>“won’t look like a shock and awe campaign” but will be persistent and sustained.</strong></p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>But if it doesn’t succeed, the top U.S. military officer said he would not rule out advising Obama to use U.S. ground forces.</strong></span></p> <p>&nbsp;</p> <p>“My view at this point is that this coalition is the appropriate way forward,” Dempsey said. “I believe that will prove true. If it fails to be true and there are threats to the U.S., then of course, <span style="text-decoration: underline;"><strong>I would go back to the president and make the recommendation that may include the use of U.S. military ground forces</strong></span>.”</p> </blockquote> <p>The Senators had plenty to say...</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Sen. John McCain (R-Ariz.) said the Obama administration had a “fundamental misunderstanding” of the Free Syrian Army</strong>, asking Dempsey how the Syrian rebel groups would fight ISIL and not Syrian President Bashar Assad’s troops. Dempsey said the U.S. has an “ISIL-first” strategy.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p>But the committee’s top Republican, Sen. Jim Inhofe of Oklahoma, said Obama’s strategy fell short by failing to acknowledge the threat ISIL poses to U.S. national security.</p> <p>&nbsp;</p> <p><strong>“His claim that ‘America is safer’ may support his political narrative — but it’s not true,”</strong> Inhofe said. “Secretary Hagel, I appreciate your honesty when you described ISIL on Aug. 21 as ‘an imminent threat to every interest we have, whether it’s in Iraq or anywhere else.’ I agree with you.”</p> <p>&nbsp;</p> <p>Inhofe also said the president’s strategy was detached from the reality on the ground, arguing that <span style="text-decoration: underline;"><strong>it will “take an army to beat an army.”</strong></span></p> <p>&nbsp;</p> <p>“I’m not advocating for an army division or combat elements on the ground,” Inhofe said.<strong> “But it is foolhardy for the Obama administration to tie its hands and so firmly rule out the possibility of air controllers and special operators on the ground</strong> to direct airstrikes and advise fighting forces. It sends the wrong message to our troops to the enemy and to partners.”</p> </blockquote> <p>*&nbsp; *&nbsp; *<br />Boots on the ground, it is!!</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="376" height="352" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140916_boots.jpg?1410882298" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-16/preparing-all-out-iraq-war-joint-chiefs-staff-back-us-troops-combat-if-necessary#comments Barack Obama Iraq John McCain national security Obama Administration Oklahoma President Obama Reality Tue, 16 Sep 2014 19:40:18 +0000 Tyler Durden 494429 at http://www.zerohedge.com How Financial Bubbles Fester And Burst - Even As The Fed Says Not To Worry http://www.zerohedge.com/news/2014-09-16/how-financial-bubbles-fester-and-burst-even-fed-says-not-worry <p><em>Submitted by <a href="http://davidstockmanscontracorner.com/how-financial-bubbles-fester-and-burst-even-as-the-fed-says-not-to-worry/">David Stockman via Contra Corner blog</a>,</em></p> <p>In today&rsquo;s post <a href="http://wolfstreet.com/2014/09/16/excessive-amounts-of-capital-doom-startup-bubble/">Wolf Richter</a> offers some solid insights&nbsp;on the dynamics of financial bubbles which merit further comment. <strong>The starting point is to recognize that once they gain a head of steam, financial bubbles tend to&nbsp;envelope&nbsp;virtually every nook and cranny of the economy, creating terrible distortions and destructive excesses as they rumble forward.</strong> In this instance, Wolf Richter&nbsp;explains how Silicon Valley has once again (like 1999-2000) been transformed&nbsp;into a rollicking capital &ldquo;burn rate&rdquo;&nbsp;machine that has spawned a whole economy based on striving for bigger&nbsp;losses, not&nbsp;better profits.</p> <p>This latter development&mdash;- currently <strong>exemplified by 44&nbsp;VC&nbsp;start-up&nbsp;companies in the IPO pipeline with a valuation of more than $1 billion each,&nbsp;despite no earnings and scarce revenues</strong>&mdash;-is indicative of late stage bubble dynamics. Say January 2000!</p> <p><strong>Needless to say, our monetary central planners remain hopelessly bubble blind&mdash;-&nbsp;still&nbsp;professing to see no significant&nbsp;speculative&nbsp;excesses because they are looking in the wrong place. Janet Yellen, for instance, keeps insisting that stock valuation multiples are still well within &ldquo;historic ranges&rdquo;. So&nbsp;do not be troubled.</strong></p> <p>Well, she&rsquo;s talking about the global big cap stocks represented in the S&amp;P 500 and is&nbsp;buying the Wall Street ex-items hockey stick that projects $125 per share next year&nbsp;(15.8X) after you exclude recurring &ldquo;non-recurring&rdquo; losses; and also after setting aside&nbsp;various asset&nbsp;write-offs that reflect the penchant for capital destruction (job restructurings, plant and store closures and excess&nbsp;purchase price or goodwill charges)&nbsp;that has become epidemic in&nbsp;big company C-suites during the era of bubble finance.</p> <p><em><strong>So the bubble&nbsp;blindness starts here. The&nbsp;very last thing you can believe is Wall Street&rsquo;s version of the so-called broad market multiple&mdash;especially near the end of a Fed money printing cycle</strong></em>. When the S&amp;P 500 peaked at 1570 in October 2007, for example,&nbsp;Wall Street&rsquo;s&nbsp;forward-looking ex-items hockey stick was about $115 for 2008&mdash;-or hardly 14X.&nbsp; Nothing to worry about there. It was all&nbsp;good and in the historic range.</p> <p>Until it wasn&rsquo;t, and the index&nbsp;hit 670&mdash;-a 57% plunge&mdash;-17 months later. And by the way, ex-items earnings for 2008 came in more than 50% lower&mdash;&ndash;at about $55 per share, and only $15 per share&nbsp;on an honest GAAP basis.</p> <p>In the course of my research for <strong>The Great Deformation</strong> I looked at that period in detail, aggregating the boom period of 2007 and most of 2008 with the bust of early 2009 and the recovery thereafter through the end of 2010.</p> <p>For the four-year period as a whole, the Wall Street sell side claimed ex-item earnings of $2.42 trillion for the entire basket of big cap global companies. And&nbsp;that was the sum of what actually happened, not the hockey sticks projected for each up-coming year. On average over the period, therefore, the broad market traded at 17.3X ex-items EPS&mdash;not &ldquo;cheap&rdquo;, as Wall Street had claimed prior to the bust,&nbsp;by any means.</p> <p><strong>But that&rsquo;s Wall Streets version of &ldquo;earnings&rdquo;. </strong>You would think the Fed would at least give some weight to the fact that in its wisdom, Washington&nbsp;spends several billion per year at the DOJ and SEC prosecuting companies and executives for violations of GAAP&mdash;sometimes even hairline infractions. So&nbsp;presumably there is&nbsp;something valuable in adherence to honest and consistent corporate accounting and disclosure.</p> <p>But when I looked at the same four years (2007-2010) for the S&amp;P 500 based on what companies had actually reported to the SEC in their filings, rather than the manicured version of their earnings touted by Wall Street, it turns out the cumulative net income was only $1.87 billion on a GAAP compliant&nbsp;basis.</p> <p><em><strong>So based on the financial&nbsp;reports vouched for by&nbsp;CEOs and CFOs not wishing to risk a spell of hospitality at one of &nbsp;Uncle Sam&rsquo;s country club&rsquo;s,&nbsp;</strong><strong><em>S&amp;P 500 </em>earnings were a staggering $550 billion less than the street version.</strong></em> In truth, therefore, the Wall Street version of earnings was over-stated by nearly 30%, and&nbsp;the broad market traded at an average multiple of 23X during this four year period.</p> <div style="float:right;margin:8px 0px 8px 8px;"> <div style="float: right;"><a class="amzn-pp-active image-anchor" href="http://www.amazon.com/gp/product/1586489127/ref=as_li_tf_il?ie=UTF8&amp;camp=211189&amp;creative=373489&amp;creativeASIN=1586489127&amp;link_code=as3&amp;tag=davistoccontc-20" target="_blank"><img alt="" border="0" src="http://ws-na.amazon-adsystem.com/widgets/q?_encoding=UTF8&amp;ASIN=1586489127&amp;Format=_SL160_&amp;ID=AsinImage&amp;MarketPlace=US&amp;ServiceVersion=20070822&amp;WS=1&amp;tag=davistoccontc-20" /></a><img alt="" border="0" height="1" src="http://ir-na.amazon-adsystem.com/e/ir?t=davistoccontc-20&amp;l=as2&amp;o=1&amp;a=1586489127" style="border: none !important; margin-left: 6px !important;" width="1" /></div> </div> <p>This is another way of saying that the market&mdash;especially near a bubble top&mdash;-is always held to be &ldquo;not yet fully valued&rdquo; and tends to trade reliably at about&nbsp;15X the sell-side&rsquo;s&nbsp;ex-items hockey stick. And it means absolutely&nbsp;nothing.</p> <p>At&nbsp;the present moment, in fact, LTM earnings for the S&amp;P 500 are about $100 per share based on GAAP and historically consistent treatment of pension accounting. The market is&nbsp;pushing 20X honest reported earnings, therefore, and is sitting exactly where it was in the fall of 2007. Back then reported earnings peaked at $85 per share&mdash;about 18.5X the market top reached&nbsp;during the last Fed bubble.</p> <p><strong>Self-evidently, the monetary politburo has learned nothing in the interim.</strong> And that is especially so for Janet Yellen who spent the spring and summer of 2008 at Fed meetings&nbsp;opining about the to-and-fro of &ldquo;in-coming&rdquo; macroeconomic data without even noticing that a ferocious explosion was brewing on Wall Street.</p> <p><strong>Yet this time the fallacy of Wall Street&rsquo;s ex-items hockey stick is even more blatant and transparent.</strong> During the period since late 2011, the stock market has risen nearly 50% yet reported S&amp;P earnings per share are up hardly 10%. And virtually, the entirety of even that prodding gain is attributable to the surge of corporate buybacks in the interim. Indeed, as the WSJ reminded yesterday, the run rate of share repurchases in the first half of 2014 had nearly regained the blow-off level of 2007.</p> <p><img alt="" height="475" src="http://si.wsj.net/public/resources/images/P1-BR325A_BUYBA_D_20140915184834.jpg" width="262" /></p> <p>Beyond that, the corporate profit margins embedded in the $100 per share of GAAP earnings posted for the LTM through June had soared beyond the 2007 peak and was now in financial terra incognita.</p> <p><img alt="" class="rg_i" data-="" data-sz="f" name="e3qadZn6ZLIdRM:" src="https://encrypted-tbn2.gstatic.com/images?q=tbn:ANd9GcQ55fVdv1cxWKjea3jeW6K41gRJqEOqjpD9N7iUwXYf0KGM3Lw" style="height: 434px; width: 600px;" /></p> <p>So even if we had not experienced an unprecedented&nbsp;68 straight months of zero interest rates that must now be normalized in the years ahead, and a global boom that is coming unwound everywhere from China and Japan to Turkey, Europe and Brazil, why would you consider a 20X multiple on the big cap stocks &ldquo;well within the range of historical experience&rdquo;?</p> <p><strong>But the next point is even more telling.&nbsp; The S&amp;P 500 is the last place where the bubble finally manifests itself.</strong> During the 66 months&nbsp;since the&nbsp;March 2009 bottom, when the S&amp;P 500 rose by 200%, the speculative precincts of the stock market have soared by orders of magnitude more. The Russell 2000, for example,&nbsp;peaked at&nbsp;a gain of nearly 260%, and, of course, the biotech and social media indices went off the charts, registering gains north of 300%.</p> <div class="irc_mutc"><a class="irc_mutl image-anchor" data-ved="0CAcQjRw" href="http://www.google.com/url?sa=i&amp;rct=j&amp;q=&amp;esrc=s&amp;source=images&amp;cd=&amp;cad=rja&amp;uact=8&amp;docid=Lv767L_CZkUMlM&amp;tbnid=ItAu6uX0wY0pQM:&amp;ved=0CAcQjRw&amp;url=http%3A%2F%2Fwww.investorsinsight.com%2Fblogs%2Fjohn_mauldins_outside_the_box%2Farchive%2F2014%2F05%2F06%2Fis-there-a-biotech-bubble.aspx&amp;ei=x3EYVIKkM8ypyATA_IBI&amp;bvm=bv.75097201,d.aWw&amp;psig=AFQjCNGeqeDNa2tYzw08lx9yYdUKglRVKQ&amp;ust=1410974311675200" target="_blank"><img alt="" class="irc_mut" height="359" src="https://encrypted-tbn2.gstatic.com/images?q=tbn:ANd9GcShgCc9wC3ID8obv_Odg-cHsOaUDQDZ__zIGLpuQBV4m6b6-ubh" width="495" /></a></div> <p><strong>What happened, therefore, is blatantly obvious.&nbsp;</strong> As the venture capital world cashed-in during the&nbsp;mid-cycle surge, Silicon Valley was flooded with winnings from IPOs and&nbsp;a tsunami of&nbsp;new institutional capital looking to get on the bandwagon. This, in turn, fueled an outpouring of more start-ups, bolder&nbsp;VC valuations and, soon, a plentitude of candidates for the parade of earning-less and increasingly revenue-less IPOs.</p> <p><a href="http://wolfstreet.com/2014/09/16/excessive-amounts-of-capital-doom-startup-bubble/">As detailed by Wolf Richter below,</a> <strong>even the leading venture capitalists now recognize that the insanity of the dotcom era has re-emerged.&nbsp;One of these days, even the monetary politburo may notice.&nbsp; But by then it will be too late. Again.</strong></p> <p>&nbsp;</p> <p><a href="http://wolfstreet.com/2014/09/16/excessive-amounts-of-capital-doom-startup-bubble/"><em><strong>By Wolf Richter At Wolf Street</strong></em></a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Not everything is&nbsp;hunky-dory in the world of stocks. The S&amp;P 500, which has been hovering near its all-time high and hasn&rsquo;t experienced a decline of 10% in three years, has been the focal point of breathless media coverage. But beneath the surface, the stocks of smaller companies are being put through the meat grinder.</p> <p>&nbsp;</p> <p>Bloomberg <a href="http://www.bloomberg.com/news/2014-09-14/record-s-p-500-masks-47-of-nasdaq-mired-in-bear-market.html" target="_blank"><span style="text-decoration: underline;"><span>found</span></span></a> that 47% of all stocks in the Nasdaq have skidded at least 20% from their 12-month high; 40% of the stocks in the Russell 2000 and, chillingly, 40% of those in the Bloomberg IPO index have made that same trip south. They&rsquo;re now languishing in their own bear-market purgatory. Investors have been fleeing these companies for months. I wrote about <a href="http://wolfstreet.com/2014/05/12/the-brutal-beneath-the-surface-slo-mo-crash-of-stocks-2/" target="_blank"><span style="text-decoration: underline;"><span>that phenomenon</span></span></a> in May, but it has gotten worse since.</p> <p>&nbsp;</p> <p>Yet, 44 startups that have not yet gone public and have not yet been acquired have valuations of <a href="http://graphics.wsj.com/billion-dollar-club/" target="_blank"><span style="text-decoration: underline;"><span>over $1 billion</span></span></a>, with five of them in (or nearly in) the $10 billion club. Uber tops the list with a valuation of $18 billion. And Snapchat, one of these $10-billion outfits, doesn&rsquo;t even have revenues yet.</p> <p>&nbsp;</p> <p>It&rsquo;s at this confluence of excess and exuberance on one side and sub-surface carnage on the other that a voice from the venture capital world speaks up: Bill Gurley, a partner at Benchmark and investor in Uber, Zillow, OpenTable, and others, lamented in an interview with the <a href="http://online.wsj.com/articles/venture-capitalist-sounds-alarm-on-silicon-valley-risk-1410740054" target="_blank"><span style="text-decoration: underline;"><span>Wall Street Journal</span></span></a> the &ldquo;excessive amount of risk&rdquo; piling up in Silicon Valley: &ldquo;In some ways less silly than &rsquo;99 and in other ways more silly than in &rsquo;99,&rdquo; he said.</p> <p>&nbsp;</p> <p>That comparison to the final outburst of craziness of the dotcom bubble before it blew up is ominous, even for him. But not for the entrepreneurs out there today, of whom perhaps as many as 60% or 70%, he said,&nbsp;&ldquo;weren&rsquo;t around in &rsquo;99, so they have no muscle memory whatsoever.&rdquo;</p> <p>&nbsp;</p> <p>And he pointed at the result of nearly free money sloshing into Silicon Valley, and why all excesses end badly: when startups are raising hundreds of millions of dollars, as they are these days, they&rsquo;re encouraged to spend it, and so they speed up their &ldquo;burn rate.&rdquo;</p> <p>&nbsp;</p> <p>And I guarantee you two things: One, the average burn rate at the average venture-backed company in Silicon Valley is at an all-time high since &rsquo;99 and maybe in many industries higher than in &rsquo;99. And two, more humans in Silicon Valley are working for money-losing companies than have been in 15 years, and that&rsquo;s a form of discounted risk.</p> <p>&nbsp;</p> <p>These &ldquo;excessive amounts of capital&rdquo; lead to trouble as startups are getting used to reckless spending.</p> <p>&nbsp;</p> <p>And that can be seriously, negatively reinforced by the capital market. In the software-as-a-service world, where the risk is potentially among the highest, Wall Street has said it&rsquo;s OK to lose tons of money as a public company. So what happens in the board rooms of all the private companies is they say, &ldquo;Did you see that? Did you see they went out and they&rsquo;re losing tons of money and they&rsquo;re worth a billion? We should spend more money.&rdquo; And there are people knocking on their door saying, &ldquo;Do you want more money, do you want more money?&rdquo;</p> <p>&nbsp;</p> <p>They do want more money. To justify the additional capital, these companies, which often don&rsquo;t have revenues and can&rsquo;t even imagine what it would be like to generate enough cash internally to survive, increase their burn rate. They move into digs with more expensive leases, and hire more people and increase their compensation, and they serve delicious free lunches&hellip;. Excessive capital reinforces every mortal sin&nbsp;a business can commit [read... <a href="http://wolfstreet.com/2014/07/22/what-a-storm-surge-of-hot-money-does-to-san-francisco/" target="_blank"><span style="text-decoration: underline;"><span>How the Surge of Hot Money Pushes San Francisco to the Brink</span></span></a>].</p> <p>&nbsp;</p> <p>And so Gurley rephrased what bankers have known for eons &ndash; that bad loans are made in good times. The way he sees it &ldquo;bad business behavior is coincidental with the best of times in our field.&rdquo; Excessive amounts of capital nurtures this bad business behavior and covers it up and distracts from the core of what a business should do. Incentives get distorted and priorities take a turn for the bizarre. Everyone who has been around the scene with open eyes has seen the symptoms. &ldquo;So, the crazier things get, the worse people execute,&rdquo; he said.</p> <p>&nbsp;</p> <p>Excessive amounts of capital lead to a lower average fitness because fitness, from a business standpoint, has to be cash-flow profitability or the ability to generate cash flow. That&rsquo;s the essence of equity value. And so I think we get further and further away from that in the headiest of times.</p> <p>&nbsp;</p> <p>The excesses are spreading around. Now landlords in San Francisco that are charging &ldquo;two or three times what the rent was three years ago&rdquo; are demanding 10-year leases, he said. If they thought rents would continue to go up, they wouldn&rsquo;t try to lock in the current rates for ten years. They know something the startup world has learned in 2000 and 2001 but has already forgotten. But their strategy&nbsp;won&rsquo;t work.</p> <p>&nbsp;</p> <p>When the money flow dries up, &ldquo;the types of gymnastics&rdquo; that these companies would have to do &ldquo;to readjust their spend is massive.&rdquo; When the prior tech bubble imploded, &ldquo;half the companies went bankrupt, and they couldn&rsquo;t pay the lease over the 10-year period.&rdquo; Many of these companies simply evaporated&nbsp;after they&rsquo;d blown through their investors&rsquo; money. In 2001, tech companies announced <a href="http://wolfstreet.com/2014/09/05/big-tech-sinks-into-trouble-may-sack-most-people-since-2009/" target="_blank"><span style="text-decoration: underline;"><span>nearly 700,000 job cuts</span></span></a>. And this time? Excessive amounts of capital thrown around willy-nilly by giddy investors with grandiose hopes at companies with puny if any revenues and endless losses always ends badly.</p> <p>&nbsp;</p> <p>How much does it cost to manipulate the entire IPO and startup market? Not much. And it&rsquo;s getting cheaper! It was leaked that VC firm Kleiner Perkins Caufield &amp; Byers would sprinkle&nbsp;$20 million on Snapchat. But the tiny deal would raise Snapchat valuation to $10 billion. Read&hellip; <a href="http://wolfstreet.com/2014/08/28/how-to-rig-the-entire-ipo-market-with-just-20-million/" target="_blank"><span style="text-decoration: underline;"><span>Pump and Dump: How to Rig the Entire IPO Market with just $20 Million </span></span></a></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="460" height="338" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140916_DS.jpg?1410892148" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-16/how-financial-bubbles-fester-and-burst-even-fed-says-not-worry#comments Brazil China Free Money GAAP Janet Yellen Japan NASDAQ recovery Russell 2000 Turkey Wall Street Journal Tue, 16 Sep 2014 19:16:31 +0000 Tyler Durden 494428 at http://www.zerohedge.com Russia Central Bank Responds To Domestic Dollar Shortage, Starts Currency Swaps http://www.zerohedge.com/news/2014-09-16/russia-central-bank-responds-domestic-dollar-shortage-starts-currency-swaps <p>With the <strong>Ruble hitting record low</strong>s once again today against the USDollar, it appears <strong>concerns over USD liquidity</strong> are growing in Russia. The <a href="http://www.cbr.ru/press/pr.aspx?file=16092014_201218dkp2014-09-16T20_07_28.htm">Russian central bank has unveiled an FX swap operation</a>, allowing firms to borrow dollars in exchange for Rubles for a duration of 1 day (at a cost of 7%p.a.). Of course, this squeeze on USD funding - driven by Western sanctions - will, instead of isolating Russia, <strong>force Russian companies (finding USD transactions prohibitively expensive) into the CNY-axis</strong>, thus further strengthening the Yuanification of world trade and the <a href="http://www.zerohedge.com/news/2014-09-15/uk-hints-next-reserve-currency-issue-chinese-yuan-denominated-bond">ultimate demise of the USD as reserve currency</a>.</p> <p>&nbsp;</p> <p>USDRUB at record lows...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_RUB.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_RUB_0.jpg" width="600" height="316" /></a></p> <p>&nbsp;</p> <p>And funding sanctions appear to have driven the Central Bank to supply USDollar liquidity into an apparently squeezed market...</p> <p><em>As Bloomberg reports,</em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>"Sanctions and closed access to foreign-exchange liquidity from the West” is feeding demand for dollars</strong>, Dmitry Polevoy, chief economist ING.</p> <p>&nbsp;</p> <p><strong>Foreign-exchange liquidity has “virtually dried out,”</strong> with volumes sinking to about $100 million per day, compared with $1 billion to $2 billion previously, according to Natalia Orlova, the chief economist for OAO Alfa Bank in Moscow.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>Companies have $22 billion in dollar-denominated payments to make in September and local banks are “anticipating demand for hard currency</strong> from retailers and accumulating additional dollar liquidity,” Abdullaev said.</p> </blockquote> <p><a href="http://online.wsj.com/article/BT-CO-20140916-707893.html">And as WSJ reports,</a> the central bank has responded...</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>The Bank of Russia said Tuesday it introduced one-day currency swaps to aid banks "better management of the their short-term liquidity".</strong></p> <p>&nbsp;</p> <p>Russian banks, unable to borrow abroad, are experiencing a shortage of currency liquidity.</p> <p>&nbsp;</p> <p><strong>"We see, naturally, some distortion on the (currency) swap market, which shows a structural deficit of dollars,"</strong> Russia's Deputy Finance Minister Alexei Moiseev said Tuesday.</p> </blockquote> <p><a href="http://www.cbr.ru/press/pr.aspx?file=16092014_201218dkp2014-09-16T20_07_28.htm">Here are the details</a>...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_RUB1.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_RUB1_0.jpg" width="600" height="362" /></a></p> <p>&nbsp;</p> <p>In addition, <a href="http://www.cbc.ca/news/world/russia-creates-emergency-fund-to-deal-with-western-sanctions-1.2766231"><strong>Russia is creating an emergency fund to deal with Western sanctions</strong></a>...</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><span style="text-decoration: underline;"><strong>Russia will create a multi-billion dollar anti-crisis fund in 2015 of money destined for the Pension Fund and some left over in this year's budget to help companies hit by sanctions</strong></span>, Finance Minister Anton Siluanov was quoted as saying on Monday.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p>Siluanov was quoted as saying by Russian news agencies that the decision to stop transferring money to the Pension Fund would hand the budget an extra 309 billion roubles ($8.18 billion US).</p> <p>&nbsp;</p> <p>He said not all of that sum would go into the anti-crisis fund, but that it would also receive at least 100 billion roubles of money left over in this year's budget.</p> <p>&nbsp;</p> <p>"<strong>This 100 billion roubles will be added to the [anti-crisis] reserve next year, which will allow us to help our companies,</strong>" RIA news agency citied Siluanov as saying.</p> <p>&nbsp;</p> <p><strong>"We are planning to create a reserve of a significant size."</strong></p> <p>&nbsp;</p> <p><strong>It was not clear how big the fund would be.</strong></p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p>"When a series of our partners, if they can be called that, test Russia's strength through sanctions and all kinds of threats, it is<strong> important not to succumb to the temptation of so-called easy solutions</strong> and to preserve and continue the development of democratic processes in our society, our state," Medvedev said in a televised speech.</p> </blockquote> <p>*&nbsp; *&nbsp; *<br /><strong>Increasingly making it prohibitively expensive for Russian firms to transact in USDollars</strong>...</p> <p><strong></strong></p> <p><strong>Which will merely serves to drive those firms to look for Chinese counterparts and further into the CNY-axis of de-dollarization</strong> (<a href="http://www.zerohedge.com/news/2014-09-15/uk-hints-next-reserve-currency-issue-chinese-yuan-denominated-bond"><em>as UK Chancellor Osborne recently confirmed</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="960" height="505" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140916_RUB.jpg?1410889784" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-16/russia-central-bank-responds-domestic-dollar-shortage-starts-currency-swaps#comments Reserve Currency World Trade Tue, 16 Sep 2014 18:50:55 +0000 Tyler Durden 494427 at http://www.zerohedge.com NSA Warns "Bad Guys Are Everywhere" As Spooks Run Afoul Of German Laws Again http://www.zerohedge.com/news/2014-09-16/nsa-warns-bad-guys-are-everywhere-spooks-run-afoul-german-laws-again <p><em>Submitted by <a href="http://www.acting-man.com/?p=32911">Pater Tenebrarum via Acting-Man blog</a>,</em></p> <h3><u><strong>Successfully Distracted &hellip;</strong></u></h3> <p><strong>We can probably &ldquo;thank&rdquo; ISIS for having distracted everyone from the ongoing spy scandal. </strong>A new barbaric and powerful terrorist group the danger of which is blown out of all proportion by politicians and the media is no doubt a Godsend for the national security apparatus and the military-industrial complex. In fact, this reminds us that ISIS looks suspiciously like an artificial creation anyway, one that has at some point undoubtedly received assistance from one or more states.</p> <p class="spx_inspected_extr spx_global">In a previous missive (see &ldquo;<a href="http://www.acting-man.com/?p=24419">Equal Opportunity Spy-Fest</a>&rdquo; for details), we discussed an article in German news magazine Der Spiegel (which has by the way done some excellent sleuthing beyond merely reporting on the content of the Snowden files). The article at Der Spiegel inter alia mentioned occasions when representatives of the &ldquo;national security&rdquo; apparatus or government spokesmen speaking on its behalf were caught in blatant lies and noted in its conclusion:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>&ldquo;The next weeks and months will show whether democratic societies across the world are strong enough to take a stand against the unlimited, totalitarian ambitions of Western secret services &mdash; or not. <em>The governments of the countries in question apparently did not have the necessary backbone. They knew full well that the kind of surveillance being undertaken lacked all democratic legitimacy. But they pursued the programs anyway, behind the backs of their electorates.</em>&nbsp;<em>It is now up to voters to defend themselves. It is up to us, whose data has landed as by-catch in the nets of Tempora. We must force our own representatives to defend our freedoms.</em> &rdquo;</em></p> </blockquote> <p>Our comment to this was:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;Shocker! They lied to the public! And now&nbsp;<em>&lsquo;we must force our own representatives to defend our freedoms</em>&lsquo;. Apparently over at the &lsquo;Spiegel&rsquo; magazine they have completely forgotten who&rsquo;s who in the zoo. The secret services are not an entity apart from the State &ndash; they are part of it. The mirage of &lsquo;democratic accountability&rsquo; is held up as a way out. But<em>&nbsp;how </em>exactly can one&rsquo;s &lsquo;representatives&rsquo; be forced to alter course? Surely no-one can be so naïve as the think that any of this can be &lsquo;fixed&rsquo; by elections or mere protests. Too powerful and well-funded an apparatus stands behind these activities. It would be a miracle if anything changed; moreover, the couch potatoes can&rsquo;t be bothered anyway. Those that have ordered and are involved in the spying are undoubtedly betting that the furor will die down again just as it did the first time around, and they are probably right. In the meantime, they will continue exactly as before. We&rsquo;re willing to take bets on this.&nbsp;<em><strong>All that has really happened is that whistleblowers have been put on notice</strong></em><strong>.</strong>&rdquo;</p> </blockquote> <p><strong>There is no reason to assume that this pessimistic conclusion needs to be reassessed.</strong> The Snowden revelations have had zero effect on the spying activities or the legal safeguards allegedly keeping them in check. So far, the main effect of these revelations was simply intimidation on a global scale.</p> <p><strong>To our not too great surprise, surveys have found that the public in the US and UK couldn&rsquo;t care less.</strong> There is in fact a vast gulf though between the public&rsquo;s reaction to the scandal in the US and the UK and elsewhere. Very likely this is a result of the fact that the US and the UK have a long history of liberty. The English monarchy was the first in Europe that lost much of its power to an elected parliament. Even if the initial construction was deeply flawed, it ensured a much faster evolution toward a democratic dispensation than in continental Europe. Obviously, in the American colonies, the British monarchy lost power entirely in the late 18<sup>th</sup> century already.</p> <p><strong>In Germany by contrast, people still remember Hitler and the GDR&rsquo;s Stasi, </strong>so they are naturally more inclined to distrust state-run surveillance agencies (and rightly so). As a result, the spook agencies are also more likely to break the law in Europe, where privacy laws are as a rule much stricter than in the US. This brings us to the latest revelations about NSA and GCHQ surveillance documents.</p> <p>&nbsp;</p> <p style="text-align: center;"><img alt="++ Iraq: al Baghdadi appare in immagini in moschea Mossul ++" class="aligncenter wp-image-32912" height="302" src="http://www.acting-man.com/blog/media/2014/09/Abu-Bakr-al-Baghdadi-3a.jpg" width="500" /><br />A welcome distraction: the Islamist dude with the $6.500 James Bond watch.</p> <p>&nbsp;</p> <h3><u><strong>The Treasure Map</strong></u></h3> <p>In its most recent edition, <a href="http://www.spiegel.de/international/world/snowden-documents-indicate-nsa-has-breached-deutsche-telekom-a-991503.html">Der Spiegel reports</a> on something called &ldquo;Treasure Map&rdquo; &ndash; which documents the attempt by the spy agencies to map the entire internet and <em>ensure they have access to every single user</em>. To do so, they have apparently illegally broken into networks belonging to German telecom providers. A few excerpts:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;When it comes to choosing code names for their secret operations, American and British agents demonstrate a flare for creativity. Sometimes they borrow from Mother Nature, with monikers such as &ldquo;Evil Olive&rdquo; and &ldquo;Egoistic Giraffe.&rdquo; Other times, they would seem to take their guidance from Hollywood. A program called Treasure Map even has its own logo, a skull superimposed onto a compass, the eye holes glowing in demonic red, reminiscent of a movie poster for the popular &ldquo;Pirates of the Caribbean&rdquo; series, starring Johnny Depp.</p> <p>&nbsp;</p> <p>Treasure Map is anything but harmless entertainment. Rather, it is the mandate for a massive raid on the digital world. It aims to map the Internet, and not just the large traffic channels, such as telecommunications cables. It also seeks to identify the devices across which our data flows, so-called routers.</p> <p>&nbsp;</p> <p><strong><em>Furthermore, every single end device that is connected to the Internet somewhere in the world &mdash; every smartphone, tablet and computer &mdash; is to be made visible.</em></strong> Such a map doesn&rsquo;t just reveal one treasure. There are millions of them.</p> <p>&nbsp;</p> <p><strong><em>The breathtaking mission is described in a Treasure Map presentation from the documents of the former intelligence service employee Edward Snowden which SPIEGEL has seen. It instructs analysts to &ldquo;map the entire Internet &mdash; Any device, anywhere, all the time.&rdquo;</em></strong></p> </blockquote> <p>(emphasis added)</p> <p>That&rsquo;s quite something. However, while the spook agencies obviously believe that they are a law unto themselves (probably because <a href="https://www.youtube.com/watch?v=pfXxl0PX__g">they are able to blackmail those</a> who are supposed to provide oversight), they are still breaking German law in their quest to &ldquo;map everything&rdquo;.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;Treasure Map graphics don&rsquo;t just provide detailed views of German cable and satellite networks. Red markings also reveal to agents which carriers and internal company networks FiveEyes agencies claim to have already accessed. Of particular interest from the German perspective are two &ldquo;Autonomous Systems&rdquo; (AS) &mdash; networks &mdash; marked in red. They are labeled Deutsche Telekom AG and Netcologne, a Cologne-based provider.</p> <p>&nbsp;</p> <p>[&hellip;]</p> <p>&nbsp;</p> <p><strong><em>Because Netcologne is a regional provider, it would seem highly likely that the NSA or one of its Treasure Map partners accessed the network from within Germany. That would be a clear violation of German law and potentially another NSA-related case for German public prosecutors. Thus far, the only NSA-related case </em></strong><a href="http://www.spiegel.de/international/germany/germany-expected-to-open-investigation-into-nsa-spying-on-merkel-a-973326.html">currently being investigated</a><strong><em>&nbsp;is the monitoring of Chancellor Angela Merkel&rsquo;s mobile phone.&rdquo;</em></strong></p> </blockquote> <p><strong>So only the surveillance of the German chancellor&rsquo;s mobile phone has so far roused public prosecutors from their slumber, as they appear to regard surveillance of <em>everyone else </em>as a somewhat lesser problem. </strong>The reason for this apathy can be guessed &ndash; nearly every nation is involved in spying on the citizenry, both at home and abroad. In fact, the NSA&rsquo;s &ldquo;anything goes&rdquo; approach is very likely welcomed by spook agencies in allied countries that are more tightly regulated, as they can get information they could not otherwise obtain in &ldquo;information exchanges&rdquo;. Then they don&rsquo;t need to do the spying, thus remaining within the law, but will get anything they want in roundabout fashion from those operating with fewer restrictions. Actually, in the case of the &ldquo;five eyes&rdquo; alliance it would be better to say &ldquo;no restrictions whatsoever&rdquo;, as the checks and balances that allegedly exist are usually revealed as a joke upon closer examination (such as the FISA court, which basically <a href="http://www.npr.org/2013/06/13/191226106/fisa-court-appears-to-be-rubberstamp-for-government-requests">rubber-stamps every request it gets</a> from government agencies).</p> <p><strong>Among the activities related to &ldquo;treasure map&rdquo; is also the close surveillance of key employees of major internet providers.</strong> Note that these are perfectly innocent citizens, who are under close surveillance by spy agencies 24/7 merely on account of their jobs. Most people don&rsquo;t care as long as they are reasonable sure that they are law-abiding and consider themeselves too unimportant to come under scrutiny. These attitudes tend to radically change once one becomes a target.</p> <p>In this context, we urge you to watch a brief video in which<strong> a Spiegel reporter reveals to satellite internet provider Stella who among its key personnel is under NSA/GCHQ surveillance and how deeply into their network the spooks have already hacked</strong> &ndash; in the process obtaining sensitive passwords to major internet routers that allow them to alter links, find out the geo-location of every customer, and arbitrarily turn the internet access of Stella customers off.</p> <p><strong>The video can be <u><a href="http://spon.de/vgxVN">seen here</a></u>. Note how the faces of Stella&rsquo;s engineers become longer and longer as they begin to realize what has happened. As der Spiegel reports, Stella&rsquo;s CEO had a terse initial comment: &ldquo;F*ck!&rdquo;</strong></p> <p>The mindset of the spooks meanwhile is illustrated nicely by one of the pages from the <a href="http://www.spiegel.de/media/media-34757.pdf">&ldquo;treasure map&rdquo; overview</a> published by Der Spiegel:</p> <p>&nbsp;</p> <p style="text-align: center;"><a href="http://www.acting-man.com/blog/media/2014/09/Treasure-Map-detail.png"><img alt="Treasure Map detail" class="aligncenter size-full wp-image-32913" height="367" src="http://www.acting-man.com/blog/media/2014/09/Treasure-Map-detail.png" width="500" /></a></p> <p style="text-align: center;">Bad guys are everywhere!</p> <p>&nbsp;</p> <p><strong>So according to the NSA, the world is brimming with bad guys. They&rsquo;re everywhere!</strong> This makes them sound like Peeping Toms with paranoid delusions. As we have pointed out on a previous occasion, even in the US, where one of the worst terror attacks in history has claimed nearly 3,000 lives, the average citizen is far more likely to die from <a href="http://danger.mongabay.com/injury_death.htm">falling off a piece of furniture</a> or drowning in his own bathtub than from a terror attack.</p> <p><strong>So what happens if it indeed turns out that German laws have been violated in the implementation of &ldquo;treasure map&rdquo;? </strong>Will there be any consequences? Our bet is that there will be none &ndash; in fact, our bet is that there very likely won&rsquo;t even be an investigation, and if there is one, it will soon quietly die again.</p> <p>&nbsp;</p> <h3><u><strong>Conclusion:</strong></u></h3> <p>Although 99.99% of what the spook agencies collect on the internet is undoubtedly useless nonsense (which makes one wonder how effective these unfocused efforts can possibly be in catching actual terrorists), the fact that they apparently do indeed collect everything<strong> is a danger to liberty, no matter how many &ldquo;bad guys&rdquo; there are in the world that can be used to rationalize these activities (bad people will always exist).</strong></p> <p><strong>There is no telling what the future will bring, what kind of governments will come to power if there is a major emergency</strong> (economic collapse due to a breakdown of the monetary system is e.g. a distinct possibility). It is after all well-known that radical political forces tend to come to power under such circumstances, and then there can no longer be even the remotest assurance that the data so diligently collected by agencies of &ldquo;free societies&rdquo; won&rsquo;t be misused. Even democratic governments are known for their past efforts to suppress political dissent. In fact, as <a href="http://www.washingtonsblog.com/2014/06/spying-dissent.html">Washington&rsquo;s Blog correctly argues</a>, <strong><u>history shows beyond a doubt that ultimately, this is what mass surveillance is <em>always</em> about.</u></strong></p> http://www.zerohedge.com/news/2014-09-16/nsa-warns-bad-guys-are-everywhere-spooks-run-afoul-german-laws-again#comments Bond fixed Germany national security None SPY Tue, 16 Sep 2014 18:26:50 +0000 Tyler Durden 494426 at http://www.zerohedge.com The "Calpers vs Hedge Funds" Debate In Just Two Charts http://www.zerohedge.com/news/2014-09-16/calpers-vs-hedge-funds-debate-just-two-charts <p>While some are shocked by Calpers' decision to <a href="http://www.bloomberg.com/news/2014-09-15/calpers-to-exit-hedge-funds-citing-expenses-complexity.html">abandon hedge funds as an investment class</a> (the first of many such "exits"), there really should be no surprise here. As we have said year after year after year (and so on), it was only a matter of time before limited partners said "enough" and stopped paying 2 and 20 to overpaid asset managers in a world in which central banks have "guaranteed" there is no longer any risk, just to underperform the <a href="http://www.zerohedge.com/news/2013-12-13/hedge-funds-underperform-sp-5th-year-row">market for a whopping 6 years in a row</a> now. And to showcase where Calpers decision came from here are just two charts. </p> <p>The first is from Goldman showing YTD performance by major asset class, with an emphasis on various hedge funds, and how for the sixth year in a row, hedge funds have underperformed the S&amp;P.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/HF%20YTD.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/HF%20YTD_0.jpg" width="600" height="352" /></a></p> <p>&nbsp;</p> <p>Wait, <em>six years</em>? Impossible. Oh no, quite possible. The chart below shows that while the S&amp;P is soaring into the stratosphere on the back of endless global liquidity injections (as a reminder, none other than JPM <a href="http://www.zerohedge.com/news/2014-09-07/jpmorgan-stunner-current-episode-excess-liquidity-most-extreme-ever">recently reported that global excess liquidity was at an all time high </a>and going higher), as today's latest news out of China definitively confirmed, hedge funds returns have yet to surpass their cycle highs.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/20140916_hedge.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/20140916_hedge_0.jpg" width="600" height="318" /></a></p> <p>&nbsp;</p> <p>And then of course, there's this: "<a href="http://www.zerohedge.com/news/2014-09-11/90-hedge-fund-managers-are-overpaid-relative-true-talent">90% Of Hedge Fund Managers Are Overpaid Relative To "True Talent</a>""</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The fees, which still make up as much as 2 percent of a fund’s assets, represent a disproportionately high share of the total remuneration unrelated to performance, said Nicolas Rousselet, head of hedge funds at Unigestion. To align managers’ pay more with performance, the fund industry should either abandon the management fee or combine it with a hurdle rate that one must achieve before collecting incentive fees, he said.</p> <p>&nbsp;</p> <p>"The philosophy of the hedge-fund industry, as it should be, is to remunerate true talent,” Rousselet said in a telephone interview on Sept. 9. “Fund managers should be remunerated when they perform. They should not be remunerated for doing nothing.”</p> <p>&nbsp;</p> <p>Fees are coming down amid efforts to win mandates in an industry that traditionally charges about 20 percent on performance and 2 percent on the total assets. Investors paid an average 1.69 percent last year, with the share of those who paid 1.5 percent or more at 79 percent, almost unchanged from 2012, according to a Deutsche Bank AG survey published in February.</p> <p>&nbsp;</p> <p>“Hedge-fund managers should work harder to justify the fees that they earn.”</p> </blockquote> <p>But while it is easy to bash hedge funds for consistently generating underwhelming returns (and being massively overpaid for it), it really is not their fault: the fault is not in our stars, dear Brutus, but in the Fed, and whoever the Chief Risk Officer of the "market" may be at any given moment. Because in a centrally-planned world in which markets are not allowed to decline, hedging as a concept is made obsolete. </p> <p>After all, there is no risk. </p> <p>Until there is. And the biggest irony will be that the Fed's idiotic policies, now in their 6th year, will ultimately demolish the only asset manager class whose job is to "hedge" risk, and just as the market crashes, there will be nobody left hedging said crash.</p> <p>Which, to some at least, will be poetically symmetric. </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="957" height="507" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/20140916_hedge.jpg?1410890649" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-16/calpers-vs-hedge-funds-debate-just-two-charts#comments Central Banks China Deutsche Bank None YTD Performance Tue, 16 Sep 2014 18:04:16 +0000 Tyler Durden 494425 at http://www.zerohedge.com Goldman's Take On China's "Stealth QE" http://www.zerohedge.com/news/2014-09-16/goldmans-take-chinas-stealth-qe <p><em>From Goldman's Yu Song:</em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Domestic media (Sina) reported that the PBOC conducted RMB 500bn of Standing Lending Facility operations with the big 5 commercial banks (ICBC, BOC, BoCOM, CCB, ABC). The reports note that the duration is 3 months and the RMB 500 bn is evenly split among the banks. <strong>This amount is roughly the same as a 50 bps cut to RRR for the whole banking system on a static basis </strong>(though the impacts of RRR cuts tend to be larger because they have ongoing effects). </p> <p>&nbsp;</p> <p>There is no official confirmation from the PBOC yet. <strong>Still, such an easing would be consistent with our expectation that (1) monetary policy will loosened amid the drastic slowdown in activity growth and falling inflation, and (2) full scale RRR and interest rate cuts are unlikely because they would be viewed as aggressive stimulus </strong>(see China: Sharp slowdown in activity in August, September 14, 2014).</p> <p>&nbsp;</p> <p>We expect monetary conditions to loosen modestly, which will provide some much needed support for demand growth. Other policies may follow. Front-loading of fiscal expenditure is one possibility--a disproportionate share of fiscal outlays (close to 20%) occurs in the last month of the year-- and could reduce recurring criticism of the year-end rush to spend. The government may also step up pressures on government agencies and local authorities to maintain momentum on investment growth. However, we see no indication of these measures yet. </p> <p>&nbsp;</p> <p>Given policymakers have shown a willingness to loosen in the face of weaker data, we believe growth will rebound in the coming months and the government will be able to reach the "around 7.5%" full year GDP growth target for 2014 (after positive effects of the expected GDP methodology adjustment to include R&amp;D).</p> </blockquote> <p>* * * </p> <p>It will rebound... for one quarter (helped no doubt because as Goldman also explained previously "<a href="http://www.zerohedge.com/news/2014-09-02/china-will-revise-its-gdp-definition-until-its-hits-government-growth-targets-goldma">China Will Revise Its GDP Definition Until Its Hits Government "Growth Targets</a>"), then tumble once more as we explained yesterday in "<a href="http://www.zerohedge.com/news/2014-09-15/why-chinas-latest-mini-stimulus-failed-again-one-chart">Why China's Latest Mini-Stimulus Failed Again, In One Chart</a>"&nbsp; thanks to the magic words: "<em><strong>Credit Impulse</strong>"</em></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/04/China%20response%20to%20credit%20surge.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/04/China%20response%20to%20credit%20surge_0.jpg" width="600" height="500" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="600" height="500" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/china%20credit%20impulse_0.jpg?1410889138" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-16/goldmans-take-chinas-stealth-qe#comments China Monetary Policy Tue, 16 Sep 2014 17:37:10 +0000 Tyler Durden 494424 at http://www.zerohedge.com This Seems To Be Going Well... http://www.zerohedge.com/news/2014-09-16/seems-be-going-well <p><em>Submitted by <a href="http://www.sovereignman.com/expat/this-seems-to-be-going-well-chart-15008/">Simon Black via Sovereign Man blog</a>,</em></p> <p><a href="http://www.gallup.com/poll/175793/no-change-mood-satisfied-not.aspx">Gallup released a new poll late last week</a> showing how many (or few, as it were) Americans are ‘satisfied’ with the direction of the country. 23%. That’s it. <strong>76% are NOT satisfied</strong>. Only 1% aren’t sure.</p> <p>The chart below shows the astounding, <strong>long-term decline since 2000</strong>.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_sat.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140916_sat_0.jpg" /></a></p> <p>Note, this is a trend that has outlasted three Presidents and six Congresses. It’s not about a single politician, or even ALL the politicians. <strong>It’s about the system itself.</strong></p> <p><span style="text-decoration: underline;"><strong>Bottom line, people are fed up. The system has failed. And people are starting to realize it.</strong></span> Where do you think this goes?</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="728" height="402" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140916_sat.jpg?1410873857" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-16/seems-be-going-well#comments Gallup Tue, 16 Sep 2014 17:19:43 +0000 Tyler Durden 494423 at http://www.zerohedge.com The Ongoing Tension Between Inflation and Growth in the People's Republic http://www.zerohedge.com/news/2014-09-16/ongoing-tension-between-inflation-and-growth-peoples-republic <p>China has announced a new stimulus program.</p> <p>&nbsp;</p> <p>The Government in the People&rsquo;s Republic is walking a tightrope. On the one hand, if the economy tanks, there will be an increase in civil unrest. And on the other hand, if the Chinese Government spends too much stimulating the economy, inflation will rip out of control (nearly 40% of the population of China lives off of $2 per day).</p> <p>&nbsp;</p> <p>So we continue to see the Chinese government inflate the economy, and then pull back, inflate the economy and then pull back.&nbsp; The Chinese stock market has reflected this as it has largely been moving sideways since the 2008 collapse.</p> <p>&nbsp;</p> <p><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user20289/imageroot/2014/09/sc_2.png" style="width: 460px; height: 284px;" /></p> <p>&nbsp;</p> <p>In an economy in which so much of GDP comes from investment, China is hoping that QE will work for it despite the clear evidence that QE has been a dud in Japan, the US, and the UK.</p> <p>&nbsp;</p> <p>The bigger issue for China is the fact that the rest of the world is in the doldrums. China is the biggest exporter to the EU. And the EU economy is in the toilet&hellip; again. The US isn&rsquo;t faring much better. And these two regions alone account for over a third of Chinese exports.</p> <p>&nbsp;</p> <p>China is hoping it can shift its economy away from exports to domestic consumption, but with 40% of the population living off of $2 per day&hellip; and much of the wealthy fleeing the country the first chance they get, the likelihood of this isn&rsquo;t great.</p> <p>&nbsp;</p> <p>Will this latest stimulus plan be the one to ignite growth again in the People&rsquo;s Republic? We&rsquo;ll see&hellip;but given that globally the world economy is slowing again&hellip; the odds aren&rsquo;t good.</p> <p>&nbsp;</p> <p>This concludes this article. If you&rsquo;re looking for the means of protecting your portfolio from the coming collapse, you can pick up a FREE investment report titled <strong><em>Protect Your Portfolio</em></strong> at <a href="http://phoenixcapitalmarketing.com/special-reports.html">http://phoenixcapitalmarketing.com/special-reports.html</a>.</p> <p>&nbsp;</p> <p>This report outlines a number of strategies you can implement to prepare yourself and your loved ones from the coming market carnage.</p> <p>&nbsp;</p> <p>Best Regards</p> <p>&nbsp;</p> <p>Phoenix Capital Research</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> http://www.zerohedge.com/news/2014-09-16/ongoing-tension-between-inflation-and-growth-peoples-republic#comments China Japan Tue, 16 Sep 2014 17:04:25 +0000 Phoenix Capital Research 494422 at http://www.zerohedge.com