http://www.zerohedge.com/fullrss2.xml/wp-content/plugins/uBillboard/Korean%20Buying%20Spree%20Boosts%20Brent%20Price en "We Are Failing To Deliver On Our Obligations As Americans" http://www.zerohedge.com/news/2015-03-01/we-are-failing-deliver-our-obligations-americans <p><a href="http://www.firstrebuttal.com/2015/02/28/im-bedazzled-by-the-bewilderment-surrounding-the-feds-behaviour-so-ive-de-engineered-to-the-bare-basics-and-oh-boy/"><em>Submitted by Thad Beversdorf via First Rebuttal blog</em></a>,</p> <p><u><strong>I&rsquo;m Bedazzled by the Bewilderment Surrounding the Fed&rsquo;s Behaviour... So I&rsquo;ve De-engineered to the Bare Basics... and Oh Boy!</strong></u></p> <p><span style="color: #000000;">According to former Fed Chair Ben Bernanke in an&nbsp;excerpt from a Nov. 3, 2009 Bloomberg article, the Fed strategy is that</span><span style="color: #000000;">&nbsp;<strong><em>&ldquo;..large-scale asset purchases should boost economic growth through lower borrowing costs and higher stock prices&hellip;&rdquo;</em></strong>. &nbsp;Now as depicted in the following chart (by Gallup) we see that the top 5% own almost 75% of financial wealth (i.e. stocks) while the bottom 80% own less than 5% (these are 2010 figures and certainly things&nbsp;have gotten significantly worse over the past 4 years). &nbsp;</span></p> <p><a href="http://www.firstrebuttal.com/wp-content/uploads/2015/02/Screen-Shot-2015-02-28-at-10.41.28-AM.png"><img alt="Screen Shot 2015-02-28 at 10.41.28 AM" class="alignnone size-full wp-image-1626" src="http://www.firstrebuttal.com/wp-content/uploads/2015/02/Screen-Shot-2015-02-28-at-10.41.28-AM.png" style="width: 600px; height: 740px;" /></a></p> <p><strong>Rather than boosting economic growth through incentivizing capital expenditures as has been the way of monetary policies gone by, this new Fed strategy, to explicitly target higher stock prices, is meant to create enough excess wealth to those on top&nbsp;by way of&nbsp;stocks such that some of that wealth would then trickle down to the rest of America. &nbsp;</strong>The Fed has made this&nbsp;clear both verbally and by way of action, that is, by ensuring (manipulating) higher stock prices. &nbsp;The result is that low cost debt is being used to invest into a risk free stock market. &nbsp;To get an idea of how this works look at the following table which I pulled from a December 2014 report from <a href="http://www.factset.com/websitefiles/PDFs/buyback/buyback_12.16.14" target="_blank">Factset.com</a>,</p> <p><a href="http://www.firstrebuttal.com/wp-content/uploads/2015/02/Screen-Shot-2015-02-28-at-10.48.59-AM.png"><img alt="Screen Shot 2015-02-28 at 10.48.59 AM" class="alignnone size-full wp-image-1627" src="http://www.firstrebuttal.com/wp-content/uploads/2015/02/Screen-Shot-2015-02-28-at-10.48.59-AM.png" style="width: 600px; height: 239px;" /></a></p> <p><strong>So during 2014, these 10 companies spent roughly $150B on share buybacks and paid out $55B in dividends, leading to an average market cap increase of around 25% across the 10 firms.</strong> &nbsp;It appears then that firms have been taking advantage of the low cost debt to borrow and buy back shares to increase market capital and pay out dividends which are typically reinvested directly&nbsp;back into the market.</p> <p>For instance, IBM has borrowed $33B since 2012 and has repurchased $37B worth of stock. &nbsp;Apple spent circa 9x the amount on share buybacks as they did on capital expenditures in 2014. &nbsp;The point here is that the Fed&rsquo;s&nbsp;policy strategy, as expressed by Bernanke above, of lowering borrowing costs and targeting higher stock prices to create wealth at the top was extremely successful. &nbsp;In fact, I doubt Bernanke ever dreamed how effective his wealth creation strategy would be.</p> <p><strong>However, the second part of the Fed&rsquo;s&nbsp;policy strategy was to have some of that extraordinary wealth trickle down to the 90%ers. &nbsp;Unfortunately this part of the strategy has failed miserably.</strong> &nbsp;Now as we&rsquo;ve discussed many time here on First Rebuttal, the second part of the strategy was inherently flawed in such a way so as to actually necessitate&nbsp;its failure. &nbsp;That is, by targeting (guaranteeing) higher stock prices you force CEO&rsquo;s and all other investors to push available capital that would otherwise have been reinvested back into the company and other economic investments to simply allocate&nbsp;directly into the market. &nbsp;Meaning no need or money left for hiring, and in fact, the layoffs continue along with the share buybacks.</p> <p><strong>Just how many layoffs are continuing is becoming difficult to ascertain. &nbsp;Ironically I found the following notice from the <a href="http://www.bls.gov/news.release/pdf/mmls.pdf" target="_blank">BLS</a>&nbsp;in its last Layoff Report&hellip;</strong></p> <p><a href="http://www.firstrebuttal.com/wp-content/uploads/2015/02/Screen-Shot-2015-02-28-at-11.44.38-AM.png"><img alt="Screen Shot 2015-02-28 at 11.44.38 AM" class="alignnone size-full wp-image-1628" src="http://www.firstrebuttal.com/wp-content/uploads/2015/02/Screen-Shot-2015-02-28-at-11.44.38-AM.png" style="width: 600px; height: 180px;" /></a></p> <p><strong>But suffice it to say looking at the U6 figure we know hiring for real breadwinner jobs has been sparse at best (we&rsquo;ll take a detailed&nbsp;look shortly). </strong>&nbsp;So the result of not only targeting but guaranteeing an upward moving market, which the Fed has been very explicit about doing, has literally prevented the trickle down part of the trickle down strategy meaning all we&rsquo;ve attained is extreme wealth creation to those on top. &nbsp;And this seems to be recognized by essentially everyone.</p> <p>What becomes obvious in researching the topic of &lsquo;trickle down economics&rsquo; is that this is one subject that appears to have almost unanimous&nbsp;agreement amongst everyone outside of the political class. &nbsp;Left, Right, Gay, Straight, Religious, Atheist, you name it they agree on the subject unless they hold a political office. &nbsp;In fact, the resounding agreement is that&nbsp;this latest experiment has been a tremendous failure. &nbsp;That said,<strong> here we are in year 6 of the now completely failed experiment with no signs of changing course. </strong>&nbsp;Rather than allocating efforts to reshaping our economic growth strategy, all efforts seem to be focused on selling a false story of success to the American people.</p> <p><strong>So this brings us to the debate around whether the parabolic move in equity valuations is the same as last time, meaning the asset bubble the eventually burst in 2008. </strong>&nbsp;The &lsquo;secular bulls&rsquo; are screaming &ldquo;It is different this time!&rdquo;. &nbsp;And well I agree, things are very different this time around. &nbsp;But is that a good thing or a bad thing? &nbsp;Well let&rsquo;s take a stroll past all of the bullshit nonsense from both sides of the bull bear coin and just look at the very parameters that are time tested indications&nbsp;of growth and valuation.</p> <p><a href="http://www.firstrebuttal.com/wp-content/uploads/2015/02/Screen-Shot-2015-02-27-at-7.40.01-PM.png"><img alt="Screen Shot 2015-02-27 at 7.40.01 PM" class="alignnone wp-image-1619" src="http://www.firstrebuttal.com/wp-content/uploads/2015/02/Screen-Shot-2015-02-27-at-7.40.01-PM.png" style="width: 599px; height: 404px;" /></a></p> <p>So just on pure price level we see about a 25% increase between 2007 and today on the S&amp;P 500. &nbsp;That would suggest we have had material&nbsp;improvement today relative to 2007. &nbsp;Now let&rsquo;s have a look at some multiples to see how we feel about our growth prospects relative to 2007.</p> <p><a href="http://www.firstrebuttal.com/wp-content/uploads/2015/02/Market-Valuation.jpg"><img alt="Market Valuation" class="alignnone wp-image-1608" src="http://www.firstrebuttal.com/wp-content/uploads/2015/02/Market-Valuation.jpg" style="width: 600px; height: 371px;" /></a></p> <p>The chart depicts price to sales of S&amp;P 500 companies and the&nbsp;Adjusted Buffet Indicator. &nbsp;We are using price to sales because it is a much better long term gauge than price to earnings as earnings, especially given all of the share buybacks and reallocation of funds from capex to income, is easily manipulated in the short term. &nbsp;What we find in price to sales is that today&rsquo;s multiple is 30% higher than in 2007 (according to multpl.com). &nbsp;This suggests the market is pricing in some pretty heavy growth relative to the expected growth in 2007.</p> <p><strong>The Adjusted Buffet indicator is a gauge I developed to adjust out reported economic gains that are solely a function of consumption from debt rather than income.</strong> &nbsp;The idea being that debt consumption is actually a net negative to economic growth and therefore is nonsensical to include in growth measures. &nbsp;What we see is that apples to apples the Adjusted Buffet indicator has grown by 150% since 2007, suggesting that either the economy needs to accelerate significantly or market pricing needs to come down.</p> <p>And really this is the crux of the whole debate. &nbsp;<strong>Is the economy poised to accelerate or will the market revert back to historic norms through price collapse, as it did in 2008. &nbsp;So let&rsquo;s have a look at our growth prospects. </strong>&nbsp;&lsquo;Secular bulls&rsquo; are obviously claiming this time is very different from last time arguing that there will be no repricing as fundamentals actually do signal growth acceleration. &nbsp;Now that&rsquo;s what they&rsquo;re claiming but as we always do here at First Rebuttal, let&rsquo;s have our own look to validate or discredit those claims. &nbsp;Specifically, we are looking for signals of economic acceleration that would support the implied expectation of&nbsp;relatively higher future corporate cash flows.</p> <p><a href="http://www.firstrebuttal.com/wp-content/uploads/2015/02/GDP-Growth.jpg"><img alt="GDP Growth" class="alignnone wp-image-1612" src="http://www.firstrebuttal.com/wp-content/uploads/2015/02/GDP-Growth.jpg" style="width: 600px; height: 370px;" /></a></p> <p>The above chart is the official real average GDP growth over a 5 yr period ending in the subject year. &nbsp;The idea is to see if generally throughout the economy we see signals of stronger growth than we had in 2007. &nbsp;What we find is that economic growth&nbsp;is 24% lower than it was is 2007. &nbsp;So this does not support today&rsquo;s higher multiples. &nbsp;But let&rsquo;s keep going. <strong>&nbsp;The market is certainly pricing higher multiples today than 2007 and so surely we should&nbsp;find the growth source for these higher multiples if we just keep digging.</strong></p> <p><a href="http://www.firstrebuttal.com/wp-content/uploads/2015/02/Income.jpg"><img alt="Income" class="alignnone wp-image-1611" src="http://www.firstrebuttal.com/wp-content/uploads/2015/02/Income.jpg" style="width: 600px; height: 347px;" /></a></p> <p><strong>In the above chart, sourced from the <a href="http://www.federalreserve.gov/pubs/bulletin/2014/pdf/scf14.pdf" target="_blank">Federal Reserve</a>, we see a 10% reduction in cash inflows for the American consumer&nbsp;and we see a whopping 40% decline in net worth to the bottom 90% since 2007. </strong>&nbsp;Historically, 70% of economic growth has come directly by way of expenditures from the American consumer. &nbsp;One has to ask oneself, does a consumer with less cash inflow and significantly lower wealth, as absolutely evidenced in the above chart i.e. this is not arguable, lead to sustained higher expected expenditures and thus future corporate cash flows?? &nbsp;The market apparently thinks so, unless we can find another source for the market&rsquo;s growth expectations. &nbsp;So let&rsquo;s carry on&hellip;</p> <p><strong>Well consumer cash flows can increase via a rise in income&nbsp;or reduction in costs. </strong>&nbsp;Above is the income&nbsp;side which failed to show any rational expectation for signs of consumer expenditures&nbsp;growth but what about the cost side? &nbsp;Well let&rsquo;s take a look at consumers&rsquo; cost of goods&nbsp;and debt service relative to 2007 to see if we have freed up some cash on the consumer&rsquo;s cost side.</p> <p><img alt="Screen Shot 2015-02-27 at 1.33.16 PM" class="alignnone wp-image-1613" src="http://www.firstrebuttal.com/wp-content/uploads/2015/02/Screen-Shot-2015-02-27-at-1.33.16-PM.png" style="width: 600px; height: 363px;" /></p> <p><strong>The deflator is a better measure of the bare necessities as these are generally domestic goods and services as opposed to imported e.g. food, rent, public transport, etc. </strong>&nbsp;And so we see that cost of goods and services&nbsp;on just the staples have moved up about 2% per year despite the CPI measurement of closer to 1% per year. &nbsp;And so it is clear from the above chart that we had no price relief since 2007 and as such still no logical expectation for increased consumer expenditures. &nbsp;But what about debt service? &nbsp;Interest rates are lower so perhaps the American consumer has freed up some cash flow due to lower rates?</p> <p><a href="http://www.firstrebuttal.com/wp-content/uploads/2015/02/DebtGDP.jpg"><img alt="Debt&amp;GDP" class="alignnone wp-image-1610" src="http://www.firstrebuttal.com/wp-content/uploads/2015/02/DebtGDP.jpg" style="width: 601px; height: 356px;" /></a></p> <p>Despite the decline in prime interest rates, <strong>average consumer credit rates saw only a 6% decline (from 14.5% to 13.7%, sourced from St. Louis Fed) vs an increase in consumer credit levels of around 30%, as depicted in the above chart.</strong> &nbsp;The implication is that the American consumer has increased their total debt service relative to 2007 meaning expected consumer expenditures should be lower than in 2007.&nbsp; This means that both the income and cost side of the American consumes&rsquo; cash flows provide an expectation of lowered consumer&nbsp;expenditures relative to 2007. &nbsp;Thus current market multiples should actually be lower not higher based on the American consumer&rsquo;s financial position. &nbsp;But the search must go on&hellip; we are nothing if not perseverant here at F.R. so let&rsquo;s keep on truck&rsquo;n.</p> <p>Ok,&nbsp;so what&nbsp;if&nbsp;consumer cash flows are down and have no signals of improving relative to 2007.&nbsp; This doesn&rsquo;t necessitate that multiples need&nbsp;actually be lower than in 2007. &nbsp;If each dollar is being used more effectively than in 2007 we could actually generate higher ultimate corporate cash flow&nbsp;growth than in 2007 and this could&nbsp;support higher market valuations. &nbsp;Let&rsquo;s take a look&hellip;</p> <p><a href="http://www.firstrebuttal.com/wp-content/uploads/2015/02/Resource-Effectiveness.jpg"><img alt="Resource Effectiveness" class="alignnone wp-image-1609" src="http://www.firstrebuttal.com/wp-content/uploads/2015/02/Resource-Effectiveness.jpg" style="width: 600px; height: 372px;" /></a></p> <p>The above chart depicts how effectively we are using both money supply and debt to generate economic growth relative to 2007. &nbsp;And we find that our effectiveness at using money supply has declined by about 25% while our ability to generate output growth from debt has plummeted by 75% since 2007. &nbsp;This actually tells us that even if cash flows were the same as in 2007 our overall growth would still be slower. &nbsp;Given the American consumer actually has less cash flow our reduced effectiveness will&nbsp;result in much lower expected&nbsp;growth than in 2007 and, as such, should result in&nbsp;lower market multiples based on the consumer and economic efficiency.</p> <p><strong>This is not looking promising for validating the higher market multiples but there could be one saving grace to all of this. </strong>&nbsp;Jobs are the key to every economy. &nbsp;The tighter the job market the greater the income distribution. &nbsp;The greater the income distribution the greater all of the above become. &nbsp;And so let&rsquo;s take a look at jobs today relative to 2007 to look for signs of a tighter job market.</p> <p><a href="http://www.firstrebuttal.com/wp-content/uploads/2015/02/Employment.jpg"><img alt="Employment" class="alignnone wp-image-1607" src="http://www.firstrebuttal.com/wp-content/uploads/2015/02/Employment.jpg" style="width: 600px; height: 385px;" /></a></p> <p><strong>Disappointingly&nbsp;we find that the job market is much looser than it was in 2007 with unemployed and underemployed 26% higher today. </strong>&nbsp;And so the likelihood of higher cash flows stemming from a tighter job market is essentially zero, especially given the continuing trend to trade away employees for share buybacks.</p> <p><u><strong>And so what we have done by way of the above analysis is provide the proof for the market&rsquo;s mispricing. </strong></u>&nbsp;Thing of it is, we already knew the market is mispriced. &nbsp;As discussed at the beginning of the&nbsp;article The Fed has told us several times that their mandate for the past 6 years has been to manipulate the market higher so that it creates wealth for those at the top in hopes that this wealth will trickle down onto the rest of America. &nbsp;Based on that declaration of price manipulation, we know the market is mispriced. &nbsp;There is nothing grey or convoluted about that. &nbsp;None of this has been done in secret. &nbsp;So why is it that these TV pundits and politicians spend so much time pitching that the market is fairly valued?? &nbsp;And<strong> how is it that those&nbsp;deemed market &lsquo;pros&rsquo; are buying into it??</strong></p> <p>Well perhaps it is not so much that these market pros are buying into it as they are trying to convince us that nothing needs to change. &nbsp;You see while the Fed&rsquo;s manipulation has not been done covertly <strong>the fact that it has failed to create any benefit to the bottom 90% of Americans is very much being kept a secret.</strong> &nbsp;Those on top for which the current Fed manipulation is creating extraordinary wealth absolutely do not want a change of policies. &nbsp;And why would they? &nbsp;They are earning incredible wealth while taking no risk.</p> <p><strong>This completely perverts the basis of capitalism which results in huge misallocations of resources.</strong> &nbsp;It is this very misallocation of resources that not only created the economic destruction we saw in the above charts but will continue to deepen the grave we are digging ourselves. &nbsp;What no one can say for certain is how long the Fed manipulation will&nbsp;last because we&rsquo;ve never been in a situation where the open mandate has been explicitly to push stock prices higher.</p> <p><u><strong><em>The hope was that the wealth would trickle down and improve the fundamentals enough to support the market valuation so that the Fed could quietly hand the market back over to fundamentals as the main pricing mechanism. &nbsp;Unfortunately what they&rsquo;ve now realized is that the fundamentals are not going to catch up to the market valuation. &nbsp;And so the Fed&nbsp;will have to either continue to manipulate the market or allow it to reprice materially downward.</em></strong></u></p> <p><strong>I expect the Fed has no idea what the next move will be. </strong>&nbsp;As I&rsquo;ve mentioned in the past the Fed can theoretically continue as long as USD strength holds up. &nbsp;If USD devalues significantly the Fed will have to step back and the market will reprice at that point. &nbsp;That said, there&nbsp;doesn&rsquo;t seem to be a near term concern for USD weakness. &nbsp;But you can see what an incredibly difficult conundrum the Fed has created for itself and for the nation.</p> <p>By implementing the wrong policies and then refusing to acknowledge it&nbsp;early on, the Fed has undoubtedly&nbsp;created irreparable&nbsp;destruction for all but the very top of the food chain. &nbsp;The destruction is already slowly playing out and that is clear when looking at&nbsp;income, net worth and consumer debt levels. &nbsp;And at some point, as we saw in 2008, an unimaginable amount of pain is going to hit home almost overnight. &nbsp;What more can anyone say about this.</p> <p><strong>The market is way out of whack and that will continue until it doesn&rsquo;t. &nbsp;In the meantime 90% of America will slowly degrade. &nbsp;How can any of this be considered a success as we hear so often from the market pros? </strong>&nbsp;The one thing that is clear in all of this mess is that our policymakers have failed miserably and so too then have our legislators for allowing this nonsense to continue. &nbsp;But worse is that we the people are failing as Americans. &nbsp;We have an obligation to those who came before us and did their job as Americans and to those who will come after deserving as many rights as were passed onto us.</p> <p><strong>But we are failing to deliver on our obligations as Americans, that is undeniable. </strong>&nbsp;We are allowing the political class to plunder our wealth, negate our freedoms and desecrate our Constitution. &nbsp;Sadly we have become the immoral populace our founding fathers warned all future generations not to become. &nbsp;As the &lsquo;Founding Father of Scholarship and Education&rsquo;, Noah Webster, put it in 1832,</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>&ldquo;<span style="color: #000000;">if the citizens neglect their duty and place unprincipled men in office, the government will soon be corrupted; laws will be made, not for the public good, so much as for selfish or local purposes; corrupt or incompetent men will be appointed to execute; the public revenues will be squandered on unworthy men; and the rights of the citizens will be violated or disregarded. If a republican government fails to secure public prosperity and happiness,&nbsp;</span>it must be because the citizens neglect the Divine commands and elect bad men to make and administer the laws&rdquo;</em></p> </blockquote> <p><strong>The duty and obligation is ours and so too then are the failures and successes of our society.</strong> &nbsp;Unfortunately ours will be the first generation to have failed at being American. &nbsp;Yet regrettably more unfortunate is that it will be the innocent&nbsp;generations yet to come that will bear the full costs of our failures. &nbsp;We are 15 years in to what is absolute denial regarding the competence of our nation&rsquo;s policymakers. &nbsp;Their failures in taking us to a false war in Iraq, in making a mockery of&nbsp;our rights as Americans and in destroying our&nbsp;economic opportunities are our failures. &nbsp;<strong>Yet here we sit, silent and indifferent to our own demise; so completely antithetical to the character of a true American.</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="605" height="479" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150301_head.jpg?1425232368" /> </div> </div> </div> http://www.zerohedge.com/news/2015-03-01/we-are-failing-deliver-our-obligations-americans#comments Apple Ben Bernanke Ben Bernanke BLS Borrowing Costs Capital Expenditures Consumer Credit CPI ETC Federal Reserve Gallup Iraq Money Supply None St Louis Fed St. Louis Fed Sun, 01 Mar 2015 18:45:37 +0000 Tyler Durden 502678 at http://www.zerohedge.com "Spectacular Developments" In Austria: Bail-In Arrives After €7.6 Billion Bad Bank Capital Hole "Discovered" http://www.zerohedge.com/news/2015-03-01/spectacular-developments-austria-bail-arrives-after-%E2%82%AC76-billion-bad-bank-capital-hol <p>Slowly, all the lies of the "recovery", all the skeletons in the closet, and all the bodies swept under the rug are emerging. </p> <p>Moments ago, <a href="http://orf.at/stories/2267206/">Austrian ORF reported</a> that there have been "<strong><em>spectacular developments</em></strong>" in the case of the Hypo Alpe Adria bad bank, also known as the Heta Asset Resolution, where an outside audit of Heta's balance sheet <strong>exposed a capital hole of up to 7.6 billion euros ($8.51 billion) which the government was not prepared to fill, the Austrian Financial Market Authority said</strong>.</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/03/hypo%20group_0.jpg" width="450" height="300" /></p> <p>As a result, according to <a href="http://www.reuters.com/article/2015/03/01/austria-heta-idUSL5N0W30OR20150301">Reuters</a>, the bad bank that was created in the aftermath of the Hypo collapse<strong>, is itself about to be unwound, as the bad bank itself goes bad!</strong></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong> "Austria's Financial Market Authority stepped in on Sunday to wind down "bad bank" Heta Asset Resolution and imposed a moratorium on debt repayments by the vehicle set up last year from the remnants of defunct lender Hypo Alpe Adria."</strong></p> </blockquote> <p>In short: Austria just cut off state support of what was until this moment a state-backed, wind-down vehicle and a key pillar of trust in what was already a shaky financial system.</p> <p>Not surprisingly, today's shock announcement comes a week after Austria's Standard reported that up to a five billion euro impairment at Heta would take place, a report which the Finance Ministry called <strong>"pure speculation" and noted that the Bank was in good health. </strong><a href="https://translate.google.com/translate?sl=auto&amp;tl=en&amp;js=y&amp;prev=_t&amp;hl=en&amp;ie=UTF-8&amp;u=http%3A%2F%2Fderstandard.at%2F2000012314950%2FHeta-wird-abgewickelt-die-Glaeubiger-muessen-bluten&amp;edit-text=">According to Standard</a>, among the reasons for the massive capital shortfall was the plunge in collateral as a result of the continuing crisis in South East Europe <a href="https://translate.google.com/translate?sl=auto&amp;tl=en&amp;js=y&amp;prev=_t&amp;hl=en&amp;ie=UTF-8&amp;u=http%3A%2F%2Fderstandard.at%2F2000011191060%2FBund-prueft-Abwicklungsfaehigkeit-der-Heta&amp;edit-text=">which meant that the value </a>of "real estate in South East Europe, shopping centers and tourism projects, deteriorated massively" driven <a href="https://translate.google.com/translate?sl=auto&amp;tl=en&amp;js=y&amp;prev=_t&amp;hl=en&amp;ie=UTF-8&amp;u=http%3A%2F%2Fderstandard.at%2F2000012314950%2FHeta-wird-abgewickelt-die-Glaeubiger-muessen-bluten&amp;edit-text=">largely by the appreciation of the Swiss Franc</a>. "<strong>As a result, the volume of bad loans has increased significantly."</strong></p> <p>Everyone was wondering who the first big casualty of the SNB's currency peg failure would be. We now know the answer. <strong><br /></strong></p> <p>Further <a href="http://www.reuters.com/article/2015/03/01/austria-heta-idUSL5N0W30OR20150301">from Reuters</a>, the finance ministry confirmed this in a statement, adding Heta was not insolvent and that debt guarantees by Hypo's home province of Carinthia and the federal government were unaffected by the move.</p> <p>The problem is that going forward that nobody knows who insures what, what various other state and quasi-state guarantors suddenly unclear as to who is responsible for what: the province of Carinthia guarantees back €10.7 billion worth of Heta debt. The federal government backs a 1 billion euro bond issued in 2012 that the ministry said would be honored in full. </p> <p>As a result of the "sudden" capital deficiency, there will be a moratorium on repayment of principal and capital lasts until May 31, 2016, giving the FMA time to work out a detailed plan to ensure equal treatment of all creditors, the FMA said in a decree published on its website. </p> <p>Perhaps a badder bank to rescue the bad bank?</p> <p>According to Reuters calculations, More than 9.8 billion euros worth of debt is affected, including senior notes worth 450 million due on March 6 and 500 million on March 20.</p> <p>But the punchline, is that while the world was waiting for Greece to announce capital controls, or a bail-in over the past week, it was none other than one of the Europe's most pristeen credits (one which until recently was rated AAA/Aaa) that informed creditors a bail-in is imminent: "<strong>The finance ministry noted that creditors can be forced to contribute to the costs of winding down Heta - or "bailed in" - under new European legislation that Austria adopted this year so that taxpayers do not have to shoulder the entire burden.</strong>" </p> <p><a href="http://www.bloomberg.com/news/articles/2015-03-01/austria-on-track-to-bail-in-heta-creditors-after-aid-stop">Bloomberg confirms </a>that the ministry announced that under new EU rules means creditors can be forced to share losses.</p> <p>Of course, this being Austria, <a href="http://en.wikipedia.org/wiki/Creditanstalt">and the Creditanstalt</a>, aka the bank which failed in 1931 under almost identical circumstances and set off the dominos that led to a global financial crisis which in turn bank fanned the flames of the Great Depression, also being Austrian, suddenly everyone is asking: "<em>what just happened and what happens next?</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="275" height="183" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/hypo%20group.jpg?1425232661" /> </div> </div> </div> http://www.zerohedge.com/news/2015-03-01/spectacular-developments-austria-bail-arrives-after-%E2%82%AC76-billion-bad-bank-capital-hol#comments Bad Bank Bond Creditors Currency Peg Great Depression Greece None Real estate recovery Reuters Swiss Franc Sun, 01 Mar 2015 17:59:46 +0000 Tyler Durden 502677 at http://www.zerohedge.com Meanwhile In California, Unambiguously Ungood... http://www.zerohedge.com/news/2015-03-01/meanwhile-california-unambiguously-ungood <p>Having <a href="http://www.zerohedge.com/news/2015-02-27/here-what-americans-spent-their-gas-savings">discovered this week what Americans are spending their "gas savings" on</a>, and noted that nationwide <a href="http://www.zerohedge.com/news/2015-02-26/gas-prices-hit-2-month-highs-rise-fastest-decade">gas prices are rising at the fastest pace in over a decade</a>; as AP reports, <strong>for Californians, it's considerably worse as gas prices have soared 60c to $3.23 per gallon in the last few weeks</strong>. Between refinery shutdowns (due to strikes and explosions) removing 17% of California's production, and the seasonal shift to the less-polluting summer blend of gas mandated in California, supply remains drastically short spiking prices 20-30c on Thursday alone as one gas station owner exclaimed, <strong>in 48 years "I've never seen anything like this kind of [price spike]."</strong> </p> <p>&nbsp;</p> <p>Nationwide, gas prices are rising at the fastest pace in over a decade...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/02-overflow/20150301_gas1.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/02-overflow/20150301_gas1_0.jpg" width="600" height="304" /></a></p> <p>&nbsp;</p> <p><strong>But California is the hardest hit for now. </strong><em>(photo taken Friday in LA)</em><strong><br /></strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/02-overflow/20150301_gas2.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/02-overflow/20150301_gas2_0.jpg" width="600" height="486" /></a></p> <p>&nbsp;</p> <p> <a href="https://finance.yahoo.com/news/gas-prices-soar-california-supply-shrinks-213436057--finance.html?soc_src=mail&amp;soc_trk=ma">As AP reports,</a> gas prices are soaring in California in a classic example of supply and demand after an explosion stopped gasoline production at an Exxon Mobil refinery while another remains offline due to labor unrest...</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Average retail gas prices in the state have surged 25 cents a gallon in less than a week</strong>, from $2.98 per gallon for regular on Monday to $3.23 per gallon on Friday. That caps a run that saw the price of regular unleaded go<strong> up 60 cents per gallon since Jan. 30</strong> as refineries prepare to shift to a summer blend of fuels.</p> <p>&nbsp;</p> <p>In some areas of Southern California, gas station owners were forced to pass price hikes of 24 cents per gallon along to consumers on Thursday after seeing wholesale prices shoot up. Prices in Northern California lagged a day, but by Friday were also rising; an independent operator with a chain of gas stations around the <strong>San Francisco Bay area boosted prices 20 cents a gallon for regular on Friday, to $3.19</strong>.</p> <p>&nbsp;</p> <p>The situation underscores the frustrating complexity of the gasoline market in California, where state environmental regulations mandate a specialized blend of fuel that isn't used anywhere else in the U.S.</p> <p>&nbsp;</p> <p>Because of that, California is economically isolated and can't easily or quickly purchase fuel from outside the state in a crisis.</p> <p>&nbsp;</p> <p>Between the strike at the Martinez Tesoro refinery and the explosion at Exxon's Torrance refinery, <strong>the two facilities combined make up 17 percent of the state's crude oil processing capacity</strong>, said Gordon Schremp, a senior fuels specialist with the California Energy Commission.</p> <p>&nbsp;</p> <p><strong>"It takes a while to get some significant supplies from outside," </strong>Schremp said. "It's very normal that we'd see a significant price spike."</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p>Gas station owners, meanwhile, chafed at having to pass the costs on to consumers. The profit margin for station owners was 18.5 cents per gallon in California on Friday, a break-even or money-losing proposition for many independent retailers, said Jeff Lenard, a spokesman for the National Association of Convenience Stores.</p> <p>&nbsp;</p> <p>In Torrance, station owner Frank Scotto was forced to increase his prices by 24 cents per gallon on Thursday. <span style="text-decoration: underline;"><strong>He hasn't seen such a spike since he went into the gas station business in 1967, he said.</strong></span></p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>"I printed out the price change and I'm framing this thing because I've never seen this kind of thing in all my years,"</strong></span> said Scotto, who owns a Mobil and Exxon station.</p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p><a href="http://www.gasbuddy.com/gb_gastemperaturemap.aspx">As GasBuddy shows</a> - the California differential is extreme...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/02-overflow/20150301_gas4.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/02-overflow/20150301_gas4_0.jpg" width="600" height="452" /></a></p> <p>&nbsp;</p> <p>*&nbsp; *&nbsp; *</p> <p>However, while the extreme price moves are hitting California for now, given RBOB's recent rise, <strong>nationwide gas prices look set to top $2.60 within a week...&nbsp;</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/02-overflow/20150301_gas3.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/02-overflow/20150301_gas3_0.jpg" width="600" height="331" /></a></p> <p>Or as CNBC's Larry Kudlow would say: "<strong>Unambiguously ungood</strong>" for everyone.</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="467" height="375" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/CA%20gas%20price.jpg?1425231014" /> </div> </div> </div> http://www.zerohedge.com/news/2015-03-01/meanwhile-california-unambiguously-ungood#comments Crude Crude Oil Exxon Larry Kudlow Sun, 01 Mar 2015 17:24:17 +0000 Tyler Durden 502676 at http://www.zerohedge.com Taking The Monetary Policy Ride Into The Theater Of The Absurd http://www.zerohedge.com/news/2015-03-01/taking-monetary-policy-ride-theater-absurd <p><a href="http://www.alhambrapartners.com/2015/02/24/this-is-all-science-you-see/"><em>Submitted by Jeffrey Snider via Alhambra Investment Partners</em></a>,</p> <p><strong>There are any number of colloquialisms for monetary repression, &ldquo;reach for yield&rdquo; and serial asset bubbles being a few. In the vernacular of monetary policy itself, such color is disdained in favor of technocratic banality &ndash; &ldquo;portfolio effects.&rdquo;</strong> The idea is simple, which is to say that by repressing the returns on &ldquo;safe&rdquo; investments financial agents will be forced, not of their own volition, into &ldquo;riskier&rdquo; assets and asset classes. The prices of those risky assets rise, and that is supposed to contribute to economy-wide good feelings which loosen purse strings, in the equally prosaic terminology of the &ldquo;wealth effect.&rdquo;</p> <p><strong>There is, yet again, an <a href="http://www.alhambrapartners.com/2015/02/20/the-drowning-of-innovation-as-a-mathematical-inequality/" target="_blank">unearned sense of precision</a> about the task and the linkages to actual economic function that belies the chaos and mess of a real economic foundation.</strong> Removing organic profitability as a mechanism for resource distribution also obliterates constraints on methodical behavior. We may not think of such discipline as useful during periods of economic malaise, where &ldquo;risk&rdquo; seems to be lacking, but true discipline leads to the very processes which create <em>sustainable</em> economic advance. The allure of monetary-driven &ldquo;risk&rdquo; is an illusion of artificial bursts of at best short-term activity.</p> <p><strong>It seems we have come to a sort of crossroads state whereby past attempts at fostering economic advance through &ldquo;reach for yield&rdquo;, portfolio effects, directly interfere with current commanding efforts. </strong>Without admitting guilt, central banks and political regulators have combined to &ldquo;make banks safer&rdquo; largely through more complex banking regulation conspicuously free of free thought and common sense; especially Basel III. One component, which was &ldquo;learned&rdquo; of the Panic of 2008, was that banks &ldquo;need&rdquo; a liquidity buffer to withstand &ldquo;market&rdquo; funding withdrawal. There are, of course, formulas that determine these.</p> <p>Banks especially in Europe were found wanting of such a buffer and have been &ldquo;encouraged&rdquo; to build their own around sovereign debt &ndash; which is believed, still, to be the most highly negotiable of all asset classes despite relatively close experience. That last problem was &ldquo;dealt with&rdquo; via Mario Draghi and the ECB&rsquo;s implicit promises to &ldquo;do whatever it takes.&rdquo; That apparently includes undertaking QE.</p> <p>The problem of QE is that it removes those same bonds in question from circulation, sequestered securely within the confines of the central bank (regardless of whether that central bank <a href="http://www.alhambrapartners.com/2014/10/01/reverse-repo-as-a-fairy-tale/" target="_blank">has made provisions</a> for addressing the direct short-comings of just such an effort).<strong> The trade-off is one of bonds for &ldquo;cash&rdquo;, but more of modern liquidity concepts than cash, that will on balance lead to &ldquo;portfolio effects.&rdquo;</strong></p> <p>In one sense, the ECB in particular is saying that banks have become &ldquo;too safe&rdquo; and the European economy needs &ldquo;more risk.&rdquo; It intends not just to force just such an outcome but also to finance it. Banks, for their part, are <a href="http://www.reuters.com/article/2015/02/20/us-markets-ecb-bonds-idUSKBN0LO0VP20150220" target="_blank">not quite ready to &ldquo;comply&rdquo;</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Weeks before the European Central Bank begins a program to buy about 1 trillion euros ofeuro zone government bonds, banks, pension funds and insurers across the continent are hoarding them for regulatory or accounting reasons.</p> <p>&nbsp;</p> <p>That may complicate implementation of the quantitative easing program, aimed at reviving growth and inflation in the euro zone. The ECB might have to pay way above market prices, or take additional measures to encourage investors to sell.</p> <p>&nbsp;</p> <p>&ldquo;We prefer to hold on to them,&rdquo; said Antoine Lissowski, deputy CEO at French insurer CNP Assurances. &ldquo;The ECB&rsquo;s policy &hellip; is reaching its limits now.&rdquo;</p> </blockquote> <p>I especially like the phrase &ldquo;take additional measures to encourage investors to sell&rdquo;, as you can almost envision some Hollywood Mafioso-type threatening a poor, expensively-suited bank executive not over blood money but on behalf of &ldquo;monetary&rdquo; authorities to take their cash. There is an element of comedy here that is un-writable as fiction; nobody could dream just such a scene.</p> <p><u><strong>In that respect, perhaps monetary depredations have reached their inevitable logical limitations. The banks &ldquo;must&rdquo; be made safe because of the last panic, but banks must be made risky because of the economy.</strong></u></p> <p><a href="http://www.alhambrapartners.com/wp-content/uploads/2015/02/ABOOK-Feb-2015-ECB-QE-Regulation-v-Monetarism.jpg"><img alt="ABOOK Feb 2015 ECB QE Regulation v Monetarism" class="aligncenter size-full wp-image-28588" src="http://www.alhambrapartners.com/wp-content/uploads/2015/02/ABOOK-Feb-2015-ECB-QE-Regulation-v-Monetarism.jpg" style="width: 599px; height: 328px;" /></a></p> <p>Of course, the central bankers under this paradigm don&rsquo;t think in such broad terms, as they see no incompatibility at all. <strong>Again, they think there is some precision or mathematics of regressions that can &ldquo;find&rdquo; harmony between two largely and seemingly contrary or even irreconcilable forces &ndash; as if banks can be made &ldquo;just safe enough&rdquo; while also &ldquo;just risky enough.&rdquo;</strong> That is because an actual economy does so, where organic profit governs that relationship &ndash; why can&rsquo;t central banks simply do it instead by dual-mandate? This is the reason for the facileness and technocracy of jargon, as this is all supposedly objective mathematics rather than anything emotionally explosive like bubbles.</p> <p>While there are any number of reasons commandment of this kind will fail, it really comes down to the market itself, namely that such forces of &ldquo;safety&rdquo; and &ldquo;risk&rdquo; are not really homogenous and harmonized unto themselves. It takes all sorts of agents and actions to produce stability from chaos, whereby many people &ldquo;take the other side.&rdquo; The relative movement of prices, free from directive interference, acts as ultimate arbiter of what constitutes &ldquo;risk&rdquo;; safety results from that. Central banks take no sides at all and simply decree based upon poorly constructed mathematics that are stale by the time they are implemented.</p> <p><a href="http://www.alhambrapartners.com/wp-content/uploads/2015/02/ABOOK-Feb-2015-ECB-QE-Circular.jpg"><img alt="ABOOK Feb 2015 ECB QE Circular" class="aligncenter size-full wp-image-28587" src="http://www.alhambrapartners.com/wp-content/uploads/2015/02/ABOOK-Feb-2015-ECB-QE-Circular.jpg" style="width: 600px; height: 438px;" /></a></p> <p><strong>And with such opposing policy intentions, is it any wonder how bubbles are formed? </strong>Which &ldquo;side&rdquo; wins out in the end? The amount of repression taken by monetary authorities will overwhelm any sense of propriety about even mathematically-drawn &ldquo;prudence.&rdquo; That is the case in every bubble, but in this one instance, especially in Europe, the tug-of-war is in the very instrument of both policies &ndash; government bonds. The ECB is demanding, reduced to constituent cases, that banks buy government bonds for every government bond they sell to the ECB. Banks are rightfully balking as &ldquo;why bother?&rdquo; It&rsquo;s not just the naked convolution to the whole scheme, it is entirely emblematic and demonstrative as to why bank &ldquo;capital&rdquo; is so relatively expensive under monetary repression.</p> <p><strong>Since, however, the &ldquo;risk&rdquo; side always wins in these things, the ECB mafia will show up with the heaviest repression possible.</strong></p> <p>And yet, somehow,&nbsp;monetary policy is still believed neutral in the long run and that bubbles are market events. Central banks have shown why they cannot command economic performance, but that doesn&rsquo;t mean they can&rsquo;t give one hell of a <em>comedic</em> performance. <strong>We have taken a monetary ride now into the theater of the absurd.</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="526" height="318" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150301_ALH.jpg?1425226656" /> </div> </div> </div> http://www.zerohedge.com/news/2015-03-01/taking-monetary-policy-ride-theater-absurd#comments Bond Central Banks European Central Bank Fail Monetary Policy Quantitative Easing Sovereign Debt Sun, 01 Mar 2015 16:37:19 +0000 Tyler Durden 502675 at http://www.zerohedge.com Dollar Drivers: Central Bank Meetings, Jobs Data and More http://www.zerohedge.com/news/2015-03-01/dollar-drivers-central-bank-meetings-jobs-data-and-more <p>March is said to come in like a lion and leave like a lamb. &nbsp;It does indeed appear to be coming in like a lion for investors. &nbsp;There are four major central bank meetings and the US employment report. &nbsp;Although Yellen did not convince many that the Fed is set to hike rates in June, yields in the eurozone continue to fall in anticipation of the bond buying scheme that will start later this month. &nbsp;The resulting widening of the interest rate differentials lent the dollar support.</p> <p>&nbsp;</p> <p>Two emerging market central banks are in play as well. &nbsp;Brazil is one of the few central banks engaged in a tightening cycle. &nbsp;It is set to continue. The Selic rate bottomed in 2012-2013 at 7.25%. &nbsp;It stands at 12.25% now. &nbsp;The consensus expects another 50 bp rate hike. &nbsp; A 25 bp rate hike would be seen as a potential signal that a pause and possibly the end of the tightening cycle is at hand. &nbsp;</p> <p>&nbsp;</p> <p>Poland is expected to cut the base rate by 25 bp to 1.75%. &nbsp;It had cut the base rate 50 bp last September. The main issue is not growth. &nbsp;Fourth quarter GDP expanded 3% year-over-year. &nbsp;Rather Poland, like so many countries in Europe, is experiencing deflation. &nbsp;In January, consumer prices were 1.3% below year ago levels. &nbsp;</p> <p>&nbsp;</p> <p>There were three developments over the weekend that may help shape the investment climate. First and most likely to impact trading on Monday is the rate cut by the People's Bank of China on Saturday. &nbsp; The 25 bp cut in the key one-year lending and deposit rates (to 5.35% and 2.50% respectively). &nbsp; The fact that the PBOC cut rates is not very surprising, but the precise timing is nearly always unpredictable. &nbsp;Most of the speculation has focused possible yuan depreciation, and some analysts have been playing up the risk that the 2% dollar-yuan band would be widened. &nbsp;The rate cut overshadows the official PMI readings that were also reported over the weekend. &nbsp;The manufacturing PMI ticked up to 49.9 from 49.8 while non-manufacturing PMI firmed to 53.9 from 53.7. &nbsp;</p> <p>&nbsp;</p> <p>The PBOC explained the rate cut in terms of a decline in inflation, which results in an increase in real rates. &nbsp;Consumer prices were 0.8% higher year-over-year in January while producer prices have been falling for three years. &nbsp;Also on Saturday, China reported that housing prices in the 100 major cities fell by 3.84% in the year through February. &nbsp; The rate cuts are not expected to reverse the slowing of the economy, arrest the deflation, or lift house prices. &nbsp;They will, though, help large businesses and state-owned enterprises to cope with the more challenging economic conditions. The rates cuts will help facilitate the rolling over of existing debt.</p> <p>&nbsp;</p> <p>The second important development over the weekend was the Sunday election in Estonia (the results are not know at pixel time). &nbsp;The latest polls showed that a party with formal ties with Putin's United Russia Party is ahead of both of the governing coalition parties. &nbsp;The government is pro-EU and pro-NATO. &nbsp;However, a third of the population (~1.3 mln) comprises ethnic Russians.</p> <p>&nbsp;</p> <p>As it has with several countries, Russia has made incursions into Estonian airspace. &nbsp;In recent years Russia has developed a hybrid warfare in Moldova, Georgia, and Ukraine, &nbsp;Although Russia's economy is being squeezed through sanctions; its tactics have seemingly succeeded. &nbsp;It continues to occupy part of Georgia. &nbsp;It supports a separatist region in Moldova. &nbsp;Its annexation of Crimea stands and Ukraine's dismemberment is a fait accompli at Minsk, where the cease fire was agreed before the insurgents made one more strategic thrust.</p> <p>&nbsp;</p> <p>Estonia could be a target of Russia's ambitions should Putin chose to challenge NATO itself, which up until now Russia has shied away from doing. &nbsp;Narva is town in Estonia near the Russian border. Half the people do not have Estonian passports, and 90% are native Russian speakers, according to press reports. &nbsp;Given Putin's view of the world, and the apparent success of his tactics, Narva (or a town like it) would seem to be a potential target as the next theater of Russian ambitions.</p> <p>&nbsp;</p> <p>The third development takes us from Russian foreign policy to domestic. &nbsp;One of the leading opposition critics of the Russian government, Boris Nemtsov was assassinated early Saturday morning in Moscow. &nbsp; Putin called it a "provocation" which opposition leaders took as an indication the President was going to blame the opposition itself. &nbsp;A large opposition rally to be held Sunday, protesting the economic crisis and Russia's involvement in Ukraine turned to more of a memorial for Nemstov. &nbsp;</p> <p>&nbsp;</p> <p>II</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>Four major central banks meet in the week ahead. &nbsp;The least interesting is the Bank of England's meeting. &nbsp;It is still seen to be at least a few quarters away from hiking rates, and despite the low inflation, and possible deflation, the bar is high for an easier policy. &nbsp;More important for sterling and UK assets than the MPC meeting are the PMI reports. &nbsp;They will likely confirm that the UK's economic recovery remains on track after slowing in H2 14.</p> <p>&nbsp;</p> <p>The ECB meeting on the same day will command more attention. &nbsp;However, it is most unlikely to do anything, having announced a larger and more aggressive effort to expand its balance sheet through asset purchases at its last meeting; no new measures are likely to be announced. &nbsp;Still, it can provide more operational color to its bond purchase program. &nbsp;The ECB's staff will produce new macro-economic forecasts. &nbsp;Growth may be revised higher, but inflation forecasts may be shaved.</p> <p>&nbsp;</p> <p>The ECB, through the Eurosystem, will launch its bond buying program later this month. &nbsp;It still appears to be some legal and technical, operational issues that need to be sorted out before the purchases can begin. &nbsp;Many participants are skeptical that it will lift price pressures for consumers (CPI) which is its declared objective. &nbsp; The BOJ, which is many times more aggressively expanding its balance sheet, has seen consumer prices pressures fall steadily for several months and could slip back into deflation in Q2. &nbsp;</p> <p>&nbsp;</p> <p>Many participants also are wary potential operational difficulties. &nbsp;In the US, foreign holders of Treasuries were more willing to sell them to the central bank than domestic investors. &nbsp;In Europe, banks and pension funds appear to be among the largest holders of government bonds. &nbsp;There are many reasons why they may not be so eager to part with their securities. &nbsp;What can replace them and the yields they generate (remember the yields are locked in at the purchase of the fixed income instrument)? &nbsp;Selling them is a tax event that some investors will not want to incur. &nbsp;Some of the demand for sovereign bonds by banks stems from the regulatory considerations. &nbsp;</p> <p>&nbsp;</p> <p>Another significant group of investors are foreign central banks. &nbsp; They could pare holdings by selling to the ECB. &nbsp;This could be reflected in a reduction of the euro's share of reserves, but it might not be clear until the COFER report at the end of the year. &nbsp;Nevertheless, the investors will be sensitive to market talk along these lines. &nbsp;</p> <p>&nbsp;</p> <p>The central banks in Australia and Canada meet. &nbsp;These meetings are live in the sense that rate cuts are possible. &nbsp;Both &nbsp;central banks have cut interest rates already this year. &nbsp;The derivative markets show a high degree of confidence that both central banks will cut rates again. &nbsp; The issue here is timing, and it effects short-term traders more than medium and longer term investors. &nbsp;</p> <p>&nbsp;</p> <p>In the past week, the pendulum of expectations for next week's meetings shifted away from cuts now. A weak capex survey from Australia at the end of last week encouraged the doves to stick with their views. &nbsp; It is a close call, and our impression is that officials had framed the issue as February or March last month. &nbsp;Back-to-back cuts may be more aggressive than is warranted by the data. &nbsp;</p> <p>&nbsp;</p> <p>With some verbal guidance by Bank of Canada officials, investors had been convinced that another rate cut would be delivered at the March meeting. &nbsp;However, last week Governor Poloz was understood to mean that a cut is not imminent. &nbsp;In our reading, Poloz simply restated the official policy--that the January rate cut was an insurance policy meant to buy time for the economy to adjust to the fall in oil prices. &nbsp;</p> <p>&nbsp;</p> <p>We suspect that there is a greater risk of a Bank of Canada rate hike than an RBA rate cut in the week ahead. &nbsp;That said, the failure to cut rates might not spur a strong rally as the lack of action now will simply raise the conviction for a later move. &nbsp;</p> <p>&nbsp;</p> <p>III</p> <p>&nbsp;</p> <p>It is a hellacious week for US economic reports, culminating with the employment report at the end of the week. &nbsp;There an economic report every day. &nbsp;The economic data will provide insight into the pace of growth in the first quarter, but the key is the impact on Fed policy. &nbsp;High frequency data may help create the price action that short-term participants like, but no one wants policy to be based on such noisy time series. &nbsp;The general picture of the economy, namely one that has returned to what appears to be trend growth after a period of acceleration in April-September period last year. &nbsp;</p> <p>&nbsp;</p> <p>Headline inflation has been pulled down by the drop in oil prices, but the core rate, which is the aim of policy, is steadier. &nbsp; Weakness in the parts of the country most linked to oil production will also likely be born out by the Beige Book prepared the mid-March FOMC meeting. &nbsp;However, most businesses have lower input costs, and households have more disposable income. &nbsp;The data is expected to confirm consumers are not necessarily increasing their consumption, though household consumption did rise 4.2% in Q414. &nbsp;Rather, at least at the start of the 2015, it appears households bumped up their savings. &nbsp;</p> <p>&nbsp;</p> <p>The core PCE deflator is not expected to have changed in January from the 1.3% pace in December. The Federal Reserve would feel better if this measure ticked up in the coming months. &nbsp;It would make the June rate decision easier. &nbsp; Fed Chair Yellen was clear on the matter, however. &nbsp;The core rate has also likely been knocked down by the drop in oil prices. &nbsp;This is transitory, and the base effect wanes late this year and early next. &nbsp;At the January FOMC meeting, the statement indicated that the Fed continued to expect that after some near-term softness, it continued to expect inflation will approach the 2% reference rate. &nbsp;</p> <p>&nbsp;</p> <p>It is that expectation coupled with continued improvement in the labor market that underpins our expectation for a June hike. &nbsp;There has been a clear acceleration in jobs growth. &nbsp;The three-month average is 336k while the six-month average is 282k. &nbsp;Growth growth in February is expected to have slowed considerably. &nbsp;The consensus expectation of 235k would be the slowest since last August. &nbsp; Hourly earnings, which had fallen 0.2% &nbsp;in December rose 0.5% in January and are expected to have risen 0.2% in February. &nbsp; This would cause the year-over-year pace to slip &nbsp;to 2.1% from 2.2%. &nbsp;&nbsp;</p> <p>&nbsp;</p> <p>On balance, the Federal Reserve will likely see the employment report as consistent with continued improvement. &nbsp;There is no compelling new piece of evidence that would shake their confidence that the 2% inflation target will be achieved in the medium term. &nbsp;Yellen argued that the international factors are mixed, and net-net are in neutral. &nbsp;We think the most likely scenario is that the Fed drops "patience" in March, and true enough, it will not signal an immediate rate hike, which would be April. &nbsp;Instead, it really is still patient and waits for June. &nbsp;</p> <div class="field field-type-filefield field-field-image-blog"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_blog" width="539" height="578" alt="" src="http://www.zerohedge.com/sites/default/files/images/user113905/imageroot/lion.jpg?1425225484" /> </div> </div> </div> http://www.zerohedge.com/news/2015-03-01/dollar-drivers-central-bank-meetings-jobs-data-and-more#comments Australia Beige Book Bond Brazil Central Banks China Consumer Prices CPI Estonia Eurozone Federal Reserve fixed Foreign Central Banks Housing Prices People's Bank Of China Poland Price Action recovery Ukraine Yuan Sun, 01 Mar 2015 15:58:09 +0000 Marc To Market 502674 at http://www.zerohedge.com Venezuela's Maduro Claims US Pilot Arrested For Espionage, Bans Bush, Cheney From Entering Nation http://www.zerohedge.com/news/2015-03-01/venezuels-maduro-claims-us-pilot-arrested-espionage-bans-bush-cheney-entering-nation <p>In case the world needed any more geopolitical risk "hotspots", overnight Venezuela's flailing president Nicolas Maduro, faced with an unprecedented economic crisis at home, decided to do what most authoritarian rulers do when faced with imminent civil unrest: point the finger abroad, and in this case, at Washington, as a distraction. With crude oil plunging, with opposition leaders being arrested, and with the economy generally in shambles, Venezuela has in recent weeks accused the United States of being behind an alleged coup plot. Then overnight, Maduro switched from broad generalizations to specifics when, as CNN reports, <strong>Maduro said Saturday an unspecified number of Americans were arrested "a few days ago" for engaging in espionage and recruitment activities. </strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/03/VZ%20arrest.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/03/VZ%20arrest_0.jpg" width="600" height="342" /></a></p> <p>More <a href="http://www.cnn.com/2015/02/28/americas/venezuela-us-pilot/index.html">from CNN</a>: </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The President said they included an American pilot of Latin American origin, arrested in the southwest border state of Táchira. </p> <p>&nbsp;</p> <p>He said the pilot was found in possession of "all kinds of documents" and was being interrogated by the authorities, though he did not identify him. The Venezuelan government has made many similar claims in recent years, without ever substantiating them. </p> <p>&nbsp;</p> <p>Maduro also announced Saturday a series of measures, including visa requirements for U.S. citizens and the downsizing of the U.S. Embassy in Caracas, to counteract what he called U.S. "interference" in his country.</p> </blockquote> <p>Considering the US has not replied officially (yet), there are two possibilities: Maduro made up the whole thing, which is far more likely, or the US did indeed engage in some covert ops in Venezuela. Considering the CIA's recent track record around Africa and Eastern Europe, that possibility certainly can not be discounted.</p> <p>Speaking at an "anti-imperialist" rally in the capital, Maduro - who is surely feeling slighted following recent US overtures toward former socialist peer Cuba - said visas would now be required for all U.S. visitors and that the U.S. Embassy in Caracas would now need foreign ministry approval for any meetings. The Embassy, which he said had more than 100 staff, is to be reduced to a number closer to the 17 Venezuelan diplomats based in Washington.</p> <p><strong>Additionally, a group of prominent U.S. officials, current and retired, will be banned from entering Venezuela because of what Maduro said was their involvement in "bombing Iraq, Syria and Vietnam" and other "terrorist" actions. The officials include George W. Bush, former U.S. Vice President Dick Cheney, former CIA Director George Tenet and several current members of Congress, including Ileana Ros-Lehtinen, Bob Menendez and Mario Diaz-Balart.</strong></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Following the Maduro's announcement Diaz-Balart reacted via Twitter, saying he has "always wanted to travel to a corrupt country that is not a free democracy. And now Castro's lap dog won't let me!" </p> <p>&nbsp;</p> <p>The move comes after the U.S. government last month approved a law under which Venezuelan officials allegedly involved in human rights violations are to have their visas revoked and their U.S. assets frozen. </p> <p>&nbsp;</p> <p>A relatively small, but noisy crowd, dressed mostly in revolutionary red, applauded and cheered the measures announced by the President from a&nbsp; platform outside the presidential palace in downtown Caracas.</p> </blockquote> <p>Meanwhile, away from the arrest announcement, CNN also reported that "gour missionaries from Bethel Evangelical Free Church in Devils Lake, North Dakota were released by Venezuelan authorities on Saturday, a church official said."</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Pastor Bruce Dick said the missionaries arrived in Venezuela on February 20 and were detained a few days ago. </p> <p>&nbsp;</p> <p>"We love the Venezuelan people and have served alongside them for over 12 years," Dick said. "We have been praying along with hundreds or thousands of others for their release and for those in Venezuela who also have been affected by this." </p> <p>&nbsp;</p> <p>It is unclear if the detention and release of these Americans is connected to Maduro's charges of espionage. </p> </blockquote> <p>Should the price of Brent resume its downward trend, or even remain around $60 where it is a loss-maker fro Venezuela, expect even more amusing antics from Maduro, whose regime may be falling apart before his eyes, however if anything, that only makes him more unpredictable and irrational.</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="748" height="426" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/VZ%20arrest.jpg?1425224216" /> </div> </div> </div> http://www.zerohedge.com/news/2015-03-01/venezuels-maduro-claims-us-pilot-arrested-espionage-bans-bush-cheney-entering-nation#comments Crude Crude Oil Eastern Europe Iraq Twitter Twitter Sun, 01 Mar 2015 15:48:37 +0000 Tyler Durden 502673 at http://www.zerohedge.com Caught On Tape: The Moment Boris Nemtsov Was Assassinated http://www.zerohedge.com/news/2015-02-28/caught-tape-moment-boris-nemtsov-was-assassinated <p>As the world contemplates the various 'provocation' scenarios - <strong>a Russian act, a CIA act meant to look like a Russian act, or a Russian act meant to look like a CIA act?</strong> - <strong>the following clip suggests this was anything but an ad hoc shooting...</strong></p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/02-overflow/20150228_Nemtrsov1_0.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/02-overflow/20150228_Nemtrsov1_0.jpg" width="568" height="344" /></a></p> <p>&nbsp;</p> <p>The narrator suggests, as Nemtsov and his companion are walking along the road, a garbage truck (or cleaning vehicle) is behind them. When the garbage truck comes alongside the couple, it slows down, then moves ahead, then stops... and another man leaves the vehicle and jumps in a following car, which speeds away with tires smoking...</p> <p>&nbsp;</p> <p><iframe src="https://www.youtube.com/embed/nyTsRQ1MMpA" width="480" height="360" frameborder="0"></iframe></p> <p>*&nbsp; *&nbsp; *</p> <p><a href="http://ukraineatwar.blogspot.co.uk/2015/02/analyzing-cctv-footage-that-seemed-to.html?m=1">As Ukraineatwar blog concludes,</a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The video seems to be real, because the location EXACTLY fits the know murder spot. It does not seem likely that such a video could have been prepared in advance.</p> <p>&nbsp;</p> <p>The murder EXACTLY takes place when the cleaning vehicle passes by. It is absolutely unclear where the assassin come from. Nobody can be seen walking towards or behind Nemtsov and his companion. Neither can somebody be seen walking to that specific spot to wait for them.</p> <p>&nbsp;</p> <p>Therefore<strong> it seems very likely that the cleaning vehicle has something to do with it and the assassin could have traveled with the vehicle.</strong></p> <p>&nbsp;</p> <p><strong>Since Nemtsov was shot from behind and the cleaning vehicle already caught up with them when the murder took place, it does not seem likely that the assassin traveled on the passenger seat next to the driver.</strong> He had to open and close the door and that may have drawn their attention. It seems likely that he had traveled on the back of the car. He could easily jump on and off and could also estimate if there were other people to close to them to do the operation at all at that moment.</p> <p>&nbsp;</p> <p><strong>Using a cleaning vehicle gives a lot of advantage: you can drive slowly, draw no attention, wait if necessary and thus pick exactly the right moment (with no other people nearby).</strong></p> <p>&nbsp;</p> <p>It does seem like the assassin had been following the couple already when he jumped on the vehicle. They may have crossed the road where the cleaning car was waiting. After seeing them pass by, it started entering the bridge. When they passed the assassin, he jumped on. In this way they could be sure that they had the right person AND they could pick the right moment without running to catch them up.</p> <p>&nbsp;</p> <p><strong>All the getaway car had to do was to wait until the cleaning vehicle got on the bridge, see the hit man jumped on and then get to follow from a distance to slowly catch up.</strong></p> <p>&nbsp;</p> <p><strong>It all does look like a REALLY WELL orchestrated operation.</strong></p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>Totally weird is that there is no traffic at all behind them.</strong></span> Such a moment is very hard to pick, especially when you can see that there are many cars before the assassination moment. Right after the car picks up the assassin, new cars start arriving again. This indicates there had been<strong> some 'orchestration' here too. Either traffic lights had been red on all fronts or traffic had been halted in another way.</strong></p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>Of course - while this seems very coordinated - one might question the fact that surely they would be aware that cameras would be everywhere?</p> <p>*&nbsp; *&nbsp; * </p> <p>Questions remain, but Soviet ex-President Mikail Gorbachev is sure, the assassination of opposition politician Boris Nemtsov as an attempt to destabilize Russia. <a href="http://sputniknews.com/russia/20150228/1018878675.html">As Sputnik News reports</a>,</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>"The assassination of Boris Nemtsov is an<strong> attempt to complicate the situation in the country, even to destabilize it by ratcheting up tensions between the government and the opposition</strong>,” Gorbachev said.</p> <p>&nbsp;</p> <p><strong>“Just who did this is hard to say, let’s not jump to any conclusions right now and give the investigators time to sort this all out,”</strong> he added.</p> <p>&nbsp;</p> <p>Gorbachev did not rule out that the high-profile murder could encourage some people to urge the authorities to introduce <strong>a state of emergency, which he said would only exacerbate what is already a difficult situation</strong>.</p> </blockquote> <p>*&nbsp; *&nbsp; *</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="568" height="344" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150228_Nemtrsov1.jpg?1425168306" /> </div> </div> </div> http://www.zerohedge.com/news/2015-02-28/caught-tape-moment-boris-nemtsov-was-assassinated#comments Sun, 01 Mar 2015 15:09:39 +0000 Tyler Durden 502668 at http://www.zerohedge.com Which New World Order Are We Talking About? http://www.zerohedge.com/news/2015-03-01/which-new-world-order-are-we-talking-about <p><em>Submitted by Jeff Thomas of <a href="http://www.internationalman.com/articles/which-new-world-order-are-we-talking-about">International Man</a></em></p> <p><strong>Which New World Order Are We Talking About?</strong></p> <p><strong><br /></strong></p> <p><strong><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/02/novus%20ordo.jpg" width="235" height="240" style="float: left; margin-right: 10px;" /></strong>Those of us who are libertarians have a tendency to speak frequently of “the New World Order.” When doing so, we tend to be a bit unclear as to what the New World Order is. Is it a cabal of the heads of the world’s governments, or just the heads of Western governments? Certainly bankers are included somewhere in the mix, but is it just the heads of the Federal Reserve and the IMF, or does it also include the heads of JPMorgan, Goldman Sachs, etc.? And how about the Rothschilds? And the Bundesbank—surely, they’re in there, too?</p> <p>And the list goes on, without apparent end.</p> <p>Certainly, all of the above entities have objectives to increase their own power and profit in the world, but to what degree do they act in concert? Although many prominent individuals, world leaders included, have proclaimed that a New World Order is their ultimate objective, the details of who’s in and who’s out are fuzzy. Just as fuzzy is a list of details as to the collective objectives of these disparate individuals and groups.</p> <p>So, whilst most libertarians acknowledge “the New World Order,” it’s rare that any two libertarians can agree on exactly what it is or who it’s comprised of. We allow ourselves the luxury of referring to it without being certain of its details, because, “It’s a secret society,” as evidenced by the Bilderberg Group, which meets annually but has no formal agenda and publishes no minutes. We excuse ourselves for having only a vague perception of it, although we readily accept that it’s the most powerful group in the world.</p> <p>This is particularly true of Americans, as Americans often imagine that the New World Order is an American construct, created by a fascist elite of US bankers and political leaders. The New World Order may be better understood by Europeans, as, actually, it’s very much a European concept—one that’s been around for quite a long time.</p> <p>It may be said to have had its beginnings in ancient Rome. As Rome became an empire, its various emperors found that conquered lands did not automatically remain conquered. They needed to be managed—a costly and tedious undertaking. Management was far from uniform, as the Gauls could not be managed in the same manner as the Egyptians, who in turn, could not be managed like the Mesopotamians.</p> <p>After the fall of Rome, Europe was in many ways a shambles for centuries, but the idea of “managing” Europe was revived with the Peace of Westphalia in 1648. The peace brought an end to the Thirty Years’ War (1618-1648) in the Holy Roman Empire and the Eighty Years’ War (1568-1648) between Spain and the Dutch Republic. It brought together the Holy Roman Empire, The House of Habsburg, the Kingdoms of Spain and France, the Dutch Republic, and the Swedish Empire.</p> <p>Boundaries were set, treaties were signed, and a general set of assumptions as to the autonomy within one’s borders were agreed, to the partial satisfaction of all and to the complete satisfaction of no one… Sound familiar?</p> <p>Later, Mayer Rothschild made his name (and his fortune) by becoming the financier to the military adventures of the German Government. He then sent his sons out to England, Austria, France, and Italy to do the same—to create a New World Order of sorts, under the control of his family through national debt to his banks. (Deep Throat was right when he said, “Follow the Money.”)</p> <p>So, the concept of a New World Order has long existed in Europe in various guises, but what does this tell us about the present and, more important, the future?</p> <p>In our own time, we have seen presidents and prime ministers come and go, whilst their most prominent advisors, such as Henry Kissinger and Zbigniew Brzezinski, continue from one administration to the next, remaining advisors for decades. Such men are often seen as the voices of reason that may be the guiding force that brings about a New World Order once and for all.</p> <p>Mister Brzezinski has written in his books that order in Europe depends upon a balance with Russia, which must be created through the control of Ukraine by the West. He has stated repeatedly that it’s critical for this to be done through diplomacy, that warfare would be a disaster. Yet, he has also supported the US in creating a coup in Ukraine. When Russia became angered at the takeover, he openly supported American aggression in Ukraine, whilst warning that Russian retaliation must not be tolerated.</p> <p>Henry Kissinger, who has literally written volumes on his “pursuit of world peace” has, when down in the trenches, also displayed a far more aggressive personality, such as his angry recommendation to US President Gerald Ford to “smash Cuba” when Fidel Castro’s military aid to Angola threatened to ruin Mr. Kissinger’s plans to control Africa.</p> <p>Whilst the most “enlightened” New World Order advisors may believe that they are working on the “Big Picture,” when it comes down to brass tacks, they clearly demonstrate the same tendency as the more aggressive world leaders, and reveal that, ultimately, they seek to dominate. They may initially recommend diplomacy but resort to force if the other side does not cave to “reason” quickly.</p> <p>If we stand back and observe this drama from a distance, what we see is a theory of balance between the nations of Europe (and, by extension, the whole world)—a balance based upon intergovernmental agreements, allowing for centralised power and control.</p> <p>This theory might actually be possible if all the countries of the world were identical in every way, and the goals of all concerned were also identical. But this never has been and can never be the case. Every world leader and every country will differ in its needs and objectives. Therefore, each may tentatively agree to common conditions, as they have going back to the Peace of Westphalia, yet, even before the ink has dried, each state will already be planning to gain an edge on the others.</p> <p>In 1914, Europe had (once again) become a tangle of aspirations of the various powers—a time bomb, awaiting only a minor incident to set it off. That minor incident occurred when a Serbian national assassinated an Austrian crown prince. Within a month, Europe exploded into World War. As Kissinger himself has observed in his writings, “[T]hey all contributed to it, oblivious to the fact that they were dismantling an international order.”</p> <p>Since 1648, for every Richelieu that has sought to create a New World Order through diplomacy, there has been a Napoleon who has taken a militaristic approach, assuring that the New World Order applecart will repeatedly be upset by those who are prone to aggression. Further, even those who seek to operate through diplomacy ultimately will seek aggressive means when diplomatic means are not succeeding.</p> <p>A true world order is unlikely. What may occur in its stead would be repeated attempts by sovereign states to form alliances for their mutual benefit, followed by treachery, one- upmanship, and ultimately, aggression. And very possibly a new World War.</p> <p>But of one thing we can be certain: Tension at present is as great as it was in 1914. We are awaiting only a minor incident to set off dramatically increased international aggression. With all the talk that’s presently about as to a New World Order, what I believe will occur instead will be a repeat of history.</p> <p>If this belief is correct, much of the world will decline into not only external warfare, but internal control. Those nations that are now ramping up into police states are most at risk, as the intent is already clearly present. All that’s needed is a greater excuse to increase internal controls. Each of us, unless we favour being engulfed by such controls, might be advised to internationalise ourselves—to diversify ourselves so that, if push comes to shove, we’re able to get ourselves and our families out of harm’s way.</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="235" height="240" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/novus%20ordo.jpg?1425221503" /> </div> </div> </div> http://www.zerohedge.com/news/2015-03-01/which-new-world-order-are-we-talking-about#comments ETC Federal Reserve Ford France Gerald Ford Goldman Sachs goldman sachs Henry Kissinger Italy Napoleon National Debt Roman Empire Ukraine Sun, 01 Mar 2015 14:53:30 +0000 Tyler Durden 502672 at http://www.zerohedge.com Tens Of Thousands Rally In Moscow To Mourn Slain Boris Nemtsov http://www.zerohedge.com/news/2015-03-01/tens-thousands-rally-moscow-mourn-slain-boris-nemtsov <p>If there was supposed to be any crackdown on opposition voices in Russia following the shocking death of Boris Nemtsov, it wasn't evident today during a rally in which tens of thousands converged in central Moscow this monring to mourn the veteran liberal politician Boris Nemtsov, whose killing on the streets of the capital has, according to AP, shaken Russia's beleaguered opposition. </p> <p><a href="http://abcnews.go.com/International/wireStory/thousands-march-moscow-mourn-slain-boris-nemtsov-29305641">As AP reports</a>, and as the photos below show, the mourners marched to the bridge near the Kremlin where Nemtsov was gunned down shortly before midnight Friday. "The march could serve to energize the opposition or it could prove to be a brief outpouring of emotions that once again dissipates in a climate of fear."</p> <p>Russia's federal investigative agency said it was looking into several possible motives for his killing. </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The first possibility, the Investigative Committee said, was that the murder was aimed at destabilizing the political situation in Russia and Nemtsov was a "sacrificial victim for those who do not shun any method for achieving their political goals."</p> <p>&nbsp;</p> <p>This suggestion echoed comments by Putin's spokesman and other Russian politicians that the attack was a "provocation" against the state.</p> </blockquote> <p>Opposition activists had planned a protest rally on Sunday, which the city demanded they hold in a suburban neighborhood. After Nemtsov's death, they called instead for a demonstration to mourn him in central Moscow. The city gave its quick approval.</p> <p>Below are various snapshots from the rally:</p> <blockquote class="twitter-tweet" lang="en"><p>MT <a href="https://twitter.com/michaelbirnbaum">@michaelbirnbaum</a>: Panoramic view of <a href="https://twitter.com/hashtag/Nemtsov?src=hash">#Nemtsov</a> March, alongside the Kremlin walls. <a href="http://t.co/GRVhc9UDTV">pic.twitter.com/GRVhc9UDTV</a> <a href="https://twitter.com/hashtag/%D0%BD%D0%B5%D0%BC%D1%86%D0%BE%D0%B2?src=hash">#??????</a></p> <p>— Boris Zilberman (@rolltidebmz) <a href="https://twitter.com/rolltidebmz/status/572034523694796800">March 1, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"> <p><a href="https://twitter.com/hashtag/Nemtsov?src=hash">#Nemtsov</a> march banner: "these bullets hit every one of us" <a href="http://t.co/PBx2TAGypp">pic.twitter.com/PBx2TAGypp</a></p> <p>— Dmitry Vostok (@DmitryVostok) <a href="https://twitter.com/DmitryVostok/status/572002705113268224">March 1, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"> <p><a href="https://twitter.com/hashtag/Nemtsov?src=hash">#Nemtsov</a> March begins. Quiet crowd walks down to Kremlin embankment towards bridge where he was shot. Thousands. <a href="http://t.co/jm9dMGiFrO">pic.twitter.com/jm9dMGiFrO</a></p> <p>— Dmitry Vostok (@DmitryVostok) <a href="https://twitter.com/DmitryVostok/status/572003564387745792">March 1, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"> <p>???? ???? ?? ????? <a href="https://twitter.com/hashtag/%D0%9D%D0%B5%D0%BC%D1%86%D0%BE%D0%B2?src=hash">#??????</a> <a href="https://twitter.com/hashtag/Nemtsov?src=hash">#Nemtsov</a> <a href="http://t.co/1hlR4BiFSR">pic.twitter.com/1hlR4BiFSR</a></p> <p>— ??? ??? (@riafanru) <a href="https://twitter.com/riafanru/status/572031777570746369">March 1, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"> <p>Nemtsov's memorial looks like the biggest protest in Russia since Bolotnaya. Organizers claiming 50,000-100,000. <a href="http://t.co/HQjFzl3fQc">pic.twitter.com/HQjFzl3fQc</a></p> <p>— max seddon (@maxseddon) <a href="https://twitter.com/maxseddon/status/572026497109774336">March 1, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"> <p>People pouring into mourning march to honor <a href="https://twitter.com/hashtag/Nemtsov?src=hash">#Nemtsov</a> <a href="http://t.co/Blg0CDv9er">http://t.co/Blg0CDv9er</a> <a href="http://t.co/6Whyjd63TZ">pic.twitter.com/6Whyjd63TZ</a></p> <p>— RT (@RT_com) <a href="https://twitter.com/RT_com/status/572017368035139584">March 1, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"> <p>Moscow March feels more like a wake than opposition rally <a href="https://twitter.com/hashtag/Nemstov?src=hash">#Nemstov</a> <a href="http://t.co/bODrQtXhUW">pic.twitter.com/bODrQtXhUW</a></p> <p>— Anissa Naouai (@ANOWRT) <a href="https://twitter.com/ANOWRT/status/572027097406963712">March 1, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"> <p>Police lined up on march route next to bridge where nemtsov killed <a href="http://t.co/aanZgpMXXk">pic.twitter.com/aanZgpMXXk</a></p> <p>— tom balmforth (@BalmforthTom) <a href="https://twitter.com/BalmforthTom/status/572010032298123264">March 1, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"> <p><a href="https://twitter.com/hashtag/Nemtsov?src=hash">#Nemtsov</a> March approaches place where he was killed, flowers laid across 100-150 metres <a href="http://t.co/D4bB6VgAe4">pic.twitter.com/D4bB6VgAe4</a></p> <p>— Dmitry Vostok (@DmitryVostok) <a href="https://twitter.com/DmitryVostok/status/572022069178843136">March 1, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"> <p>Mourners reach bridge where <a href="https://twitter.com/hashtag/Nemtsov?src=hash">#Nemtsov</a> was killed <a href="http://t.co/Blg0CDv9er">http://t.co/Blg0CDv9er</a> <a href="http://t.co/8DPWTl62fk">pic.twitter.com/8DPWTl62fk</a></p> <p>— RT (@RT_com) <a href="https://twitter.com/RT_com/status/572019594136846336">March 1, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"> <p><a href="https://twitter.com/hashtag/Nemtsov?src=hash">#Nemtsov</a> marchers shout Russia without Putin, No to war, Russia will be free <a href="http://t.co/6965oDYAom">pic.twitter.com/6965oDYAom</a></p> <p>— Sarah Rainsford (@sarahrainsford) <a href="https://twitter.com/sarahrainsford/status/572026398723973120">March 1, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"> <p>Mikhail Kasyanov on the bridge where <a href="https://twitter.com/hashtag/Nemtsov?src=hash">#Nemtsov</a> died: "We won't forgive, we won't forget. Boris with us" <a href="http://t.co/F90sMD66T9">pic.twitter.com/F90sMD66T9</a></p> <p>— Ryskeldi Satke (@RyskeldiSatke) <a href="https://twitter.com/RyskeldiSatke/status/572029628392460288">March 1, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"> <p>Ukrainian, reported organizer of <a href="https://twitter.com/hashtag/Odessa?src=hash">#Odessa</a> Massacre, came to Moscow today to mourn his hero <a href="https://twitter.com/hashtag/BorisNemtsov?src=hash">#BorisNemtsov</a> <a href="http://t.co/tHjkE8DV9n">pic.twitter.com/tHjkE8DV9n</a></p> <p>— Mark Sleboda (@MarkSleboda1) <a href="https://twitter.com/MarkSleboda1/status/572023639681470464">March 1, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"> <p>Thousands of Russian flags with black ribbons but everyone once in a while blue and yellow <a href="https://twitter.com/hashtag/Moscow?src=hash">#Moscow</a> <a href="https://twitter.com/hashtag/Nemtsov?src=hash">#Nemtsov</a> <a href="http://t.co/XeTL7X7KZo">pic.twitter.com/XeTL7X7KZo</a></p> <p>— Anissa Naouai (@ANOWRT) <a href="https://twitter.com/ANOWRT/status/572029275244789760">March 1, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script> <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="1002" height="561" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/nemtsov%20rally.png?1425219527" /> </div> </div> </div> http://www.zerohedge.com/news/2015-03-01/tens-thousands-rally-moscow-mourn-slain-boris-nemtsov#comments Twitter Twitter Sun, 01 Mar 2015 14:19:36 +0000 Tyler Durden 502671 at http://www.zerohedge.com Housing Industry Frets About the Next Brick to Drop http://www.zerohedge.com/news/2015-03-01/housing-industry-frets-about-next-brick-drop <p>Wolf Richter&nbsp;&nbsp; <a href="http://www.wolfstreet.com">www.wolfstreet.com</a>&nbsp;&nbsp; <a href="http://www.amazon.com/author/wolfrichter">www.amazon.com/author/wolfrichter</a></p> <p>Stephen Schwarzman, CEO and co-founder of Blackstone Group, the world’s largest private-equity firm with $290 billion in assets under management, made $690 million for 2014 via a mix of dividends, compensation, and fund payouts, <a href="http://www.nytimes.com/2015/02/28/business/dealbook/blackstones-schwarzman-took-home-690-million-in-2014.html"><span style="text-decoration: underline;"><span style="color: #0009c4;">according</span></span></a> to a regulatory filing. A 50% raise from last year.</p> <p>The PE firm’s subsidiary Invitation Homes, doped with nearly free money the Fed’s policies have made available to Wall Street, has become America’s number one mega-landlord in the span of three years by buying up 46,000 vacant single-family homes in 14 metro areas, initially at a rate of $100 million per week, now reduced to $35 million per week.</p> <p>As of September 30, Invitation Homes had $8.7 billion worth of homes on its balance sheet, followed by American Homes 4 Rent ($5.5 billion), Colony Financial ($3.4 billion), and Waypoint ($2.6 billion). Those are the<a href="http://cdn.americanbanker.com/media/newspics/AB011415RENTAL.jpg"><span style="text-decoration: underline;"><span style="color: #0009c4;"> top four</span></span></a>. Countless smaller investors also jumped into the fray. Together they scooped up several hundred thousand single-family houses.</p> <p>A “bet on America,” is what Schwarzman <a href="http://www.tampabay.com/news/business/realestate/blackstone-other-investors-snap-up-thousands-of-tampa-bay-rental-homes/2110744"><span style="text-decoration: underline;"><span style="color: #0009c4;">called</span></span></a> the splurge two years ago.</p> <p>The bet was to buy vacant homes out of foreclosure, outbidding potential homeowners who’d actually live in them, but who were hobbled by their need for mortgages in cash-only auctions. The PE firms were initially focused only on a handful of cities. Each wave of these concentrated purchases ratcheted up the prices of all other homes through the multiplier effect.</p> <p>Homeowners at the time loved it as the price of their home re-soared. The effect rippled across the country and added about $7 trillion to homeowners’ wealth since 2011, doubling equity to $14 trillion.</p> <p>But it pulled the rug out from under first-time buyers. Now, only the ludicrously low Fed-engineered interest rates allow regular people – the lucky ones – to buy a home at all. The rest are renting, in a world where rents are ballooning and wages are stagnating.</p> <p>Thanks to the ratchet effect, whereby each PE firm helped drive up prices for the others, the top four landlords booked a 23% gain on equity so far, with Invitation Homes alone showing &nbsp;$523 million in gains, according to RealtyTrac. The “bet on America” has been an awesome ride.</p> <p>But now what? PE firms need to exit their investments. It’s their business model. With home prices in certain markets exceeding the crazy bubble prices of 2006, it’s a great time to cash out. RealtyTrac VP Daren Blomquist told <a href="http://www.americanbanker.com/news/consumer-finance/new-uncertainty-in-housing-as-investors-seek-maximum-profits-1073006-1.html"><span style="text-decoration: underline;"><span style="color: #0009c4;">American Banker</span></span></a> that small batches of investor-owned properties have already started to show up in the listings, and some investors might be preparing for larger liquidations.</p> <p>“It is a very big concern for real estate professionals,” he said. “They are asking what the impact will be if investors liquidate directly onto the market.”</p> <p>But larger firms might not dump these houses on the market unless they have to. American Banker reported that Blackstone will likely cash out of Invitation Homes by spinning it off to the public, according to “bankers close to the Industry.”</p> <p>After less than two years in this business, Ellington Management Group exited by <a href="http://www.prnewswire.com/news-releases/american-homes-4-rent-announces-acquisition-of-ellington-housing-single-family-portfolio-300014876.html"><span style="text-decoration: underline;"><span style="color: #0009c4;">selling</span></span></a> its portfolio of 900 houses to American Homes 4 Rent for a 26% premium over cost, after giving up on its earlier idea of an IPO. In July, Beazer Pre-Owned Rental Homes had exited the business by selling its 1,300 houses to American Homes 4 Rent, at the time still flush with cash from its IPO a year earlier.</p> <p>Such portfolio sales maintain the homes as rentals. But smaller firms are more likely to cash out by putting their houses on the market, Blomquist said. And they have already started the process.</p> <p>Now the industry is fretting that liquidations by investors could unravel the easy Fed-engineered gains of the last few years. Sure, it would help first-time buyers and perhaps put a halt to the plunging homeownership rates in the US [<a href="http://wolfstreet.com/2015/01/30/the-american-dream-dissipates-at-record-pace/" target="_blank"><span style="text-decoration: underline;"><span style="color: #0009c4;">The American Dream Dissipates at Record Pace]</span></span></a>.</p> <p>But the industry wants prices to rise. Period.</p> <p>When large landlords start putting thousands of homes up for sale, it could get messy. It would leave tenants scrambling to find alternatives, and some might get stranded. A forest of for-sale signs would re-pop up in the very neighborhoods that these landlords had targeted during the buying binge. Each wave of selling would have the reverse ratchet effect. And the industry’s dream of forever rising prices would be threatened.</p> <p>“What kind of impact will these large investors have on our communities?” wondered Rep. Mark Takano, D-California, in an email to American Banker. He represents Riverside in the Inland Empire, east of Los Angeles. During the housing bust, home prices in the area plunged. But recently, they have re-soared to where Fitch now considers Riverside the third-most overvalued metropolitan area in the US. So Takano fretted that “large sell-offs by investors will weaken our housing recovery in the very same communities, like mine, that were decimated by the subprime mortgage crisis.”</p> <p>PE firms have tried to exit via IPOs – which kept these houses in the rental market.</p> <p>Silver Bay Realty Trust went public in December 2012 at $18.50 a share. On Friday, shares closed at $16.16, down 12.6% from their IPO price.</p> <p>American Residential Properties went public in May 2013 at $21 a share, a price not seen since. “Although people look at this as a new industry, there’s really nothing new about renting single-family homes,” CEO Stephen Schmitz told <a href="http://www.bloomberg.com/news/articles/2013-05-08/american-residential-raises-287-7-million-in-ipo"><span style="text-decoration: underline;"><span style="color: #0009c4;">Bloomberg</span></span></a> at the time. “What’s new is that it’s being aggregated, we’re introducing professional management and we’re raising institutional capital.” Shares closed at $17.34 on Friday, down 17.4% from their IPO price.</p> <p>American Homes 4 Rent went public in August 2013 at $16 a share. On Friday, shares closed at $16.69, barely above their IPO price. These performances occurred during a <em>euphoric</em> stock market!</p> <p>So exiting this “bet on America,” as Schwarzman had put it so eloquently, by selling overpriced shares to the public is getting complicated. No doubt, Blackstone, as omnipotent as it is, will be able to pull off the IPO of Invitation Homes, regardless of what kind of bath investors end up taking on it. </p> <p>Lesser firms might not be so lucky. If they can’t find a buyer like American Homes 4 Rent that is publicly traded and doesn’t mind overpaying, they’ll have to exit by selling their houses into the market.</p> <p>But there’s a difference between homeowners who live in their homes and investors: when homeowners sell, they usually buy another home to live in. Investors cash out of the market. This is what the industry dreads. Investors were quick to jump in and&nbsp;inflated prices. But if they liquidate their holdings at these high prices, regular folks might not materialize in large enough numbers to buy tens of thousands of perhaps run-down single-family homes. And then, getting out of the “bet on America” would turn into a real mess.</p> <p>And getting out of the <em>bet on China</em>? China has long frustrated the hard-landing watchers. But maybe not much longer. Read… <a href="http://wolfstreet.com/2015/02/26/housing-crash-in-china-steeper-than-in-pre-lehman-america/" target="_blank"><span style="text-decoration: underline;"><span style="color: #0009c4;">Housing Crash in China Steeper than in Pre-Lehman America </span></span></a></p> http://www.zerohedge.com/news/2015-03-01/housing-industry-frets-about-next-brick-drop#comments Beazer China Fitch Free Money Real estate RealtyTrac RealtyTrac recovery Vacant Homes Sun, 01 Mar 2015 05:54:11 +0000 testosteronepit 502670 at http://www.zerohedge.com