Germany

A half-century ago, America - and then the world - was rocked by a mighty stock-market crash that soon turned into the steepest and longest-lasting depression of all time. Those who ignore the lessons of history are doomed to repeat it - except that now, with gold abandoned and each nation able to print currency ad lib, we are likely to wind up, not with a repeat of 1929, but with something far worse...

News That Matters

We warned on Friday, after last week's China rout, that the market is getting ahead of itself with its expectation of a RRR-cut by China as large as 100 bps. "The risk is that there isn't one." We were spot on, because not only was there no RRR cut, but Chinese stocks plunged, with the composite tumbling as much a 9% at one point, the most since 1996 when it dropped 9.4% in a single session. The session, as profile overnight was brutal, with about 2000 stocks trading by the -10% limit down, and other markets not doing any better: CSI 300 -8.8%, ChiNext -8.1%, Shenzhen Composite -7.7%. This was the biggest Chinese rout since 2007.

Germany's DAX is now down 15% since the "China doesn't matter" devaluation began with most European borses down 3-5% from Friday's close as the day started off with a modest bounce only to test new lows. EURUSD is now up 500 pips in 4 days back to 7 month highs. European bond risk is surging with Portugal up 50bps since China's debacle began. And finally crude continues to get battered, now testing the $38 handle for the first time since Feb 09.

Earlier this week, two people, a Pole and a German, said they may have found the legendary, long-lost Nazi train rumored to be full of gold, gems and guns, i.e., the prize possessions of years of Third Reich plunder, that disappeared just before the end of World War Two. As BBC first reported, the train was believed to have gone missing near what is now the Polish city of Wroclaw as Soviet forces approached in 1945.

Back on July 18, Christopher Bartley (a police lieutenant for the National Institutes of Standards and Technology), tried to refill a butane lighter. Or he tried to cook a batch of meth...

Carnage - everywhere. A surging EUR - as CNH carry traders unwind en masse - has led to an unwind across most risky assets in Europe. This week saw EuroStoxx 600 - the broad index - crash almost 6%, its biggest drop since September 2011. Perhaps most stunningly, Germany's DAX was the biggest loser - collapsing 7.4% on the week. European bonds are are also seeing risk increase dramatically with Portugal and Italy worst (aside from Greece's blowout). Europe's VIX topped 30 this week, as US VIX surges.

Members of Syriza's Left Coalition, led by Panagiotis Lafazanis who once plotted to storm the Greek mint, seize the country’s reserves, and arrest central bank governor Yannis Stournaras, have broken away and formed their own political party which they say will support Grexit and stand firm in the face of German "blackmail."

Perhaps the biggest surprise about the overnight Chinese stock rout is which followed the lowest manufacturing PMI since March 2009, is that it happened despite repeat sellside pleas for a PBOC RRR cut as soon as this weekend: usually that alone would have been sufficient to push the market back into the green, and it almost worked when in the afternoon session stocks rebounded after dropping as much as 4.7% below the "hard" floor of 3500, but then a second bout of selling just before the close took Chinese stocks right back to the lows with the Shanghai Composite closing at 3,507, down 4.3% on the day, having wiped out the entire 18% rebound from July 8 when the PBOC first threatened both sellers and shorters with arrest.

• Crude prices fall towards $40 on global glut (Reuters)
• China Central Bank Injects Most Funds Since February as Money Rates Increase (BBG)
• Divided Fed Puts Yellen on Hot Seat (Hilsenrath)
• So Long September: Bond Traders Defer Their Date With the Fed (BBG)
• More Foods Boast Non-GMO Labels—Even Those Without GMO Varieties (WSJ)
• UN to let Iran inspect alleged nuke work site (AP)
• IAEA says access to Iran's Parchin military site meets demands (Reuters)
• Time to End Quarterly Reports, Law Firm Says (WSJ)

It is unclear what precipitated it (some blamed China concerns, fears of rate hikes, commodity weakness, technical picture deterioration although  it's all just goalseeking guesswork) but overnight S&P futures followed yesterday's unexpected slide following what were explicitly dovish Fed minutes, and took another sharp leg lower down by almost 20 points, set to open below the 200 DMA again, as the dazed and confused investing world reacts to what both the Treasury and Oil market signal is a deflationary deluge. Indeed, oil is about to trade under $40 while the 10Y Treasury was last seen trading at 2.07%. Incidentally, the last time oil was here in March of 2009, the Fed was about to unleash QE 1. This time, so called experts are debating if the Fed will hike rates in one month or three.

Who says there’s no affordable housing in NYC or San Francisco?

Will the West endure, or disappear by the century’s end as another lost civilization? Mass immigration, if it continues, will be more decisive in deciding the fate of the West than Islamist terrorism. For the world is invading the West.

Since the 2011 Fukushima nuclear disaster, Germany has been one of the few countries that have successfully moved away from nuclear energy. In fact, the contribution of nuclear power in Germany’s electricity generation has now fallen to just 16% and renewables are now the preferred source of electricity generation in the country. However, Germany and its neighbors are now facing an unusual problem. With the dramatic increase in green energy usage, Germany is generating so much electricity from renewables that it is finding it hard to handle it.

According to the latest, just released survey concerns about both geopolitics and Greece have been largely forgotten, as have Chinese debt defaults, and instead these have been replaced with far more overarching fears about a China recession (made all the more acute after China's devaluation) and an Emerging Market debt crisis. In fact, according to BofA, "2 out of 3 investors think either China recession or EM debt crisis = biggest "tail risks."