While Europe is furiously scrambling to find alternative sources of energy should Gazprom pull the plug on natgas exports to Germany and Europe (the imminent surge in Ukraine gas prices by 40% is probably the best indication of what the outcome would be), Russia is preparing the announcement of the "Holy Grail" energy deal with none other than China, a move which would send geopolitical shockwaves around the world and bind the two nations in a commodity-backed axis. One which, as some especially on these pages, have suggested would lay the groundwork for a new joint, commodity-backed reserve currency that bypasses the dollar, something which Russia implied moments ago when its finance minister Siluanov said that Russia may refrain from foreign borrowing this year. Translated: bypass western purchases of Russian debt, funded by Chinese purchases of US Treasurys, and go straight to the source.
Ukraine Announces Joint US Military Exercises As Obama Rules Out "Military Incursion" - Recap Of The Day's EventsSubmitted by Tyler Durden on 03/19/2014 18:12 -0400
With the story of the day undoubtedly Yellen's first (bungled) press conference, it was easy to forget that the second coming of the Cold War is raging in the Ukraine. For those curious what they may have missed, here is a summary of the major events that took place in the troubled country this afternoon. Highlights from AP, AFP, Reuters, WSJ, Bloomberg, RIA and Interfax.
Back in 2013 it was Syria where the world was gearing for imminent military action after a relentless series of false flag provocations by the United States (intent on securing a Qatar gas pipeline to Europe) which in the last minute was deftly diffused by Vladimir Putin. In 2014, it was the Ukraine's turn, and after a prolonged campaign orchestrated by Victoria Nuland and the US State Department (again) which succeeded in the now traditional violent coup (see Egypt and Libya), once again saw Putin victorious, after yesterday's annexation of the all important Crimean peninsula, achieved without the firing of one shot. So now that Putin has succeeded in trouncing the US twice in a row, it is time to poke some old, well-known geopolitical wounds, such as Iran. And who better to do it than Israel, where as Haaretz reports, "Prime Minister Benjamin Netanyahu and Defense Minister Moshe Ya’alon have ordered the army to continue preparing for a possible military strike on Iran’s nuclear facilities at a cost of at least 10 billion shekels ($2.89 billion) this year, despite the talks between Iran and the West, according to recent statements by senior military officers."
Well over a week after the disappearance of flight MH370 - which now is the longest official disappearance of a modern jet in aviation history - with no official trace of the missing plane yet revealed, the investigation, which as we reported over the weekend has focused on the pilots and specifically on Captain Zaharie Ahmad Shah, earlier today revealed that on his home-made flight simulator had been loaded five Indian Ocean practice runways, among which those of Male in the Maldives, that of the US owned base at Sergio Garcia, as well as other runways in India and Sri Lanka - all notable runways as all are possible landing spots based on the flight's potential trajectories. The Malay Mail Online reported, "The simulation programmes are based on runways at the Male International Airport in Maldives, an airport owned by the United States (Diego Garcia), and three other runways in India and Sri Lanka, all have runway lengths of 1,000 metres."
Has the market done it again? Two weeks ago, Putin's first speech of the Ukraine conflict was taken by the USDJPY algos - which seemingly need to take a remedial class in Real Politik - as a conciliatory step, and words like "blinking" at the West were used when describing Putin, leading to a market surge. Promptly thereafter Russia seized Crimea and is now on the verge of formally annexing it. Over the weekend, we had the exact same misreading of the situation, when the Crimean referendum, whose purpose is to give Russia the green light to enter the country, was actually misinterpreted as a risk on event, not realizing that all the Russian apparatus needed to get a green light for further incursions into Ukraine or other neighboring countries was just the market surge the algos orchestrated. Anyway, yesterday's risk on, zero volume euphoria has been tapered overnight, with the USDJPY sliding from nearly 102.00 to just above 101.30 dragging futures with it, in advance of Putin's speech to parliament, in which he is expected to provide clarity on the Russian response to US sanctions, as well as formulate the nation's further strategy vis-a-vis Crimea and the Ukraine.
The Battle for Ukraine Was Planned in 1997 … Or Earlier
Putin has warned that U.S. action over Ukraine would have a boomerang effect. With the situation anything but de-escalating (and the weekend's Crimea referendum set as a potential catalyst), it seems timely to consider what actions Russia could take against the United States if tensions were to spiral out of control. Clearly Vladimir Putin has a number of options to create significant havoc in multiple areas of American national interest—especially in Asia.
In retaliation, Russia could opt to only accept gold bullion for payment for their gas, oil and other commodity exports. This would likely lead to a sharp fall in the dollar and a surge in gold prices.
Currency wars could soon take the turn for the worst that many of us have warned of for some years.
It was another day of ugly overnight macro data, all of it ouf of China, with industrial production (8.6%, Exp. 9.5%, Last 9.7%), retail sales (11.8%, Exp. 13.5%, Last 13.1%) and fixed asset investment (17.9% YTD vs 19.4% expected) all missing badly and confirming that in a world of deleveraging, the Chinese economy will continue to sputter. Which is precisely what the "bad news is good news" algos needs and why futures levitated overnight: only this time instead of latching on to the USDJPY correlation pair, it was the AUDJPY which surged after Australia - that Chinese economic derivative - posted its third best monthly full-time jobs surge in history! One can be certain that won't last. But for now it has served its purpose and futures are once again green. How much longer will the disconnect between deteriorating global macro conditions and rising global markets continue, nobody knows, but sooner rather than later the central planner punch bowl will be pulled and the moment of price discovery truth will come. It will be a doozy.
At the onset of the derivatives collapse in 2007/2008 it would have been easy to assume that most of America was receiving a valuable education in normalcy bias. As much as we are for people waking up to the nature of the crisis, there comes a point when those who are going to figure it out will figure it out, and the rest are essentially hopeless. The cultism surrounding the U.S. economy and the U.S. dollar is truly mind boggling, and by “cultism” we mean a blind faith in the fiat currency mechanism that goes beyond all logic, reason and evidence.
Unlike most trading sessions in the past month, when the overnight session saw a convenient algo assisted USDJPY/AUDJPY levitation, tonight there has been no such luck for the permabullish E-Trade babies who are conditioned that no matter what the news, the next morning the S&P 500 will open green regardless. Whether this is due to ever louder fears that what is happening in China can not be swept under the rug this time will be revealed soon, but as of this moment both the USDJPY, and its derivative, US equity futures, are looking at a sharp lower open, as gold continues to press higher, while the traditional tension points such as Russia-Ukraine, and ongoing capital flight from some of the more "fringe" emerging markets, continues. Expect more of the same today as people finally peek below the Chinese surface to realize just how profoundly bad the situation on the mainland truly is. And while we realize macro news are meaningless, especially in Europe where the ECB is now the sole supervisor of all asset classes, the fact that Cyprus, Greece, Slovakia and Portugal, are all in deflation, and many more countries lining up to join the club, probably means that absent a massive global credit impulse, we have certainly reached the upward inflection point from the most recent $1+ trillion injection of liquidity by the Fed, not to mention the ongoing QE by the BOJ.
Mt. Gox’s lawyers confirmed 750,000 Bitcoins belonging to the firm’s customers had gone “missing”, along with around 100,000 units that the company owned. Alleged that it came under some 150,000 DDoS attacks per second for several days ahead of its spectacular failure.
While progress on the search-and-recovery efforts of the missing Malaysian Airlines jet continues to disappoint, the stolen-passport plot thickens considerably. While earlier we discovered that it was a mysterious "Mr. Ali" that purchased the tickets for the two passengers traveling on stolen passports (with cash), The Telegraph reports that BBC Persia confirms they were Iranian nationals. According to another Iranian friend (who had hosted them while in Kuala Lumpur) the two were "looking for a place to settle" in Europe (intending to complete their journey in Frankfurt and Denmark).
While the mystery builds over the still officially unexplained disappearance of Malaysian flight MH370, or just who the two passengers with "stolen" passports may have been although we expect a revelation on this issue shortly, the FT has added yet another twist to what is sure to be a conspiracy thriller for weeks to come: the paper reports that the Thai travel agent who booked the tickets for the men in question said that she had been asked to arrange the travel by an Iranian contact. Adding to the confusion is the revelation that originally the mysterious Iranian, known only as Mr. Ali, tried to reserve seats for the two men on separate flights not to China, but to Europe, one on a Qatar Airways flight, and the other on Etihad. And the punchline: a "friend" of Mr. Ali's paid for the tickets in cash.
How much faith can we put in our ability to decipher all the numbers out there telling us the US is closing in on its cornering of the global oil market? There’s another side to the story of the relentless US shale boom, one that says that some of the numbers are misunderstood, while others are simply preposterous. The truth of the matter is that the industry has to make such a big deal out of shale because it’s all that’s left. There are some good things happening behind the fairy tale numbers, though—it’s just a matter of deciphering them from a sober perspective.