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More than merely a subjective, psychological state, the complacency of market participants can be effectively quantified, which is precisely what Deutsche Bank's David Bianco has done by looking at the ratio of the market's P/E to implied vol or VIX.

As Bianco notes, "our PE/VIX market emotion indicator climbed to 1.3 on S&P trailing PE of 18 and 3m avg VIX of 14. A level between 1.2-1.5 signals complacency. There was similar complacency going into summer last year, with S&P trailing PE at 17.5 and a calm market kept VIX at 10-14. The complacency persisted to July but then faded as the risk of higher yields came on falling unemployment, but yields ultimately stayed subdued preventing any major summer sell-off. Yet a selloff began in late Sept as oil prices started cracking and the dollar climbing."

And while the 3M trailing average may be at "only" at 1.30 suggesting prevailing complacency, the chart below shows that on a daily basis, the PE/VIX ratio just hit 1.49x - it has never been higher, and again based on DB's estimation, market sentiment has now crossed from the complacency zone into outright Mania.

The last time this ratio was at the current level: late 2007/early 2008, just before the Fed had to launch a multi-trillion bailout to save capitalism as we know it.

So is a correction imminent? Depends on one's definition: Deutsche sees the probability of a 5% correction as "high", although the question is whether the S&P will slide by 10% or more in the coming months. One look a the chart below shows that it has been over three calendar years or 916 trading days since the last 10% market drop, the third longest period in history without a 10% drop, so yes: one could say we are indeed overdue.

From DB:

We believe the probability of a 5%+ dip is high this summer and our tactical call remains Down given the S&P now at an even higher PE than a year ago, heightened uncertainty in 10yr yields, weak earnings growth and continued soft economic data. We haven’t had a 5%+ dip this year. Historically 5%+ dips are common and happen at least once a year since 1960, except 1964, 1993 & 1995. It has been 916 trading days (3.6 years) since a 10% correction. Selloff triggers could be a further rise in 10yr yields especially if UE keeps falling amidst slow economic growth and Fed remains unclear on first hike timing, or a jump in the dollar upon the Fed expressing firm intentions to hike in Sept.

Of course, the time since a 10% correction would have been far, far shorter had Bullard not popped up in October when the market had plunged 9.8% in the matter of days, only for the Fed "hawk" to suggest that should the market selloff continue, the Fed can always do QE4.

Which is why even a token 10% market correction here could be catastrophic: since the BTFD and BTFATH "mentality" is now purely driven by faith that the Fed will never let the market drop again, anything suggesting a loss of control by the market could become a self-fulfilling prophecy, and all those who suggest that a 10% drop is just what the market needs, is cathartic and so on, may find that suddenly there is not a single BTFDer left once stocks do drop by 10.1% or more...








On such a 'patriotic' weekend, we thought it appropriate to consider who is the 'MVP' superhero of our time. Captain America? No. How about Ironman? No. What about Superman? Nope... The most valuable superhero of our time is a dark, deranged masked-human dressed in black...

 

Batman.

 

Source: Goldman Sachs








The global Central Banks, driven by their Keynesian lunacy, have induced the single largest misallocation of capital in history.

 

Nowhere is this clearer than in the bond market today.

 

Do the following sound normal?

 

1)   Globally 45% of all Government bonds yield less than 1%.

 

2)   Over 40% of European Sovereign bonds now have negative nominal yields..

 

3)   German bunds have NEGATIVE yields as far out as 8 YEARS.

 

4)   The 10-YR US Treasury yield is at levels not seen since we were in a World War.

 

True, the world faces issues today… so it’s not odd for bond yields to be lower… but are those issues on par with a disease that wiped out 25%+ of Europe’s population… or the single largest military conflict in history?

 

The bond market is now over $100 trillion in size. The large banks have used a small portion of this (under 10%) as collateral to generate over $551 trillion in derivatives.

 

The bubble is so massive, that the Treasury department had survival kits delivered to the large banks around the country in anticipation of a crisis.

 

The NY Fed, similarly, is increasing the scope of operations in satellite office Chicago branch in preparation of a natural disaster or other eventuality could shut down its market operations as it approaches an interest rate hike…”

 

And then of course there are the big banks themselves… who lobbied Congress to the put taxpayers on the hook for their (the banks’) future losses on their gargantuan derivatives portfolios.

 

The simple truth is that the Central Banks bet the financial system on their academic theories… and have found that the system didn’t respond as they hoped. The economic “recovery” is the weakest in 80+ years… and that’s based on data that OVERstates growth.

 

The Fed’s own research shows that its QE programs only dropped unemployment by 0.13%... spending over $390,000 per new job created between the start of the crisis and the alleged end of the recession.

 

The ECB hasn’t done any better. It is not actively CHARGING depositors for sitting in cash. Several EU nations are now showing metrics on par with 3rd world countries.

 

And then there’s the Bank of Japan… which has induced a record high number of Japanese on welfare… and boosted the misery index to a 33 year high (mind you, this period of 33 years includes the collapse of the biggest asset bubble in Japan’s history… and people are MORE miserable NOW).

 

Another crisis is coming. And judging from the actions of the Fed and others to prepare (survival kits, etc.) it’s going to be far worse than the 2008 collapse.

 

take action to prepare for this, we offer a FREE investment report called the Financial Crisis "Round Two" Survival Guide that outlines simple, easy to follow strategies you can use to not only protect your portfolio from it, but actually produce profits.

 

We are making 1,000 copies available for FREE the general public.

 

To pick up yours, swing by….

http://www.phoenixcapitalmarketing.com/roundtwo.html

 

Best Regards

Phoenix Capital Research

 








Via Dana Lyons Tumblr,

If it feels like the stock market hasn’t moved in a few days, you’re not imagining things. With the long weekend approaching, it seemed as though Wall Streeters (or their robots) packed up and departed for the mythological “Hamptons” days ago. As it pertains to the small caps, as represented by the Russell 2000, it isn’t merely pre-holiday low volatility, however. It is historically low, period. As measured by the Russell 2000 Volatility Index (RVX), volatility expectations for the small cap index have only been this low a couple of times since its inception in 2006.

 

 

As the chart reveals, there have been a total of 19 days since 2006 that the RVX has traded below 15. Most of them occurred within the following windows:

December 2006 & February 2007 (6 days): The Russell 2000 hit a short-term peak almost immediately, dropping 8% in about a week. It would recover and rally for 4 more months, making marginal new highs before forming its cyclical top.

 

January & March 2013 (10 days): The Russell 2000 was early into its 15-month, nearly straight-up rally. However, the index did struggle to gain much traction in the days and weeks following most of these readings.

 

March 2015 (2 days): The Russell 2000 hit a short-term peak immediately, dropping 3% in a few days before returning to its high.

It is difficult to make much out of this development with so few precedents. However, in the short-term, low readings in the RVX like this have not presented favorable times to be long. Even those times when the Russell 2000 did not immediately pull back (e.g., 2013), it still struggled to gain much ground in the near-term. On average following these readings, the maximum gain over the subsequent month has been +1.3% while the average drawdown has been -3.9%. So the short-term risk:reward setup is not attractive.

Longer-term, the limited precedents (not to mention, limited history) does not allow for any reliable conclusions. The Russell 2000 was able to rally for awhile following the 2013 occurrences. However, it ran into a cyclical top not long after the 2007 examples.

We will say – and it’s no revelation – that low volatility is a hallmark of market tops. That said, such low volatility can persist for some time. Witness the historic lows in the S&P 500 Volatility Index, VIX, in the mid-1990′s. The market went on to rally for several more years following that example. However, the norm is for low volatility to be more representative of tops.

Of course, volatility expectations can always go even lower. Looking historically, though, the rubber band is essentially as stretched to the down side as it has ever been. Therefore, if the RVX continues lower, it would be pushing a new lower bound on its all-time chart.

Lastly, one interesting aspect of today’s reading of the RVX is that it occurred despite the fact that the Russell 2000 is not at a 52-week high. Every other sub-15 occurrence in the RVX has come with the Russell 2000 at a high, or within 0.3% of one. What the significance of that is, we’re not sure. It may just have something to do with the impending long weekend.

What’s the ultimate takeaway? Considering the broad market is over 2 years into a rally without anything much in the way of a correction, not to mention 6 years into a cyclical bull market, the historically low volatility is certainly not a “buy signal”. As we said, the low volatility can persist for awhile. However, for stock bulls, that is a tougher road to hoe than it would be with volatility expectations higher. Therefore, at a minumum, the historically low volatility likely means a “hold” for stocks rather than a buy.








A shorter week in the market ...

Full story available on Benzinga.com

Clinton, or Clint-off...

 

 

Source: Townhall via Sunday Funnies








via Paul Craig Roberts,

Memorial Day commemorates soldiers killed in war.  We are told that the war dead died for us and our freedom. US Marine General Smedley Butler challenged this view.  He said that our soldiers died for the profits of the bankers, Wall Street, Standard Oil, and the United Fruit Company.  Here is an excerpt from a speech that he gave in 1933:

War is just a racket. A racket is best described, I believe, as something that is not what it seems to the majority of people. Only a small inside group knows what it is about. It is conducted for the benefit of the very few at the expense of the masses.

 

I believe in adequate defense at the coastline and nothing else. If a nation comes over here to fight, then we’ll fight. The trouble with America is that when the dollar only earns 6 percent over here, then it gets restless and goes overseas to get 100 percent. Then the flag follows the dollar and the soldiers follow the flag.

 

I wouldn’t go to war again as I have done to protect some lousy investment of the bankers. There are only two things we should fight for. One is the defense of our homes and the other is the Bill of Rights. War for any other reason is simply a racket.

 

There isn’t a trick in the racketeering bag that the military gang is blind to. It has its “finger men” to point out enemies, its “muscle men” to destroy enemies, its “brain men” to plan war preparations, and a “Big Boss” Super-Nationalistic-Capitalism.

 

It may seem odd for me, a military man to adopt such a comparison. Truthfulness compels me to. I spent thirty-three years and four months in active military service as a member of this country’s most agile military force, the Marine Corps. I served in all commissioned ranks from Second Lieutenant to Major-General. And during that period, I spent most of my time being a high class muscle- man for Big Business, for Wall Street and for the Bankers. In short, I was a racketeer, a gangster for capitalism.

 

I suspected I was just part of a racket at the time. Now I am sure of it. Like all the members of the military profession, I never had a thought of my own until I left the service. My mental faculties remained in suspended animation while I obeyed the orders of higher-ups. This is typical with everyone in the military service.

 

I helped make Mexico, especially Tampico, safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefits of Wall Street. The record of racketeering is long. I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-1912 (where have I heard that name before?). I brought light to the Dominican Republic for American sugar interests in 1916. In China I helped to see to it that Standard Oil went its way unmolested.

 

During those years, I had, as the boys in the back room would say, a swell racket. Looking back on it, I feel that I could have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.

 

Most American soldiers died fighting foes who posed no threat to the United States. Our soldiers died for secret agendas of which they knew nothing. Capitalists hid their self-interests behind the flag, and our boys died for the One Percent’s bottom line.

Jade Helm, an exercise that pits the US military against the US public, is scheduled to run July 15 through September 15.  What is the secret agenda behind Jade Helm?

The Soviet Union was a partial check on capitalist looting in the 1950s, 1960s, 1970s, and 1980s.  However, with the Soviet collapse capitalist looting intensified during the Clinton, Bush, and Obama regimes.

Neoliberal Globalization is now looting its own constituent parts and the planet itself. Americans, Greeks, Irish, British, Italians, Ukrainians, Iraqis, Libyans, Argentinians, the Spanish and Portuguese are being looted of their savings, pensions, social services, and job opportunities, and the planet is being turned into a wasteland by capitalists sucking the last penny out of the environment.

As Claudia von Werlhof writes, predatory capitalism is consuming the globe.

We need a memorial day to commemorate the victims of neoliberal globalization.  All of us are its victims, and in the end the capitalists also.








We're all about to be taken to the woodshed, warns David Stockman in this excellent interview. The huge wealth disparity is "not because of some flaw in capitalism, or Reagan tax cuts, or even the greed of Wall Street; the problem is central banks that are out of control." Simply put, they have "syphoned financial resources into pure gambling" and the people that own the stocks and bonds get the huge financial windfall. "The 10% at the top own 85% of the financial assets," and thus, thanks to the unleashing of almost limitless money-printing, which has created a massive worldwide financial inflation, "the central banks have created and exaggerated the wealth gap." Stockman concludes, rather ominously, "it's a coup d'etat, the central banks have taken over - unconstitutional domination of the entire economy."

"Everywhere, misleading distorted signals are being given to both public and private sector players about financial values... the prices have been falsified by The Fed.

 

We can't print our way to prosperity... The Fed is now petrified that Wall Street will have a hissy-fit when they tighten."

Full interview below:

Watch the latest video at video.foxbusiness.com








Submitted by Michael McDonald via OilPrice.com,

Economics 101 tells us that prices in a free market are set by the interaction of supply and demand. The world oil markets have gotten a graphic lesson in that truth over the last year, as the dramatic surge in US oil production has met stagnant demand. This, in turn, has pushed down spot prices by nearly half.

The recent uptick in oil prices, however, has buoyed hopes among market watchers that a strong oil price rally is in order. Unfortunately economics is working against these investors.

Gasoline demand is starting to rise as prices have reached multiyear lows. As it continues to rise, motorists around the world will begin to suck up extra all of that extra supply. That would normally lead to a strong rebound in prices.

But unlike the 2008 fall in oil prices, which was driven by a collapse in demand across the industry, the current price quandary is supply based. And the massive expansion in supply is overwhelming the newfound demand. That may make it more difficult for prices to bounce back.

Over the past few years exploration companies have unlocked extraordinary new unconventional resources like the Alberta oil sands and US shale, leading to a historic increase in supply. More impressive is the fact that even at today’s low prices, there is likely to be some small production increase in 2015.

That is because many firms are looking at new efficiency improvements that should increase oil production while lowering production costs. Statoil, for example, says it has lowered its per well drilling cost by $1 million or roughly 22%, and it can now drill wells faster than ever before. The rise in efficient oil production has led to more than half of the country’s rig fleet being idled with many firms now drilling multiple wells at a time rather than single ad hoc wells. These innovations have led to a 20% fall in the per barrel cost of production according to some industry executives, and more improvements are still to come.

As a result, the EIA is forecasting oil production will rise to 9.2 million barrels of oil per day for 2015 versus 8.7 mopd in 2014. That’s right, an increase in oil output this year even though prices have cratered.

It should not be a surprise, in light of all this, that many industry experts are pretty grim about the future of oil prices, including recent studies announcing that it may be a decade or more before the price of oil hits $100 a barrel again. With drillers able to profitably produce at ever lower price levels, the ceiling on oil prices could remain low for quite some time. We are in a new era.

The new oil price environment will take some adjustments and it will definitely result in economic pain in some areas. At the end of the day, oil companies are starting to get used to the idea of lower prices and they are adapting to the new reality. Now investors need to do the same.








While many eagerly await the day when China will finally reveal its latest official gold holdings, a number which when made public will be orders of magnitude higher than its last 2009 disclosure of just over 1,000 tons, or less even than Russia, China continues to plough ahead with agreements and arrangements to obtain even more gold in the coming years.

Exhibit A: two weeks ago, Xinhua reported that China National Gold Group Corporation announced it has signed an agreement with Russian gold miner Polyus Gold to deepen ties in gold exploration. The companies will cooperate in mineral resource exploration, technical exchanges and materials supply, the largest gold producer of China said.

Polyus Gold is the largest gold producer in Russia and one of the world's top 10 gold miners.

 

The agreement between the two gold miners is one of many deals signed between China and Russia in energy, transportation, space, finance and media exchanges during President Xi Jinping's visit to Russia from May 8 to May 10.

 

"China's Belt and Road Initiative brings unprecedented opportunities for the gold industry. There is ample room for cooperation with neighboring countries, and we have advantages in technique, facilities, cash, and talents," said Song Xin, general manager of China National Gold Group Corporation.

In light of such developments, it is little wonder there has been increasing chatter in recent months that Russia and China are setting the stage for a gold-backed currency, in preparation for the day the Dollar reserve hegemony finally ends (a hegemony whose demise is accelerating with every incremental physical gold repatriation such as those of Germany, the  Netherlands, and now Austria).

And now, Exhibit B: overnight Xinhua also reported that a gold sector fund involving countries along the ancient Silk Road has been set up in northwest China's Xi'an City during an ongoing forum on investment and trade this weekend. (read more about the "New Silk Road" which could change global economics forever here). The fund, led by Shanghai Gold Exchange (SGE), is expected to raise an estimated 100 billion yuan (16.1 billion U.S. Dollars) in three phases. The amount of capital allocated to nothing but physical gold purchases (without plans for financial paper intermediation a la western ETFs) will be the largest in the world.

The billions of dollars in allocated funding will come from roughly 60 countries that have invested in the fund, which will in turn facilitate gold purchase for the central banks of member states to increase their holdings of the precious metal, according to the SGE.

As Xinhua notes, China is the world's largest gold producer, and also a major importer and consumer of gold. Among the 65 countries along the routes of the Silk Road Economic Belt and the 21st-Century Maritime Silk Road, there are numerous Asian countries identified as important reserve bases and consumers of gold.

"China does not have a big say in gold pricing because it accounts for a small share of international gold trade," said Tang Xisheng of the Industrial Fund Management Co. "Therefore, the Chinese government seeks to increase the influence of RMB in gold pricing by opening the domestic gold market to international investors."

As a reminder, the reason why China has been aggressively building out and expanding its Shanghai Gold Exchange is precisely that: to shift the global gold trading center away from London (and certainly the US where only paper gold is relevant these days) and to its own native soil: China's ambition is nothing short of becoming the world's new gold trading hub.

In other to do that, it is already setting up the regional infrastructure to facilitate such a goal: according to Tang, the fund will invest in gold mining in countries along the Silk Road, which will increase exploration in countries such as Afghanistan and Kazakhstan.

The good news for China is that with the BIS and virtually all "developed" central banks in desperate need of keeping the price of gold as low as possible while they debase their own paper currencies to unprecedented levels over fears of faith in fiat evaporating, China's gold fund will be able to procure gold for its members at a very reasonable price until such time as the lack of physical gold supply can no longer be swept away by mere paper shorting of the yellow metal.








The default countdown is about to go under 10 days and it is becoming increasingly apparent that both Greece and its creditors have had enough.

Months of tense negotiations have gone nowhere and yielded exactly nothing and it now looks like PM Alexis Tsipras and FinMin Yanis Varoufakis may be willing to miss a June 5 payment to the IMF if it means proving they are serious about keeping their campaign promises and forcing the troika to the bargaining table. The implications of a missed payment aren’t entirely clear but Athens is keen to predict the worst as it tries to squeeze concessions from creditors. Bloomberg has more:

A day after Prime Minister Alexis Tsipras said Greek society can’t absorb any more austerity measures, Finance Minister Yanis Varoufakis said his government has met the euro area and IMF three-quarters of the way, and that it’s up to creditors to cover the remainder.

 

“Greece has made enormous strides reaching a deal, it is now up to the institutions to do their bit,” Varoufakis said Sunday on BBC’s Andrew Marr Show. “It is not in their interests as our creditors that the cow that produces the milk should be beaten into submission to the extent that the milk will not be enough for them to get their money back”...

 

German Finance Minister Wolfgang Schaeuble, meanwhile, signaled there isn’t much wiggle room after Tsipras’s government committed to policy changes in return for aid in a euro-area accord on Feb. 20.

 

“That is the condition for completing the current program,” Schaeuble said in a Deutschlandfunk radio interview aired Sunday. “The problems are rooted in Greece. And now Greece does have to fulfill its commitments.”

 

Some members of Tsipras’s Syriza party advocate defaulting on loans rather than backing down from the anti-austerity policies that swept it to power in January even if that leads the country out of the euro.

 

Greece doesn’t have the money, and won’t pay what it owes the IMF in June, Interior Minister Nikos Voutsis said in a Mega TV interview on Sunday. Spiegel Online on April 1 cited Voutsis as saying Greece should delay an April 9 payment to the fund, which was made.

 

“We’ve done remarkably well for an economy that doesn’t have access to the money markets to meet our obligations,” Varoufakis said. “At some point we will not be able to do it.”

 

“Once you are in a monetary union, getting out of it is catastrophic,” Varoufakis said. “It would be a disaster for everyone involved. It would be a disaster primarily for the Greek social economy but it would also be the beginning of the end of the common currency project in Europe, whatever some analysts might be saying.”

And "whatever some analysts might be saying", Greeks are now suffering mightily, as the €22 million per day hit to the economy has now bankrupted the country's hospitals which have reportedly run out of painkillers and sheets. Here's The Independent:

Greek hospitals have run out of supplies such as painkillers, scissors and sheets as budget cuts have left the health service unable to provide even basic provisions for operations and medical procedures…

Huge cuts to the healthcare budget, amid the economic turmoil which made millions unemployed, have left than 2.5m Greeks uninsured, up from 500,000 in 2008..
healthcare spending has fallen by 25 per cent since 2009, creating shortages of the most basic surgical equipment and leaving too little money to pay nurses' salaries.
Reports have surfaced of patients being turned away from hospital because there was no meter to measure their high blood pressure, while others have had to do without painkillers during medical procedures. One patient was even asked to bring their own sheets to hospital.
A trainee surgeon at KAT, a respected state hospital in Athens, said the situation was at “breaking point”.
“There is no money to repair medical equipment, no money for ambulances to use for petrol, no money to hire nurses and no money to buy modern surgical supplies."
Meanwhile, Tsipras is steadfastly refusing to compromise on the now ubiquitous "red lines" and the most outspoken austerity advocates look to be entrenching themselves even further as the following quote from German FinMin Wolfgang Schaeuble makes clear:
Greece committed itself to the fulfillment of this program on Feb. 20 and therefore we don't need to talk about alternatives.
Clearly, the end game is approaching although it's till unclear what form it will take. The idea that a developed country cannot provide basic emergency medical care because it is in poor standing with the institutions that print a fiat currency is patently absurd and simply isn't tenable meaning that one way or another, this 'situation' will resolve itself in the coming weeks, an event which will put Europe's broken bond markets to a rather difficult test.







The US dollar's recovery last week may not get the kind of fundamental support that medium and long-term investors would like to see to raise the confidence that the two-month correction has run its course.  

 

Owing to a greater deterioration of net exports and a smaller than expected inventory build, Q1 GDP is likely to be revised sharply lower.  The 0.2% expansion may turn into a 0.8-1.0% contraction.  Although it is backward looking, especially given that the second quarter is two-thirds when the revision is announced, it does have an important implication.

 

It means that rather than raise rates in June, as many of us had previously anticipated, the Federal Reserve will have to cut its GDP growth forecast for the entire year.  In March, the Fed's central tendency forecast, which excludes the three highest and three lowest forecasts was 2.3%-2.7%.  It is possible that growth in the first half is flat or barely positive.  This means that even if growth in the second half averages 3%, GDP for the entire year would be about 1.5%.  To reach the current Fed forecast, the economy would have to expand by close to 5% in H2.

 

The projection for growth in the current quarter could edge higher if the details of the April durable goods orders report on May 26 is firmer.  The headline activity may slip on the back of lower aircraft orders.  Boeing reported its April orders slipped to 37 from 39 in March.  However, orders, excluding defense and aircraft and shipments of the same, which are inputs for capex and GDP forecasts, should both be above Q1 averages.

 

Separately, the Richmond and Dallas Fed manufacturing surveys, and the Chicago PMI and Milwaukee ISM will also likely boost confidence that the world's largest economy is not recession-bound.  Whereas the Atlanta Fed's GDPNow suggests the US economy is tracking 0.7% growth in Q2, we expect the incoming data to gradually lift this estimate.  The increase in aggregate income (~5% year-over-year) and the increase in savings (~$125 bln in Q1) will likely provide the fuel for stronger consumption going forward.

 

The economic data is one thing, but how the markets respond to it is a different matter.  For the better part of the past two months, disappointing, though not always weak, US data sparked dollar selling.  At the same time, the dollar was not rewarded for good news.  This was broadly consistent with the dollar's downside correction after recording one of the strongest quarterly performances in many years.   How the markets respond to the new fundamental news may be more revealing that the economic data itself.

 

The Bank of Canada is the only central bank that meets during the last week of May. There is little doubt that policy will remain on hold.  The economy has generally performed in line with the Bank of Canada's expectations.  Speculators shift to a net long positions in the futures market, for the first time since last September strikes us a premature.  We suspect that this net long position was established at the end of the Canadian dollar's two-month upside correction.  

 

The economic highlight from the eurozone will be April money supply data.  M3 has been trending up for a year.  It is expected to have accelerated on a 3-month year-over-year basis to 4.5% from 4.1%.  It had bottomed at 1% in April 2014.  More importantly, credit extension is accelerating a well.  This is important because this is the last data point to set the condition for the TLTRO that will be available in the middle of June.  Lending to households had turned positive recently and now lending to business is expected be turn up too.

 

The unresolved Greek crisis continues to hang over the market.  No doubt it will be a point of discussion at the G7 meeting being held in Dresden on May 27-29.  Just like there has been greater progress since Greek Prime Minister Tsipras reigned in his finance minister, is it really beyond the pale to suspect that if Merkel would reign in her finance minister (who has recently appeared to advocate referendum and a parallel currency for Greece), it would also be helpful?  What Europe has to convince its G7 partners of is that is it not turning a broken state into a failed state.  

 

The immediate problem is that Greece owes the IMF about 1.6 bln euros spread out over four payments in June.  Recall that the last payment to the IMF was made possible only because the Greek government borrowed from a reserve account held by the IMF itself.  If that reserve account is not repaid in a few weeks, the IMF will begin another set of procedures against Greece.  It is true that Greece has cried wolf many times, saying it would not make a debt payment, but then somehow,  miraculously,  found the means to make the payment.  

 

Greece was the proverbial canary in the coal mine in 2010 and Syriza is performing a similar function five years later.  The political push back against austerity is not isolated to Athens.  Today's local elections in Spain will offer a test for Podemos, which shares many beliefs of Syriza. Prime Minister Rajoy has staked his political future on the improving macro-economic conditions.  The strategy has not yet yielded positive results.  The local elections will also be a test for the new center-right alternative to Rajoy's PP, the Ciudadanos.

 

Three non-EMU European countries will report Q1 GDP figures in the week ahead.  The UK is expected to revise up its preliminary estimate of 0.3%.  Industrial output and construction figures for March were stronger than the ONS projected.  Sweden, where the central bank has set a negative repo rate and is engaged in a bond-buying program is likely to have grown just less than 1% after growing a little more than 1% in Q4 14.  Switzerland's growth is expected to have slowed to 0.3% from 0.6%.

 

Turning to Asia, there is a Japanese economic report every day in next week.  The picture that is likely to emerge from the data is an economy that is picking up after losing some momentum as Q1 wound down.  Retail sales, overall household spending, and industrial production are expected to have improved.  However, if the main thrust of the aggressive monetary easing was to fuel an increase in inflation, it has been considerably less successful.  With last year's sales tax increase dropping out of the base effect, core inflation (which excludes fresh food) is expected to be around 0.2%.  

 

Lastly, before the weekend Chinese officials confirmed the long anticipated mutual recognition of mutual fund listing between the mainland and Hong Kong (SAR) will begin July 1.  This represents a new era for asset managers.  Previously foreign asset managers accessed Chinese savings by partnering with local mutual fund companies.  The mutual recognition will allow Hong Kong domiciled funds to sell directing into China and allows China-based fund managers to sell their product in Hong Kong.  The initial quota will be CNY600 bln  (~$97 bln) evenly split between the two.  This is seen as enhancing the case to include Chinese "A shares" into the MSCI indices and demonstrating the liberalization that may see the yuan included in the SDR later this year.   

 








We’re at the point of absurdity. Maybe it made sense when you had a crisis. It does not make sense now.

The world lost one of its truly beautiful minds this Saturday, when a taxi carrying John Nash, 86, and his wife of nearly 60 years, Alicia, crashed on the New Jersey Turnpike. The two were killed on the spot when the driver of the Ford Crown Victoria lost control as he tried to pass a Chrysler in the center lane, crashing into a guard rail according to NJ.com.

The Nashes were ejected from the car according to State Police Sgt. Gregory Williams, adding that "It doesn't appear that they were wearing seatbelts."

The second vehicle also crashed into the guard rail, Williams said. The taxi driver was extricated from the vehicle and flown to Robert Wood Johnson University Hospital in New Brunswick with non-life-threatening injuries.

John Forbes Nash, Jr, was best known recently for the 2001 movie starting Russell Crowe "A Beautiful Mind" which depicted Nash's struggles with schizophrenia. His biggest accomplishment was his groundbreaking and pioneering work on game theory. Nash earned a Ph.D. degree in 1950 with a 28-page dissertation on non-cooperative games.

The thesis contained the definition and properties of what is now known as the "Nash equilibrium" - a crucial concept in non-cooperative games, it won Nash the Nobel Memorial Prize in Economic Sciences in 1994.

As NJ.com reports, Nash spent his career at Princeton University and the Massachusetts Institute of Technology. He's considered a giant in mathematics, particularly in the field of partial differential equations, but won the Nobel Prize in economics for a paper he wrote on game theory, the mathematics of decision-making.

In addition to the Nobel, Nash has won the John von Neumann Theory Prize (1978) and the American Mathematical Society's Steele Prize for a Seminal Contribution to Research (1999).

Nash was in Norway on Tuesday to receive the Abel Prize for mathematics from King Harald V for his work, along with longtime colleague Louis Nirenberg, on nonlinear partial differential equations.

Nirenberg, reached at his home Sunday, said Nash was a "wonderful mathematician" and person. Nirenberg had just flown back from Norway with the couple. The Nashes were taking a taxi back from the airport, he said. Nirenberg had known the couple since the 1950s.

Alicia Nash was his caretaker while he battled his mental illness. They became mental health care advocates when their son John was also diagnosed with schizophrenia.

Upon learning of the crash, Russell Crowe who was nominated for the Best Actor Oscar for his role as John Nash took to Twitter to share condolences.

Stunned...my heart goes out to John & Alicia & family.
An amazing partnership. Beautiful minds, beautiful hearts. https://t.co/XF4V9MBwU4

— Russell Crowe (@russellcrowe) May 24, 2015

We share in his condolences as the world has indeed just lost one of its most brilliant minds of the past century.

Follows a clip of Nash accepting the Nobel prize in 1994.

 

And here is an interview with Dr. John Nash at the 1st Meeting of Laureates in Economic Sciences in Lindau, Germany, September 1-4, 2004.

 

What may be one of Nash's last documented media appearances, here is the legendary mathematician speaking at Seton Hall University in 2012.

 

Finally, for those who may be unfamiliar with Nash's life and achievements, here is a National Geographic documentary of the game theory pioneer.








That may all have changed now when a declassified secret US government document obtained by the public interest law firm, Judicial Watch, shows that Western governments deliberately allied with al-Qaeda and other Islamist extremist groups to topple Syrian dictator Bashir al-Assad.

India Gold 2

An interesting fact has recently crossed the newswires, as India’s banking system is ready to start paying its clients interest on physical gold.

The Indian Minister of Finance, Arun Jaitley, has revealed new guidelines for the financial system, and the proposed new rules are somewhat surprising, even though the minister had already hinted in an earlier speech that 'gold could become an even more important asset during his tenure'.

Banks would not only be allowed to count the gold as part of their cash reserve ratio, it would also count as an integral part of the liquidity ratio of the banks which is now based on bonds rather than hard assets. That’s an important step forward which should pave the way for gold to become a much more important asset in India’s financial system.

This shouldn’t really come as a huge surprise as the Indians have always been a little bit crazy about gold. India is one of the largest gold-importing countries and the yellow metal is used as a gift on traditionally important days such as weddings. As India doesn’t have a mature gold mining sector at all, the vast majority of the gold will have to be imported and this incentivizes smugglers to bring gold into the country without declaring it to the proper authorities.

India Gold Import

Source: GoldchartsRus.com

It’s unheard of in this modern world that gold will effectively be earning an interest when deposited at the bank. By this move, the Indian banking sector implicitly confirms it considers physical gold to be a currency above anything else.

If gold would indeed be widely accepted in the banking system, it would activate a part of the 20,000 unused tonnes of gold and this would reduce the pressure on the Indians to import gold.

Gold Price India

Source: Goldprice.org

But there’s one critical flaw in this idea.

If one ounce of gold owned by family X is deposited at the bank, and the bank subsequently lends it out to family Y which was looking to buy gold for a wedding, where will the bank get the gold from to repay family X when it wants to withdraw its gold from the banking system?

Indeed, the bank will very likely use the gold deposited by family Z to ‘repay’ family X’s deposit. This system will work great in the beginning, but can you imagine what would happen if the majority of the clients are demanding their gold back from the banks? The bank will not be able to refund everybody and that’s the exact moment where this Ponzi scheme (and yes, this is a Ponzi pyramid) will come to a screeching halt.

It’s great to see banks will be allowed to count the gold as a part of their reserves but this idea definitely needs to be worked out before it gets instated as a system that would facilitate a Ponzi scheme in gold.

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Authored by F. William Engdahl via New Eastern Outlook,

What if Putin is Telling The Truth?

On April 26 Russia’s main national TV station, Rossiya 1, featured President Vladimir Putin in a documentary to the Russian people on the events of the recent period including the annexation of Crimea, the US coup d’etat in Ukraine, and the general state of relations with the United States and the EU. His words were frank. And in the middle of his remarks the Russian former KGB chief dropped a political bombshell that was known by Russian intelligence two decades ago.

Putin stated bluntly that in his view the West would only be content in having a Russia weak, suffering and begging from the West, something clearly the Russian character is not disposed to. Then a short way into his remarks, the Russian President stated for the first time publicly something that Russian intelligence has known for almost two decades but kept silent until now, most probably in hopes of an era of better normalized Russia-US relations.

Putin stated that the terror in Chechnya and in the Russian Caucasus in the early 1990’s was actively backed by the CIA and western Intelligence services to deliberately weaken Russia. He noted that the Russian FSB foreign intelligence had documentation of the US covert role without giving details.

What Putin, an intelligence professional of the highest order, only hinted at in his remarks, I have documented in detail from non-Russian sources. The report has enormous implications to reveal to the world the long-standing hidden agenda of influential circles in Washington to destroy Russia as a functioning sovereign state, an agenda which includes the neo-nazi coup d’etat in Ukraine and severe financial sanction warfare against Moscow. The following is drawn on my book, “The Lost Hegemon” to be published soon…

CIA’s Chechen Wars

Not long after the CIA and Saudi Intelligence-financed Mujahideen had devastated Afghanistan at the end of the 1980’s, forcing the exit of the Soviet Army in 1989, and the dissolution of the Soviet Union itself some months later, the CIA began to look at possible places in the collapsing Soviet Union where their trained “Afghan Arabs” could be redeployed to further destabilize Russian influence over the post-Soviet Eurasian space.

They were called Afghan Arabs because they had been recruited from ultraconservative Wahhabite Sunni Muslims from Saudi Arabia, the Arab Emirates, Kuwait, and elsewhere in the Arab world where the ultra-strict Wahhabite Islam was practiced. They were brought to Afghanistan in the early 1980’s by a Saudi CIA recruit who had been sent to Afghanistan named Osama bin Laden.

With the former Soviet Union in total chaos and disarray, George H.W. Bush’s Administration decided to “kick ‘em when they’re down,” a sad error. Washington redeployed their Afghan veteran terrorists to bring chaos and destabilize all of Central Asia, even into the Russian Federation itself, then in a deep and traumatic crisis during the economic collapse of the Yeltsin era.

In the early 1990s, Dick Cheney’s company, Halliburton, had surveyed the offshore oil potentials of Azerbaijan, Kazakhstan, and the entire Caspian Sea Basin. They estimated the region to be “another Saudi Arabia” worth several trillion dollars on today’s market. The US and UK were determined to keep that oil bonanza from Russian control by all means. The first target of Washington was to stage a coup in Azerbaijan against elected president Abulfaz Elchibey to install a President more friendly to a US-controlled Baku–Tbilisi–Ceyhan (BTC) oil pipeline, “the world’s most political pipeline,” bringing Baku oil from Azerbaijan through Georgia to Turkey and the Mediterranean.

At that time, the only existing oil pipeline from Baku was a Soviet era Russian pipeline that ran through the Chechen capital, Grozny, taking Baku oil north via Russia’s Dagestan province, and across Chechenya to the Black Sea Russian port of Novorossiysk. The pipeline was the only competition and major obstacle to the very costly alternative route of Washington and the British and US oil majors.

President Bush Sr. gave his old friends at CIA the mandate to destroy that Russian Chechen pipeline and create such chaos in the Caucasus that no Western or Russian company would consider using the Grozny Russian oil pipeline.

Graham E. Fuller, an old colleague of Bush and former Deputy Director of the CIA National Council on Intelligence had been a key architect of the CIA Mujahideen strategy. Fuller described the CIA strategy in the Caucasus in the early 1990s: “The policy of guiding the evolution of Islam and of helping them against our adversaries worked marvelously well in Afghanistan against the Red Army. The same doctrines can still be used to destabilize what remains of Russian power.”6

The CIA used a dirty tricks veteran, General Richard Secord, for the operation. Secord created a CIA front company, MEGA Oil. Secord had been convicted in the 1980s for his central role in the CIA’s Iran-Contra illegal arms and drugs operations.

In 1991 Secord, former Deputy Assistant Secretary of Defense, landed in Baku and set up the CIA front company, MEGA Oil. He was a veteran of the CIA covert opium operations in Laos during the Vietnam War. In Azerbaijan, he setup an airline to secretly fly hundreds of bin Laden’s al-Qaeda Mujahideen from Afghanistan into Azerbaijan. By 1993, MEGA Oil had recruited and armed 2,000 Mujahideen, converting Baku into a base for Caucasus-wide Mujahideen terrorist operations.

General Secord’s covert Mujahideen operation in the Caucasus initiated the military coup that toppled elected president Abulfaz Elchibey that year and installed Heydar Aliyev, a more pliable US puppet. A secret Turkish intelligence report leaked to the Sunday Times of London confirmed that “two petrol giants, BP and Amoco, British and American respectively, which together form the AIOC (Azerbaijan International Oil Consortium), are behind the coup d’état.”

Saudi Intelligence head, Turki al-Faisal, arranged that his agent, Osama bin Laden, whom he had sent to Afghanistan at the start of the Afghan war in the early 1980s, would use his Afghan organization Maktab al-Khidamat (MAK) to recruit “Afghan Arabs” for what was rapidly becoming a global Jihad. Bin Laden’s mercenaries were used as shock troops by the Pentagon and CIA to coordinate and support Muslim offensives not only Azerbaijan but also in Chechnya and, later, Bosnia.

Bin Laden brought in another Saudi, Ibn al-Khattab, to become Commander, or Emir of Jihadist Mujahideen in Chechnya (sic!) together with Chechen warlord Shamil Basayev. No matter that Ibn al-Khattab was a Saudi Arab who spoke barely a word of Chechen, let alone, Russian. He knew what Russian soldiers looked like and how to kill them.

Chechnya then was traditionally a predominantly Sufi society, a mild apolitical branch of Islam. Yet the increasing infiltration of the well-financed and well-trained US-sponsored Mujahideen terrorists preaching Jihad or Holy War against Russians transformed the initially reformist Chechen resistance movement. They spread al-Qaeda’s hardline Islamist ideology across the Caucasus. Under Secord’s guidance, Mujahideen terrorist operations had also quickly extended into neighboring Dagestan and Chechnya, turning Baku into a shipping point for Afghan heroin to the Chechen mafia.

From the mid-1990s, bin Laden paid Chechen guerrilla leaders Shamil Basayev and Omar ibn al-Khattab the handsome sum of several million dollars per month, a King’s fortune in economically desolate Chechnya in the 1990s, enabling them to sideline the moderate Chechen majority.21 US intelligence remained deeply involved in the Chechen conflict until the end of the 1990s. According to Yossef Bodansky, then Director of the US Congressional Task Force on Terrorism and Unconventional Warfare, Washington was actively involved in “yet another anti-Russian jihad, seeking to support and empower the most virulent anti-Western Islamist forces.”

Bodansky revealed the entire CIA Caucasus strategy in detail in his report, stating that US Government officials participated in,

“a formal meeting in Azerbaijan in December 1999 in which specific programs for the training and equipping of Mujahideen from the Caucasus, Central/South Asia and the Arab world were discussed and agreed upon, culminating in Washington’s tacit encouragement of both Muslim allies (mainly Turkey, Jordan and Saudi Arabia) and US ‘private security companies’. . . to assist the Chechens and their Islamist allies to surge in the spring of 2000 and sustain the ensuing Jihad for a long time…Islamist Jihad in the Caucasus as a way to deprive Russia of a viable pipeline route through spiraling violence and terrorism.”

The most intense phase of the Chechen wars wound down in 2000 only after heavy Russian military action defeated the Islamists. It was a pyrrhic victory, costing a massive toll in human life and destruction of entire cities. The exact death toll from the CIA-instigated Chechen conflict is unknown. Unofficial estimates ranged from 25,000 to 50,000 dead or missing, mostly civilians. Russian casualties were near 11,000 according to the Committee of Soldiers’ Mothers.

The Anglo-American oil majors and the CIA’s operatives were happy. They had what they wanted: their Baku–Tbilisi–Ceyhan oil pipeline, bypassing Russia’s Grozny pipeline.

The Chechen Jihadists, under the Islamic command of Shamil Basayev, continued guerrilla attacks in and outside Chechnya. The CIA had refocused into the Caucasus.

Basayev’s Saudi Connection

Basayev was a key part of the CIA’s Global Jihad. In 1992, he met Saudi terrorist Ibn al-Khattag in Azerbaijan. From Azerbaijan, Ibn al-Khattab brought Basayev to Afghanistan to meet al-Khattab’s ally, fellow-Saudi Osama bin Laden. Ibn al-Khattab’s role was to recruit Chechen Muslims willing to wage Jihad against Russian forces in Chechnya on behalf of the covert CIA strategy of destabilizing post-Soviet Russia and securing British-US control over Caspian energy.

Once back in Chechnya, Basayev and al-Khattab created the International Islamic Brigade (IIB) with Saudi Intelligence money, approved by the CIA and coordinated through the liaison of Saudi Washington Ambassador and Bush family intimate Prince Bandar bin Sultan. Bandar, Saudi Washington Ambassador for more than two decades, was so intimate with the Bush family that George W. Bush referred to the playboy Saudi Ambassador as “Bandar Bush,” a kind of honorary family member.

Basayev and al-Khattab imported fighters from the Saudi fanatical Wahhabite strain of Sunni Islam into Chechnya. Ibn al-Khattab commanded what were called the “Arab Mujahideen in Chechnya,” his own private army of Arabs, Turks, and other foreign fighters. He was also commissioned to set up paramilitary training camps in the Caucasus Mountains of Chechnya that trained Chechens and Muslims from the North Caucasian Russian republics and from Central Asia.

The Saudi and CIA-financed Islamic International Brigade was responsible not only for terror in Chechnya. They carried out the October 2002 Moscow Dubrovka Theatre hostage seizure and the gruesome September 2004 Beslan school massacre. In 2010, the UN Security Council published the following report on al-Khattab and Basayev’s International Islamic Brigade:

Islamic International Brigade (IIB) was listed on 4 March 2003. . . as being associated with Al-Qaida, Usama bin Laden or the Taliban for “participating in the financing, planning, facilitating, preparing or perpetrating of acts or activities by, in conjunction with, under the name of, on behalf or in support of” Al-Qaida. . . The Islamic International Brigade (IIB) was founded and led by Shamil Salmanovich Basayev (deceased) and is linked to the Riyadus-Salikhin Reconnaissance and Sabotage Battalion of Chechen Martyrs (RSRSBCM). . . and the Special Purpose Islamic Regiment (SPIR). . .

 

On the evening of 23 October 2002, members of IIB, RSRSBCM and SPIR operated jointly to seize over 800 hostages at Moscow’s Podshipnikov Zavod (Dubrovka) Theater.

 

In October 1999, emissaries of Basayev and Al-Khattab traveled to Usama bin Laden’s home base in the Afghan province of Kandahar, where Bin Laden agreed to provide substantial military assistance and financial aid, including by making arrangements to send to Chechnya several hundred fighters to fight against Russian troops and perpetrate acts of terrorism. Later that year, Bin Laden sent substantial amounts of money to Basayev, Movsar Barayev (leader of SPIR) and Al-Khattab, which was to be used exclusively for training gunmen, recruiting mercenaries and buying ammunition.

The Afghan-Caucasus Al Qaeda “terrorist railway,” financed by Saudi intelligence, had two goals. One was a Saudi goal to spread fanatical Wahhabite Jihad into the Central Asian region of the former Soviet Union. The second was the CIA’s agenda of destabilizing a then-collapsing post-Soviet Russian Federation.

Beslan

On September 1, 2004, armed terrorists from Basayev and al-Khattab’s IIB took more than 1,100 people as hostages in a siege that included 777 children, and forced them into School Number One (SNO) in Beslan in North Ossetia, the autonomous republic in the North Caucasus of the Russian Federation near to the Georgia border.

On the third day of the hostage crisis, as explosions were heard inside the school, FSB and other elite Russian troops stormed the building. In the end, at least 334 hostages were killed, including 186 children, with a significant number of people injured and reported missing. It became clear afterward that the Russian forces had handled the intervention poorly.

The Washington propaganda machine, from Radio Free Europe to The New York Times and CNN, wasted no time demonizing Putin and Russia for their bad handling of the Beslan crisis rather than focus on the links of Basayev to Al Qaeda and Saudi intelligence. That would have brought the world’s attention to the intimate relations between the family of then US President George W. Bush and the Saudi billionaire bin Laden family.

On September 1, 2001, just ten days before the day of the World Trade Center and Pentagon attacks, Saudi Intelligence head US-educated Prince Turki bin Faisal Al Saud, who had directed Saudi Intelligence since 1977, including through the entire Osama bin Laden Mujahideen operation in Afghanistan and into the Caucasus, abruptly and inexplicably resigned, just days after having accepted a new term as intelligence head from his King. He gave no explanation. He was quickly reposted to London, away from Washington.

The record of the bin Laden-Bush family intimate ties was buried, in fact entirely deleted on “national security” (sic!) grounds in the official US Commission Report on 911. The Saudi background of fourteen of the nineteen alleged 911 terrorists in New York and Washington was also deleted from the US Government’s final 911 Commission report, released only in July 2004 by the Bush Administration, almost three years after the events.

Basayev claimed credit for having sent the terrorists to Beslan. His demands had included the complete independence of Chechnya from Russia, something that would have given Washington and the Pentagon an enormous strategic dagger in the southern underbelly of the Russian Federation.

By late 2004, in the aftermath of the tragic Beslan drama, President Vladimir Putin reportedly ordered a secret search and destroy mission by Russian intelligence to hunt and kill key leaders of the Caucasus Mujahideen of Basayev. Al-Khattab had been killed in 2002. The Russian security forces soon discovered that most of the Chechen Afghan Arab terrorists had fled. They had gotten safe haven in Turkey, a NATO member; in Azerbaijan, by then almost a NATO Member; or in Germany, a NATO Member; or in Dubai–one of the closest US Allies in the Arab States, and Qatar-another very close US ally. In other words, the Chechen terrorists were given NATO safe haven.








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