by Zero Hedge - October 25th, 2014 2:45 pm
Submitted by Tyler Durden.
While the analogy of Vladimir Putin playing geopolitical chess (while the rest of the world plays checkers) has been a popular one, the French ambassador Gerard Araud has a different – somewhat stunningly honest – persepctive: Putin “is more a poker player really, putting all the money on the table; saying, ‘Do the same’ and of course we blink. We don’t do the same.” As Bloomberg reports, Araud goes on to express entirely un-Juncker-like, how Putin has outmaneuvered his opponents and humiliated Ukraine. Simply put, he adds, the Russian president “has won because we were not ready to die for Ukraine, while apparently he was,” leaving the ominous question, “when is Putin going to stop? Whatever we decide is a disaster for us.”
Vladimir Putin has outmaneuvered his opponents and humiliated Ukraine by continuing to back pro-Russian separatists and flouting a cease-fire, making it crucial that sanctions on Russia remain firm, France’s ambassador to the U.S. said.
The Russian president “has won because we were not ready to die for Ukraine, while apparently he was,” Ambassador Gerard Araud said yesterday at a Bloomberg Government breakfast in Washington… Echoing the view of other European envoys in Washington, Araud expressed concern that the Ukraine conflict has hit an impasse, leaving Putin the winner by default.
Poroshenko is “kneeling in front of Putin with the cord around his neck and saying, ‘You know, you have won,’” and Putin is still not backing down, Araud said.
While many observers have called Putin a geopolitical chess player, he said, the Russian leader is more a “poker player really, putting all the money on the table, saying, ‘Do the same,’ and of course we blink. We don’t do the same.”
The economic sanctions against Russia must stay in place to prevent Putin from going further, said Araud, who moved to Washington in September after serving as the French ambassador to the United Nations.
“Whatever we decide is a disaster for us,” Araud said, again expressing his personal view. On one side, he said, lies France’s credibility as an arms supplier who delivers on contracts, and on the other, the difficulty of delivering a weapons system to
by Zero Hedge - October 25th, 2014 2:12 pm
Submitted by Tyler Durden.
Submitted by Erico Tavares of Sinclair & Co.
California – A Food Powerhouse In Peril
Now in its third year, the drought in California has forced local farmers to switch their water use from rivers and reservoirs, which are at historic low levels, to underground sources. This has mitigated substantial production losses, but given that underground reservoirs take a long time to replenish, if the drought continues the food situation in California might get much more dicey.
Food export data provided by the US Department of Agriculture for 2012, that is, before the current drought started to bite, can provide a sense of what is at stake. [Note: while a State’s actual agricultural export value cannot be measured directly, the USDA provides estimates per major food variety based on farm cash-receipts data]. The following table shows the crops where California was ranked either #1 or #2 based on 2012 export values:
(1) Includes live animals, other meats, animal parts, eggs, wine, beer, other beverages, coffee, cocoa, hops, nursery crops, inedible materials and prepared foods.
Last July, a study on the effects of the drought on California’s food production by the UC Davis Center for Watershed Sciences highlighted that “consumer food prices will be largely unaffected. Higher prices at the grocery store of high-value California crops like nuts, wine grapes and dairy foods are driven more by market demand than by the drought.”
However, looking at the table above, future production losses could extend to a wider variety of staples: California represents almost one-fifth of all US States’ milk exports, a third of all vegetable and rice exports, almost half of all fruit exports and over 90% tree nut exports. What is equally striking is how distant the #2 States are in some cases in terms of production volumes.
So if the drought continues into the foreseeable future (and this is a real possibility), here’s a really interesting question: who will make up for any shortfall in California’s gigantic contribution to US food production?
by Zero Hedge - October 25th, 2014 1:44 pm
Submitted by Tyler Durden.
18 months ago we first brought the world’s attention to the end of what has now been exposed as among the largest ponzi schemes in history – the Chinese Commodity Financing Deals (CCFDs) – pointing out how this meant commodities like copper were likely to come under pressure as firms liquidate what minimal holdings they had (and sell out futures hedges) to manage the risk of unwinds in these quasi-collateralized deals. Since then, copper prices have indeed plunged, as has global growth expectations and global bond yields as a realization that ‘demand’ implied by previous prices was entirely artificial. Now, as Goldman notes, the real world is catching up (or down) to the reality of mal-investment and how copper is set to drop notably further…
As Goldman Sach’s Max Layton,
Metals and mining commodities – including the base and bulk commodities, steel and cement – are highly exposed to a slowdown in the Chinese property, with over 40% of Chinese demand for cement and copper in particular consumed in the construction sector. The recent slowdown in Chinese property sales, prices and early-cycle new starts has most impacted physical demand for (and sentiment towards) commodities exposed to the earlier stages of China’s construction cycle – steel and iron ore – which have underperformed commodities more exposed to latter stages of the construction cycle, such as copper. However, as the recent slowdown in new starts flows through to late-cycle, copper-intensive construction completions, we expect copper to come under further pressure.
Understanding the construction cycle and commodity demand
The property development timeline for a typical Chinese building (such as an apartment building) from new start to property completion takes around 18 to 24 months. An “early-cycle” construction phase can be characterized as a period with strong new starts, relatively weak completions, and falling inventories (associated with higher sales). Conversely, “late-cycle” construction phases are typically associated with weak new starts, relatively strong completions, and rising/and or high property inventories (associated with weak sales). The intensity of basic material consumption varies significantly across these phases: consumption of steel and steel-making raw material (such as iron ore and coking coal) tends to be strongest in the earlier stages, while copper tends to be consumed in the later stages.
by Zero Hedge - October 25th, 2014 12:46 pm
Submitted by Tyler Durden.
What the New York Fed attempted to pull off this past Monday with its full-day conference for the execs of wayward Wall Street banks was a public relations stunt to switch the national debate from its culture to Wall Street’s culture. Styled as a “Workshop on Reforming Culture and Behavior in the Financial Services Industry,” the event came less than a month after ProPublica and public radio’s “This American Life” released internal tape recordings made by a former New York Fed bank examiner, Carmen Segarra, revealing a regulator with no bark or bite.
ProPublica’s Jake Bernstein wrote that the tapes and a confidential report by an outside consultant demonstrated the New York Fed’s “history of deference to banks.”
But there is far more to this story. Wall Street banking executives, who elect two-thirds of the Board of Directors of the New York Fed and have frequently served on its Board, have structured the institution to be its sycophant. Consider the fact that Jamie Dimon, CEO of JPMorgan Chase, sat on the Board of the New York Fed from 2007 through 2012 as the regulator failed to follow through on three separate staff recommendations that JPMorgan’s Chief Investment Office undergo a thorough investigation, as reported this week by the Federal Reserve System’s Inspector General.
JPMorgan’s Chief Investment Office in 2012 finally owned up to losing $6.2 billion of bank depositors’ money in wild bets on exotic derivatives in London.
A Wall Street regulator, like the New York Fed, which has staff positions called “relationship managers” that are considered senior to, and can bully and intimidate, their bank examiner colleagues, is in no position to be lecturing Wall Street on its culture. Indeed, the culture on Wall Street of “it’s legal if you can get away with it,” grew out of its cozy, crony relationships with its regulators like the New York Fed, an enshrined revolving door at the SEC, self-regulatory bodies delivering hand slaps and its own private justice system to keep its secrets shielded from the public’s view.
by Zero Hedge - October 25th, 2014 11:46 am
Submitted by Marc To Market.
The US dollar gained on most of the major foreign currencies last week, but the overall tone, leaving aside the yen, was largely consolidative in nature. The greenback was soft in the first half of the week but recovered in the second half.
The Australian and Canadian dollars were the only major currencies that managed to hold onto some of their gains (0.55% and 0.40% respectively). The yen was the weakest of the majors, losing 1.2%, as the panic from the week before died down. Equity markets were mostly higher, with the Nikkei’s 5.2% rise, leading the major markets. US 10-year Treasury yields rose 8 bp. Core bonds generally traded heavier, but European peripheral bonds were firmer, in line with the calmer conditions.
We were never persuaded that last week’s turmoil would prevent the Fed from completing its tapering operation, and see that in the market, cooler heads are prevailing. Talk of “tapering the tapering” has diminished, and no one is taking too seriously the prospects of QE4. Nevertheless, we note that both the December 2015 Fed funds and Eurodollar futures contracts were unchanged on the week at 46 bp and 77 bp respectively.
Perhaps offsetting the diminished interest rate support for the dollar has been speculation that more action from the European Central Bank and the Bank of Japan could be imminent. Reports suggested that the ECB may consider adding corporate bonds to its asset purchase program. There were also report suggesting that the BOJ sees risk that inflation may fall, and this could prompt an extension of the already aggressive Qualitative and Quantitative Easing. We are skeptical that either will materialize in the coming weeks. The BOJ meets next week and the ECB the following week.
Technically, the euro looks poised to continue to consolidate. Most of last week’s price action took place within the $1.2625-$1.2886 range set on October 15. In recent session, the euro flirted with the lower end and slipped to about $1.2615. The euro spending the second half of the week below the 20-day moving average, which comes in near $1.2690. This is the nearby cap. Of note, the nearly four-cent bounce in the euro has not been accompanied by a sharp change in euro positioning The confidence of…
by Zero Hedge - October 25th, 2014 11:13 am
Submitted by Tyler Durden.
Back on January 26, a 58-year-old former senior executive at German investment bank behemoth Deutsche Bank, William Broeksmit, was found dead after hanging himself at his London home, and with that, set off an unprecedented series of banker suicides throughout the year which included former Fed officials and numerous JPMorgan traders.
Following a brief late summer spell in which there was little if any news of bankers taking their lives, as reported previously, the banker suicides returned with a bang when none other than the hedge fund partner of infamous former IMF head Dominique Strauss-Khan, Thierry Leyne, a French-Israeli entrepreneur, was found dead after jumping off the 23rd floor of one of the Yoo towers, a prestigious residential complex in Tel Aviv.
Just a few brief hours later the WSJ reported that yet another Deutsche Bank veteran has committed suicide, and not just anyone but the bank’s associate general counsel, 41 year old Calogero “Charlie” Gambino, who was found on the morning of Oct. 20, having also hung himself by the neck from a stairway banister, which according to the New York Police Department was the cause of death. We assume that any relationship to the famous Italian family carrying that last name is purely accidental.
Here is his bio from a recent conference which he attended:
Charlie J. Gambino is a Managing Director and Associate General Counsel in the Regulatory, Litigation and Internal Investigation group for Deutsche Bank in the Americas. Mr. Gambino served as a staff attorney in the United Securities and Exchange Commission’s Division of Enforcement from 1997 to 1999. He also was associated with the law firm of Skadden, Arps, Slate Meagher & Flom from 1999 to 2003. He is a frequent speaker at securities law conferences. Mr. Gambino is a member of the American Bar Association and the Association of the Bar of the City of New York.
As a reminder, the other Deutsche Bank-er who was found dead earlier in the year, William Broeksmit, was involved in the bank’s risk function and advised the firm’s senior leadership; he was “anxious about various authorities investigating areas of the bank where he worked,” according to written evidence from his psychologist, given Tuesday at an inquest at London’s Royal Courts of Justice. And…
by Zero Hedge - October 25th, 2014 11:13 am
Submitted by Phoenix Capital Research.
In Europe, we already know the economy is in tatters. Italy is back in recession for the third time since 2008. Germany’s economy contracted in the second quarter of 2014 and will likely be in recession before the first quarter of 2015. France has registered zero growth for six months now.
None of this should shock anyone. From an economics perspective, Europe has been dead for four years now. Sure, there were little bumps in various data points here and there during that time… but overall unemployment remains at or near record highs, debt continues to grow, and human conditions in some regions now resemble third world countries.
However, the bigger story is one of politics. If you’ve been reading us for some time you know that a key theme for us is that politics drives everything in Europe.
Europe as a whole is socialist in nature. You will never hear a discussion of “how involved should the Government be in the economy?” in most of Europe; it is just assumed that the Government should always be involved to a significant degree.
The question is whether it should be a lot (the public sector accounts for 30% of jobs in Germany) or almost entirely (the public sector accounts for 56% of jobs in France).
In simple form, politics drives the economy and everything else in Europe. This is how Europe managed to squeak through a banking crisis that would have cratered any other region (it will still happen, but down the road). It’s also why the real European crisis will be political in nature. What I mean is that Europe will finally break apart based on politics, not finance or economics.
And by the look of things, it’s just begun.
I’m sure you’re aware of the fact Scotland attempted to break away from the UK earlier this month. What you may not be aware of is that fact that secessionist movements are spreading throughout Europe.
In Belgium, tensions between French-speaking Walloons and the Flemish (Dutch) population have been on the rise in recent years and there is a simmering sense among many in Flanders that they should be independent. Belgium would not simply split in half: it is likely that the map of Europe would have to be redrawn, with Wallonia perhaps attaching…
by Chart School - October 25th, 2014 10:11 am
Courtesy of Doug Short.
In last weekend’s update, only one the eight indexes on my watchlist posted a weekly gain. This weekend’s numbers have reversed. Seven indexes closed the week with a gain and there were some substantial ones at that. Japan’s Nikkei erased the previous week’s -5.02% plunge with a 5.22% surge. The S&P 500 finished second with a 4.12% advance. China’s Shanghai Composite was the sole loser, down 1.66%.
In fact, the Shanghai Composite remains the only index on the watch list in bear territory — the traditional designation for a 20% decline from an interim high. The index is down 33.68% from its August 2009 peak. See the table inset (lower right) in the chart below.
Here is a look at 2014 so far.
Here is a table highlighting the year-to-date index performance, sorted from high to low, along with the 2014 interim highs for the eight indexes. At this point, three of the eight are positive YTD, unchanged from last week, although Hong Kong’s Hang Seng is a mere 0.02% below the flat line..
A Closer Look at the Last Four Weeks
The tables below provide a concise overview of performance comparisons over the past four weeks for these eight major indexes. I’ve also included the average for each week so that we can evaluate the performance of a specific index relative to the overall mean and better understand weekly volatility. The colors for each index name help us visualize the comparative performance over time.
The chart below illustrates the comparative performance of World Markets since March 9, 2009. The start date is arbitrary: The S&P 500, CAC 40 and BSE SENSEX hit their lows on March 9th, the Nikkei 225 on March 10th, the DAX on March 6th, the FTSE on March 3rd, the Shanghai Composite on November 4, 2008, and the Hang Seng even earlier on October 27, 2008. However, by aligning on the same day and measuring the percent change, we get a better sense of the relative performance than if we align the lows.
A Longer Look Back
Top Ebola Scientists: Ebola More Likely to be Spread by Aerosol In Cold, Dry Conditions than In Hot, Humid Africa
by Zero Hedge - October 25th, 2014 3:28 am
Submitted by George Washington.
We've repeatedly warned that this strain of Ebola might be spread by aerosols.
But there is a fascinating and terrifying wrinkle to this …
You might assume that hot, steamy places would be more likely to spread deadly germs than developed countries. But the opposite might be true.
In 1995, scientists from the US Army Medical Research Institute of Infectious Diseases (USAMRIID) reported in the International Journal of Experimental Pathology:
We also demonstrated aerosol transmission of Ebola virus at lower temperature and humidity than that normally present in sub-Saharan Africa. Ebola virus sensitivity to the high temperatures and humidity in the thatched, mud, and wattel huts shared by infected family members in southern Sudan and northern Zaire may have been a factor limiting aerosol transmission of Ebola virus in the African epidemics. Both elevated temperature and relative humidity (RH) have been shown to reduce the aerosol stability of viruses (Songer 1967). Our experiments were conducted at 240C [i.e. 75 degrees Fahrenheit] and < 40% RH, conditions which are known to favour the aerosol stability of at least two other African haemorrhagic fever viruses, Rift Valley fever and Lassa (Stephenson et a/. 1984; Anderson et a/. 1991). If the same holds true for filoviruses [Ebola is a type of filovirus], aerosol transmission is a greater threat in modern hospital or laboratory settings than it is in the natural climatic ranges of viruses.
Peter Jahrling was one of the authors of the report. Jahrling was discoverer of the Reston strain of Ebola, and is now chief scientist at the U.S. National Institute of Allergy and Infectious Diseases.
In 2012, scientists from USAMRIID published a report in the journal Viruses finding:
Aerosol transmission is thought to be possible and may occur in conditions of lower temperature and humidity which may not have been factors in outbreaks in warmer climates.
Given that this is the first time that Ebola has spread out of West Africa to cooler, dryer nations, we may soon find out whether or not high temperature and humidity really do suppress the spread of Ebola by aerosols.
H/t Kit Daniels.
by Zero Hedge - October 25th, 2014 2:58 am
Submitted by Tyler Durden.
Submitted by Martin Armstrong via Armstrong Economics blog,
If you want to hide something in plain view, exaggerate it to the point it becomes extreme and convert it to a conspiracy theory. This is a very standard in how to create propaganda and if you keep saying a lie, its becomes the truth to many without ever having to prove anything. To uncover the truth, takes digging. This I have discovered both in politics as well as market fundamentals.
The two big conspiracy theories to be exaggerated that cover up the truth are the 911 WTC Attack and the Kennedy Assassination. With the former, people take it to the extreme and claim there was not even an attack by terrorists and the whole thing was made up. Sorry, there was an attack and the government knew it was coming and allowed it to for three purposes
- (1) eliminate the evidence on many cases in WTC7 including all my evidence that documented EVERY market manipulation up to 1999 by the investment banks et al for which they are getting fined all the time today
- (2) wipe out the evidence that would have exposed the missing $2 trillion in the Pentagon budget, and
- (3) generate more power for government by allowing Americans to be victims as originally proposed in Operation Northwoods.
Now, that is far closer to the truth than claiming there was no Middle East terrorists involved at all, Strange, for that does not jive with Saudi Arabia threatening Russia with terrorism or the funding of ISIS to overthrow Syria which has now overthrown most of Iraq.
Then there is the Kennedy Assassination spun to be the product of the Mafia or with Oswald’s Russian connection. Eisenhower in his Farewell Address warned of the vast military complex that had grown out of World War II employing over 3 million people. There was no such industry before that war and the view was now Communism would take the world. My father was a Colonel under General Patton and you to tell me all the time about him as a child how he read the books of his opponent and how he accurately predicted that the real enemy…