Apr 102014
 
 April 10, 2014  Posted by at 4:17 pm Finance Tagged with: , , ,
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Fenno Jacobs Children pledging allegiance to the flag, Southington, CT May 1942

The headlines are great, but then so is the headfake. “Greece makes ‘triumphant’ return to the markets in €3 billion bond sale”, says the Guardian. CNBC speaks of a “voracious appetite” for Greek bonds, but does question whether it’s justified. Still, at first glance it certainly looks like the Greeks have been welcomed back into the fold of civilized people:

Greece, the country once held responsible for sparking the sovereign debt crisis, managed to attract €20 billion ($27.7 billion) of offers for a new five-year bond and is set to sell €3 billion at a yield of 4.95%.

The bonds were all snapped up by big investors. Like your pension fund perhaps. And if you feel inclined to ask why, you’re not the only one. Of course they pay a much higher yield than most. Bonds of European countries like Germany pay hardly anything (the yield for Germany 5-year bonds is 0.6%). These Greek 5-years pay almost 5%. Plus, the troika restructurings of the past few years mean that Greece doesn’t have huge debt payments to make for another 10 years. Then again, Greek economy looks to have zero probability of returning to growth for as many years as well.

Greek 2013 GDP may have fallen as much as 7%, though the IMF/EC/ECB troika claims a small gain. It also claims a €500 million primary surplus for 2014 , whereas Eurostat shows a primary deficit of €17 billion for the first 3 quarters of 2013. Greek government debt is at 177% of GDP, which is far worse than before the crisis. Unemployment is 28%, and youth unemployment about 65%. Salaries have been cut by 50%. Unemployment benefits have been shattered. 3 million Greeks, or 30% of the population, lost their insurance and have no access to health care.

Why is the troika embellishing the numbers? It seems to fit their agenda. Which mentions European elections next month. And after all, who are the troika members accountable to? The IMF to the whole planet and therefore no-one. The European Commission (EC) to its parliament, but with Barroso at its head for over 10 years, that doesn’t have much meaning. The ECB is accountable to all 28 EU members, but of course in reality first and foremost to Germany.

And that makes this interesting. Because there is no way in hell and high water the institutional investors would have gobbled up, at less than 5%, the bonds of a country with such abominable numbers to show for its economic performance. And if and when 2/3 of your young and promising are out of a job, your economy is not going to be doing well anytime soon. Even if there is a turnaround in the offing, it’ll take many many years. And then the big debt repayments are due. But hey, do let’s discount the future where we can, shall we?

Eurobonds have been on – and under, and hovering over – the table since the recession started, but they have always been politically unpalatable, especially for the rich north, Germany, Netherlands, Finland, because they would carry with them the risk that the rich have to pay more for borrowing. And they like their ultra low yields, if only because it helps them hide their actual financial situation from sight.

But it’s still hard to see how these new Greek bonds are de facto anything else than Eurobonds in disguise. Investors buy them because of the implied, alleged, suggested support from the ECB, where Mario Draghi had pledged to do anything he needs to in order to support the euro and eurozone. For all we know, the ECB itself may have bought a large slice of today’s issue. Not directly, of course, but there are always ways.

I’m still wondering why Germany now allows this. Is Angela Merkel trying to pull one over on her own people? What will she do when Portugal, Cyprus, Spain expect, let alone demand, the same treatment? Obviously, the Greek government can’t decide on its own to do a debt issue. So who’s dealing the cards behind the curtains behind the closed doors? What is Mario Draghi’s role? Is he the man behind the plan, or was he instead overruled by the Bundesbank in order to get this done? Is this all about the elections, and if so, what’s going to happen afterwards, over the summer?

The funny thing is I don’t see any analyst or talking head calling these things for what they are. The news stories are all about Greece recovering and being the new darling of the debt markets. And that’s such obvious nonsense that there’s no way we can not ask ourselves what’s happening behind the curtain. Athens can borrow because Brussels has implied it’s good for it. In 5 years time, or 10. And no matter how many justified questions there may be about this murky process, one thing is certain: the first Eurobonds have been issued. After having recognized that, we can see what it all means.

A great set of graphs from Lance Roberts at STA. Recommended reading.

No One Will Ring The Bell At The Top (Lance Roberts)

Throughout human history, the emotions of "fear" and "greed" have influenced market dynamics.  From soaring bull markets to crashing bear markets, tulip bubbles to the South Sea, railroads to technology; the emotions of greed, fear, panic, hope and despair have remained a constant driver of investor behavior.  The chart below, which I have discussed previously, shows the investor psychology cycle overlaid against the S&P 500 and the 3-month average of net equity fund inflows by investors. The longer that an advance occurs in the market, the more complacent that investors tend to become.

Complacency is like a "warm blanket on a freezing day."  No matter how badly you want something, you are likely to defer action because it will require leaving the "cozy comfort" the blanket affords you. When it comes to the markets, that complacency can be detrimental to your long term financial health. The chart below shows the 6-month average of the volatility index (VIX) which represents the level of "fear" by investors of a potential market correction.


The current levels of investor complacency are more usually associated with late stage bull markets rather than the beginning of new ones. Of course, if you think about it, this only makes sense if you refer back to the investor psychology chart above.

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Gartman is worth your time.

‘Scared’ Dennis Gartman: Get Out Of Stocks (CNBC)

In a reversal of his more bullish take on U.S. equities in recent weeks, Dennis Gartman said Monday that he’s getting out of equities and sticking with cash and gold to ride out the recent pullback, which he called a “long-awaited and much-needed correction.” On CNBC’s “Fast Money” on Monday, the editor of the Gartman Letter said simply, “I got scared.” Gartman said that Friday’s action made it seem as though a switch was flipped in the minds of investors. “The whole world switched at that period of time,” he said.

That same switch evidently dimmed Gartman’s view of stocks as well; he pared down his exposure to equities from an average of 100%, to close to zero. “In a bull market there are only three positions you can have: Really long, pleasantly long and neutral. It’s time to be neutral. It’s still a bull market. You don’t need to be short, but you don’t need to be long at this point. I think cash is the right place to be,” he said.

Gartman narrowed down the moment that sentiment seemed to turn to a brief, 15-minute window on Friday morning. “I’m not sure what happened, but something happened between 11 and 11:15, that everything turned on a dime.” In Monday’s issue of “The Gartman Letter,” Gartman said he couldn’t recall “a time in our history of trading when we’ve seen such unanimity of trend reversals” as was observed on Friday. “Indeed, the changes were material enough and important enough to mandate that action be taken to reduce our exposure to everything we have on, save for positions in gold,” he said.

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I’ve written so much about China already lately. And it doesn’t get any better. Turns out, the 18.1% drop in February was not a total fluke, and it looks like we are looking at structural issues. Which China will have a very hard time handling.

China March Exports Tumble 6.6%, Imports Down 11.3% (CNBC)

China’s exports tumbled for a second straight month in March while imports unexpectedly slumped, heightening concerns over the health of the world’s second-biggest economy. Exports fell 6.6% from the year-ago period, official data showed on Thursday, missing a Reuters forecast for an increase of 4% and after plunging 18.1% in February. Imports fell 11.3% on year, compared to a Reuters forecast for a 2.4% increase and after rising 10.1% in February. This leaves the country with a trade surplus of $7.7 billion for the month, the Customs Administration said. But the country’s customs bureau added that exports would likely fare better in the second quarter as external demand improves and remains optimistic about achieving this year’s 7.5% trade growth target.

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When to parts of one body, the Communist Party, start bickering, the outcome is hard to foresee. But one wonders how reliable numbers are coming out, and how effective policies in face of the obvious problems China is in the middle of.

China Bank Regulators Caught In Turf War (FT)

A bitter turf war between China’s two most important financial regulators is hampering policy co-ordination just as the country’s debt-laden financial system is starting to show signs of real strain. The China Banking Regulatory Commission and the People’s Bank of China, the central bank, have always been rivals, but now rising tensions are obstructing reforms and efforts to tackle risks in the financial sector, according to officials from both agencies. From the outside, the Chinese system can often look like a monolithic structure but the various arms of the bureaucracy are often engaged in vicious institutional battles that can delay or even hamstring policy.

In just one example of how rancorous the split has become, several people familiar with the matter say a Financial Stability Council chaired by the PBoC and including the heads of the main financial regulatory bodies has met just once since it was established last August. The row comes after several high-profile defaults in recent weeks including the first ever public domestic bond default in modern history and a small bank run in eastern China. The council has not been able to meet because of opposition from the CBRC, which has vehemently objected to what it sees as a power grab by the PBoC.

In recent weeks the central bank, which has responsibility for overall financial stability in China, has expressed frustration at the CBRC’s unwillingness or inability to rein in the off-balance sheet activity of the state-controlled banking system, which has ballooned in recent years. The PBoC also feels the CBRC is too close to the state banks and has failed to get a handle on the scale of problem loans at many of the country’s smaller lenders.

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Ouch!

Japanese Sales Plunge 25% After Tax Hike (Zero Hedge)

On April 1, as was widely known, Japan raised its sales tax from 5% to 8% – a move many dread could unleash a recession as happened the last time Japan hiked a consumption tax in 1997. A week later the verdict on just how much consumption was frontloaded ahead of the hike is in, as we get the first sales data on the ground. The result is, in short, a disaster: overnight the Nikkei reported that Japanese department store Takashimaya’s revenue in April 1-7 period crashed 25%! We for one can’t wait to see what Japan’s Q2 GDP will be now that consumption has literally fallen off a cliff. The Nikkei reports:

Retailers watched Japanese shoppers rush to stock up on all sorts of consumer goods ahead of the April 1 sales tax rise, and are now bracing for a corresponding dip in demand. But Takashimaya says it carefully assessed the tax hike’s likely impact and is moving to slash costs by around 10 billion yen to ensure profit growth for the year through February 2015. [T]he company is tempering its outlook for the near future. “Insofar as big-ticket products were in high demand before the tax rise, it’s possible their sales will fall more than presumed,” President Shigeru Kimoto said at a news conference Tuesday.

Indeed, demand has recoiled since the start of this month, with department store sales tumbling 25% on the year during the first week of April. Takashimaya estimates that the combined impact of the drop-off in demand and the tax increase itself will lower fiscal 2014 operating revenue – equivalent to sales – by about 20 billion yen and operating profit by about 5 billion yen. As the steady performance of such segments as the Singapore unit and a subsidiary that operates shopping centers will be insufficient to offset this, operating revenue is expected to decline slightly to 900 billion yen.

Luckily, Takashimaya has a plan to deal with this plunge in revenues:

Takashimaya aims to weather these headwinds with sizeable cost cuts, targeting rents as one area for savings. Since the start of the year, the company has spent nearly 120 billion yen to acquire properties that house a number of its department stores. The move is expected to save just over 3 billion yen in rent annually. The corporation will cut back on other costs, including personnel expenditures and advertising fees as well, aiming to save about 7.3 billion yen at its department stores and around 2 billion yen for its group companies.

In other words, the company is about to unleash a “rationalization” campaign, better known as wholesale firings. But, but, what happened to those wage hikes that Abe swore up and down were coming and are so critical for the absent third arrow of Abenomics to finally emerge. Or maybe instead of wages surging, they meant unemployment? Happens – it was lost in translation.

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And more ouch. We’ll get to see where this is going as we move forward, but I’m again asking how much longer Abe will be in charge.

Japan Machinery Orders Fall 8.8% On Month In February

Japan’s core machinery orders fell 8.8% on month in February, worse than expectations for a 3% decline in a Reuters poll. The decline follows January’s 13.4% on-month rise – the fastest gain in nearly a year – casting doubt on the strength of capital spending in Asia’s second-largest economy. On an annual basis machinery orders rose 10.8% below Reuters’ expectations for a 17.6% on-year rise. Along with the data release the cabinet office cut its machinery orders assessment noting that the increasing trend in orders is stalling.

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What History Tells Us About The Carry Trade (El-Erian)

If there were any remaining doubts about investors’ “reach for yield,” today’s Greek bond news should lift them. This massively oversubscribed offering speaks to a strong market appetite for the first internal bond issuance since 2010 by a sovereign that – only two years ago – imposed significant losses on private bondholders; and it did so without being able to deal decisively with its excessive indebtedness. The scramble for the new Greek bonds is but the latest indication of a “carry trade” that is back in full force and, as explained here, for understandable reasons. It’s a market phenomenon that is likely gain further momentum in the weeks to come as competitive pressures accentuate the opportunity costs of below-carry portfolios.

As this phase continues to plays out, investors would be well advised to remember four key historical insights: First, investors’ romance with carry trades flourishes in relatively stable economic environments, particularly when interest rate volatility is relatively low. These days, central banks are also acting as matchmakers by repressing risk-free interest rates. (And yesterday’s Federal Open Market Committee minutes confirm that the Federal Reserve is committed to this policy approach.) Second, the impact of these “pull factors” can be turbocharged by an already-compressed level of risk spreads that pushes investors to take more risk and increase leverage – all as a means of targeting unchanged return objectives.

Third, such a combination of pull and push factors can lead investors to overdo the love affair with carry trades – not just by pushing bond prices too high (and, therefore, credit spreads too low) but also by failing to differentiate sufficiently between low- and high-risk holdings (resulting in an excessive flattening of the credit curve). Fourth, history also reminds us that, when taken to extremes, carry trades can end up delivering quite unpleasant surprises to investors, especially unsuspecting ones.

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Nobody wants to invest. That’s one of the shadows deflation casts.

Record European Dividends Keep $3 Trillion Out of Factories (Bloomberg)

Given the choice between investing in their businesses or paying off shareholders, European chief executive officers are choosing the latter. Companies of the benchmark Stoxx Europe 600 Index will pay 11.54 euros a share in dividends this year, the most since data going back to 2002, according analysts’ estimates compiled by Bloomberg. At the same time, cash flow from operations is poised to be the highest since 2011, at 37.45 euros a share. Stocks have more than doubled since 2009 after European Central Bank President Mario Draghi pledged to preserve the single currency.

European companies have pushed cash balances to €2 trillion ($2.8 trillion), close to the most since at least 2003, following the 2008 financial crisis, according to data compiled by Bloomberg. While the region emerged from its worst recession ever last year, CEOs remain skeptical about the euro area’s economic recovery and want to see results of monetary policy, according to RMG Wealth Management LLP’s Stewart Richardson. “There is money, but companies don’t want to invest in big capex programs,” Richardson, who helps manage about $100 million as RMG’s chief investment officer, said in a phone interview. “They are uncertain where growth will come from, and there is a huge focus from corporate management to shore up balance sheets and share prices.”

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Greek Return To Financial Markets Attracts Flock Of Investors (Guardian)

Greece will make a successful return to the financial markets on Thursday after investors flocked to its first sale of government bonds since the eurozone crisis flared up four years ago. There was strong demand for a new five-year bond, despite the country being gripped by its first anti-austerity general strike of 2014. By early evening Athens had received more than €11bn (£9bn) of bids, pushing down the interest rate it will pay on the debt at Thursday’s sale towards just 5%.

The general strike disrupted transport services, schools and hospitals in Greece, with thousands of people marching past the parliament building. The private sector GSEE union urged Antonis Samaras’s government to change its austerity programme, and ditch the “dead-end policies that have squeezed workers and made Greek people miserable”. Greece could raise as much as €2.5bn from the bond sale, those close to the deal say, a sign of confidence two years after Greece came close to crashing out of the euro. The country received bailouts totalling more than €200bn from the IMF and EU. The strong demand sparked a rally in eurozone sovereign debt in the bond markets, driving up the price at which Greece’s 10-year bonds were changing hands – and therefore driving down the yield.

Some fund managers warned, though, that Greece still faces serious challenges in the years ahead. Paul McNamara, investment director at fund manager GAM, cautioned that Greece will only be able to repay the bonds in 2019 if it sticks with the economic reform plans agreed with international lenders. “For Greece to be paying in full and on time in five years is dependent on them staying on good terms with the Troika and sticking with the (IMF) programme. A yield of around 5% feels low for what, for us, seems like a speculative investment,” said McNamara.

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Greek ‘Recovery’ Is Just More Agony (Bloomberg)

Financial markets respond more to changes in people’s beliefs than to changes in reality, which helps explain why Greek stocks and bonds have been doing so well recently even as the economy keeps shrinking. Reuters’s Hugo Dixon makes the optimists’ case, arguing that the troubled Mediterranean country is “undergoing an astonishing financial rebound” thanks to the combination of fiscal austerity, useful reforms of the public sector and relatively generous bailout terms.

Last June, I wrote about the Greek government’s relatively successful efforts to attract foreign investment by offering valuable assets at rock-bottom prices. Even though the Athens Stock Exchange General Index has done much better than the German Stock Index during the past year, Greek equities have a price-to-earnings ratio of just 4.2 compared with 18.3 for German shares. You could make a lot of money buying Greek stocks if valuations ever converge.

Another bullish data point is that the Greek government has just managed to raise billions of euros from private investors by selling five-year notes at an interest rate of only about 5 percent. Part of the appeal of these instruments is that they will be governed by English rather than local law, unlike the Greek sovereign bonds that were forcibly restructured in 2012. The debt sale comes after a big decline in yields on existing Greek bonds since they peaked in 2011. Yields are still much higher than on German equivalents, which suggests investors demand compensation for the risk of lending to weaker economies in the euro area.

These developments are impressive but they don’t mean Greece’s problems are solved. The best that can be said of the Greek economy is that things are getting worse at a slower pace than they were a few years ago. And while employment is a lagging indicator, the fact that it’s still falling isn’t particularly bullish either. The most depressing number, however, is 2025 – the year Greece’s gross domestic product is expected to return to its 2007 level under a relatively optimistic set of forecasts. Two lost decades would be a catastrophe for a developed country in peacetime far worse than anything experienced since the Great Depression. But by all means, call it a recovery.

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Top Economists Warn Germany EMU Crisis As Dangerous As Ever (AEP)

Benn Steil, from the Council on Foreign Relations, said Germany’s refusal to allow the eurozone rescue fund (ESM) to recapitalise banks directly means there will be no back-stop in place to prevent problems spinning out of control if European banks fail stress tests later this year, as expected. This ignores the key lesson of the US stress tests, where government capital lay in reserve to ensure the stability of the system. “There is the potential for a fresh crisis if they announce the stress tests without the ESM being able to recapitalise banks,” he said.

While Mr Steil did not cite specific countries, there are concerns that some Irish, Portuguese, Spanish and Italian lenders may fail tests as they grapple with a backlog of non-performing loans. “Germany and the creditor states are going to have to decide whether they will accept fiscal transfers or whether it is best to wind down the project and let the eurozone unravel,” he said. Mr Steil compared Germany’s hardline stance with US policy towards Britain at the end of the Second World War, when a prostrate UK emerged with the world’s biggest debts – though US policy later changed. “We are hearing the same language as in the 1940s. The crisis was all the fault of lax policies in the debtor countries. It was precisely the way the US spoke when it was a creditor,” he said.

Mr Steil warned that the achievement of primary budget surpluses in Italy and Greece may prove a Pyrrhic Victory since history shows that heavily-indebted countries are most likely to default once they have crossed this line and can meet day-to-day costs from tax revenue. “This is a good time for Greece to default,” he said. Professor Michael Burda, from Berlin’s Humbolt University, said the eurozone’s core problem is Germany’s current account surplus – more than 6% of GDP – and flat wages for a decade. “Germany has to become less competitive or the eurozone is not going to survive. You can’t just save forever. It’s mercantilism and we don’t do that kind of thing anymore. All Germany has to do is to make its people happier by raising their wages,” he said.

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Good thing we have stress tests being executed as we speak. ;-)

IMF Warns Europe’s Banking System Threat To Global Financial Stability (Guardian)

The eurozone’s creaking banking system poses a serious threat to global financial stability, according to the International Monetary Fund, which warned European leaders to accelerate plans to support weak banks and create a banking union. In a report that forecasts a “Goldilocks” outcome of stable growth, IMF financial counsellor José Viñals said the end of low interest rates in the US, coupled with a failure by the Obama administration to monitor risky lending, a sharp slowdown in China and disruption to emerging markets could all upset expectations of a smooth recovery. “Can the US make a smooth exit from unconventional policies? I call this the ‘Goldilocks exit’ – not too hot, not too cold, just right.

“This is our base line, most likely outcome. After a turbulent start, the normalisation of monetary policy has begun. But a bumpy exit is possible.” He said the eurozone’s incomplete repair of bank and corporate balance sheets continued to place a drag on the recovery, while the widening gap between Germany and the poorest of the 18 member states was restricting the flow of funds around the currency zone and hampering the growth of smaller businesses. “Thus, further efforts must be made to strengthen bank balance sheets, through the European comprehensive bank assessment and follow-up, and to tackle the corporate debt overhang,” he said. [..]

Willem Buiter, chief economist at US bank Citi, told an audience at the IMF’s spring conference that the US central bank was irresponsible to predict higher interest rates without putting in place insurance plans for countries that will be hit by the increased costs. Buiter said greater co-operation was needed to insulate weaker countries from the ripple effects of policy changes in the US. A refusal by the European Central Bank and its boss Mario Draghi to make borrowing cheaper for local banks was also a concern, he said. “We talk about the US exiting loose monetary policy and low interest rates, but the eurozone has not yet even entered. Europe is too confident that everything will be OK when its banks are still in need of massive support,” he said. “The markets are strong, but investors are still sniffing the glue provided by Draghi and his declaration to do whatever it takes to rescue the euro.”

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A side of the conflict that merits more scrutiny.

Russia Can’t Support Ukrainian Economy Forever – Putin (RT)

Russia can’t continue to prop up Ukraine’s faltering economy, and this responsibility should fall on the US and EU, which have recognized the authorities in Kiev but not yet given one dollar to support the economy, President Putin has said. “The situation is – to put it kindly, strange. It’s known our partners in Europe have recognized the legitimacy of the government in Kiev, yet have done nothing to support Ukraine – not even one dollar or one euro,” Putin said at a meeting with government officials at his residence outside of Moscow. “The Russian Federation doesn’t recognize the legitimacy of the authorities in Kiev, but it keeps providing economic support and subsidizing the economy of Ukraine with hundreds of millions and billions of dollars. This situation can’t last indefinitely,” Putin said.

In December, Russia provided Ukraine with a $3 billion loan, which was a part of a bigger $15 billion aid package agreed the same month. Russia also offered a 33% gas price discount that would have saved more than $7.5 billion. The head of the International Monetary Fund Christine Lagarde said that Russia’s loan tranche last year was vital for the collapsing Ukraine economy. In the meantime, the West hasn’t yet effectively provided any money to Ukraine. The International Monetary Fund has agreed to provide Ukraine a bailout package of up to $18 billion, but the details are still being worked out. The US has also promised $1 billion in loan guarantees to help the collapsing Ukraine economy.

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Russia Urges Companies To Return Assets To The Motherland (RT)

As the US and Europe escalate talks of sanctions, Russia is recommending companies unregister abroad and bring their shares to the Moscow Exchange to protect from possible future sanctions and provide economic security. “Companies that have listed shares on the New York Stock Exchange, London need to seriously reconsider,” Russia’s Deputy Prime Minister Igor Shuvalov told reporters in Moscow on Tuesday. Sanctions by the West have ramped up over the geopolitical action in Ukraine, and Russian business and politicians have been the target of asset freezes and visa bans.

The government will not force companies to delist and return to Russia, but Shuvalov said the Russian state and the Moscow Exchange will work together to create “attractive conditions” for companies to make the switch. “This is a question of economic security,” the minister said. The US continues to ramp up economic sanctions against Russia, which has spooked investors and resulted in a massive $70 billion outflow of capital since the beginning of 2014, according to Economics Minister Andrei Klepach.

Russian stocks have plummeted over the crisis in Crimea and Ukraine, and are the worst performing stocks worldwide. Since the beginning of the year, stocks have dropped more than 10%. Poor performance is also linked to a general trend in emerging markets, which are losing as the US Federal Reserve cuts back its multi-billion dollar bond-buying program.

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Europeans better prepare for much higher energy bills. And Americans too, with a time lag.

Russia And China About To Sign “Holy Grail” Gas Deal (Zero Hedge)

Several weeks ago we reported that in response to ongoing alienation of Russia by the west Putin was aggressively setting the stage for Russia’s eastward expansion, set to culminate with a “holy grail” gas deal with China. We said that “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.”

Reuters added, reflecting on the recent trip of Rosneft executive chairman to Asia, that “the underlying message from the head of Russia’s biggest oil company, Rosneft, was clear: If Europe and the United States isolate Russia, Moscow will look East for new business, energy deals, military contracts and political alliances. The Holy Grail for Moscow is a natural gas supply deal with China that is apparently now close after years of negotiations. If it can be signed when Putin visits China in May, he will be able to hold it up to show that global power has shifted eastwards and he does not need the West.”

It’s time for an update. According to Itar-Tass, “Russia’s Gazprom and China are poised to conclude a gas supply contract in coming weeks, the first in a series of energy projects planned between the two countries. “We’re working now to sign a gas contract in May,” said Deputy Prime Minister Arkady Dvorkovich. “Consultations are continuing and Gazprom’s leaders are holding talks with Chinese partners on the contract terms. We hope to conclude the contract in May and believe it should come into effect by the year end.”

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Bad bad feeling.

‘US Uses Mercenaries Where It Wants Its Hands Clean’ (RT)

As the US says there is “no confirmation” that American mercenaries are operating in Ukraine, Iraq war veteran Michael Prysner told RT that private US armies have been covertly operating globally wherever there is “dirty work” needs to be done.

RT: Could US contractors indeed be operating in Ukraine?

Michael Prysner: Well, of course they could. There is no law in the world that the Pentagon recognizes or will follow for its own soldiers let alone its dirty little secret with its corporate hitmen it had. I do know that mercenaries of this type, especially that have gone out of Blackwater, have been illegally operating in countries all around the world. We can assume that wherever there is dirty work to be done, where the US wants its hands clean and be able to say it has no connection to it, we can expect that private mercenaries could be there. Because it is part of a shift in US strategy over the last decade or more towards special operations on one hand and the private military contractors on the other.

RT: If this is the case, why would the Kiev government need to deploy them?

MP: The new government in Ukraine is very unpopular in large parts of the country and the uprisings that we are seeing all over are threatening the new rule of this semi-fascist government that is willing to sell off the entire country to the West.

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Euan Mearns runs a noteworthy piece by Andrew McKillop.

From Financial Subprime To Global Energy Subprime (McKillop)

Headline-grabbing statements are coming thick and fast about the so-called “switching” of European energy supplies, starting with frothy fantasist claims that Europe can “switch” to American gas, other LNG suppliers, and even to American and non-Russian oil supplies. In the US, this political fantasy is being fanned at the highest levels. US media is hailing the launch of Obama’s oil and gas offensive. New, impossible to finance, and even more impossible to build, pipeline projects to bring Central Asian, Middle Eastern and even West African gas or oil to Europe are being mooted. Europe’s almost moribund nuclear power industry has been wheeled back on stage – using the shaky premise that atomic energy could loosen Russia’s energy stranglehold on Europe.

The bottom line for Europe, every time, is the continent will have to pay more for its energy – despite European energy prices already being among the highest in the world. Whether this is remotely possible is presently unimportant to political deciders, as they engage in a bizarre remake and follow-on to the Cold War. The real world of energy is rigorously placed on the back burner of an emerging political fantasy, because the EU is not currently prepared, neither technically nor in energy-economic terms, to buy exported energy from the US which under the most extreme optimistic scenarios will not be available in anything but tiny, near-symbolic quantities until at least 2017 for gas, and far into the 2020s for oil. Other non-Russian energy supplies face similar and basic problems of credibility.

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There’s this stooge, Mike Pompeo (R-Kan.), proclaiming that GMO made food so much safer and abundant. And he has traction. Beware, America.

Congress Considers Blocking GMO Food Labeling (RT)

A new bill introduced in Congress looks to ban states from implementing their own labeling laws when it comes to food containing genetically engineered ingredients. According to Reuters, US Rep. Mike Pompeo (R-Kan.) introduced the legislation on Wednesday, which is intended to head off bills in about 24 states that would require companies to inform customers when their food is produced using genetically modified organisms (GMOs). Titled the “Safe and Accurate Food Labeling Act,” the proposal would forbid states from enacting such proposals.

“We’ve got a number of states that are attempting to put together a patchwork quilt of food labeling requirements with respect to genetic modification of foods,” Pompeo told Reuters. “That makes it enormously difficult to operate a food system. Some of the campaigns in some of these states aren’t really to inform consumers but rather aimed at scaring them. What this bill attempts to do is set a standard.” Supporters of GMO labeling argue that modified ingredients pose a threat to human health, and that as a result they should be clearly labeled in the marketplace so that consumers can make informed decisions. In addition to health concerns, they also point to the negative environmental consequences that could arise from widespread GMO use, since millions of acres of farmland and weeds are developing resistances to the pesticides used.[..]

Pompeo’s bill has drawn the ire of the Center for Food Safety advocacy group, which noted his ties to the biotech company Monsanto and the Koch Industries corporation. “[The] selection of Congressman Pompeo as their champion shows how extreme the proposal really is,” said Colin O’Neil, director of government affairs for Center for Food Safety. “Selecting Pompeo creates an unholy alliance between Monsanto and Koch Industries, two of the most reviled corporations in America.” As RT reported last year, polling around the United States tends to find that a large majority of Americans favor GMO labeling, yet ballot initiatives to do just that keep failing in multiple states – an outcome advocates have blamed on huge amounts of corporate spending intended to move public opinion against the measures.

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Home Forums Debt Rattle 10 2014: They Snuck In Eurobonds Through The Backdoor

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April 10, 2014 at 4:17 pm #12254

Raúl Ilargi Meijer

Fenno Jacobs Children pledging allegiance to the flag, Southington, CT May 1942 The headlines are great, but then so is the headfake. “Greece makes ‘t
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