May 242018
 
 May 24, 2018  Posted by at 9:15 am Finance Tagged with: , , , , , , , , , , , ,  


Wassily Kandinsky Contrasting Sounds 1924

 

Every Fed Tightening Cycle ‘Creates A Meaningful Crisis Somewhere’ (MW)
Fed Minutes Show Support For June Hike And Calm About Inflation Outlook (MW)
US Launches Auto Import Probe (R.)
China Signals To State Giants: ‘Buy American’ Oil And Grains (R.)
Turkey Halts Lira’s Free Fall – But It’s Not Out Of The Woods Yet (MW)
Argentines Brace For Another Crisis As Nation Again Seeks IMF Help (R.)
US Birth Rates Are Falling Because This Is A Harsh Place To Have A Family (G.)
Yulia Skripal Gives First Interview (RT)
NHS Needs £2,000 In Tax From Every Household To Stay Afloat (Ind.)
Trump’s Blocking Of Critics On Twitter Violates Constitution – US Judge (R.)
Hitting Toughest Climate Target Will Save World $30 Trillion In Damages (G.)
The Mediterranean Diet Is Gone: Region’s Children Are Fattest In Europe (G.)

 

 

Take their power away?!

Every Fed Tightening Cycle ‘Creates A Meaningful Crisis Somewhere’ (MW)

Federal Reserve rate increases are a lot like shaking an overripe fruit tree. That’s the analogy offered by Deutsche Bank macro strategist Alan Ruskin in a note late Wednesday, in which he urged clients not to “overcomplicate” the macro picture. “A starting point should be that every Fed tightening cycle creates a meaningful crisis somewhere, often external but usually with some domestic (U.S.) fallout,” he wrote. To back it up, Ruskin offered the following history lesson:

“Going back in history, the 2004-6 Fed tightening looked benign but the US housing collapse set off contagion and a near collapse of the global financial system dwarfing all post-war crises. The late 1990s Fed stop/start tightening included the Asia crisis, LTCM and Russia collapse, and when tightening resumed, the pop of the equity bubble. The early 1993-4 tightening phase included bond market turmoil and the Mexican crisis. The late 1980s tightening ushered along the S&L crisis. Greenspan’s first fumbled tightening in 1987 helped trigger Black Monday, before the Fed eased and ‘the Greenspan put’ took off in earnest. The early 80s included the LDC/Latam debt crisis and Conti Illinois collapse. The 1970s stagflation tightening was when the Fed was behind ‘the curve’ and where inflation masked a prolonged decline in real asset prices.”

So what about now? The fed funds rate stands at 1.50% to 1.75% following a series of slow rate increases that began in December 2015, lifting it from near zero. The degree of tightening might seem pretty tame, but Ruskin notes that it comes after a period of “extreme and prolonged” accommodation and is also taking forms that economists and investors don’t fully understand as swollen balance sheet begins to shrink.

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The stronger the dollar the more likely rate hikes get.

Fed Minutes Show Support For June Hike And Calm About Inflation Outlook (MW)

Federal Reserve officials in their meeting in early May confirmed they planned to raise interest rates in June and were not concerned they were behind the curve on inflation. “Most participants judged that if incoming information broadly confirmed their economic outlook, it would likely soon be appropriate for the FOMC to take another step in removing policy accommodation,” the minutes said. Traders in the federal funds futures market see more than a 90% chance of a June rate hike. Although inflation hit the Fed’s 2% target in the latest reading for March, for the first time in a year, officials were not convinced it would remain there for long.

“It was noted that it was premature to conclude that inflation would remain at levels around 2%, especially after several years in which inflation had persistently run below the Fed’s 2% objective,” the minutes said. Only a “few” officials thought inflation might move “slightly” above the 2% target. “It has taken them so long to get there, with so many fits and starts, they are not quite sure it’s going to stay there,” said Michael Arone, chief investment strategist for State Street Global Advisors. Arone said the minutes were consistent with three total hikes this year although the Fed gave itself wiggle room if inflation picks up markedly. “They didn’t take [a fourth hike] off the table,” he said.

On the trade dispute with China, officials said the possible outcome on inflation and growth remained “particularly wide,” but there was some concern the dispute would hurt business confidence.

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Up to 25% tariffs. How about building better cars? Or weaning yourself off the addiction?

US Launches Auto Import Probe (R.)

The Trump administration has launched a national security investigation into car and truck imports that could lead to new U.S. tariffs similar to those imposed on imported steel and aluminum in March. The national security probe under Section 232 of the Trade Expansion Act of 1962 would investigate whether vehicle and parts imports were threatening the industry’s health and ability to research and develop new, advanced technologies, the Commerce Department said on Wednesday. “There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” Commerce Secretary Wilbur Ross said in a statement, promising a “thorough, fair and transparent investigation.”

Higher tariffs could be particularly painful for Asian automakers including Toyota, Nissan, Honda and Hyundai, which count the United States as a key market, and the announcement sparked a broad sell-off in automakers’ shares across the region. The governments of Japan, China and South Korea said they would monitor the situation, while Beijing, which is increasingly eyeing the United States as a potential market for its cars, added that would defend its interests. “China opposes the abuse of national security clauses, which will seriously damage multilateral trade systems and disrupt normal international trade order,” Gao Feng, spokesman at the Ministry of Commerce, said at a regular news briefing in Beijing on Thursday which focused largely on whether it is making any progress in its trade dispute with Washington.

[..] Roughly 12 million cars and trucks were produced in the United States last year, while the country imported 8.3 million vehicles worth $192 billion. This included 2.4 million from Mexico, 1.8 million from Canada, 1.7 million from Japan, 930,000 from South Korea and 500,000 from Germany, according to U.S. government statistics. At the same time, the United States exported nearly 2 million vehicles worldwide worth $57 billion. German automakers Volkswagen, Daimler and BMW all have large U.S. assembly plants. The United States is the second-biggest export destination for German auto manufacturers after China, while vehicles and car parts are Germany’s biggest source of export income. Asked if the measures would hit Mexico and Canada, a Mexican source close to the NAFTA talks said: “That probably is going to be the next battle.”

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For now it’s all opaque.

China Signals To State Giants: ‘Buy American’ Oil And Grains (R.)

China will import record volumes of U.S. oil and is likely to ship more U.S. soy after Beijing signalled to state-run refiners and grains purchasers they should buy more to help ease tensions between the two top economies, trade sources said on Wednesday. China pledged at the weekend to increase imports from its top trading partner to avert a trade war that could damage the global economy. Energy and commodities were high on Washington’s list of products for sale. The United States is also seeking better access for imports of genetically modified crops into China under the deal. As the two sides stepped back from a full-blown trade war, Washington neared a deal on Tuesday to lift its ban on U.S. firms supplying Chinese telecoms gear maker ZTE, and Beijing announced tariff cuts on car imports.

But U.S. President Donald Trump indicated on Wednesday that negotiations were still short of his objectives when he said any deal would need a “different structure”. China is the world’s top importer of both oil and soy, and already buys significant volumes of both from the United States. It is unclear how much more Chinese importers will buy from the United States than they would have otherwise, but any additional shipments would contribute to cutting the trade surplus, as demanded by Trump. Asia’s largest oil refiner, China’s Sinopec will boost crude imports from the United States to an all-time high in June as part of Chinese efforts to cut the surplus, two sources with knowledge of the matter said on Wednesday.

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Erdogan defeated?

Turkey Halts Lira’s Free Fall – But It’s Not Out Of The Woods Yet (MW)

Turkey’s central bank intervened to halt the free fall of the Turkish lira on Wednesday, but it isn’t clear whether policy makers will be able to stave off a full-fledged currency crisis. The Central Bank of the Republic of Turkey raised its late liquidity window lending rate by 300 basis points on Wednesday, in a surprise move that put a halt to the lira selloff — at least for now. The lending rate now sits at 16.5%, compared with 13.5% before. The U.S. dollar had rallied to a historic high against Turkey’s lira on Wednesday, buying 4.9233 lira at the high, before the path reversed on the back of the CBRT’s action and the lira found its feet again. The buck last bought 4.7015 lira. In the year to date, the Turkish currency has dropped more than 20% against the dollar, according to FactSet data.

The euro-lira pair behaved similarly, first rallying to an all-time high but paring the rise after the rate increase. The euro last bought 5.5084 lira. The U.S. and eurozone are two of Turkey’s most important trading partners. The central bank has been operating in a peculiar environment given that Turkey’s inflation has been hitting double digits and its currency keeps sliding to historic lows. Moreover, the government of President Recep Tayyip Erdogan has been critical of the central bank, calling for lower interest rates.

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Rising dollar.

Argentines Brace For Another Crisis As Nation Again Seeks IMF Help (R.)

Maria Florencia Humano opened a clothing store in 2016, convinced that Argentina’s long history of economic crises had ended under pro-business President Mauricio Macri. She will shutter it later this month, unable to make rent or loan payments. Soaring interest rates and a plunging currency have upended her dream and returned Argentina to a familiar place: asking the IMF for a lifeline. Humano’s decision comes just weeks after a somber Macri announced in a televised May 8 speech that Argentina would start talks with the IMF. He is seeking a credit line worth at least $19.7 billion to fund the government through the end of his first term in late 2019. The unexpected move surprised investors and stoked Argentines’ fears of a repeat of the nation’s devastating 2001-2002 economic collapse.

Many here blame IMF-imposed austerity measures for worsening that crisis, which impoverished millions and turned Argentina into a global pariah after the government defaulted on a record $100 billion in debt. Word of a potential bailout sent thousands of angry Argentines into the streets this month, some with signs declaring “enough of the IMF.” As recently as a few months ago, analysts were hailing Argentina as an emerging-market success story. Now some are predicting recession. Macri’s popularity has plummeted. [..] Macri’s free-market credentials earned him a 2017 invitation to the White House to meet U.S. President Donald Trump, who just last week on Twitter hailed the Argentine leader’s “vision for transforming his country’s economy.”

But economists say Macri badly damaged his credibility in December when his administration weakened tough inflation targets. The central bank followed with a January rate cut to goose growth, even as consumer prices kept galloping. Rising U.S. interest rates did not help. Argentina is saddled with more than $320 billion in external debt, equivalent to 57.1% of GDP, much of it denominated in dollars. Jittery investors hit the exits. The peso swooned. The central bank sold $10 billion in reserves trying to prop up the peso, forcing Macri to seek assistance from the IMF.

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And getting harsher all the time.

US Birth Rates Are Falling Because This Is A Harsh Place To Have A Family (G.)

America’s birth rate has fallen to a 30-year low, let the hand-wringing and finger-pointing begin. It’s those selfish women, wanting careers before kids! Or, gasp, not wanting kids at all! It’s all those abortions! It’s Obama’s fault! The reality is, for all its pro-family rhetoric, the US is a remarkably harsh place for families, and particularly for mothers. It’s a well-known fact, but one that bears repeating in this context, that the US is one of only four countries in the world with no government-subsidized maternity leave. The other three are Lesotho, Swaziland, and Papua New Guinea, countries that the US doesn’t tend to view as its peer group.

This fact is met with shrugs from those who assume that companies provide maternity leave. Only 56% do, and of those, just 6% offer full pay during maternity leave. This assumption also ignores the fact that 36% of the American workforce, a number expected to surpass 50% in the next 10 years, are contract laborers with no access to such benefits. That gig economy you keep hearing so much about, with its flexible schedule and independence? Yeah, it sucks for mothers. That doesn’t stop companies and pundits from pushing it as a great way for working moms to balance children and career. As a gig-economy mother myself, I can tell you exactly how great and balanced it felt to go back to work two hours after giving birth.

If they return to work, mothers can look forward to an increasingly large pay gap for every child they have, plus fewer promotions. Who could resist? The option for one parent to stay home with kids is increasingly not economically viable for American families, either. A data point that got far less attention than the falling birth rate was released by the Bureau of Labor Statistics last month: 71.1% of American mothers with children under 18 are in the workforce now. It’s not just because they want to be (not that there’s anything wrong with that), but increasingly because they have to be in order to support the family.

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Scripted interview?

Yulia Skripal Gives First Interview (RT)

In her first interview since surviving an alleged nerve agent attack, Yulia Skripal said she eventually wants to return to Russia. She has not shed any light on what happened in March in Salisbury. “I came to the UK on the 3rd of March to visit my father, something I have done regularly in the past. After 20 days in a coma, I woke to the news that we had both been poisoned,” Skripal said in a video that was recorded by Reuters. She reiterated her words in a handwritten statement. She and her father, Sergei Skripal, a former Russian double-agent, were found unconscious on a public bench in the British city of Salisbury on March 4. The UK government immediately accused Russia of being behind their poisoning, but it has yet to provide evidence for the claim.

Skripal did not comment on who she thought was to blame for her poisoning. “I still find it difficult to come to terms with the fact that both of us were attacked. We are so lucky to have both survived this attempted assassination. Our recovery has been slow and extremely painful,” she said. “The fact that a nerve agent was used to do this is shocking. I don’t want to describe the details but the clinical treatment was invasive, painful and depressing.” She also said that she was “grateful” for the offers of assistance from the Russian Embassy, “but at the moment I do not wish to avail myself of their services.” Skripal reiterated what she had said in an earlier written statement released by British police: “no one speaks for me, or for my father, but ourselves.”

Following the release of the interview, Russia’s Foreign Ministry spokeswoman addressed Yulia Skripal in a comment to RT. “We’d like Yulia Skripal to know that not a single day passed without the Foreign Ministry, Russia’s Embassy in London trying to reach her with the main purpose to make sure she was not held against her will, she was not impersonated by somebody else, to get the first-hand information about her and her father’s condition,” Maria Zakharova said.

Russia’s Embassy in the UK welcomed the release of the interview, stating: “we are glad to have seen Yulia Skripal alive and well.” The video itself and the wording of the written statements, however, raised concerns with Russian diplomats, who urged London once again to allow consular access to Yulia “in order to make sure that she is not held against her own will and is not speaking under pressure.” Skripal said that the ordeal had turned her life “upside down,” both “physically and emotionally.” She added that she was now focused on helping her father to make a full recovery, and that “in the long term I hope to return home to my country.”

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With the level of incompetence in UK politics, the NHS looks beyond salvation.

NHS Needs £2,000 In Tax From Every Household To Stay Afloat (Ind.)

Taxes will “almost certainly” have to rise over the coming years simply to prevent the National Health Service and social care system from slipping further into crisis, a major new report concludes. The Institute for Fiscal Studies and the Health Foundation state that the NHS, which has been suffering the most severe fiscal squeeze since its foundation over the past eight years, now requires an urgent increase in government spending in order to cope with an influx of older and sicker patients. Funding the projected increases in health spending through the tax system would need taxes to rise by between 1.6 and 2.6% of GDP – the equivalent of between £1,200 and £2,000 per household, the experts said.

The two organisations say that state funding growth rate, which has been just 1.4% a year since 2010, will have to more than double to between 3.3% and 4% over the next 15 years if government pledges, such as bringing down waiting times and increasing the provision of mental health services, are to stand any chance of being delivered. They also say that to finance this increase the government would “almost certainly need to increase taxes”. “If we are to have a health and social care system which meets our needs and aspirations, we will have to pay a lot more for it over the next 15 years. This time we won’t be able to rely on cutting spending elsewhere – we will have to pay more in tax,” said the IFS’s director Paul Johnson.

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Raises some interesting questions. I can block him, but he cannot block me. I can all him “Corrupt Incompetent Authoritarian” and much much worse, and he’s going to have to swallow it.

Trump’s Blocking Of Critics On Twitter Violates Constitution – US Judge (R.)

Trump has made his @RealDonaldTrump Twitter account an integral and controversial part of his presidency, using it to promote his agenda, announce policy and attack critics. He has blocked many critics from his account, which prevents them from directly responding to his tweets. U.S. District Judge Naomi Reice Buchwald in Manhattan ruled that comments on the president’s account, and those of other government officials, were public forums, and that blocking Twitter users for their views violated their right to free speech under the First Amendment of Constitution. Eugene Volokh, a University of California Los Angeles School of Law professor who specializes in First Amendment issues, said the decision’s effect would reach beyond Trump.

“It would end up applying to a wide range of government officials throughout the country,” he said. The U.S. Department of Justice, which represents Trump in the case, said, “We respectfully disagree with the court’s decision and are considering our next steps.” Twitter, which is not a party to the lawsuit, declined to comment on the ruling. Buchwald’s ruling was in response to a First Amendment lawsuit filed against Trump in July by the Knight First Amendment Institute at Columbia University and several Twitter users. The individual plaintiffs in the lawsuit include Philip Cohen, a sociology professor at the University of Maryland; Holly Figueroa, described in the complaint as a political organizer and songwriter in Washington state; and Brandon Neely, a Texas police officer.

Cohen, who was blocked from Trump’s account last June after posting an image of the president with words “Corrupt Incompetent Authoritarian,” said he was “delighted” with Wednesday’s decision. “This increases my faith in the system a little,” he said. Novelists Stephen King and Anne Rice, comedian Rosie O’Donnell, model Chrissy Teigen, actress Marina Sirtis and the military veterans political action committee VoteVets.org are among the others who have said on Twitter that Trump blocked them. Buchwald rejected the argument by Justice Department lawyers that Trump’s own First Amendment rights allowed him to block people with whom he did not wish to interact.

“While we must recognize, and are sensitive to, the president’s personal First Amendment rights, he cannot exercise those rights in a way that infringes the corresponding First Amendment rights of those who have criticized him,” Buchwald said. She said Trump could “mute” users, meaning he would not see their tweets while they could still respond to his, without violating their free speech rights.

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Said it before: putting it in monetary terms is counter-productive. Only when we recognize that it’s not about money will we do something.

Hitting Toughest Climate Target Will Save World $30 Trillion In Damages (G.)

Achieving the toughest climate change target set in the global Paris agreement will save the world about $30tn in damages, far more than the costs of cutting carbon emissions, according to a new economic analysis. Most nations, representing 90% of global population, would benefit economically from keeping global warming to 1.5C above pre-industrial levels, the research indicates. This includes almost all the world’s poorest countries, as well as the three biggest economies – the US, China and Japan – contradicting the claim of US president, Donald Trump, that climate action is too costly. Australia and South Africa would also benefit, with the biggest winners being Middle East nations, which are threatened with extreme heatwaves beyond the limit of human survival.

However, some cold countries – particularly Russia, Canada and Scandinavian nations – are likely to have their growth restricted if the 1.5C target is met, the study suggests. This is because a small amount of additional warming to 2C would be beneficial to their economies. The UK and Ireland could also see some restriction, though the estimates span a wide range of outcomes. The research, published in the journal Nature, is among the first to assess the economic impact of meeting the Paris climate goals. Data from the last 50 years shows clearly that when temperatures rise, GDP and other economic measures fall in most nations, due to impacts on factors including labour productivity, agricultural output and health.

The scientists used this relationship and 40 global climate models to estimate the future economic impact of meeting the 1.5C target – a tough goal given the world has already experienced 1C of man-made warming. They also assessed the long-standing 2C target and the impact of 3C of warming, which is the level expected unless current plans for action are increased.

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It’s not gone. But it is under threat.

The Mediterranean Diet Is Gone: Region’s Children Are Fattest In Europe (G.)

For kids in Greece, Spain and Italy, the Mediterranean diet is dead, according to the World Health Organisation, which says that children in Sweden are more likely to eat fish, olive oil and tomatoes than those in southern Europe. In Cyprus, a phenomenal 43% of boys and girls aged nine are either overweight or obese. Greece, Spain and Italy also have rates of over 40%. The Mediterranean countries which gave their name to the famous diet that is supposed to be the healthiest in the world have children with Europe’s biggest weight problem. Sweets, junk food and sugary drinks have displaced the traditional diet based on fruit and vegetables, fish and olive oil, said Dr Joao Breda, head of the WHO European office for prevention and control of noncommunicable diseases.

“The Mediterranean diet for the children in these countries is gone,” he said at the European Congress on Obesity in Vienna. “There is no Mediterranean diet any more. Those who are close to the Mediterranean diet are the Swedish kids. The Mediterranean diet is gone and we need to recover it.” Children in southern Europe are eating few fruit and vegetables and drinking a lot of sugary colas and other sweet beverages, said Breda. They snack. They eat sweets. They consume too much salt, sugar and fat in their food. And they hardly move. “Physical inactivity is one of the issues that is more significant in the southern European countries,” he said. “A man in Crete in the 60s would need 3,500 calories because he was going up and down the mountain.”

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Mar 062015
 
 March 6, 2015  Posted by at 12:20 pm Finance Tagged with: , , , , , , ,  


Harris&Ewing War-bond rally on Penn. Avenue, Washington DC 1918

Dollar-Euro Parity A Matter Of When Not If (CNBC)
“Chinese Economic Activity Has Probably Slowed To Less Than 3%” (Zero Hedge)
Mario Draghi’s Yield of Dreams (WSJ)
Greece Seeks To Plug Its ‘Bermuda Triangle’ Of Lost Taxes (AFP)
Draghi Declares Victory for Bond-Buying Before It Starts (Bloomberg)
Nowhere But Down? Euro Reacts To QE (CNBC)
Is Greece Already Rolling Back On Its Pledges? (CNBC)
Wall Street Will Crush Obama’s Plan To Protect 401(k) Savers (Paul B. Farrell)
Storage Dearth May Drive Oil Prices To $30 (MarketWatch)
UK Trade Deal Finances ‘Dirty Energy’ Projects In Mexico (Guardian)
The American Woman Who Stands Between Putin and Ukraine
Victoria Nuland: Russia’s Actions In Ukraine Conflict An ‘Invasion’
‘Nuland Ensconced In Neocon Camp Believes In Noble Lie’ (Ron Paul Inst. at RT)
A Mediterranean Diet Is Even Better For You Than You Thought (Independent)
El Nino Declared As Climate Scientists Watch On With ‘Amazement’ (SMH)

Major shift afoot.

Dollar-Euro Parity A Matter Of When Not If (CNBC)

Parity between the dollar and euro is likely “a matter of when not if,” a strategist told CNBC on Thursday. Sameer Samana of Wells Fargo said on “Squawk on the Street” that it would depend on quantitative easing in Europe and economic data in the U.S. “The economic surprises in Europe have been getting a little bit better and the ones in the U.S. are getting a little more negative so I would say appreciation probably starts to happen at a much-slower pace,” he said. “Parity is probably only a matter of when not if.”

Meanwhile, Ward McCarthy, Jefferies chief financial economist, expects money to flow to the U.S. “Investors who sell bonds to the ECB are going to look for some place to put their money,” he also said on “Squawk on the Street.” “The dollar should strengthen and the U.S. bond market continues to be high yield, so I think expectations are a lot of this money will find its way over here and I think that is exactly what’s going to happen.” Samana recommends investors stay in stocks with diversified portfolios. “Going forward it looks like Europe has the chance to actually surprise to the upside.”

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I’ve been saying this forever: there’s no way they get 7% in a 1% at best world.

“Chinese Economic Activity Has Probably Slowed To Less Than 3%” (Zero Hedge)

In a world in which sell-side research (and even that of independent third-parties) is not only meaningless – because as we first said in 2010 the only thing that matters in the New Paranormal is ‘the Fed’s H.4.1 statement’ – there are few sources of insightful, non-conflicted analysis. One place which stands out is Cornerstone Macro – yes, it costs a lot of money, but it’s worth it. Cornerstone is the one place which actually turned bearish a little over a month ago, purely on fundamental factors (FX, oil, global recession), and has been pointing out many of the discrepancies in the narrative (then again, as we showed before, in a world in which central banks are set to have the greatest amount of nominal “intervention” surpassing even the post-Lehman period…

… one doesn’t have to be a rocket surgeon to realize that things are not only not good, but have rarely been worse even with the benefit of $13 trillion in central bank liquidity).

We bring it up because Cornerstone’s analysis of recent developments in China bears keeping a very dose eye on. We won’t spoil it, especially for those who are paying subscribers to the paid (and quite expensive) service, but we will present what they have chosen to broadcast publicly on their research section, which in light of last night’s official news of yet another confirmation the slowdown in China is getting worse (not only on the unprecedented debt build up which we have covered extensively in the past, and where monetary ‘austerity’ is suddenly a very hot topic, but where capital outflows have become the number one focal issue) has released several key research reports. Here are the key publicly-available excerpts from some of their salient recent reports:

From Hello Beijing, We Have a Problem:
China is likely to continue to ease, for 3 reasons:
1. Chinese economic activity has probably slowed to less than 3%.
2. China is likely to experience broad-based deflation.
3. China is Nicely to continue to experience net capital outflows. That last bullet, net capital outflows, is the focus of the report today.

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“Mr. Draghi’s open-mouth operations to talk down the euro..”

Mario Draghi’s Yield of Dreams (WSJ)

The ECB begins its much-anticipated purchases of sovereign bonds on Monday, and ECB President Mario Draghi says the program known as quantitative easing is working before it has even begun. He’s right about that, as strange as it sounds, and therein lies the paradox of Europe’s dive into QE: It may already have had the most effect it is going to have through Mr. Draghi’s salesmanship and Europe’s will to believe. Recall how the ECB got here. Demands have grown for years for an ECB program to match the bond purchases by central banks in the U.S., U.K. and Japan. Mr. Draghi started hinting at a willingness to play along in his August speech at the global central banking conference at Jackson Hole, Wyo. By the time Mr. Draghi in September announced a plan to buy private securities, investors viewed it as a stepping-stone to buying sovereign debt too.

As investors came to view QE as inevitable, prices responded, especially the price of the euro. As a result of Mr. Draghi’s open-mouth operations to talk down the euro—coupled with an expectation that interest rates might rise soon in the U.S.—the euro has declined steadily against the dollar and other currencies. On Thursday it hit an 11-year low of $1.10, compared to about $1.40 last summer. QE boosters hope the euro devaluation will enhance European export competitiveness, although there’s little evidence so far. The euro’s fall might also have produced some inflation through higher euro-denominated import prices had the global price of oil not fallen by some 50% in the past few months. Above all, by demonstrating his commitment to bold steps to avert full-blown deflation, Mr. Draghi has been trying to jolt market expectations about future price moves.

QE expectations have driven down bond yields across Europe, which is supposed to be another benefit. Yields on government bonds have fallen significantly, some into negative territory. Large companies are also starting to line up to issue ultralow yield debt. French energy company GDF Suez on Wednesday sold bonds worth €500 million ($551 million) with a zero coupon, the first such deal in Europe in more than 14 years. Berkshire Hathaway on Thursday raised €3 billion in its first euro-denominated bond issue. So Mr. Draghi has some cause to say, as he did Thursday, that “we have already seen a significant number of positive effects” from the ECB’s January QE announcement.

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“.. the only efficient way of countering smuggling was to cut the tax on cigarettes..”

Greece Seeks To Plug Its ‘Bermuda Triangle’ Of Lost Taxes (AFP)

It could be a scene from a thriller: a ghost ship abandoned in the crystal-clear bay of a Greek island, its hold crammed with millions of illegal cigarettes, the crew nowhere to be seen. And no one knows where the freighter Amaranthus or its cargo were bound for when it beached on the island of Zanthe off the Ionian coast of western Greece in December. But such discoveries are now almost routine for police as cigarette and petrol smuggling has become big business in crisis-hit Greece. Every country in Europe has a problem with cigarette smuggling but in Greece – which has the highest proportion of smokers of any developed country – it has mushroomed since the economy sank into crisis. A security official told AFP corruption and a lack of resources had caused “major failings in the Greek Customs system” with few major seizures or investigations into smuggling rings.

Yet it is by cracking down on this multi-billion euro business, and the even more lucrative trade in petrol smuggling, that the new left-wing government hopes to find some of the money it needs to pay off Greeces gigantic debts. Prime Minister Alexis Tsipras has made stamping out fuel and cigarette fraud one of his priority reforms, with the state losing an estimated €1.5 billion a year in petrol tax alone, and between €500 and €600 million in lost revenue on tobacco. According to the market research company Nielsen, which used official Greek data, more than one cigarette in five smoked in Greece last year was smuggled, compared with only 3% in 2009 when the crisis that has devastated the Greek economy first struck.

But with the price of cigarettes rocketing, and cash-strapped governments raising taxes on them five times in as many years, researcher Ioannis Michaletos of the Institute of Defence Studies and Analyses said “the only efficient way of countering smuggling was to cut the tax on cigarettes”. This is not, however, what the government, desperate to fill the states empty coffers, want to hear, and it seems determined instead to tighten controls and fully implement European rules on the traceability of cigarettes. Michaletos is sceptical any such crackdown would work “given that European states better equipped than Greece have not had much success.”

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No kidding: “We don’t have any experience with this quantitative easing, so anybody who knows this now should speak up.”

Draghi Declares Victory for Bond-Buying Before It Starts (Bloomberg)

Mario Draghi is claiming victory for his quantitative-easing program before it even starts. As the European Central Bank president set a start date of Monday for his 1.1 trillion euro ($1.2 trillion) bond-buying program, he said the stimulus will spur the euro area’s fastest economic growth since 2007 and return inflation to the ECB’s goal within three years. The bullish tone after policy makers met in Nicosia on Thursday signals optimism that what Draghi called the ECB’s “final set of measures” will restore the 19-nation currency bloc to health. The risk is that this is just yet another false dawn, leaving the central bank needing to do more. “Draghi had a tough battle to reach the QE compromise, now of course he wants to promote it as much as possible,” said Thomas Harjes at Barclays in Frankfurt. “He gave a strong statement that QE will deliver.”

Draghi’s faith in quantitative easing, which he pushed through against German-led opposition, was reflected in the ECB’s new economic forecasts. After consumer prices fell 0.3% in February, the central bank now sees a deflationary spiral averted. Prices are projected to be flat over the whole of 2015. Inflation should average 1.5% next year, twice as much as the 0.7% estimate in December, and 1.8% in 2017. The ECB’s goal is just below 2%, a level not seen since early 2012. As for economic growth, the ECB’s economists lifted their outlook for this year to 1.5% from 1%, for 2016 to 1.9%, and projected 2.1% in 2017. The economy hasn’t expanded faster than 2% since 2007. “Our monetary-policy decisions have worked,” Draghi told reporters in the Cypriot capital.

He may be catching a lucky break. Critics of quantitative easing, such as Bundesbank President Jens Weidmann, said the euro-zone economy would enjoy an uplift anyway after oil prices fell by half, the euro tumbled, and stimulus in recent months such as interest-rate cuts take effect. Whether QE will work “is not that easy to answer,” Bundesbank board member Andreas Dombret said on Bloomberg TV on Thursday. “We don’t have any experience with this quantitative easing, so anybody who knows this now should speak up.”

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“Killing three birds with one stone…”

Nowhere But Down? Euro Reacts To QE (CNBC)

With the ECB about to launch its €1 trillion bond-buying program on Monday, foreign exchange experts are already preparing to readjust their forecasts for the single currency. After the ECB announced its massive quantitative easing (QE) campaign would start Monday, the euro fell below $1.1000 for the first time since September 2003. On Friday, the currency was hovering around 1.1012. Against sterling, the euro had also fallen to near seven-year lows of 72.29 pence. Whether the euro could recover after the ECB announced that it was to begin purchasing €60 billionworth of assets a month has prompted analysts to question their forecasts for the currency. One market analyst said the euro was being “brutally punished” by traders. “Volatility is the name of the game for today,” Naeem Aslam at Ava Trade said.

“Short the euro and buy the dollar is probably the most crowded trade for the last year, and yet till this day, investors are not afraid to put more chips on the table. This is causing a tremendous amount of pressure for the euro zone currency.” Derek Halpenny at Bank of Tokyo-Mitsubishi, said in a note Thursday that his year-end forecasts for euro/dollar “might quickly look too conservative.” “(The) ECB press conference certainly highlighted the determination of the ECB to implement the QE program but the forecasts suggest the markets should not expect more,” Halpenny said in a note Thursday. Currencies tend to weaken during QE as there is more money in circulation and lower interest rates tend to encourage consumers to spend and businesses to invest. Killing three birds with one stone, a cheaper euro is expected to help combat deflation and stimulate both the region’s economy and exports, which become more attractive with a cheaper currency.

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At this point, it’s not Greece that’s the problem.

Is Greece Already Rolling Back On Its Pledges? (CNBC)

It’s payback time for Greece. Despite securing a four-month lifeline on its loans, the bills are already piling up. On top of this month’s repayments to the International Monetary Fund worth a total of 1.5 billion euros, the country faces debt obligations amounting to €22.5 billion for 2015. And there are mounting concerns that, in spite of the extension, Greece still won’t be able to pay its way. A snap election on January 25th led to a new government headed by left-wing Syriza party, which has pledged to make a break from the past austerity measures imposed on it by its lenders. 5 years down the line, and Greece is still tied to two loan programs worth €240 billion overseen by the so-called Troika of the EC, the ECB and the IMF. The bailout, that was due to expire at the end of last year, has been extended twice to give time to Greece’s international creditors to negotiate with the new government.

State revenues, key to helping Greece repay its loans, dropped dramatically in January as people stopped paying taxes in the hope of new legislation. Banks, meanwhile, have been hit by a big wave of capital flight as depositors took money abroad in fear of a “Grexit”.
Meanwhile, Spain’s finance minister, Luis de Guindos, said this week that a third bailout on top of the 240 billion euros already doled out is inevitable. “It is absolutely clear from a market’s perspective that Greece will have to continue relying on official sector financing if it likes to stay in the euro. The new government may try different ways to raise tax revenue etc. than previous governments, but investors have heard the same song over and again”, David Schnautz, interest rates strategist for Commerzbank in New York told CNBC.

The new Greek government is pushing for the money that it thinks is rightfully theirs. Finance minister Yanis Varoufakis has been arguing that the ECB should release €1.9 billion that it gained in interest from its Greek bond holdings. These proceeds, currently held by other euro zone countries, would be returned to Greece once the final review of the country’s bailout programme was concluded. A further €7.2 billion, the last tranche of aid from this second package, is also to be released. Eurogroup President Jeroen Dijsselbloem said this week that a first disbursement could be made as soon as this month, if Greece picked up the speed of its reforms – as the country agreed on February 20th.

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“Janet Yellen’s Fed favors too-greedy-to-fail banks versus America’s 95 million Main Street investors..”

Wall Street Will Crush Obama’s Plan To Protect 401(k) Savers (Paul B. Farrell)

President Obama’s new fiduciary rule for retirement advice is DOA. Why? Not just because a 2004 GOP Senate killed the fiduciary rule Vanguard’s Jack Bogle has been pushing for over a half century. Not just because Wall Street banks will defeat any and every proposed fiduciary rule, just like they’ve been killing all bank reforms like Dodd-Frank since the 2008 crash. And not just because Janet Yellen’s Fed favors too-greedy-to-fail banks versus America’s 95 million Main Street investors. Even if Obama’s fiduciary rule is not dead on arrival, it will get buried soon in Washington’s deadly partisan graveyard. No such rule will ever go far in today’s hostile GOP Congress, any more than Bogle’s Fidelity Rule did a decade ago. Why? Because banks will fight to the death to protect the hundred of billions in fees generated without any fiduciary rules.

Banks and the financial industry a ideologically selfish. They will never voluntarily put the investor’s interests first, never! Even without a fiduciary rule, America’s 95 million Main Street investors can beat Wall Street at its own game, building a bigger, better retirement portfolio. Here’s how: Last year we built our own new set of rules based on a comparison of fees in the Wall Street Journal. Listen: “For example, imagine putting $200,000 in stock ETFs averaging 0.04% fees. Do that and you’ll have $2 million for your retirement in three decades. But put the same $200,000 in mutual funds charging the industry average, an annual fee of 1.25%, and you’d have only $1.4 million in 30 years. Yes, you lose $600,000. You’d have $600,000 less for your retirement years. Meanwhile, some clever advisers would pocket your $600,000 into their retirement accounts.”

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Or $10.

Storage Dearth May Drive Oil Prices To $30 (MarketWatch)

As the U.S. runs out of space to store its glut of crude-oil supplies, prices for the commodity could sink to as low as $30 a barrel. When storage is full, there is pressure on those holding oil in storage to “dump that inventory,” said Charles Perry, chief executive officer of energy-consulting firm Perry Management. So a space shortage could cause a drop in prices to the $30 to $40-per-barrel range, he said. West Texas Intermediate crude – the U.S. benchmark — has already seen its prices halved from a year ago. A cost of $30 per barrel of oil represents a 40% drop from the current level, which stands near $51. At Cushing, Okla., the “mecca” of oil storage in the U.S., “the Motel 6 may have a vacancy sign out, but the storage terminals really don’t,” said Kevin Kerr, president of Kerr Trading International.

Here’s why storage plays such a big part: While there are several storage options such as pipelines, very large crude carriers, also known as VLCCs, aboveground tanks and underground salt caverns, the costs for these have “dramatically increased, forcing some companies to sell their inventory as a cheaper option, thus putting significant pressure on prices,” said John Macaluso at Tyche Capital Advisors. It’s not clear how much costs have increased but Perry, an oil-and-gas industry veteran, points out that he’s always heard the going rate for aboveground storage at Cushing was, more or less, 50 cents a barrel a month. Oil tanker storage is the most expensive, with prices likely in the $1 to $1.25 a barrel a month range, he said. Total utilization of crude storage capacity in the U.S. is at about 60% as of the week ended Feb. 20, and capacity at Cushing, the delivery point for WTI futures contracts, is about 67% full, the EIA reported Wednesday.

Coincidentally, the CME Group announced plans Wednesday for what it calls the “first-ever physically delivered crude-oil storage futures contract.” Storage is a major component of the supply-glut dilemma. U.S. crude inventories are at their highest level on record, according to EIA records dating back to the 1980s. Supplies have climbed for eight weeks straight. Capacity for many of the storage locations will be at or near capacity in several weeks to a few months, Kerr estimates — and if storage facilities “begin to turn away supplies and/or dump them on the market en masse,” the market could see oil prices at or below the $45 level. “The scenario could keep us in cheap oil for some time to come,” Kerr said. “We don’t see much spare storage opening up anytime soon. What we do expect are higher rates for storage and a glut of supply.”

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Anything for a buck.

UK Trade Deal Finances ‘Dirty Energy’ Projects In Mexico (Guardian)

The UK government has become embroiled in a row over financial support for fossil fuel companies after announcing a $1bn (£660m) funding package involving Pemex, the Mexican state oil group. Greenpeace said the move to provide credit for “dirty” energy projects under the UK Export Finance (UKEF) scheme flew counter to the government’s commitments to fighting climate change. The Tories and Lib Dems pledged in 2010 that export finance would be used to champion British companies that developed and exported innovative green technologies around the world, “instead of supporting investment in dirty fossil fuel energy production”.

“The truth is that the ‘greenest government ever’ has spent the last five years bankrolling some of the dirtiest energy developments on the planet, from Russian coal mining to the Saudi oil industry,” said Lawrence Carter, a Greenpeace UK energy campaigner. “Our ministers should stop acting like the merchant bankers of climate change and start using export finance to promote the cutting-edge clean technologies that are reshaping energy markets the world over.” The financing agreement was revealed during a visit to Aberdeen by Matthew Hancock, the UK energy minister, alongside Mexico’s president Enrique Peña Nieto who is on a wider state trip to the UK.

Mexico’s energy system is undergoing significant reform and Nieto was visiting Scotland to speak to energy leaders across the business and education sectors, as well as signing agreements with the UK government for greater collaboration in the areas of energy and climate change. “This visit today by President Peña Nieto to the UK’s energy capital cements the already close links between our two countries and heralds an era of closer collaboration in energy,” said Hancock. “The government of Mexico expects $50bn of investment by 2018 in the wake of its energy reforms – boosting the economy and creating jobs while rejuvenating production,” he added.

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See my artcile March 5.

The American Woman Who Stands Between Putin and Ukraine

Ukraine is a nation at war, which is why Natalie Jaresko, the minister of finance, has traveled 20 miles from Kiev to the town of Irpin, a settlement of 40,000 on the edge of a pine forest. She’s here to visit a rearguard army hospital and to console convalescing veterans of recent battles against Russian forces and their proxies in the Ukrainian east. “Where did you serve?” she asks, moving slowly from room to room. “How were you wounded?” She may be from Chicago’s West Side, but she speaks Ukrainian fluently, and if anyone notices her American accent, no one seems to care. Jaresko tells the soldiers they’re heroes, the country’s national accountant handling a job for generals. The crisis has thrust people into unlikely roles.

Three months ago, Jaresko, 49, left the private equity firm that she co-founded in Ukraine in 2006 to join the government of Petro Poroshenko. At the time, Jaresko didn’t even have Ukrainian citizenship. Now, as the country’s top economic official, she’s Ukraine’s liaison to the World Bank, the IMF, and the European Bank for Reconstruction and Development. Tax reform is hers. So is the treasury.

[..].. whether Ukraine succeeds as an independent democratic nation arguably depends as much on the efforts of Jaresko and her colleagues as it does on the military battles. Together they must rebuild a shattered economy and restore international confidence in Ukraine while confronting the corruption and cronyism that have haunted the country since the fall of communism. And they must somehow do so as state-owned banks teeter on the brink of collapse, the national treasury counts its last foreign notes, and inflation is at 28% and rising. The longer the war carries on and reforms are delayed, the more hostile Ukrainians will become to their government and its Western supporters, leaving the country even more vulnerable to Vladimir Putin.

Get rid of the freak already.

Victoria Nuland: Russia’s Actions In Ukraine Conflict An ‘Invasion’

Assistant secretary of state Victoria Nuland has admitted the US considers Russia’s actions in Ukraine “an invasion”, in what may be the first time a senior American official has used the term to describe a conflict that has killed more than 6,000 people. Speaking before the House committee on foreign affairs, Nuland was asked by representative Brian Higgins about Russia’s support of rebels in eastern Ukraine, through weapons, heavy armor, money and soldiers: “In practical terms does that constitute an invasion?”

Nuland at first replied that “we have made clear that Russia is responsible for fielding this war,” until pressed by Higgins to answer “yes or no” whether it constitutes an invasion. “We have used that word in the past, yes,” Nuland said, apparently marking the first time a senior official has allowed the term in reference to Russia’s interference in eastern Ukraine, and not simply its continued occupation of the Crimean peninsula.

Obama administration officials across departments have strenuously avoided calling the conflict an invasion for months, instead performing verbal contortions to describe an “incursion”, “violation of territorial sovereignty” and an “escalation of aggression”. In November Vice-President Joe Biden, who has acted as one of Obama’s primary liaisons with the Ukrainian president, Petro Poroshenko, rapidly corrected himself after breaking from the White House’s careful language on CNN, saying “When the Russians invaded – crossed the border – into Ukraine, it was, ‘My god. It’s over.’”

“.. the US does not want peace to break out.” “..the US hasn’t provided one piece of proof, except for Ambassador Geoffrey Pyatt’s Rorschach tests he passes off as a satellite photo.”

‘Nuland Ensconced In Neocon Camp Believes In Noble Lie’ (Ron Paul Inst. at RT)

RT:World leaders and international monitors agree the situation in Ukraine is generally improving. Why are we still witnessing aggressive rhetoric from some US officials?

Daniel McAdams: Because the US does not want peace to break out. The US is determined to see its project through. But unfortunately like all of its regime change projects this one is failing miserably. Victoria Nuland completely disregards the role of the US in starting the conflict in Ukraine. She completely glosses over the fact that the army supported by Kiev has been bombarding Eastern Ukraine, as if these independent fighters in the east are killing themselves and their own people. Victoria Nuland was an aid to Dick Cheney; she is firmly ensconced in the neocon camp. The neocons believe very strongly in lying, the noble lie… They lied us into the war in Iraq; they are lying now about Ukraine. Lying is what the neocons do.

RT: Nuland listed a lot of hostile actions by Russia without providing any reliable proof. Do you think she can be challenged on these topics?

DM: Maybe she is right but the US hasn’t provided one piece of proof, except for Ambassador Geoffrey Pyatt’s Rorschach tests he passes off as a satellite photo. Maybe they are true but we have to present some evidence because we’ve seen now the neocons have lied us into the war. This is much more serious than the attack on small Iraq. This has the potential for a global nuclear war. So I think they should be held to a higher level of scrutiny. Thus far they have not provided any. We do know however that the US is providing military aid. As the matter of fact this week hundreds of American troops are arriving in Ukraine. Why is that not an escalation? Why is it only an escalation when the opponents of the US government are involved?

RT: How probable is that the Western nations ship lethal aid to Ukraine?

DM: It is interesting because Victoria Nuland this week spent some time with Andriy Parubiy, one of the founders of the fascist party in Ukraine and I believe one of the founders of the Joseph Goebbels Institute. She met with him this week and had a photo taken with him. He came back to Ukraine and assured his comrades that the US will provide additional, non-lethal weapons – whatever that means – and felt pretty strongly that they would provide lethal weapons. The Chairman of the Joint Chiefs of Staff, General Martin Dempsey has been urging the US government to provide lethal weapons as has the new US defense secretary [Ashton Carter], both of whom come from the military industrial complex which is thrilled by prospect of a lot more arms to be sold.

RT: Nuland has said the State Department is in talks with EU leaders for another round of sanctions on Russia. Do you think the EU will agree?

DM: I think they will be pressured into agreeing. It is interesting that Nuland said that the new Rada, the new Ukrainian parliament, in this first four months has been a hive of activity. I was just watching some videos from the fights in the Ukrainian parliament. So that was one bit of unintentional humor probably in her speech. It looks like a fight club over there.

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Or just stop eating crap.

A Mediterranean Diet Is Even Better For You Than You Thought (Independent)

You’ve heard the evidence before but one can never be too sure – yet another study has shown that adopting a Mediterranean diet is good for your health. Filling up on oily fish, nuts, whole grains and fruit and vegetables – and even the odd glass of red wine – could cut your risk of developing heart disease by almost half over a 10-year period. Scientists at Harokopio University in Athens found that the benefits even outweigh those of regular exercise – and it doesn’t matter whether you’re a man or a woman, old or young. The study, which will be presented at the American College of Cardiology’s 64th Annual Scientific Session in San Diego later this month, reinforces previous research. But it is also the first of its kind, in that it tracked heart disease risk in a general population. Most other studies have focused on middle-aged people.

Ekavi Georgousopoulou, a PhD candidate, who conducted the study along with Professor Demosthenes B Panagiotakos, said: “Our study shows that the Mediterranean diet is a beneficial intervention for all types of people – in both genders, in all age groups, and in both healthy people and those with health conditions. “It also reveals that the Mediterranean diet has direct benefits for heart health, in addition to its indirect benefits in managing diabetes, hypertension and inflammation.” More than 2,500 Greek adults, aged 18 to 89, provided researchers with details about their health each year from 2001 to 2012. The participants also completed comprehensive surveys about their medical records lifestyle and dietary habits three times throughout the study: at the start, after five years and after 10 years.

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Weak little kid.

El Nino Declared As Climate Scientists Watch On With ‘Amazement’ (SMH)

Unusual warming of waters in the central equatorial Pacific has prompted the US government to declare an El Nino event and predict a better-than-even chance that it will linger through the middle of the year. The US National Oceanic and Atmospheric Administration said the above-average sea-surface temperatures had exceeded key thresholds, triggering the declaration of the “long-anticipated” El Nino. However, the location of the main warming – about 10 degrees west of the International Dateline rather than to the east – and its timing early in the year are puzzling climate experts looking for similar events. “Climate scientists are monitoring this with amazement,” said Cai Wenju, a principal CSIRO research scientist who has published widely on the El Nino Southern Oscillation (ENSO) climate pattern. “We only understand what we have seen.”

El Ninos involve the relative warming of sea-surface temperatures in the eastern equatorial Pacific, compared with western regions. In such events, the typical east-to-west trade winds abate or reverse, and large areas of the western Pacific including eastern Australia receive reduced rainfall. Currently, the area of most anomalous warmth is located about 7000 kilometres west of the area where El Ninos are typically centred. They also tend to appear in the late autumn to winter period for the southern hemisphere. “All these are very different from a classic El Nino,” Dr Cai said. While Japanese researchers have identified similar central Pacific warming events – dubbing them El Nino Modoki, or “same but different” in Japanese – the current pattern is about 1500 kilometres further to the west than previous ones, Dr Cai said.

Earlier this week, the Bureau of Meteorology upgraded its ENSO Tracker to “watch” level, reflecting the recent warming. “Weakened trade winds are forecast to continue, and this may induce further warming,” the bureau said. Andrew Watkins, the bureau’s supervisor of its Climate Prediction Services unit, said Australia’s definition differs from the NOAA’s so it is yet to declare an El Nino event. “Even by their definition, it’s very weak,” Dr Watkins said. “It just scrapes over the line.” For the bureau to declare an El Nino event, greater warmth needs to persist in the monitored areas – 0.8 degrees above average compared with 0.5 degrees – and the atmosphere must begin to “couple” with the changed ocean conditions, reinforcing them.

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