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We are constantly looking for new stocks by running stock screens, endlessly reading (blogs, research, magazines, newspapers), looking at holdings of investors we respect, talking to our large network of professional investors, attending conferences, scouring through ideas published on value investor networks, and finally, looking with frustration at our large (and growing) watch list of companies we’d like to buy at a significant margin of safety. The median stock on our watch list has to decline by about 35–40% to be an attractive buy. But maybe we’re too subjective. Instead of just asking you to take our word for it, in this letter, we’ll show you a few charts that not only demonstrate our point, but also show the magnitude of the stock market’s overvaluation and, more importantly, put it into historical context.

Each chart examines stock market valuation from a slightly differently perspective, but each arrives at the same conclusion: the average stock is overvalued somewhere between tremendously and enormously. If you don’t know whether “enormously” is greater than “tremendously” or vice versa, don’t worry, we don’t know either. But this is our point exactly: When an asset class is significantly overvalued and continues to get overvalued, quantifying its overvaluation brings little value. Let’s demonstrate this point by looking at a few charts. The first chart shows price-to-earnings of the S&P 500 in relation to its historical average. The average stock today is trading at 73% above its historical average valuation. There are only two other times in history that stocks were more expensive than they are today: just before the Great Depression hit and in the 1999 run-up to the dot-com bubble burst.

We know how the history played in both cases—consequently stocks declined, a lot. Based on over a century of history, we are fairly sure that, this time too, stock valuations will at some point mean revert and stock markets will decline. After all, price-to-earnings behaves like a pendulum that swings around the mean, and today that pendulum has swung far above the mean. What we don’t know is how this journey will look in the interim. Before the inevitable decline, will price-to-earnings revisit the pre-Great Depression level of 95% above average, or will it maybe say hello to the pre-dot-com crash level of 164% above average? Or will another injection of QE steroids send stocks valuations to new, never-before-seen highs? Nobody knows. One chart is not enough. Let’s take a look at another one called the Buffett Indicator. Think of this chart as a price-to-sales ratio for the whole economy, that is, the market value of all equities divided by GDP. The higher the price-to-sales ratio, the more expensive stocks are.

What does this say about where the S&P is?

• 72% Of US Businesses Are Not Profitable (Simon Black)

Total Household Wealth is exactly what it sounds like– the total net worth of every person in the United States, from Bill Gates down to the youngest newborn baby. So when you add up all the 330+ million folks in the Land of the Free and tally up their combined net worth, the total is $94 trillion. The thing is that the VAST majority of that wealth, especially the incredible growth over the last 8 years, has been from increases in just two asset classes: real estate and the stock market. In fact, stocks and real estate alone account for roughly 2/3 of the wealth increase since 2009. I’ll come back to that in a moment. Now, simultaneously, we see plenty of other interesting data, also published by the Federal Reserve and US federal government. Both the Fed and Census Bureau, for example, tell us that over 80% of businesses in the US are “nonemployer” companies, i.e. businesses which only employ one person (the owner), and often provide his/her primary source of income.

Yet according to the Federal Reserve, only 35% of these small businesses are profitable. Most are operating at a loss. In other words, only 35% of the companies which make up 80% of American businesses are profitable. You’re probably already doing the arithmetic– this means that a whopping 72% of all US businesses are NOT profitable. That hardly sounds like record wealth to me. Shifting gears, there’s the little factoid that an astounding 40% of young Americans are living with their parents– the highest%age in the last 75 years. And who can blame them considering student debt in the Land of the Free also hit a record $1.4 trillion three months ago, more than double the amount since the Great Recession. Speaking of record debt, US credit card debt passed a record $1 trillion, and total US consumer credit hit a record $3.8 trillion last month. Again, all of this hardly seems like ‘wealth’ to me.

Then there’s the issue of wages, which have remained essentially flat since the 2009 Great Recession if you adjust for inflation. According to the US Department of Labor, inflation-adjusted wages, aka “real hourly compensation” in the US fell an annualized 0.9% last quarter, and fell a dismal 5.6% in the previous quarter. Adjusted for inflation, the average American isn’t making any more money. Once again, this is a pitiful excuse for ‘wealth.’ American businesses aren’t more productive either. The same Labor Department report shows that productivity in the Land of the Free was flat in the first quarter of this year. And productivity actually declined in 2016– something that hasn’t happened in at least the last 50 years. Not to mention total economic growth in the Land of the Free has been pretty pitiful, logging a pathetic 1.6% last year. And GDP growth in the first quarter of 2017 was just 1.2% on an annualized basis. The US economy has exceed hasn’t surpassed 3% growth in more than 10-years.

Oversaturated with debt.

• UBS Has Some Very Bad News For The Global Economy (ZH)

[..] fast forwarding just over three months later, where are we now? To answer that question, overnight UBS released its much anticipated update on the current state of the global credit impulse, and it’s nothing short of a disaster. As Kapteyn writes in what may have been the most eagerly awaited report in recent UBS history, “we have been inundated with questions about the chart below, first published in March. Yes, the global credit impulse is still falling. And yes, it matters because the correlation of this global credit impulse with global domestic demand is 0.61.” But it’s what follows next that should send shivers down the spine of anyone still clutching to the failed “recovery” narrative:

From peak to trough the deceleration in global credit growth is now approaching that during the global financial crisis (-6% of global GDP), even if the dispersion of the decline is much narrower. Currently 55% of the countries in our sample have experienced a -0.3 standard deviation deterioration in their credit impulse (median over 12 months) compared to 77% of countries in Dec ’09 when the median decline was -1.4 stdev.” Here is what the stunning collapse in the credit impulse looks like as of today:

While we urge all readers to get in touch with their friendly UBS sales coverage for the full report, here is a quick primer from UBS on what the current data is telling us, not so much about China where the credit impulse slowdown was discussed previously, but about the world’s biggest economy. From UBS: The credit impulse in the US has also turned down, seemingly on the back of a sharp drop in demand for C&I loans. The slowdown is more visible in the bank loan data than the Flow of Funds data we are using to calculate the credit impulse (the FoF is 3x as broad and includes non-bank credit as well). But the slowdown is nonetheless at odds with confidence being expressed about investment and future borrowing plans.

The US credit impulse was running at 0.7% GDP back in September 2016 and by March had fallen to -0.53% GDP (recovering somewhat in April based on bank loan data). Why does this matter? Because as UBS shows in the chart below, in the US the correlation between activity and the impulse is very strong, and the lack of credit growth could constrain an acceleration in GDP from weak Q1 levels (the credit impulse suggests domestic demand growth should be close to 1% rather than the 2+% which consensus is currently tracking).

Yawn.

• Fed To Raise Interest Rates, Give More Detail On Balance Sheet Winddown (R.)

The U.S. Federal Reserve is widely expected to raise its benchmark interest rate this week due to a tightening labor market and may also provide more detail on its plans to shrink the mammoth bond portfolio it amassed to nurse the economic recovery. The central bank is scheduled to release its decision at 2 p.m EDT on Wednesday at the conclusion of its two-day policy meeting. Fed Chair Janet Yellen is due to hold a press conference at 2:30 pm EDT. “The expectation of a rate hike…is widely held, and has been reinforced by the most recent round of Fed communications,” said Michael Feroli, an economist with J.P. Morgan. Economists polled by Reuters overwhelmingly see the Fed raising its benchmark rate to a target range of 1.00 to 1.25% this week.

The Fed embarked on its first tightening cycle in more than a decade in December 2015. A quarter%age point interest rate rise on Wednesday would be the second nudge upwards this year following a similar move in March. Since then, the unemployment rate has fallen to a 16-year low of 4.3% and economic growth appears to have reaccelerated following a lackluster first quarter. However, other indicators of the economy’s health have been more mixed. The Fed’s preferred measure of underlying inflation has retreated to 1.5% from 1.8% earlier in 2017 and investors are growing increasingly doubtful policymakers will be able to stick to their anticipated pace of tightening of three interest rate rises this year and next.

There’s money in derivatives yet.

• EU Plans to Force Relocation of Euro Clearing After Brexit (BBG)

Firms that clear euro-denominated derivatives may be forced to relocate to the European Union from London after Brexit under EU proposals to be rolled out on Tuesday, according to a person with knowledge of the matter. Under the European Commission’s plans for overhauling supervision of clearinghouses that are based outside the bloc, firms deemed systemically important to the EU financial system could be required to accept direct oversight by the bloc’s authorities, the person said, asking not to be named because the proposals aren’t yet public. Firms could also be forced to move their euro clearing operations to a location inside the EU, the person said.

This so-called location requirement has spurred warnings from the industry of skyrocketing costs, and has helped to turn clearing into a political football as the EU and U.K. prepare for divorce negotiations. In a June 8 letter to Valdis Dombrovskis, the EU’s financial-services policy chief, the International Swaps and Derivatives Association said a survey of data from 11 banks showed that requiring euro-denominated interest-rate derivatives to be cleared by an EU-based clearinghouse would boost initial margin by as much as 20%. The proposals to be published on Tuesday are largely in line with initial plans floated last month by the commission, the EU’s executive arm.

Central banks and shunned economists seem to be the only ones who understand this.

• Norway Central Bank Explains How Money Is Created (Norges Bank)

Today, there are two forms of central bank money. One of the forms is common knowledge – banknotes and coins. The other, bank reserves at Norges Bank, is less well known. The sum total of banknotes and coins and bank reserves at Norges Bank is about NOK 85 billion.[5] But the total money supply is much larger than this. Customer deposits in banks are also money. These deposits, referred to as deposit money, total more than NOK 2 trillion in Norway. This money is created by banks, not by Norges Bank. Chart 1 shows the money supply and the supply of banknotes and coins in Norway since 1960. In Norway, the money supply mainly comprises deposit money in banks.[6] In the early 1960s, banknotes and coins accounted for a fifth of the money supply. Current accounts and cheques were already becoming commonplace.

Since then, banks’ deposit money has increased dramatically, and today, banknotes and coins make up less than 2.5% of the money supply. In other words, virtually all the money we use has been created by banks. So how do banks create money? The answer to that question comes as quite a surprise to most people. When you borrow from a bank, the bank credits your bank account. The deposit – the money – is created by the bank the moment it issues the loan. The bank does not transfer the money from someone else’s bank account or from a vault full of money. The money lent to you by the bank has been created by the bank itself – out of nothing: fiat – let it become. The money created by the bank does not disappear when it leaves your account. If you use it to make a payment, it is just transferred to the recipient’s account.

The money is only removed from circulation when someone uses their deposits to repay a bank, as when we make a loan repayment.[7] The money supply is therefore only reduced when banks’ claims on the rest of the economy decrease. Banks also fund lending by raising loans themselves instead of creating money in the form of deposits. In order to reduce risk, banks also use other forms of investment in addition to lending.[8] Nevertheless, the money supply is growing at almost at the same pace as total bank credit. To sum up: banks create money out of nothing and withdraw it when loans are repaid. Growth in total bank credit is normally matched by growth in the money supply.[9] This does not sound encouraging. Is money an illusion? Why is today’s privately issued deposit money often perceived to be as safe as money issued by the central bank?

Flying pigs would have been even nicer.

• Qatar Spends $8 Million To Airlift 4,000 Cows (BBG)

Call it the biggest bovine airlift in history. The showdown between Qatar and its neighbors has disrupted trade, split families and threatened to alter long-standing geopolitical alliances. It’s also prompted one Qatari businessman to fly 4,000 cows to the Gulf desert in an act of resistance and opportunity to fill the void left by a collapse in the supply of fresh milk. It will take as many as 60 flights for Qatar Airways to deliver the 590-kilogram beasts that Moutaz Al Khayyat, chairman of Power International Holding, bought in Australia and the U.S. “This is the time to work for Qatar,” he said. Led by Saudi Arabia, Qatar stands accused of supporting Islamic militants, charges the sheikhdom has repeatedly denied.

The isolation that started on June 5 has forced the world’s richest country by capita to open new trade routes to import food, building materials and equipment for its natural gas industry. The central bank said domestic and international transactions were running normally. Turkish dairy goods have been flown in, and Iranian fruit and vegetables are on the way. There’s also a campaign to buy home-grown produce. Signs with colors of the Qatari flag have been placed next to dairy products in stores. One sign dangling from the ceiling said: “Together for the support of local products.” “It’s a message of defiance, that we don’t need others,” said Umm Issa, 40, a government employee perusing the shelves of a supermarket before taking a carton of Turkish milk to try. “Our government has made sure we have no shortages and we are grateful for that. We have no fear. No one will die of hunger.”

“..they had no idea what to do about it, except maybe try to escape the moment-by-moment pain of their ruined lives with powerful drugs. And then, a champion presented himself..”

• Things To Come (Jim Kunstler)

As our politicos creep deeper into a legalistic wilderness hunting for phantoms of Russian collusion, nobody pays attention to the most dangerous force in American life: the unraveling financialization of the economy. Financialization is what happens when the people-in-charge “create” colossal sums of “money” out of nothing — by issuing loans, a.k.a. debt — and then cream off stupendous profits from the asset bubbles, interest rate arbitrages, and other opportunities for swindling that the artificial wealth presents. It was a kind of magic trick that produced monuments of concentrated personal wealth for a few and left the rest of the population drowning in obligations from a stolen future. The future is now upon us. Financialization expressed itself in other interesting ways, for instance the amazing renovation of New York City (Brooklyn especially).

It didn’t happen just because Generation X was repulsed by the boring suburbs it grew up in and longed for a life of artisanal cocktails. It happened because financialization concentrated immense wealth geographically in the very few places where its activities took place — not just New York but San Francisco, Washington, and Boston — and could support luxuries like craft food and brews. Quite a bit of that wealth was extracted from asset-stripping the rest of America where financialization was absent, kind of a national distress sale of the fly-over places and the people in them. That dynamic, of course, produced the phenomenon of President Donald Trump, the distilled essence of all the economic distress “out there” and the rage it entailed.

The people of Ohio, Indiana, and Wisconsin were left holding a big bag of nothing and they certainly noticed what had been done to them, though they had no idea what to do about it, except maybe try to escape the moment-by-moment pain of their ruined lives with powerful drugs. And then, a champion presented himself, and promised to bring back the dimly remembered wonder years of post-war well-being — even though the world had changed utterly — and the poor suckers fell for it. Not to mention the fact that his opponent — the avaricious Hillary, with her hundreds of millions in ill-gotten wealth — was a very avatar of the financialization that had turned their lives to shit. And then the woman called them “a basket of deplorables” for noticing what had happened to them.

The permafrost is not all that perma.

• Multi-Million Dollar Upgrade Planned To ‘Failsafe’ Arctic Seed Vault (G.)

The Global Seed Vault, built in the Arctic as an impregnable deep freeze for the world’s most precious food seeds, is to undergo a multi-million dollar upgrade after water from melting permafrost flooded its access tunnel. No seeds were damaged but the incident undermined the original belief that the vault would be a “failsafe” facility, securing the world’s food supply forever. Now the Norwegian government, which owns the vault, has committed $4.4m (NOK37m) to improvements. The vault is buried 130m inside a mountain in the Svalbard archipelago and contains almost a million packets of seeds, each a variety of an important food crop. The vault was opened in 2008, sunk deep into the permafrost, and was expected to provide protection against “the challenge of natural or man-made disasters” and “to stand the test of time”.

But the vault’s planners had not anticipated the extreme warm weather seen recently at the end of the world’s hottest ever recorded year. “The background to the technical improvements is that the permafrost has not established itself as planned,” said a government statement. “A group will investigate potential solutions to counter the increased water volumes resulting from a wetter and warmer climate on Svalbard.” One option could be to replace the access tunnel, which slopes down towards the vault’s main door, carrying water towards the seeds. A new upward sloping tunnel would take water away from the vault.

A former Svalbard coal miner, Arne Kristoffersen, told the Guardian most coal mines on the islands had upward sloping entrance tunnels: “For me it is obvious to build an entrance tunnel upwards, so the water can run out. I am really surprised they made such a stupid construction.” Hege Njaa Aschim, the Norwegian government’s spokeswoman for the vault, said: “The construction was planned like that because it was practical as a way to go inside and it should not be a problem because of the permafrost keeping it safe. But we see now, when the permafrost is not established, maybe we should do something else with the tunnel, so that is why we have this project now.”

Hollow threats.

• EU To Open Case Against Poland, Hungary, Czech Republic Over Refugees (R.)

The European Union’s executive will decide on Tuesday to open legal cases against three eastern members for failing to take in asylum-seekers to relieve states on the front lines of the bloc’s migration crisis, sources said. The European Commission would agree at a regular meeting to send so-called letters of formal notice to Poland and Hungary, three diplomats and EU officials told Reuters. Two others said the Czech Republic was also on the list. This would mark a sharp escalation of the internal EU disputes over migration. Such letters are the first step in the so-called infringement procedures the Commission can open against EU states for failing to meet their legal obligations. The eastern allies Poland and Hungary have vowed not to budge. Their staunch opposition to accepting asylum-seekers, and criticism of Brussels for trying to enforce the scheme, are popular among their nationalist-minded, eurosceptic voters.

Speaking in Hungary’s parliament earlier on Monday, Prime Minister Viktor Orban said: “We will not give in to blackmail from Brussels and we reject the mandatory relocation quota.” A spokeswoman in Brussels did not confirm or deny the executive would go ahead with the legal cases, but referred to an interview that Commission head Jean-Claude Juncker gave to the German weekly Der Spiegel last week. “Those that do not take part have to assume that they will be faced with infringement procedures,” he was quoted as saying. Poland and Hungary have refused to take in a single person under a plan agreed in 2015 to relocate 160,000 asylum-seekers from Italy and Greece, which had been overwhelmed by mass influx of people from the Middle East and Africa. Poland’s Interior Minister Mariusz Blaszczak was quoted as saying on Monday by the state news agency PAP: “We believe that the relocation methods attract more waves of immigration to Europe, they are ineffective.”

Not going to happen, it would solve many of Greece’s problems, and Germany is not done with it yet.

• ECB Unlikely to Include Greece in QE in Coming Months (BBG)

The ECB is unlikely to include Greek bonds in its asset-purchase program for the foreseeable future, a person familiar with the matter said, as European creditors aren’t prepared to offer substantially easier repayment terms on bailout loans to improve the nation’s debt outlook. Euro-area finance ministers will meet in Luxembourg on June 15 to discuss debt-relief measures that the ECB has said are needed before it will consider purchasing Greek bonds. The so-called Eurogroup is expected to complete a review of Athens’s rescue program that would allow for the disbursement of at least €7.4 billion in aid needed for a similar amount of bond repayments in July. An agreement among the ministers will likely allow the IMF – whose participation in the rescue program is a requirement for many nations – to commit in principle to a conditional loan, said the person.

But the extent and wording of debt-relief commitments probably won’t convince the Governing Council of the ECB to buy Greek bonds. And while the government of Prime Minister Alexis Tsipras is relying on quantitative easing to aid Greece’s return to the public debt market, the ECB won’t factor fiscal consequences into its policy-making decisions and excessive emphasis on QE inclusion would be misguided, according to the person. [..] The ECB’s quantitative easing is scheduled to continue until December 2017, with economists saying purchases will be gradually tapered throughout 2018. This would leave little time for purchases of Greek bonds before the program’s end.

Meanwhile, France, which is trying to bridge differences on the debt issue, has proposed automatically reducing loan repayments when Greece misses growth targets, according to two people with knowledge of the talks. European officials see the proposal as a step in the right direction but doubt it will be enough to convince the ECB to include Greece in its bond purchase program if the IMF maintains its position that the country’s debt is unsustainable. Other euro-area member states so far have opposed France’s proposal, the people said.

Is Macron going to stand up to Merkel and Schäuble? I’m not convinced.

• Greek Debt Deal ‘Not Far’ Says New French Finance Minister (AFP)

A deal on debt relief for Greece is “not far,” France’s new finance minister Bruno Le Maire said Monday ahead of crunch eurozone talks on the issue on Thursday. “I am optimistic that we will have a good solution. We are not far from agreement,” Le Maire said ahead of a meeting with Greek PM Alexis Tsipras. “We are really doing our best to find an agreement,” he had said earlier after seeing his Greek counterpart Euclid Tsakalotos. “It’s difficult. It’s complicated,” he said. At the June 15 meeting, Le Maire said he planned to propose a “mechanism” of “flexibility” to lessen Greek debt repayment based on its economic growth. “It’s a mechanism which should allow us to revise certain (debt) parameters based on Greek growth,” he told reporters.

The issue of debt relief for Greece has sharply divided its international creditors, the EU and the IMF, for months in the latest round of talks. The impasse has held up a tranche of bailout cash which Greece needs to repay loans in July, and Athens says its fragile recovery has also been impaired. Tsipras has said he will ask EU leaders to resolve the issue at the end of June if no solution is forthcoming on Thursday. “Piling drama on the problem helps no one,” he said on Monday. The Europeans expect Greece’s economy to grow strongly and its government to bring in large surpluses in revenue in the coming years, allowing it to pay down its debts. But the IMF is less optimistic, arguing there must be further relief for Athens before it can label its debt sustainable and justify loaning Greece any more cash.

New French President Emmanuel Macron last month called Tsipras after his election, saying he was in favour of “finding a deal soon to alleviate the weight of Greece’s debt over time.” Macron’s position puts him at odds with Germany where Greek debt relief – following three different bailouts with public money for the country since 2010 – is seen as a vote loser ahead of general elections in September. Macron explained his thinking about Greece in an interview to the Mediapart website two days before his election. “I am in principle in favour of a concerted restructuring of Greek debt and in keeping Greece in the eurozone. Why? Because the current system is unsustainable,” he said.

Wonder what the older, religious people on Lesbos must be thinking by now. It once was a quiet place.

• One Dead As 6.3-Magnitude Earthquake Rocks Greek Islands Lesbos, Chios (AFP)

A woman died and 10 people were hurt on Monday when a 6.3-magnitude earthquake struck the Greek islands of Lesbos and Chios and the Aegean coast of western Turkey, officials said. The middle-aged victim had been trapped for around seven hours in the ruins of her home in the Lesbos village of Vrisa, the area that bore the brunt of the strong quake and where several homes collapsed. “Our fellow citizen who was trapped in the house that collapsed in Vrisa was pulled out dead,” Lesbos mayor Spyros Galinos said in a tweet. The earthquake also struck the Aegean coast of western Turkey after 1200 GMT.

Video footage shot by a Vrisa resident on a cellphone showed masonry from several single and two-level homes clogging the streets. “It’s a difficult situation, we are facing a disaster,” Christiana Kalogirou, governor of the north Aegean region, told Greek state TV station ERT, adding: “Some 10 people are injured.” “The army is bringing in tents so people can spend the night,” she said, adding that the south of Lesbos had taken the brunt of the quake. The tremor, felt as far as Athens and Izmir in Turkey, damaged at least three churches and shops in south Lesbos, local owners said, while rock slides blocked some roads.

Debt Rattle June 8 2017

Jun 082017

June 8, 2017 Posted by Raúl Ilargi Meijer at 9:37 am Finance Tagged with: Airbnb, Coco, Comey, Corbyn, Greece, leverage, LNG, Macron, OECD, Qatar, refugees 1 Response »

Roy Lichtenstein Femme d’Alger 1963

• UK Press Gang Up On Jeremy Corbyn In Election Day Coverage (G.)

• US Market Risk Is Highest Since Pre-2008 Crisis – Bill Gross (BBG)

• Global Financial System More Leveraged Than 2008 – Paul Singer (BBG)

• UK Housing Weakens Further as Market Emits ‘Ominous’ Signals (BBG)

• The Cost of Getting It Wrong (Claire Connelly)

• The UAE Needs Qatar’s Gas to Keep Dubai’s Lights On (BBG)

• Oil Prices Drop More Than 4% On Surge In Stockpiles (CNBC)

• China’s Top Property-Bubble Prophet Says Prices Set to Soar 50% (BBG)

• A Reform Beyond Macron’s Grip: The Revolving Door of French Politics (BBG)

• OECD Puts Greek Growth At Just 1.1% This Year (K.)

• Athens To Seek Growth Package At Eurogroup Meeting (K.)

• Greece Says Colombian Gangs Plundering Hospitals Europe-Wide (AP)

• Greek Room Owners Threaten To Return Permits in Airbnb Challenge (K.)

• Bid For EU States To Stop Migrants, Refugees ‘Asylum Shopping’ (K.)

The Daily Mail ran 13 pages yesterday on the theme of Corbyn and Labour being terrorist apologists. No shame, no morals. In the same vein, I tried to find an objective piece on the Comey testimony, but couldn’t find one. The UK press has no faith in its voters, the US press has none in its Senate: the press draws the conclusions before anyone else can. The media cares little about credibility, it’s all echo chambers all the way down.

• UK Press Gang Up On Jeremy Corbyn In Election Day Coverage (G.)

The Sun has urged its readers not to “chuck Britain in the Cor-bin” on its final front page before the country votes in the general election. The tabloid, owned by Rupert Murdoch’s News Corp, published an editorial on its front page under the headline “Don’t Chuck Britain in the Cor-bin” alongside 10 bullet points that described the Labour leader Jeremy Corbyn as a “terrorists’ friend”, “useless on Brexit”, “puppet of unions” and “Marxist extremist”. The article said readers could “rescue Britain from the catastrophe of a takeover by Labour’s hard-left extremists”. The Daily Mail front page roared, “Let’s reignite British spirit” on the back of a Theresa May speech and also promoted a feature inside called “Your tactical voting guide to boost the Tories and Brexit”.

The Daily Mirror reiterated its support for the Labour party with a front page headline of “Lies, damned lies, and Theresa May”, while the Daily Telegraph ran a story headlined “Your Country Needs You” based on an editorial by the prime minister that urged “patriotic” Labour supporters to vote Conservative. The Daily Express front page said: “Vote for May Today”. Meanwhile, the Times reported that the Conservatives had a seven-point in the final opinion poll before the election, and the Guardian covered May and Corbyn’s late attempts to win support from voters. Thursday’s front pages come after the Daily Mail devoted 13 pages to attacking Labour, Jeremy Corbyn, Diane Abbott and John McDonnell on Wednesday under the headline: “Apologists for terror”. The tabloid urged readers to support the Conservatives in an editorial on its first and second pages, but concentrated its fire on Labour’s leadership, compiling hostile anecdotes dating back to the 1970s.

“Instead of buying low and selling high, you’re buying high and crossing your fingers…”

• US Market Risk Is Highest Since Pre-2008 Crisis – Bill Gross (BBG)

U.S. markets are at their highest risk levels since before the 2008 financial crisis because investors are paying a high price for the chances they’re taking, according to Bill Gross, manager of the $2 billion Janus Henderson Global Unconstrained Bond Fund. “Instead of buying low and selling high, you’re buying high and crossing your fingers,” Gross, 73, said Wednesday at the Bloomberg Invest New York summit. Central bank policies for low-and negative-interest rates are artificially driving up asset prices while creating little growth in the real economy and punishing individual savers, banks and insurance companies, according to Gross. The U.S. economy is expected to grow 2.2% this year and 2.3% in 2018, according to forecasts compiled by Bloomberg. Trump administration officials have said their policies will boost annual growth to 3%.

Despite being concerned about high asset prices, Gross said he feels required to stay invested and sees value in some closed-end funds. Examples he gave are the Duff & Phelps Global Utility Income Fund and the Nuveen Preferred Income Opportunities Fund. He also said he has about 2% to 3% in exchange-traded funds to get yield and add diversification. “They’re appetizers, not entrees,” he said in an interview outside the conference. Gross’s fund has returned 3.1% in the year through June 6, outperforming 22% of its Bloomberg peers. It has posted a total return of 5.4% since Gross took over management in October 2014 after he was ousted from PIMCO. ”If there’s a common factor it’s the expansion of credit,” Gross said on Bloomberg TV Wednesday. “And the credit that’s being generated by central banks. Money is being pumped out into the system and money that is yielding less than nothing seeks a haven not only in bonds that are under-yielding but in stocks that are overpriced.”

We know.

• Global Financial System More Leveraged Than 2008 – Paul Singer (BBG)

Billionaire investor Paul Singer said “distorted” monetary and regulatory policies have increased risks for investors almost a decade after the financial crisis. “I am very concerned about where we are,” Singer said Wednesday at the Bloomberg Invest New York summit. “What we have today is a global financial system that’s just about as leveraged – and in many cases more leveraged – than before 2008, and I don’t think the financial system is more sound.” Years of low rates have eroded the effectiveness of central banks to contend with downturns, Singer said at the event in an interview with Carlyle Group co-founder David Rubenstein. “Suppressive” fiscal, regulatory and tax policies have also exacerbated income inequality and led to the rise of populist and fringe political movements, he added. Confidence “could be lost in a very abrupt fashion causing conceivably a ruckus in bond markets, stock markets and in financial institutions,” said Singer, founder of hedge fund Elliott Management, which is known for being an activist investor.

Volatility is back.

• UK Housing Weakens Further as Market Emits ‘Ominous’ Signals (BBG)

While the general election had an impact on activity in May, damping buyer demand and new sellers coming to the market, RICS used its latest monthly report to highlight broader, and more damaging, risks. That includes the dearth of homes for sale, which has pushed up values in recent years, cutting off many potential first-time buyers. RICS Chief Economist Simon Rubinsohn said the report shows the issue of affordability may even worsen further.“Perhaps the most ominous signal is that contributors still expect house prices to increase at a faster pace than wages over the medium term despite the difficulty many first-time buyers are clearly having,” he said. On the shortage, “it’s hard to see this as anything other a major obstacle to the efficient functioning of the housing market.”

In May, RICS’s monthly price index fell to 17 – the lowest since August – from 23 in April, indicating modest price gains. A gauge for London, where prime properties have been under pressure, remained below zero for a 14th month. Nationally, the supply-demand imbalance means it’s a sellers’ market and recent reports show that any uncertainty about the election had little effect on U.K. asking prices, which according to Rightmove jumped 1.2% to a record in May. For some, it’s reminiscent of the overheating seen before the financial crisis.“Prices are too expensive,” Josh Homans at surveyors Valunation said in the RICS report. “Excessive” valuations are increasing and “we are now in a 2007 situation,” he said.

One of those must reads. Economics is all but dead, but not entirely yet.

• The Cost of Getting It Wrong (Claire Connelly)

What most of us have long believed about how the economy works is based on a set of fundamental myths, supported by a series of inappropriate and misleading metaphors, from which it is difficult to escape. The emotional investment we have made in these myths has allowed for levels of unemployment, underemployment, inequality and relative poverty which would have seemed incredible a generation ago. Somehow we have convinced ourselves of the following:
– Governments need taxpayers’ money to pay for things.
– Governments, like households, need to at least balance their budgets.
– Deficits are bad and government surpluses are good.
– Deficits paid for by printing money causes inflation.
– Surpluses set aside savings which can be spent in the future.
– Lower wages promote full employment.

Wrong, wrong, all wrong. The federal government does not need taxpayers’ money. Actually, it is the other way around. The government issues the currency. We use it. Taxes help to control inflation and stop us spending too much. (It can also be used to control behaviour, as witnessed by taxes on cigarettes and alcohol). Professor Steve Keen says the government, and the public, have the most basic fundamentals of macroeconomics backwards. “Expenditure is what causes income,” he said. “Reducing expenditure also reduces income.” “Individuals can save (without a significant effect on national income), but if you extrapolate that to the whole economy, you are going to make a huge error.” Similarly, the economist says the idea that the government can save by paying down the national debt is misleading.

“Believing that government saving will increase employment or growth is like believing the Earth sits at the centre of the universe”, he says. All it does is destroy spending which would otherwise have created private sector incomes. “If you don’t understand where income comes from, then it means you don’t understand economics, or the economy.” “Individuals can save money by spending less than they earn but if everyone decides to do that, income falls by precisely as much as you try to save. If the government does the same thing, by saving money at a national level, you cause a recession.”

As solid as the Saudi grip on OPEC cuts: “Abu Dhabi’s Petroleum Ports Authority removed the ban on Wednesday – just one day after announcing it.”

• The UAE Needs Qatar’s Gas to Keep Dubai’s Lights On (BBG)

When it comes to natural gas shipments, the United Arab Emirates needs Qatar more than Qatar needs the U.A.E. The U.A.E. joined Saudi Arabia in cutting off air, sea and land links with Qatar on Monday, accusing the gas-rich sheikhdom of supporting extremist groups. But the U.A.E., which depends on imported gas to generate half its electricity, avoided shutting down the pipeline supplying it from Qatar, which has the world’s third-largest gas deposits. Without this energy artery, Dubai’s glittering skyscrapers would go dark for lack of power unless the emirate could replace Qatari fuel with more expensive liquefied natural gas. Qatari natural gas continues to flow normally to both the U.A.E. and Oman through a pipeline, with no indication that supplies will be cut, according to a person with knowledge of the matter who asked not to be identified because the information isn’t public.

Qatar sends about 2 billion cubic feet of gas a day through a 364-kilometer (226-mile) undersea pipeline. Dolphin Energy, the link’s operator, is a joint-venture between Mubadala Investment, which holds a 51% stake, and Occidental Petroleum and Total, each with a 24.5% share. Since 2007, the venture has been processing gas from Qatar’s North field and transporting it to the Taweelah terminal in Abu Dhabi, according to Mubadala’s website. Dolphin also distributes gas in Oman. Apart from preserving gas shipments from Qatar, the U.A.E. on Wednesday actually eased efforts to isolate its smaller neighbor. The oil-port authority in Abu Dhabi, the U.A.E. capital, lifted restrictions on international tankers that have sailed to Qatar or plan to do so. Abu Dhabi’s Petroleum Ports Authority removed the ban on Wednesday – just one day after announcing it.

The Saudi-Qatar spat is growing and oil plunges? Huh?

• Oil Prices Drop More Than 4% On Surge In Stockpiles (CNBC)

U.S. crude prices plunged toward $46 a barrel on Wednesday after weekly government data left the oil market with virtually nothing to cheer. West Texas Intermediate futures dropped more than 4% as stockpiles of oil in the US surged by 3.3 million barrels in the week ended June 2, according to the Energy Information Administration. That confounded analysts’ estimates for a 3.5 million-barrel decline. WTI prices fell as far as $45.92, a four-week low, following the report. The drop below $47 was a “big deal” said John Kilduff at energy hedge fund Again Capital. The next level to watch is the March low just below $44 a barrel, struck after oil prices fell through a number of key technical levels, culminating in a flash crash to $43.76. The bad news kept on coming below the headline figure. Gasoline stocks also jumped by 3.3 million barrels, more than five times the expected increase. Inventories of distillate fuels like diesel and heating oil rose by 4.4 million barrels, 15 times the anticipated rise.

Author of “China’s Guaranteed Bubble”.

• China’s Top Property-Bubble Prophet Says Prices Set to Soar 50% (BBG)

China’s home prices could rise by another 50% in the nation’s biggest cities, as the latest measures to rein them in are likely to be eased by policy makers seeking to support the broader economy. So says Zhu Ning, deputy director of the National Institute of Financial Research at Tsinghua University in Beijing and author of “China’s Guaranteed Bubble: How Implicit Government Support Has Propelled China’s Economy While Creating Systemic Risk.” As measures to curb housing prices drag on growth in the second half and early next year, he says, the government will resort to its old playbook of dialing them back again to shore up expansion. “We’re living through a bubble,” Zhu said. “If we don’t engage in more meaningful reform, which we haven’t, we’re very likely to have a financial crisis or a burst of the bubble. It’s a matter of sooner or later.”

Real estate prices in major cities will surge again “by another 50% or so” after measures to rein them in are eased, said Zhu, without specifying a time. Because policy makers have previously imposed curbs only to ease them again, people see them as a bluff, he said. Last year 45% of new loans went to mortgages. Local authorities have boosted down-payment requirements, restricted purchases by non-residents, and capped the number of dwellings that a household can own. Since March, at least 26 cities have imposed resale lock-up periods, with Hebei’s Baoding city slapping a decade-long ban on some homes, according to Shanghai-based Tospur Real Estate Consulting.

Zhu said he arrived at the 50 percent estimate based on the average price appreciation after past curbs were lifted, an ever-stronger belief among buyers that housing prices will rise, China’s humongous supply of credit, and tighter controls on capital outflows. Over the past year, however, Zhu, who earned his doctorate in finance at Yale, said he’s had more doubts over whether the thinking of western-trained economists applies to a nation that’s proven naysayers wrong “with its might and its determination” for three decades. “Over the past 12 months my confidence has really been shaken,” he said, adding that a crisis remains probable. “Could China be the black swan that we’ve never seen before?”

Where would the EU be without creative accounting?

Banco Popular’s wipeout has left CoCo bonds on the drawing board. The Spanish lender’s failure and rescue by rival Santander did not provide the expected test for bonds which convert into equity under stress: the securities were wiped out before they could be triggered. It’s still not clear whether the bonds work as intended. The collapse of Spain’s sixth-largest bank by assets marked the first big loss for investors in so-called contingent convertible bonds. The securities were created after the 2008 financial crisis to provide an extra buffer when banks are struggling. They permit lenders to preserve capital by suspending dividends, and convert into ordinary shares when capital ratios run low.

The Popular trauma has eased one fear: that investors would panic when a CoCo bond went down, creating a spiral of contagion to other lenders. Similar securities issued by other Spanish banks actually rose in value on June 7, suggesting that investors see Popular as an isolated case. Yet in another way, Popular’s bonds fell short. The securities are supposed to provide extra capital before a bank fails, allowing it to absorb losses over time without failing or requiring a government bailout. But regulators deemed Popular non-viable before any of the triggers in its bonds could blow. The CoCo bonds suffered the same fate as other, more senior bonds that only suffer losses when a bank goes bust.

Civil servants and jobs for life. It’s like talking about dinosaurs.

• A Reform Beyond Macron’s Grip: The Revolving Door of French Politics (BBG)

French President Emmanuel Macron has promised to change how politics is done in France, starting with the parliament to be elected beginning Sunday. Half of the 500-plus candidates for his young party are women. Half have never held office. They all had to apply online. But he isn’t taking the biggest step: requiring that anyone running for parliament resign from his or her government job. Unlike many other other developed countries, France allows bureaucrats to hold political office—multiple offices, in fact—without having to quit the civil service. And they have a guaranteed right to return. Should the bureaucrat-candidate lose an election, there’s a job for life waiting back at the Agriculture Ministry or the Ministry for Overseas Territories. And a pension at retirement.

Having lawmakers remain part of the civil service creates conflicts of interest, said Dominique Reynie, head of Fondapol, a political research institute. “You have lawmakers making funding decisions about institutions such as universities and hospitals where they are still officially employed,” he said. “We have a parliament that’s inbred.” Among the many beneficiaries of the system: Macron’s prime minister, Edouard Philippe, several others in the cabinet and fully 55% of the parliament that just finished its five-year term. Macron himself, though he’s never been in parliament, kept bureaucrat status through several government and private jobs until he resigned last year to start his political party.

[..] “France is one of the rare countries in Europe where a civil servant can serve an elected mandate without resigning, and with the certainty of going back to their job in case of failure,” said Luc Rouban, a professor at Sciences Po in Lille who has compiled a database of all 2,857 French members of parliament back to 1958. “The absence of professional risk encourages employees from the public sector to run for office.”

And that will make any agreements with the Troika impossible. All growth assumptions are wrong.

• OECD Puts Greek Growth At Just 1.1% This Year (K.)

The OECD has further doused hopes regarding Greek growth this year, forecasting an expansion of 1.1%, and stresses the need to implement reforms and for the national debt to be lightened. The Organization for Economic Cooperation and Development wrote in its annual report on the global economy published on Wednesday that “delays in reform implementation and reaching an agreement on debt relief would weigh on confidence, hampering investment,” while adjusting its Greek GDP forecast. The 1.1% growth it expects contrasts with the 2.7% growth the budget provides for, the recent European Commission estimate for 2.1% and even the 1.8% forecast included in the midterm fiscal plan the government voted for last month.

Still, the OECD says in its Global Economic Outlook that the economy will expand by 2.5%. It anticipates the primary budget surplus to slide from last year’s 3.8% of GDP, but no lower than 2.5% of GDP for the next few years. The report notes that the Greek economy is beginning to recover although uncertainty remains over the country’s growth prospects. Further progress in reforms is necessary for productivity and exports to grow, the OECD argues. It makes special reference to the reforms in the products markets and in the reduction of nonperforming loans, which could lead to more exports and investments. It also warns that “the expansion of exports depends largely on the pace of world trade growth. Geopolitical tensions among Greece’s neighbors and a renewed large influx of refugees would pose additional risks.”

Who does any of the parties involved think they’re fooling? A serious question.

• Athens To Seek Growth Package At Eurogroup Meeting (K.)

Ahead of yet another crucial Eurogroup on June 15, the government has its mind set on seeking a package of growth-inducing measures which it hopes may, finally, pry open the door that will ultimately put Greece on the road to recovery. Athens believes that securing such a package could work to bridge the difference between the country’s EUpartners, and lead to an agreement which could pave the way for Greece to access international markets. Speaking to reporters on Wednesday, government spokesman Dimitris Tzanakopoulos outlined three basic principles that should govern any proposal that comes Greece’s way at the meeting of the eurozone finance ministers. Firstly, he insisted that the proposal must specify, in the clearest possible way, what midterm debt relief measures Greece should expect.

Secondly, these measures should also allow all the institutions, including the ECB, to proceed with positive sustainability studies of the Greek debt. Finally, he said, a proposal must include specific measures that will boost growth. The government reckons that a growth-oriented agreement will prompt the IMF to positively revise its projections on the Greek economy, reduce its demands with regard to the Greek program, and open the way for an agreement. Athens believes the formula that is being promoted to get the Fund to join the Greek bailout will stipulate that it will not have to provide immediate funding. Instead, the IMF’s contribution will be placed in a fund of sorts, which will be made available at a later date, on the condition that the midterm debt relief measures are implemented.

Why have none of the other countries involved ever said a word?

• Greece Says Colombian Gangs Plundering Hospitals Europe-Wide (AP)

Greek authorities say Colombian organized crime rings were behind a string of heists targeting costly medical diagnostic equipment from hospitals in Greece and another 11 European countries. Police say three Colombian suspects have been identified in connection with last month’s four thefts in Greece. Four out of about a dozen stolen pieces of equipment, worth more than half a million euros, have been recovered in Colombia. There were similar thefts in the past four years in France, Germany, Italy, Austria, the Netherlands, Spain, Poland, Lithuania, Luxembourg, Croatia and the Czech Republic, Major-General Christos Papazafeiris said. Papazafeiris, head of security police for the greater Athens region, said Wednesday the stolen equipment had been mailed to Colombia, and was seized in cooperation with local authorities.

Airbnb is huge in Athens. Must cost the government a fortune in taxes. Why then liberalize laws even more?

• Greek Room Owners Threaten To Return Permits in Airbnb Challenge (K.)

Owners of rooms for rent are threatening to return their operating licenses to the state unless the government withdraws legal clauses that fully liberalize the short-term urban lease market where accommodation is advertised through platforms such as Airbnb and Homeaway. According to a statement by the Confederation of Greek Tourism Accommodation Entrepreneurs (SETKE), if the room owners do hand in their licenses they will be able to enjoy the special privileges of the short-term rental market, which, it argues, has created unfair competition at the expense of legal accommodation. In its statement it claims this will lead to the elimination of the tourism accommodation sector’s 30,000 small entrepreneurs. “Instead of withdrawing the semi-liberal status of the short-term urban lease market under the 2016 law, the government is fully liberalizing it with a 2017 law abolishing the quantitative and qualitative limitations and permitting the rental for tourism purposes of all properties of all owners year round without any income limits,” SETKE says.

The EU keeps thinking reality is whatever it wants it to be. The European Parliament President says: “The rules have to be the same for everybody.”. They’re not. They’re obviously different for Greece, and that’s not Greece’s doing.

• Bid For EU States To Stop Migrants, Refugees ‘Asylum Shopping’ (K.)

As Greece continues to struggle to host thousands of migrants, European Parliament President Antonio Tajani on Wednesday called for a common agreement from all European Union member-states on the implementation of asylum procedures aimed at stopping migrants traveling from one country to another “shopping for asylum status.” “At the moment the rules are not properly harmonized,” Tajani told reporters. “The rules have to be the same for everybody. Otherwise we will end up with people shopping for asylum status, which undermines our credibility.” He noted that many refugees who have been accepted in European countries as part of an EU relocation program have continued their journeys to more prosperous nations such as Germany or Sweden.

Latvia welcomed 380 refugees as part of the relocation program but most of those – 313 – have already moved on to Sweden or Germany, according to Agnese Lace from Latvia’s Center for Public Policy. She said low salaries, a lack of jobs and language barriers meant asylum seekers had little incentive to remain in the country. Meanwhile Andras Kovats of the Hungarian Association for Migrants said Hungary’s failure to support integration was pushing new arrivals abroad. In a related development, Nils Muiznieks, the Council of Europe’s commissioner for human rights, expressed concern at reports of collective expulsions of asylum seekers from Greece to Turkey. “I urge the Greek authorities to cease immediately the pushback operations and uphold their human rights obligation to ensure that all people reaching Greece can effectively seek and enjoy asylum,” Muiznieks said in a statement.

Debt Rattle June 6 2017

Jun 062017

June 6, 2017 Posted by Raúl Ilargi Meijer at 9:32 am Finance Tagged with: Corbyn, Intercept, leak, LNG, May, Qatar, refugees, repo, Russia, shadow, Tillerson, Trump 1 Response »

Pablo Picasso Les femmes d’Alger 1955

• Trump Set To Make First Moves At Completely Revamping The Fed (CNBC)

• Trump’s ‘Been Clear To Me’ To Try To Rebuild Russia Ties: Tillerson (R.)

• Contractor Charged With Leaking Document About US Election Hacking (R.)

• How The Intercept Outed Reality Winner (ErrataS)

• China’s Biggest Bank Is Wall Street’s Go-To Shadow Lender (BBG)

• One Belt, One Road, and One Debt Hangover (Rickards)

• Qatar Stocks Tumble 7% As Six Arab Nations Cut Diplomatic Ties (CNBC)

• Qatar’s Real Power Is As The World’s Largest LNG Exporter (BBG)

• Britain’s Economic Model Is Broken: This Is Our First Post-Crash Election (G>)

• Simple Numbers Tell Story Of Police Cuts Under Theresa May (G.)

• Earnings vs. Profits & The Bull Market (Roberts)

• US M&A: One Of The Scariest Charts To Look At – Citi (BI)

• IMF’s Lagarde Offers Eurozone Greek Debt Compromise, Handelsblatt Says (R.)

• The Euro’s Future Demands Trust (K.)

• An Occupied Hotel In Greece Models How To Welcome Refugees (WNV)

Well, it’ll be different alright. Given the Fed’s actions over the past decade, it can hardly get wrose.

• Trump Set To Make First Moves At Completely Revamping The Fed (CNBC)

President Donald Trump appears ready to remake the Federal Reserve in an image that will be considerably different than what investors have known for many years. The president is prepared to nominate Randal Quarles and Marvin Goodfriend to two of three vacancies at the central bank, according to multiple press accounts that have not been disputed by the administration. Quarles likely would assume the role vacated by Daniel Tarullo to oversee the nation’s banking system. White House officials did not respond to a CNBC request for comment. Should Trump nominate the two men and they receive confirmation, it will represent the first steps in a possible substantial remaking of a Fed that has practiced ultra-loose monetary policy for the past decade but has been tight on banking regulations.

Trump will have the opportunity to name one more person now, then can fill two even more critical vacancies in 2018 — that of Chair Janet Yellen and Vice Chair Stanley Fischer. If the Quarles and Goodfriend moves are indicators of what’s to come, things could start getting less comfortable for Yellen. Both are considered solidly conservative, in line with the Republican president and Congress but perhaps not with Yellen. “Clearly, these appointees are a significant departure from the crowd that we’ve had on the board,” said Christopher Whalen, head of Whalen Global Advisors and a former investment banker and long-time financial analyst. “Yellen is probably the most left-wing Fed chair we’ve ever had. I also think both Quarles and Goodfriend have much better grounding in the financial markets. That would be refreshing.”

Yellen, however, may not think so, particularly if the coalition she has carefully crafted since taking the chair’s seat in 2014 starts to unravel. “I welcome these additions,” Whalen said. “Hopefully they put a banker in the third slot. Then eventually Yellen’s going to leave because she’s going to start losing votes.”

Kiwis flipping birds.

• Trump’s ‘Been Clear To Me’ To Try To Rebuild Russia Ties: Tillerson (R.)

U.S. President Donald Trump told his top diplomat that the dispute over probes into links between his inner circle and Russia should not undermine U.S. efforts to rebuild relations with Moscow, Secretary of State Rex Tillerson said on Tuesday. Speaking in New Zealand after a trip to Australia, Tillerson reiterated the U.S. commitment to the Asia-Pacific region as global leaders have expressed growing mistrust over the Trump administration, which has withdrawn from key international agreements since taking office. At home, Trump’s administration has been plagued by questions over links to the Russian government. Tillerson said Trump told him to try to improve ties with Russia regardless of the U.S. political backdrop.

“I can’t really comment on any of that because I don’t have any direct knowledge,” Tillerson told a news conference in Wellington, when asked how worried he was that the U.S. political crisis could take down the Trump administration. “The president’s been clear to me: do not let what’s happened over here in the political realm prevent you from the work that you need to do on this relationship and he’s been quite clear with me… that we might make progress. I’m really not involved in any of these other issues,” he said after a meeting with New Zealand Prime Minister Bill English.

This is another very curious story, and it’s not just the girl’s name, Reality Leigh Winner. Still, even The Intercept jumps to conclusions:

“Russian military intelligence executed a cyberattack on at least one U.S. voting software supplier and sent spear-phishing emails to more than 100 local election officials just days before last November’s presidential election, according to a highly classified intelligence report obtained by The Intercept.”

Even though they know that when signs point to Russia, it’s probably not Russial, the caveat only come later:

“While the document provides a rare window into the NSA’s understanding of the mechanics of Russian hacking, it does not show the underlying “raw” intelligence on which the analysis is based. A U.S. intelligence officer who declined to be identified cautioned against drawing too big a conclusion from the document because a single analysis is not necessarily definitive.”

If the raw intelligence is not available, how can one draw the Russia conclusions? The Intercept now blindly trusts US intelligence agents? And that’s not all, see next article…

• Contractor Charged With Leaking Document About US Election Hacking (R.)

The U.S. Department of Justice on Monday charged a federal contractor with sending classified material to a news organization that sources identified to Reuters as The Intercept, marking one of the first concrete efforts by the Trump administration to crack down on leaks to the media. Reality Leigh Winner, 25, was charged with removing classified material from a government facility located in Georgia. She was arrested on June 3, the Justice Department said. The charges were announced less than an hour after The Intercept published a top-secret document from the U.S. National Security Agency that described Russian efforts to launch cyber attacks on at least one U.S. voting software supplier and send “spear-phishing” emails, or targeted emails that try to trick a recipient into clicking on a malicious link to steal data, to more than 100 local election officials days before the presidential election last November.

While the charges do not name the publication, a U.S. official with knowledge of the case said Winner was charged with leaking the NSA report to The Intercept. A second official confirmed The Intercept document was authentic and did not dispute that the charges against Winner were directly tied to it. The Intercept’s reporting reveals new details behind the conclusion of U.S. intelligence agencies that Russian intelligence services were seeking to infiltrate state voter registration systems as part of a broader effort to interfere in the election, discredit Democratic presidential candidate Hillary Clinton and help then Republican candidate Donald Trump win the election. The new material does not, however, suggest that actual votes were manipulated.

… but it gets weirder. Soon after the Intercept published the story and docs, the leaker was arrested. How? She could easily be traced back to these docs. Was the Intercept not aware of this? That’s hard to believe, leaked documents is what they do. Was someone careless? We haven’t seen any excuses made. Did they knowingly give her up? Is this then the end of the Intercept?

• How The Intercept Outed Reality Winner (ErrataS)

Today, The Intercept released documents on election tampering from an NSA leaker. Later, the arrest warrant request for an NSA contractor named “Reality Winner” was published, showing how they tracked her down because she had printed out the documents and sent them to The Intercept. The document posted by the Intercept isn’t the original PDF file, but a PDF containing the pictures of the printed version that was then later scanned in. The problem is that most new printers print nearly invisibly yellow dots that track down exactly when and where documents, any document, is printed. Because the NSA logs all printing jobs on its printers, it can use this to match up precisely who printed the document. In this post, I show how.

You can download the document from the original article here. You can then open it in a PDF viewer, such as the normal “Preview” app on macOS. Zoom into some whitespace on the document, and take a screenshot of this. On macOS, hit [Command-Shift-3] to take a screenshot of a window. There are yellow dots in this image, but you can barely see them, especially if your screen is dirty.

We need to highlight the yellow dots. Open the screenshot in an image editor, such as the “Paintbrush” program built into macOS. Now use the option to “Invert Colors” in the image, to get something like this. You should see a roughly rectangular pattern checkerboard in the whitespace.

It’s upside down, so we need to rotate it 180 degrees, or flip-horizontal and flip-vertical:

Now we go to the EFF page and manually click on the pattern so that their tool can decode the meaning:

This produces the following result:

The document leaked by the Intercept was from a printer with model number 54, serial number 29535218. The document was printed on May 9, 2017 at 6:20. The NSA almost certainly has a record of who used the printer at that time.

“With 260-to-1 Leverage A Chinese Giant Takes On Goldman In US Repo”

• China’s Biggest Bank Is Wall Street’s Go-To Shadow Lender (BBG)

High up in a New York City skyscraper, China’s biggest bank is playing in the shadows of American finance. The prize for Industrial & Commercial Bank of China isn’t stocks, bonds or currencies. It’s the grease in the wheels of all those markets: repurchase agreements. By exploiting a loophole in rules intended to keep U.S. banks from getting “too big to fail,” the state-owned ICBC has become a go-to dealer in repos in just a few short years, alongside longtime powerhouses like Goldman Sachs Group Inc. The short-term loans allow investors to borrow money by lending securities, serving a vital role in day-to-day trading on Wall Street. ICBC’s rise reflects not only China’s global ambitions in high finance, but also how post-crisis rules have let a whole host of new players profit from the murky world of shadow banking, largely beyond the reach of bank regulators.

As big banks face tougher standards, they’re being replaced by brokers, asset managers and foreign firms like ICBC, which can use more leverage and take greater risks. That has some regulators worried non-bank lenders are once again emerging as a threat to financial stability, less than a decade after panic in the repo market wiped out Lehman Brothers. “The concern is that non-bank dealers are becoming a larger part of the repo market,” said Benjamin Munyan, who specializes in shadow banking and regulation at Vanderbilt University’s Owen Graduate School of Management. “These intermediaries are outside the scope of our traditional Federal Reserve safety net.” In some ways, the development is emblematic of how steps taken to stamp out financial risk-taking in one area have created unforeseen risks in another. But it also highlights the willingness and ability of firms to jump through whatever holes regulators leave or create.

In a repo, firms borrow money by putting up securities like Treasuries as collateral. The cash can then be used to buy higher-yielding assets, something hedge funds often do. When the agreement expires, the borrower “repurchases” the collateral, paying interest to the lender. The process can be repeated over and over, boosting a firm’s leverage, as long as the assets backing the repo maintain their value. During the credit crisis, reliance on such short-term funding helped bankrupt Lehman and imperiled the financial system. Bailouts put the biggest securities firms under Fed supervision as banks, and Dodd-Frank regulations forced them to shrink their assets. A key provision has been the enhanced capital requirements, which made it prohibitively expensive for large U.S. banks to warehouse low-yielding Treasuries and finance repos.

China runs out of collateral.

• One Belt, One Road, and One Debt Hangover (Rickards)

China is not only one of the world’s largest debtors, it is one of the world’s largest creditors. China uses debt not in the customary financial manner, but as a political tool to generate employment and maintain social stability. Likewise China uses loans and investment as a tool to advance its strategic interests. This may be good geopolitics in the short run, but it will be a disaster economically in the long run. Just as Chinese state owned enterprises (SOEs) can’t repay debts to Chinese banks, China’s foreign partners will not be able to repay debts to China itself. These twin disasters-in-the-making may converge in such a way that China’s assets disappear or become illiquid at exactly the time they are most needed to bail-out its own banking system.

China has launched four major overseas investment initiatives in the past ten years. The oldest is their sovereign wealth fund, China Investment Corporation, or CIC, established in 2007. Sovereign wealth funds are a way for countries to invest their reserves in securities other than safe instruments such as U.S. Treasury notes. CIC today has assets of over $800 billion, spread among stocks, corporate bonds, hedge funds, private equity, commodities, and commercial real estate. Some of CIC’s investments are directly-owned enterprises, including gold mines in Zimbabwe. While these assets may outperform Treasury notes over time, they are also illiquid, and would tend to decline in value during a financial panic. This means that about 20%, of China’s reserves are unavailable for critical tasks such as bailing out the banking system or defending the currency.

[..] The problem with One Belt, One Road is that many of the potential recipients of development loans are not highly creditworthy or have a track record of defaulting on debts or requiring substantial debt restructuring in order to stay current. As with Chinese bank loans to SOEs, the NDB, AIIB, and One Belt, One Road efforts are not primarily economic but political. China is seeking to use its economic clout to create jobs and control critical infrastructure. [..] As with its other policies, China will turn liquid assets into illiquid assets in order to pursue its ambitions. This could make sense if nothing goes wrong. But, things will go wrong. China will face a monumental liquidity crisis sooner than later and find that its liquid assets have been turned into bridges to nowhere.

This thing has been developing over decades.

• Qatar Stocks Tumble 7% As Six Arab Nations Cut Diplomatic Ties (CNBC)

Qatar’s stock market tumbled more than 7% on Monday as six of the Middle Eastern country’s neighbors reportedly severed diplomatic relations with Doha for allegedly supporting terrorism. The key stock index in Doha slipped shortly after Monday’s open – the benchmark’s sharpest fall in more than seven years – before paring some its losses to trade down 7.2% at around 3:00 p.m. local time. Six countries, including Saudi Arabia and Egypt, had all coordinated on Monday to accuse the wealthy Gulf state of supporting terrorism, which Qatar has denied. Investors viewed the diplomatic withdrawal as a major breakdown between powerful Gulf nations, who are also close U.S. allies. While Saudi Arabia – the world’s leading crude oil exporter – said Qatar had supported “Iranian-backed terrorist groups,” Qatar described the joint decision as having “no basis in fact” and was therefore “unjustified”.

Political tensions in the region had been building in recent weeks as Egypt, Saudi Arabia, Bahrain and the United Arab Emirates – all countries to have cut relations with Doha on Monday – had blocked Qatari-based news sites in May. However, Monday’s decision was reported to be based on Qatar’s alleged role in supporting Islamist groups and its stance concerning Iran – a regional rival to Saudi Arabia. Qatar, a member of the U.S. coalition against the so-called Islamic State, has frequently and consistently rejected accusations from Iraq’s Shia leaders that it has provided financial backing to ISIS. “Whilst Qatar is the member of the U.S. coalition against IS, wealthy individuals have reportedly made donations to extremist groups and the government is also accused of supporting extremists – allegations that Qatar vehemently deny,” Tamas Varga, oil associates analyst at PVM, said in an email on Monday.

If I remember, the UK gets 90% of its LNG from Qatar.

• Qatar’s Real Power Is As The World’s Largest LNG Exporter (BBG)

Oil markets seem impervious to geopolitical risk. As four Arab neighbors imposed an unprecedented embargo on Qatar on Monday, oil prices briefly jumped 1.6 percent before falling back. The fuel to watch, though, is not oil, but gas. If this dispute is not resolved quickly, it may mean a hot summer in the Gulf. The problem has been simmering for a long time, with three of Qatar’s Gulf Cooperation Council colleagues blaming it for backing Islamist groups including the Muslim Brotherhood, and being too friendly with Iran. But in a dramatic escalation shortly after U.S. President Donald Trump’s visit to Saudi Arabia, the United Arab Emirates and Bahrain, along with Egypt, the shaky official government of Yemen and Libya’s contested eastern government broke relations with Doha and imposed a ban on air, land and sea travel.

Much of Qatar’s food and key equipment comes by land from Saudi Arabia, or reshipments through Dubai’s Jebel Ali port. Qatar is one of the smallest oil producers in OPEC, at 618,000 barrels per day, but condensate (light oil) and natural gas liquids – byproducts of its giant North Field – add about another 1.3 million barrels per day. It will stay in the OPEC production cuts deal, and even if it does not, its contribution is small. Its real power comes from being the world’s largest liquefied natural gas exporter. Qatar’s liquefied natural gas and oil exports should not be affected, even if Saudi and Emirati waters are barred to its ships. They can sail via Iranian waters and then pass the Strait of Hormuz via the usual shipping lane in Omani territory, or stay in the Iranian sector if Oman joins its GCC colleagues in the blockade. Any attempt to stop Qatari exports would be a major crisis, and would invite a serious response from major LNG customers Japan, South Korea, China and India.

So is Britain’s political model.

• Britain’s Economic Model Is Broken: This Is Our First Post-Crash Election (G>)

Mayism could mean Brexit Britain renaming itself Poundland – cheap goods and cheap workers – or it might mean a reversion to some kind of one-nation Toryism. Her party just doesn’t know. Were it not for the Tories’ slim majority, their crisis would be far more exposed. The sofa class don’t do political economy, more’s the pity, but if they did they’d see the contradictions of Conservatism in 2017. The party of capital is now pursuing a policy – hard Brexit – hated by capital. The political arm of the City is about to rip a hole through the City. All these paradoxes are given almost physical representation on our tellies every night by May herself – a populist who doesn’t actually like people.

As a non-believer in New Labour, Corbyn has no such ideological awkwardness, while John McDonnell is one of the few people in the Labour party who didn’t subcontract out their economic thinking to Brown and Ed Balls. But still, their team admit they have a way to go in rethinking Britain’s economy – and they are having to do so against a famously hostile parliamentary party. The result is Corbyn’s manifesto, which is chiefly remarkable for its unabashed defence of basic social democratic values. It’s the programme you imagine Brown would like to have delivered – if only he hadn’t been so busy triangulating.

But behind the scenes, the party is doing much deeper thinking. I have seen an internal Labour report commissioned by McDonnell. It forms one part of what could be a far more radical programme after Thursday night. Some of the lines in it will give the Daily Mail stories for days – such as calling for a overhaul of the BBC trust (which is “dominated by appointees from the corporate and financial sectors”) and hundreds of millions in public money to be spent on establishing workers co-ops. For the sympathetic reader, however, it contains some of the most imaginative thinking around economic democracy to come out of the party in decades (not saying much, sadly). In that, it sits alongside the speeches made by Corbyn’s team last week about the need for “industrial patriotism”, and to give public backing to new sectors.

More cuts are being prepared.

• Simple Numbers Tell Story Of Police Cuts Under Theresa May (G.)

Police numbers, including the number of armed police officers, have fallen sharply under Theresa May’s watch first as home secretary between 2010 and 2016 and then as prime minister. The simple numbers tell the story. In 2010 May as home secretary made the mistake that Margaret Thatcher never made in the 1980s and agreed to a Treasury demand to cut police budgets by 18%. Over the next five years the number of police officers in England and Wales fell from a peak of 144,353 in 2009 to 122,859 in 2016. At the same time the number of specialist armed police officers has fallen from a peak of 6,796 in 2010 to 5,639 in 2016. As the graph shows it would appear to be an open and shut case that cuts in police officer numbers have had an impact on the capacity of the police to respond.

May was told in 2010 that in cutting police funding she was making a mistake that Thatcher never made when she instinctively realised that there would come a crucial moment when the country, and her premiership, would depend entirely on the resilience of the thin blue line. May took a different approach as home secretary that was not without foundation. She argued that with the big continuing falls in crime that had been seen since the mid-1990s it was not necessary to maintain such a large police force. Anyway, it was argued, there was no direct link between the number of officers and the level of crime.

What you get after years of having zero price discovery. It gets worse as we go along.

• Earnings vs. Profits & The Bull Market (Roberts)

As I have discussed previously, the operating and reported earnings per share are heavily manipulated by accounting gimmicks, share buybacks, and cost suppression. To wit: “The tricks are well-known: A difficult quarter can be made easier by releasing reserves set aside for a rainy day or recognizing revenues before sales are made, while a good quarter is often the time to hide a big ‘restructuring charge’ that would otherwise stand out like a sore thumb. What is more surprising though is CFOs’ belief that these practices leave a significant mark on companies’ reported profits and losses. When asked about the magnitude of the earnings misrepresentation, the study’s respondents said it was around 10% of earnings per share.“ However, if we analyze corporate profits (adjusted for taxes and inventory valuations) we find a very different story. Since the lows following the financial crisis, the S&P 500 has grown by 266% versus corporate profit growth of just 98%.

Important Note: The profits generated by the Federal Reserve’s balance sheet are included in the corporate profits discussed here. As shown below, actual corporate profitability is weaker if you extract the Fed’s profits from the analysis. As a comparison, in the first quarter of 2017, Apple reported a net income of just over $17 billion for the quarter. The Fed reported a $109 billion profit.

With corporate profits still at the same level as they were in 2011, there is little argument the market has gotten a bit ahead of itself. Sure, this time could be different, but it usually isn’t. The detachment of the stock market from underlying profitability suggests the reward for investors is grossly outweighed by the risk. But, as has always been the case, the markets can certainly seem to “remain irrational longer than logic would predict.” This was something Jeremy Grantham once noted: “Profit margins are probably the most mean-reverting series in finance, and if profit margins do not mean-revert, then something has gone badly wrong with capitalism. If high profits do not attract competition, there is something wrong with the system, and it is not functioning properly.” Grantham is correct. As shown, when we look at inflation-adjusted profit margins as a percentage of inflation-adjusted GDP we see a clear process of mean reverting activity over time. Of course, those mean reverting events are always coupled with a recession, crisis, or stock market crash.

More importantly, corporate profit margins have physical constraints. Out of each dollar of revenue created there are costs such as infrastructure, R&D, wages, etc. Currently, one of the biggest beneficiaries to expanding profit margins has been the suppression of employment, wage growth, and artificially suppressed interest rates which have significantly lowered borrowing costs. Should either of the issues change in the future, the impact to profit margins will likely be significant. The chart below shows the ratio overlaid against the S&P 500 index.

Well, if you don’t know what something’s worth, how are you going to justify purchasing it? At some point that stops.

• US M&A: One Of The Scariest Charts To Look At – Citi (BI)

The slowdown in US dealmaking since 2015 is cause for concern, Citi’s equity strategists say. “In some respects, one of the scariest charts to look at currently is the number of announced mergers & acquisition deals over the past year or two,” Tobias Levkovich, the chief US equity strategist at Citi, said in a note on Friday. “M&A lawyers argue the ‘uncertainty’ factor, which has come about recently, given some unpredictable aspects of the new Trump administration, has been the issue. It only may explain the last six months, but the trend has been poor for about two years or more. In the past, there has been some correlation with the S&P 500 and thus it could generate more legitimate fears than some of the other excuses that are put forth for not wanting to buy American equities.”

This year through June 5, 7,561 deals were announced, the lowest count since 2013, according to S&P Global Market Intelligence. M&A volume reached a record $2.055 trillion that year, the firm’s data show, slipping in 2016 to $1.7 trillion. More dealmaking signals, in part, that companies are placing big bets on the long-term growth of certain pockets of the market. Levkovich said tough antitrust measures from European authorities and the Department of Justice antitrust division may be slowing dealmaking.

Please let it stop.

• IMF’s Lagarde Offers Eurozone Greek Debt Compromise, Handelsblatt Says (R.)

IMF Managing Director Christine Lagarde has offered Greece’s European creditors a way out of their impasse over Athens’s debts that would allow the eurozone to release a tranche of aid later this month. The IMF believes Greece needs a debt haircut, which Germany rejects. Lagarde suggested agreeing a deal whereby the IMF would stay on board in the bailout, as Berlin wants, but not pay out further aid until debt relief measures are clarified. “There can therefore be a program in which the disbursement only takes place when the debt measures have been clearly outlined by the creditors,” she told Handelsblatt in pre-released comments to run in its Tuesday edition. The compromise could allow eurozone finance ministers to give the go-ahead for their next payment of their tranche of aid at their meeting on June 15, Handelsblatt said.

“It is a possibility for an agreement,” Lagarde said. Greece has about €7 billion of debt maturing in July, a sum it will not be able to repay unless it gets new loans out of its current bailout worth up to 86 billion euros, the third aid program since its debt crisis began. Eurozone finance ministers failed to agree with the IMF last month on debt relief terms for Greece. They did not release new loans to Athens but recognized it had made significant progress with reforms. Greece hopes that eurozone finance ministers will offer enough clarity in June on debt relief measures that could be carried out after its bailout ends in 2018, to show investors that its debt – now at 197% of GDP – will be sustainable and help it return to bond markets as early as this summer.

Trust in the Troika has proven to be a very expensive mistake.

• The Euro’s Future Demands Trust (K.)

The European Commission presented its proposal for possible ways to deepen Europe’s Economic and Monetary Union a few days ago, as part of the public debate on the EU’s future. It went unnoticed in Greece, which is a pity, because if all that is proposed is adopted, the Greek problem will be overcome; also, if the mechanisms and procedures now in place had existed from the start, our country would not have hit a dead end. The question now is how Greece will be part of a system that was established because of the Greek crisis but from which our country is still excluded.

For the Greeks – sinking in recession, insecurity and isolation – the ironies are many. Presenting the proposals in Brussels on Wednesday, Commission Vice President Valdis Dombrovskis said: “The euro is one of Europe’s most significant achievements. It is much more than just a currency. It was conceived as a promise of prosperity. To keep that promise for future generations, we need the political courage to work on strengthening and completing Europe’s Economic and Monetary Union now.” Pierre Moscovici, commissioner for economic and financial affairs, added: “The euro is already a symbol of unity and a guarantee of stability for Europeans. We now need to make it a vehicle for shared prosperity. Only by reversing economic and social divergence in the euro area will we be able to defeat the dangerous populism that this fuels.”

The indirect references to Greece are clear. This is where the euro’s weaknesses first appeared, this is where the political center was torn apart and fringe groups gained power, this is where confidence in the common currency and in solidarity is being tested. The Commission’s proposals focus on completing a genuine financial union, achieving a more integrated economic and fiscal union, on greater democratic accountability and strengthening euro-area institutions (including a full-time Eurogroup chair and a European Monetary Fund). The Commission noted the euro’s successes, adding, “And yet it is only 25 years since the Treaty of Maastricht paved the way for the single currency and only 15 years since the first coin was used.” So we ask: As the currency is so new, and as the necessary mechanisms and procedures are only now being instituted, why is Greece continually an outcast? How can we pretend all is well with the euro? .

Nice thing is the City Plaza is not really occupied, nor a squat. The former employees own everyhting inside the building.

• An Occupied Hotel In Greece Models How To Welcome Refugees (WNV)

It is almost summer in Europe. Temperatures are rising, and many are preparing for vacations somewhere in the Mediterranean, which means searching for accommodation online. “No pool, no minibar, no room service, and nonetheless: the best hotel in Europe” reads the City Plaza Hotel’s homepage. A joke? Yes. A lie? Not at all. While this hotel in Athens, Greece might not offer those conventional services, it provides something far better: Free housing, medical care and meals for hundreds of people who have had to flee their countries. [..] Over the course of the year, the hotel has provided decent housing for over 1,500 refugees — 400 at any one time — in times of undignified detention camps. It is a model of self-organization and solidarity with refugees — who share living quarters with locals — in times of rising racism and nationalism.

[..] Thousands of homeless refugees are living in the streets of Athens, including families with small children. In response to this crisis, the Greek state set up more than 49 detention centers and camps. Activists and refugees had another idea of how to respond. On April 22, 2016 they took over the City Plaza — which, like many businesses since the economic collapse, had been abandoned for six years. Along with eight other self-organized shelters occupied by refugees and activists around the city, the hotel offers displaced people a safe and dignified alternative to the miserable, unhygienic and cruel conditions of the detention facilities. When the City Plaza went bankrupt in 2010, the management failed to pay the employees their final salaries. According to a court ruling, since they were unable to pay the workers monetarily, everything that is inside the building belongs to the workers.

However, the owner prevented auctioning the hotel for years. When the seven-story building was finally occupied last year, the former hotel employees declared that they were happy to offer and share everything. And the activists running City Plaza now support the workers and are planning common efforts to meet the demands of both the former workers and the refugees. The refugees’ demands include access to housing, education and employment. By providing everything that is needed themselves, the project proves that decent living conditions for everyone is possible, even in a country as burdened by crisis as Greece. And the warm reception that the refugees have received by those living near the hotel demonstrate that poverty is not an obstacle to welcoming people with open arms. “The neighbors bring some clothes, some food — you know, they are warm. Although their lives are also ruined, they see in the ruins of their lives, the ruins of the lives of other people,” said Maria, one of the Greek activists running the hotel.

Debt Rattle June 5 2017

Jun 052017

June 5, 2017 Posted by Raúl Ilargi Meijer at 10:22 am Finance Tagged with: Banksy, Biden, Cameron, Corbyn, Greece, Iran, May, neocons, Qatar, Saudi, terrorism 1 Response »

Banksy Girl with a balloon 2002/2017

• Gulf Countries Cut Ties With Qatar, Oil Price Jumps (CNBC/R.)

• Saudi Arabia, Egypt, UAE, & Bahrain Cut Ties, Shut Borders With Qatar (ZH)

• Theresa May Urged Not To Suppress Report Into Funding Of Jihadi Groups (G.)

• Top Cameron Aide: Theresa May ‘Responsible’ For London Terror Attack (BI)

• Against Terror, Is London Pride Enough? (NYT)

• Nearly 10 Million Britons Are In Insecure Work (G.)

• Banksy Offers Free Art To People Who Vote Against The Tories (Ind.)

• World Bank Economist: Risks To World Economy Receded (AFP)

• Italy Faces Borrowing Shock When ECB Removes Support – Pimco (Tel.)

• Joe Biden Boasts of US Role in ‘Saving’ Greece (K.)

It’s not about Qatar. US neocons are testing a new way to get to Iran.

• Gulf Countries Cut Ties With Qatar, Oil Price Jumps (CNBC/R.)

The governments in Saudi Arabia, Egypt and the UAE are all wary of the Muslim Brotherhood because it enjoys support as an Islamist party among a broad base, Sluglett said. In the case of Iran, he added, a key factor is the Trump administration’s threat to review a landmark deal that lifted most economic sanctions against Iran in return for curbing its nuclear and missile programs. “The Americans cannot unilaterally back out of the deal as it is the P5+1 [permanent five members of the U.N. security council and Germany], so they are using the GCC and Egypt to put pressure on any countries supporting Iran,” Sluglett said, referring to the Gulf Cooperation Council, which counts Qatar, Saudi Arabia, Kuwait, the United Arab Emirates, Bahrain and Oman as members.

Charles Lister, a senior fellow at the Middle East Institute, responded on Twitter to the news by pointing out that Qatar “is very heavily reliant on food supplies accessed” through Saudi Arabia, so a closing of the borders poses a “very” serious challenge to Doha. For its part, Saudi Arabia accused Qatar of backing militant groups and spreading their violent ideology, in an apparent reference to its influential state-owned satellite channel al Jazeera. “(Qatar) embraces multiple terrorist and sectarian groups aimed at disturbing stability in the region, including the Muslim Brotherhood, ISIS (Islamic State) and al-Qaeda, and promotes the message and schemes of these groups through their media constantly,” state news agency SPA said. The statement went on to accuse Qatar of supporting what it described as Iranian-backed militants in its restive and largely Shi’ite Muslim-populated Eastern region of Qatif and in Bahrain.

Qatar said in May that hackers had faked remarks by its emir, Sheikh Tamim bin Hamad al-Thani, criticizing some leaders of fellow Gulf Arab states and calling for an easing of tensions with Iran, a regional adversary. But several Gulf Cooperation Council states rejected Qatar’s explanation, leaving local media to unleash a barrage of attacks accusing the emir of cozying up to Tehran. Qatar shares the world’s largest gas field, South Pars, with Iran. The commercial and business ties have irritated Saudi Arabia and other Gulf Cooperation Council countries at odds with Iran over Tehran’s support for Shia-linked militants. Sluglett noted that Qatar’s dealings with Iran center on the gas field and that Doha is uncomfortable at times with a hard push against Tehran: “They find it quite ridiculous to blindly follow U.S. views on Iran.”

Saudi Arabia pointing to Iran as terror source is rich…

• Saudi Arabia, Egypt, UAE, & Bahrain Cut Ties, Shut Borders With Qatar (ZH)

Just days after president Trump left the region, a geopolitical earthquake is taking place in the Middle East tonight as the rift between Qatar and other members of the (likely extinct) Gulf Cooperation Council explodes with Bahrain, UAE, Saudi Arabia, and Egypt cutting all diplomatic ties with Qatar accusing it of “speading chaos,” by funding terrorism and supporting Iran. The dispute between Qatar and the Gulf’s Arab countries started over a purported hack of Qatar’s state-run news agency. It has spiraled since, and appears to be climaxing now… just days after President Trump left the region. As Al Arabiya reports, Bahrain has announced it is cutting diplomatic ties with Qatar, according to a statement carried on Bahrain News Agency.

The statement on Monday morning said Bahrain decided to sever ties with its neighbor “on the insistence of the State of Qatar to continue destabilizing the security and stability of the Kingdom of Bahrain and to intervene in its affairs”. The statement also said Qatar’s incitement of the media and supporting of terrorist activities and financing groups linked to Iran were reasons behind the decision. “(Qatar has) spread chaos in Bahrain in flagrant violation of all agreements and covenants and principles of international law Without regard to values, law or morals or consideration of the principles of good neighborliness or commitment to the constants of Gulf relations and the denial of all previous commitments,” the statement read. Qatari citizens have 14 days to leave Bahraini territories while Qatari diplomats were given 48 hours to leave the country after being expelled.

Meanwhile, Bahrain has also banned all of its citizens from visiting or residing in Qatar after the severance of ties. Additionally, Bahrain has has closed both air and sea borders with Qatar. Saudi Arabia then confirmed the same – cutting ties and shutting down all sea, airspace, and land crossings with Qatar as well as dissolving Qatar’s role in the Saudi-led coalition fighting against Yemen. Emirates, Etihad, Saudia, Gulf Air, and Egypt Air are no longer allowed to fly to Qatar and Saudi Arabia is providing facilities, services to Qatari pilgrims. Egypt then followed, confirming it was cutting diplomatic ties. Then UAE confirmed it would cut ties, shut down all sky, water, and land crossings, and expel all Qataris within 48 hours. The Maldives also just cut diplomatic ties with Qatar.

All of this happens within 24 hours of Iran calling out ‘The West’ for ignoring the real sponsors of terrorism around the world and UK’s Labor party leader outright name-shaming Saudi Arabia’s funding of terrorism. As a reminder, documents obtained by Middle East Eye show strategic alliance includes pledge by Ankara to protect Gulf state from external threats… “In December 2015, Turkey announced, to the surprise of many, that it planned to establish a military base in Qatar. Behind the scenes, the agreement was about forming a major strategic alliance. After a 100-year hiatus, Turkey is militarily back in the Gulf and ramping up its presence overseas. In January, Ankara announced that it would also establish a military base in Somalia. Specific details about the Qatar agreement, which Turkey described as an alliance in the face of “common enemies”, remain scant, but Middle East Eye has acquired copies of the agreements, as well as further details, which include a secret pledge by Ankara to protect Qatar from external threats.

Did Qatar just get scapegoated in the ‘war on terror’? One thing seems clear, support for a Syrian gas pipeline will be dwindling and with it the need for a Syrian war. Notably, this raises further doubts about OPEC’s stability. As Bloomberg notes, while Middle East ructions have historically added risk premia to oil prices, discord here could theoretically put downward pressure on prices as OPEC members struggle to maintain unity and compliance on production cuts.

Too late now. It’s not like she’ll volunteer to publish the report before June 8.

• Theresa May Urged Not To Suppress Report Into Funding Of Jihadi Groups (G.)

Jeremy Corbyn and Tim Farron have challenged Theresa May over a long-delayed inquiry into foreign funding and support of jihadi groups in the UK, after the Home Office suggested the investigation may not be published. The inquiry into revenue streams for extremist groups was commissioned by David Cameron when he was prime minister and is thought to focus on Saudi Arabia. But the Guardian revealed last week that the report was still incomplete and its contents may not be published. The Labour leader used a speech in Carlisle on Sunday evening to challenge the prime minister over the delayed report. Corbyn referenced May’s speech after the London Bridge attack on Saturday, in which she said challenging terrorism would “require some difficult and often embarrassing conversations”.

In a speech that also criticised May for ignoring warnings about the impact of police cuts, he said: “Yes, we do need to have some difficult conversations, starting with Saudi Arabia and other Gulf states that have funded and fuelled extremist ideology. “It is no good Theresa May suppressing a report into the foreign funding of extremist groups. We have to get serious about cutting off the funding to these terror networks, including Isis here and in the Middle East.” The Liberal Democrat foreign affairs spokesman, Tom Brake, wrote to May last week asking her to commit to not shelving the report. Writing in the Guardian on Monday, the Lib Dem leader, Tim Farron, said it was essential the report was not suppressed. “Theresa May now has a choice. Does she publish that report or keep it hidden?” Farron said.

“Theresa May talks of the need to have some difficult and sometimes embarrassing conversations. That should include exposing and rooting out the source funding of terror, even it means difficult and embarrassing conversations with those like Saudi Arabia that the government claims are our allies.” The Conservatives were criticised last year for selling billions of pounds of arms to the Saudis. Cameron ordered the investigation as part of a deal with the Lib Dems in exchange for the party supporting the extension of British airstrikes against Islamic State into Syria in December 2015. The Home Office’s extremism analysis unit was directed by Downing Street in January 2016 to investigate overseas funding of extremist groups in the UK, with findings to be shown to the then home secretary May and Cameron. Eighteen months on, the Home Office said the report, originally due to be published in spring 2016, had not yet been completed and publication was not guaranteed, given the sensitive nature of the content. .

May the cannabalism begin.

• Top Cameron Aide: Theresa May ‘Responsible’ For London Terror Attack (BI)

The Prime Minister should resign over her alleged failure to prevent the London Bridge terror attack, a former senior aide to the last Conservative Prime Minister David Cameron has said. Former Downing Street director of Strategy, Steve Hilton, on Monday claimed the Theresa May was “responsible” for the attack that left seven people dead and many more injured, and called for her to resign rather than seek re-election. “Theresa May responsible for security failures of London Bridge, Manchester, Westminster Bridge,” he tweeted. “Should be resigning not seeking re-election.” Hilton posted an excerpt from a Daily Mail report, suggesting that security services had been warned about at least one of the terrorists behind the attack on Saturday.

The Mail reported that one of the attackers had featured in a documentary about extremists and been reported to the security services by friends concerned that he had been radicalised. The paper also reported evidence that the suspect had been quizzed by police last year. Previous reports have indicated that the terrorists behind the Manchester and Westminster attacks earlier this year were also known to security services. May is also under pressure to release a suppressed report Home Office report into the international funding of terror groups in the UK. The report was commissioned by the last coalition government in 2015 and due to be published last year but has never been emerged. The Home Office admitted last week that it may never be published due to the “very sensitive” nature of the report.

The report is expected to reveal links between Saudi Arabia and extremist groups in the UK. Critics of the government believe it has been suppressed due to the UK government’s ongoing trade relationships with the country. The UK recently approved £3.5bn worth of arms export licences to Saudi Arabia, despite criticisms over its involvement in the bombing campaign in Yemen.

Keep calm as a myth.

• Against Terror, Is London Pride Enough? (NYT)

Cultures live by myths. These create their own reality. Britons may not know much history, but they all know about the spirit of the Blitz, and many lived through the bombing campaigns of the Irish Republican Army of the 1970s and ’80s. Many will remember that, in 1984, on the day Prime Minister Margaret Thatcher and half her cabinet team were blown out of their beds in the early morning by the Brighton bomb, in which five people died, she insisted that the Conservative Party conference should still start as scheduled at 9.30 a.m. Terrorism, she said, would never cripple democracy. The country is proud of that stoicism, and on the whole, wishes to live up to it. And yet. Today, there is a ripple of unease spreading through Britain, after the third brutal and unexpected attack in three months. It is the chilling realization that whatever the antiterror strategy has been so far, it clearly hasn’t worked.

However many plots are being foiled, now that anyone with the access to a car or van, a kitchen knife or the internet can choose to kill, some will succeed. This is a bleak and, frankly, unbearable prospect, and it’s concentrating minds. My 25-year-old son says that what terrifies him and his friends is their impotence. If this were indeed the Blitz, they could join up. If it was the ’70s they could either fight the I.R.A. or lobby for peace talks. But here, they have no idea how to combat this, whom to talk to, how to do anything other than wait for the next atrocity to happen, and then send sympathy and hashtags in the aftermath. Others, seeing that good will and candlelit vigils have their limits, are demanding radical action. On social media and phone-ins, and in private conversations, some people are calling for the immediate internment of the 3,000 suspected radicals on the terrorist watch lists, or their deportation, or for mass aerial bombing of the Islamic States abroad.

None of these will be solutions, but everyone is beginning to understand that savagery may become a regular occurrence, rather than an exceptional one — unless whoever is in government can offer a different and more successful approach. That is why Prime Minister Theresa May, only days away from a general election where she is fighting to keep her parliamentary majority, announced this morning that “enough is enough” in the war against terrorism, and that “things need to change.” There had been too much tolerance of extremism in Britain. The police and security services should have all the powers they needed. The internet giants, Facebook and Google, must be held responsible for radicalizing material that appeared on their sites.

Mrs. May knows just how vulnerable she is on these issues. She is already performing unexpectedly badly in the election campaign, appearing wooden and uneasy in comparison to her Labour challenger. Normally, she and the Tories could count on scoring high for law and order, but Mrs. May is in the uncomfortable position of denouncing counterterror policies for which she herself has been responsible over the past six years (in five years as home secretary and one as prime minister).

The result of what is it, 10 year, Tories?! That’s one in every three jobs? Or is it four? Talk about a gutted society… And then Brexit surprised?

• Nearly 10 Million Britons Are In Insecure Work (G.)

Up to 10 million Britons or nearly a third of the UK workforce do not have secure employment, according to the GMB union, which has warned of a heavy impact on health and family life. The union’s research, unveiled at its 100th annual congress in Plymouth on Monday, attempts to quantify people in what it calls precarious employment – those in the gig economy, on zero- or short-hours contracts, temporary workers, the underemployed and those at risk of false self-employment. The data, based on a survey of nearly 3,500 people of working age, emerged before the publication this month of recommendations from Matthew Taylor, a former adviser to Tony Blair who was appointed by the current prime minister to lead a review into the gig economy. He is expected to recommend changes to the rights of self-employed workers.

Tim Roache, the GMB’s general secretary, said: “This paints a shocking picture of the modern world of work. Up to 10 million people go to work either not knowing what their hours are, if they’ll be able to pay the bills, or what their long-term prospects are. That’s a sorry state of affairs in the 21st century and a product of government’s failure to tackle bogus self-employment, the use of agency contracts as a business model and point-blank refusal to ban zero-hours contracts.” Further interviews of those who identified themselves as insecure workers found that 61% had suffered stress or anxiety as a result of their current job and the same proportion said they had been to work while unwell for fear of not being paid, losing their job or missing out on future hours. The rapid change in employment practices was highlighted by more than three-quarters of those interviewed who said they had previously been in permanent employment.

Not sure it’s entirely legal.

• Banksy Offers Free Art To People Who Vote Against The Tories (Ind.)

Banksy has offered fans an exclusive free print if they vote against the Conservatives in the general election. The artist posted on his website asking voters in six Bristol-area constituencies to send him a photo of their ballot paper showing that they voted against the Tories to receive a limited-edition work. He wrote: “Simply send in a photo of your ballot paper from polling day showing you voted against the Conservative candidate and this complimentary gift will be mailed to you.” The artwork is taken from his iconic “girl with a balloon” motif but now features a Union Jack flag in the balloon. Banksy said that it will be released on 9 June. However, critics have pointed out that this would contravene laws designed to ensure votes remain secret, and could also break rules against bribery.

In a “lawyer’s note” disclaimer, Banksy’s post added: “This print is a souvenir piece of campaign material, it is in no way meant to influence the choices of the electorate, has no monetary value, is for amusement purposes only and is strictly not for resale. “Terms and conditions to follow, postage not included.” Under Section 66 of the Representation of the People’s Act, it is a criminal offence to “induce a voter to display his ballot paper after he has marked it so as to make known to any person the name of the candidate for whom he has or has not voted”. It is also illegal to show the paper’s unique identification number. An Electoral Commission spokesman told the BBC: “Given the risk that someone taking a photo inside a polling station may be in breach of the law, whether intentionally or not, the commission’s advice is against taking any photos inside polling stations.”

At the World Bank they get to smoke the good stuff.

• World Bank Economist: Risks To World Economy Receded (AFP)

The World Bank is keeping its forecast for global growth in 2017 unchanged, because for the first time in years, no new risks have arisen to threaten the outlook. “Over the past four years this is the first time we didn’t have a downgrade and I think that’s very good sign. Growth is firming,” World Bank economist Ayhan Kose told AFP. The World Bank expects the global economy to grow by 2.7% this year, and 2.9% in 2018 and 2019, the same as the January forecast. And after 10 years of crisis and tepid recovery, keeping a stable growth forecast is news. Kose, who heads the World Bank’s Development Prospects Group, which twice a year prepares the global economic forecasts, attributes the good news to the fact the risks, while still present, have receded.

The issues that had the potential to derail the incipient recovery included stress in financial markets as they adapt to rising US interest rates, uncertainty over the stability of oil prices, and concerns about election outcomes in Europe. But after the Federal Reserve’s two rate increases in recent months, markets have reacted “very well,” European political uncertainty “has receded quite a bit” – French voters rejected the anti-EU candidate – and oil prices while still low, have stabilized after OPEC and non-OPEC oil producers extended the agreement to limit output. “All in all, we still think that risks are tilted to the downside but the risk profile is a little bit more improved today versus six months ago,” Kose said.

However, uncertainty over policies, especially US trade protectionism and immigration restrictions under the Trump administration, is having immediate, real impacts on conditions that could dampen growth, Kose cautioned. Companies may delay business decisions and postpone investments in the absence of “well-defined policies,” for example in a case where companies have cross-border operations impacted by the North American Free Trade Agreement which President Donald Trump has opened to renegotiation. Kose noted the “serious slowdown” in investment in emerging markets and developing economy already seen over the past six years. “We are of course worried about how policy uncertainty impacts investment growth and then ultimately impacts growth in the real economy,” he said.

They won’t let Italy fall unless Beppe Grillo wins the next elections. Which by the way is quite possible.

• Italy Faces Borrowing Shock When ECB Removes Support – Pimco (Tel.)

Italy faces a “horror” scenario when the ECB winds down its bond buying programme in a move that risks sparking a surge in the country’s borrowing costs, according to one of the world’s largest bond managers. The Pacific Investment Management Company (Pimco) said the ECB’s €60bn-a-month QE programme was “very supportive” for countries such as Italy and Portugal and had helped to limit volatility in these countries. Andrew Balls, chief investment officer for global fixed income, said removing that support was likely to push up bond yields in a country that has struggled to implement reforms and reduce its massive debt pile amid weak growth. Italian 10-year benchmark borrowing costs currently stand at around 2.2pc, compared with 0.2pc in Germany and close to 3pc in Portugal.

Mr Balls said funding Italy at these rates “doesn’t look particularly attractive” considering the risks facing the eurozone’s third largest economy. He said removal of ECB support raised the risk that Italy could be forced into a bail-out programme if its borrowing costs rose to unsustainable levels, even though the country has long lived within its means excluding debt interest costs. “The thing which fills me with horror is an environment where the ECB has finished QE, Italy does need support, and the message is you need to go to the European Stability Mechanism [the eurozone’s bail-out fund],” said Mr Balls. “Replaying the events of a few years ago with Portugal, Greece and others in the case of Italy would be an event that would raise an awful lot of risk – and you’d want to get paid a lot more than a 2pc return over 10 years to take that risk.”

While Pimco believes an Italian exit from the eurozone is “not our baseline”, Mr Balls added: “It doesn’t seem terribly unlikely either”. “Italy can’t grow,” he said. “You have limited political will to implement reform …In contrast to Portugal it’s big and systemic, but its not clear how Italy improves the situation. “In the event of a recession or shock it’s not clear how the policy apparatus deals with something as large as Italy.”

In a piece on Cyprus, and Biden’s visit to Athens this week. Biden only cares about the impact of the Greek crisis abroad, not inside the country.

• Joe Biden Boasts of US Role in ‘Saving’ Greece (K.)

President Obama and I were engaged with all parties in the Greek financial crisis, because we wanted to prevent Greece from experiencing financial collapse. Grexit would have had very serious long-term consequences for Greece and Europe – and could potentially have triggered a wider crisis of confidence in the global economy. We were concerned that in the high-stakes negotiation between Greece and its creditors, failure to reach a sensible agreement would have made all parties much worse off in the end. But because of each side’s desire to secure the best possible terms, this worst-case scenario was a real possibility.

While the ultimate decision was up to the leaders of Greece, the IMF, and the eurozone countries, I think we helped steer the conversation in a more pragmatic direction because of the credibility we had in Athens, Brussels and Berlin. We argued with the creditor countries that Greece had been saddled with an unsustainably high debt burden and that reform would only go so far with such a large debt overhang. At the same time, we encouraged the Greek leadership to think about how to demonstrate to its creditors that it had a credible roadmap for systemic economic reform, which was necessary. While a deal was reached and the worst of the crisis is behind us, we are not yet completely out of the woods. I believe the United States continues to have a role to play in supporting the parties as they move forward with discussions on Greece’s economic future.

Debt Rattle November 5 2016

Nov 052016

November 5, 2016 Posted by Raúl Ilargi Meijer at 10:36 am Finance Tagged with: Assange, Brexit, FANG, FBI, Hillary, IRS, ISIS, Manning, Qatar, Trump 2 Responses »

Harris&Ewing House-Capitol tunnel, Washington, DC Feb 3 1939

• S&P 500 Down For 9th Straight Day; Longest Losing Streak In 36 Years (R.)

• FB, AMZN, NFLX, GOOGL Stocks Lose Over $100 Billion In A Week (ZH)

• Americans Not In Labor Force Surge By 425,000 To 94,609,000 (ZH)

• Theresa May Told To Act To Calm Brexit ‘Mob’ Anger (G.)

• Assange: ‘Clinton and ISIS Funded By Same Money’ (Ind.)

• Many More Voters Think Hillary Actions Illegal, Trump Unethical (McC.)

• Clinton Charity Confirms $1 Million Qatar Gift While She Was At State Dept (R.)

• Clinton Foundation Being Investigated by IRS, FBI & Intelligence (Armstrong)

• Chelsea Manning Attempts Suicide In Prison For Second Time This Year (AP)

• 3 New Scandals Show Pervasive and Dangerous Mass Surveillance in West (GG)

Still a shallow loss. But 1980 seems a distant memory.

• S&P 500 Down For 9th Straight Day; Longest Losing Streak In 36 Years (R.)

The S&P 500 ended lower on Friday for a ninth straight day, the longest losing streak for the benchmark index in more than 35 years, as investors stayed on edge ahead of an uncertain U.S. election. The Nasdaq also ended lower for a ninth-consecutive session, while the Dow industrials closed down for a seventh straight day. Investors have been unnerved by signs of a tightening presidential race between Clinton and Trump. Clinton had been thought to have a clear lead until the re-emergence last week of a controversy over her use of a private email server while secretary of state. “Investors are uncertain about the outcome of the election, and they have grown more uncertain since last Friday,” said Walter Todd, CIO with Greenwood Capital.

The Dow Jones industrial average fell 42.39 points, or 0.24%, to 17,888.28, the S&P 500 lost 3.48 points, or 0.17%, to 2,085.18 and the Nasdaq Composite dropped 12.04 points, or 0.24%, to 5,046.37. Despite the historic run, the S&P has pulled back by only about 3.1% over that time. For the year, the index is up 2%. It was the 14th time since 1928 that the S&P 500 had declined for nine sessions in a row, according to S&P Dow Jones Indices. On Friday, Wall Street had posted solid gains as of the afternoon, spurred by a strong U.S. employment report, but then lost steam and sold off into the close.

“Obviously the big concern this week has been the shift in the polls in the election. We did have a bounce for a period of time, but when it didn’t hold and people just decided to liquidate going into the close to reduce exposure in case any more news hits over the weekend,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut. “There’s a lot of headline risk out there.”

“..the four horsemen of the Fed’s wealth creation bubble…”

• FB, AMZN, NFLX, GOOGL Stocks Lose Over $100 Billion In A Week (ZH)

In the last week the so-called FANG stocks (FB, AMZN, NFLX, GOOGL) have stumbled. As earnings and outlooks disappointed, shareholders have awoken to the new normal low growth world and wiped over $100 bilion in market capitalization of the four horsemen of the Fed’s wealth creation bubble. FANGs are now down 8 days in a row…

Losing a massive $108 billion in that time…

This is the biggest drop since the February growth scare – which was only saved by massive coordinated global central bank money-printing… which is simply not about to happen this time.

The only stat from the BLS report that tells a real story.

• Americans Not In Labor Force Surge By 425,000 To 94,609,000 (ZH)

On the surface, the establishment survey print of 161K jobs was just good enough when taking into account the 44,000 in upward revisions to August and September jobs. However, the household survey was less impressive, with the number of workers employed declining by 43,000 to 151,925 even as the number of persons unemployed declined from 7,939K to 7,787K.

So how did the unemployment rate drop? Because contrary to expectations that people are rushing back into the labor force, in October the number of Americans who were not in the labor force rose by a substantial 425,000 to 94,609, the highest print in the series since May, and suggests that the exodus of Americans out of the labor force has resumed.

Civilized society attacked from all sides.

• Theresa May Told To Act To Calm Brexit ‘Mob’ Anger (G.)

Theresa May’s government has been accused of failing to restrain the furious backlash against this week’s high court judgment about article 50, as one of her own MPs resigned, stepping up the political pressure as she battles to stick to her Brexit timetable. Stephen Phillips, the MP for Sleaford and North Hykeham in Lincolnshire, stepped down on Friday with immediate effect. He was unhappy that the government had not planned to consult parliament before triggering article 50 – the issue that led to Thursday’s ruling. Former ministers warned that the febrile tone of media coverage, which included the judges who ruled against the government being condemned as “enemies of the people” by the Daily Mail, risked poisoning public debate.

Dominic Grieve, the Conservative former attorney general, said reading hostile coverage in the Mail and the Daily Telegraph “started to make one think that one was living in Robert Mugabe’s Zimbabwe .. I think there’s a danger of a sort of mob psyche developing – and mature democracies should take sensible steps to avoid that”. Labour also raised concerns about the absence of a ministerial response to the media coverage. Lord Falconer, who was lord chancellor under Labour between 2003 and 2007, said faith in the “independence and quality” of the judiciary was being undermined “by this Brexit-inspired media vitriol” in an article written for the Guardian. Jeremy Corbyn will accuse the government of opposing democratic scrutiny because “frankly, there aren’t any plans, beyond the hollow rhetoric of Brexit means Brexit”.

In a speech on Saturday, the Labour leader will say: “Thursday’s high court decision underlines the necessity that the prime minister brings the government’s negotiating terms for Brexit to parliament without delay. “Labour accepts and respects the decision of the British people to leave the European Union. But there must be transparency and accountability to parliament about the government’s plans.” May called European leaders to tell them again that she would meet her self-imposed deadline and trigger article 50 by the end of March 2017, despite losing the high court case. The prime minister otherwise refused to be drawn into the row. Her spokesman refused to condemn the media coverage on Friday, saying: “I don’t think the British judiciary is being undermined.” But the pro-remain former business minister Anna Soubry told the Guardian: “I think we have to call this out and say ‘not in my name’.”

“..Trump will not be permitted to win..”

• Assange: ‘Clinton and ISIS Funded By Same Money’ (Ind.)

Wealthy officials from Qatar and Saudi Arabia who donated money to Hillary Clinton’s charitable foundation also provided financial support to Isis, WikiLeaks founder Julian Assange has claimed. In an extended interview at the Ecuadorian embassy in London with documentary maker John Pilger for RT, Mr Assange said the same Saudi and Qatari officials could be seen to be supporting both the Clinton Foundation – founded by Mrs Clinton’s husband Bill – and funding the activities of Isis. Mr Pilger asked if Mr Assange believed that “this notorious jihadist group, called Isil or Isis, is created largely with money from people who are giving money to the Clinton Foundation” “Yes,” Mr Assange replied.

The WikiLeaks founder pointed to an email exchange between presidential hopeful Ms Clinton and her campaign manager John Podesta, leaked by his organisation last month, which he believes “is the most significant email in the whole collection”. In the email sent on August 17 2014, Ms Clinton asked Mr Podesta, who at that time worked under president Barack Obama, to help put “pressure” on Qatar and Saudi Arabia regarding the countries’ alleged support for the terrorist group Isis. “We need to use our diplomatic and more traditional intelligence assets to bring pressure on the governments of Qatar and Saudi Arabia, which are providing clandestine financial and logistic support to Isil and other radical Sunni groups in the region,” Ms Clinton wrote.

Mr Assange noted the US government had never acknowledged governments of Middle East nations had financially supported Isis, instead arguing such support was isolated to “some rogue princes using their cut of the oil money to do whatever they like, although the government disapproves”, according to the WikiLeaks founder. According to the Clinton Foundation, the Saudi Arabian government has donated between $10m (£8m) and $25million since the foundation was set up in 1997. Last month it was reported the government of Qatar offered to donate $1m to the foundation in celebration of Bill Clinton’s birthday. Representatives from the Clinton Foundation have repeatedly denied accusations Ms Clinton has solicited funds and used donations to boost her campaign.

There were no donations from Saudi Arabia while she was acting as secretary of state between 2009 and 2013. Mr Assange also used the interview to dismiss the prospect of a Donald Trump victory in next week’s election, which the polls show will be close. “My analysis is that Trump will not be permitted to win. Why do I say that? Because he has had every establishment against him. Trump does not have one establishment, maybe with the exception of the Evangelicals, if you can call them an establishment. “Banks, intelligence, arms companies, foreign money, etc are all united behind Hillary Clinton. And the media as well. Media owners, and the journalists themselves.”

“..51% saying she did something illegal..” “..Just 26% think he’s done something illegal..”

• Many More Voters Think Hillary Actions Illegal, Trump Unethical (McC.)

A majority of voters believe Hillary Clinton has done something illegal, according to a new McClatchy-Marist Poll days before the presidential election. A total of 83% of likely voters believe that Clinton did something wrong – 51% saying she did something illegal and 32% saying she something unethical but not illegal. Just 14% said she’s done nothing wrong. By comparison, 79% think Donald Trump did something wrong, though not nearly as many think he did something illegal. Just 26% think he’s done something illegal, while 53% think he’s dome something unethical but not illegal. Just 17% think he’s done nothing wrong. The deep suspicion of Clinton is likely a top reason she’s lost much of her lead and the race for the White House has tightened in the race’s closing days.

In a four-way race, the two are neck and neck with Clinton supported by 44% and Trump by 43%. Libertarian Gary Johnson has 6%, and the Green Party’s Jill Stein has 2%. In a two-way match up, Clinton has 46%, Trump 44%. Both candidates are disliked. Clinton gets a favorable rating from just 40% while 57% have unfavorable views of her. Voters have a 61% to 36% unfavorable-favorable rating of Trump. “This is practically off the charts,” said Lee Miringoff, the director of the Marist Institute for Public Opinion in New York, which conducted the nationwide survey. “You have candidates coming before the electorate with enormous baggage.”

Even 57% of those who are supporting Trump and 58% of Republicans think he acted unethically. 55% of voters said the accusations against Trump would make a difference in how they vote. At the same time stories about the FBI inquiry may have raised more suspicion about Clinton, they also may have energized the vote for Trump. The poll shows Trump gaining support among Republicans, as running mate Mike Pence and others have urged GOP voters in recent weeks to “come home.” Trump enters the final weekend with the support of 92% of Republicans. That’s more than Clinton, who has 89% support of Democrats.

The irony of people voting for her because Hillary’s a woman is dazzling given how Qatar thinks about women.

• Clinton Charity Confirms $1 Million Qatar Gift While She Was At State Dept (R.)

The Clinton Foundation has confirmed it accepted a $1 million gift from Qatar while Hillary Clinton was U.S. secretary of state without informing the State Department, even though she had promised to let the agency review new or significantly increased support from foreign governments. Qatari officials pledged the money in 2011 to mark the 65th birthday of Bill Clinton, Hillary Clinton’s husband, and sought to meet the former U.S. president in person the following year to present him the check, according to an email from a foundation official to Hillary Clinton’s presidential campaign chairman, John Podesta. The email, among thousands hacked from Podesta’s account, was published last month by WikiLeaks. Clinton signed an ethics agreement governing her family’s globe-straddling foundation in order to become secretary of state in 2009.

The agreement was designed to increase transparency to avoid appearances that U.S. foreign policy could be swayed by wealthy donors. If a new foreign government wished to donate or if an existing foreign-government donor, such as Qatar, wanted to “increase materially” its support of ongoing programs, Clinton promised that the State Department’s ethics official would be notified and given a chance to raise any concerns. Clinton Foundation officials last month declined to confirm the Qatar donation. In response to additional questions, a foundation spokesman, Brian Cookstra, this week said that it accepted the $1 million gift from Qatar, but this did not amount to a “material increase” in the Gulf country’s support for the charity. Cookstra declined to say whether Qatari officials received their requested meeting with Bill Clinton.

[..] At least eight other countries besides Qatar gave new or increased funding to the foundation, in most cases to fund its health project, without the State Department being informed, according to foundation and agency records. They include Algeria, which gave for the first time in 2010, and the United Kingdom, which nearly tripled its support for the foundation’s health project to $11.2 million between 2009 and 2012. Foundation officials have said some of those donations, including Algeria, were oversights and should have been flagged, while others, such as the UK increase, did not qualify as material increases. The foundation has declined to describe what sort of increase in funding by a foreign government would have triggered notification of the State Department for review.

IRS. New kid on the block.

• Clinton Foundation Being Investigated by IRS, FBI & Intelligence (Armstrong)

The internal war we have warned is unfolding with Intelligence and Law Enforcement standing against Obama and the corrupt DOJ under Lynch is really heating up. The FBI realizes that Lynch’s DOJ will protect Hillary at all costs and will never allow her to be criminally charged. They have no choice now but to leak everything they can to show the corruption going on in the Department of Justice (see Daily Mail). There are 650,000+ emails on Weiner’s laptop. Meanwhile, Huma Abedin is preparing for her own criminal changes of obstruction of justice. She did not turn over that laptop when ordered to do so. She is now crying “she doesn’t know how her emails wound up on her husband’s computer” according to the Washington Post. She is saying that and it is not plausible. She had to be using that computer.

Oh she may try to claim that her husband hacked her emails to escape the criminal charges. But that will get really messy. It would also mean there was a MAJOR breach of security. Now the FBI is letting the press know that Clinton’s server was hacked by at least five foreign intelligence agencies. There are now also two addition investigations into Hillary on that score. State Department has revealed there were 10 attempts to hack Hillary in just 2 days. Let’s face it, if Hillary is elected, she will most likely be IMPEACHED as was her husband, but this time she would be removed. This is not a Monica deal. This election is going down in history as the tipping point for the United States. It has revealed how corrupt Congress really is. We have even former Bush Sr saying he will vote for Hillary.

He just lost all my respect for he has chosen the status quo to save the politicians rather than his country. This is just over the top. Even Podesta began a lobbying firm with his brother, which now collects $120,000 PER MONTH in a fee from Saudi Arabia. Hillary has tried to slander Assange saying all these hacks came from Russia. Assange has come out and bluntly said the hacked Clinton emails didn’t come from Russia government. They may be coming from sources inside the USA. Do not forget, to my surprise, there is one source that has EVERYTHING. Hello – NSA! Anyone remember they are storing everyone’s emails, text messages, and phone calls? Nobody want to order the NSA to turn it all over because it will reveal treason, where Hillary took money from foreign government and they approved arms deals.

If Hillary is elected, it will be by rigging the election. Our computer has NEVER been wrong on this score. So if she takes office, this will be the worst administration in history and may very will set in motion the phase transition where capital flees to bonds and we see a significant rise in civil unrest.

Say a prayer, light a candle.

• Chelsea Manning Attempts Suicide In Prison For Second Time This Year (AP)

An attorney for Chelsea Manning says the transgender soldier imprisoned in Kansas has tried to kill herself for the second time in recent months. Vincent Ward said Friday that Manning attempted suicide last month at the military prison at Fort Leavenworth, though the attorney declined to divulge specifics. Manning also tried to take her own life in July. Wayne Hall, an Army spokesman, on Friday would not discuss the latest attempt, citing medical privacy laws. Manning is serving a 35-year sentence. She was arrested in 2010 as Bradley Manning and was convicted in 2013 in military court of leaking more than 700,000 secret military and State Department documents to WikiLeaks. Manning was an intelligence analyst in Iraq at the time.

Everyday practices.

• 3 New Scandals Show Pervasive and Dangerous Mass Surveillance in West (GG)

[..] three major events prove how widespread, and dangerous, mass surveillance has become in the west. Standing alone, each event highlights exactly the severe threats which motivated Edward Snowden to blow his whistle; taken together, they constitute full-scale vindication of everything he’s done. Earlier this month, a special British court that rules on secret spying activities issued an emphatic denunciation of the nation’s domestic mass surveillance programs. The court found that “British security agencies have secretly and unlawfully collected massive volumes of confidential personal data, including financial information, on citizens for more than a decade.” Those agencies, the court found, “operated an illegal regime to collect vast amounts of communications data, tracking individual phone and web use and other confidential personal information, without adequate safeguards or supervision for 17 years.”

On Thursday, an even more scathing condemnation of mass surveillance was issued by the Federal Court of Canada. The ruling “faulted Canada’s domestic spy agency for unlawfully retaining data and for not being truthful with judges who authorize its intelligence programs.” Most remarkable was that these domestic, mass surveillance activities were not only illegal, but completely unknown to virtually the entire population in Canadian democracy, even though their scope has indescribable implications for core liberties: “the centre in question appears to be the Canadian Security Intelligence Service’s equivalent of a crystal ball – a place where intelligence analysts attempt to deduce future threats by examining, and re-examining, volumes of data.”

The third scandal also comes from Canada – a critical partner in the Five Eyes spying alliance along with the U.S. and UK – where law enforcement officials in Montreal are now defending “a highly controversial decision to spy on a La Presse columnist [Patrick Lagacé] by tracking his cellphone calls and texts and monitoring his whereabouts as part of a necessary internal police investigation.” The targeted journalist, Lagacé, had enraged police officials by investigating their abusive conduct, and they then used surveillance technology to track his calls and movements to unearth the identity of his sources. Just as that scandal was exploding, it went, in the words of the Montreal Gazette, “from bad to worse” as the ensuing scrutiny revealed that police had actually “tracked the calls and movements of six journalists that year after news reports based on leaks revealed Michel Arsenault, then president of Quebec’s largest labour federation, had his phone tapped.”

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