US Manufacturing Slumps To Biggest Contraction Since Financial Crisis

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US Manufacturing Slumps To Biggest Contraction Since Financial Crisis



After a bloodbath in European PMIs (and a 'surprise' surge back to growth in China), and following some serious collapses in regional Fed surveys (and this morning's tumble in Canadian PMIs), today's US manufacturing survey data was expected to slide further into contraction (though not as much as the Services surveys collapsed).








"We Are Buyers Of Dips": Wall Street's Biggest Bear Turns Bullish

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"We Are Buyers Of Dips": Wall Street's Biggest Bear Turns Bullish

For much of 2019, Morgan Stanley's chief equity strategist Micheal Wilson issued a weekly sermon of fire and brimstone in his Monday Morning market takes, which contrasted with the euphoric pronouncements by his peers at other banks - most notably Goldman, which in December hilarious declared that the US economy is "structurally less recession-prone today", which probably explains why three months

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later the same bank cut its Q2 GDP estimate to -34%...

... earning him the moniker of Wall Street's biggest bear (a few permabearish exceptions such as Albert Edwards were excluded from the tally), not to mention quite a few angry clients. Then, in November, just as the melt up phase of the post "Not QE" market was kicking in sending stocks to all time highs every single day, Wilson got the proverbial tap on the shoulder, and threw in the towel raising his S&P "bull case" price target to 3,250, however not without a slew of warnings that the most likely outcome was another retest in stocks lower.

In retrospect, Wilson should have held fast to his bearish conviction as the unprecedented March market crisis confirmed he was spot on (even if for different reasons).

And yet, demonstrating just how fickle Wall Street fates can be, just as Goldman turned beyond bearish, warning today that the recent rally was just a bear market bounce...

... Wall Street's "biggest bear", Michael Wilson turned bullish, paraphrasing Michael Hartnett who famously says that "markets stop to panic when officials start to panic", and in his latest strategy note writes that "crises lead to bailouts and this time it's extreme given health angle. As a result, the inevitable credit crunch could be truncated this time, leaving us buyers of dips."

Explaining the reasoning behind his reversal, Wilson first lays out how we got here, noting that "in the past month, we've experienced a full bear market (-20%) and full bull market (+20%)" extreme volatility which follows a period of extreme calm during which we observed some of the lowest volatility readings in history.

Then in an appeal to the Austrians inside all of us (by which we mean Zero Hedge readers), Wilson points out that as noted by Hyman Minsky, the onset of a market collapse can be brought on by the reckless speculative activity that defines an unsustainable bullish period – i.e. the Minsky moment.

Sound familiar? If one accepts that 4Q19 was a speculative frenzy driven by liquidity rather than fundamentals, such a conclusion is compelling.

This, incidentally, is Wilson's - rather subdued - victory lap; it would have been far less subdued had Wilson not turned semi bullish in November, but since it may have been his job or his conviction, we'll let it slide. That said, Wilson's argument is spot on, and has to do with the fact that while Covid was the spark for the crisis, the gasoline that was poured on the crash was the unprecedented build up of the trillions in debt over the past decade, that lifted asset prices to their February all time highs.... and the resulting violent unwind. To wit:

Excess leverage explains the ferocity of the decline in risk assets and the economy. While the focus right now is on COVID-19 as the cause of the bear market, the conditions have to be in place for a market and economic crash like we have just experienced.

To Wilson, it is important to acknowledge how and why we got here "as it may help us understand and predict what happens from here" especially since "the necessary conditions for a Minsky-type moment referred to above require leverage in the system."

So before moving on, Wilson explains that in his view there are two primary areas of excess leverage in this particular episode that have been building for the past decade – corporate credit and the shadow banks.

First on corporate credit.

We have never seen corporate leverage as high as it is now. Much of this credit was added because credit markets have rarely been so inviting to issuers. This is the direct result of the financial repression era orchestrated by central  banks during and after the Great Recession. In short, the abnormally low cost of borrowing has encouraged companies to lever up and use this financial leverage to drive better earnings growth in what has been a sluggish economic recovery. Companies are capitalist entities and so they are simply acting in their fiduciary duty to shareholders when they behave in such a manner. Much of this financial arbitrage has been executed via share buybacks, which is now being criticized by members of Congress as they pass the largest fiscal stimulus in history. It’s important to note that low growth is very different from negative growth. Now that we have entered a recession, the corporate bond market knows the risk of default is much greater – hence the dramatic moves we have seen in credit spreads in the past month. As an aside, the correction in stocks really took a turn for the worse when tensions between Russia and OPEC caused a collapse in oil prices. This is what triggered the stress in corporate credit markets, in our view, which contributed significantly to the crash in stocks and the economy. Many acknowledge that credit markets are more important to the functioning of the economy than equity. As bad as the moves were in stocks this month, they were much worse in credit than they were in equities on a risk-adjusted basis.

Second is the shadow banks which are unregulated financial market participants.

Without singling out one particular group, these entities also ballooned in size and scope after the financial crisis. Some of this is due to the easy monetary conditions and low borrowing costs provided by central banks while it’s also due to the fact that the traditional banking system is more tightly regulated, which has allowed many of these entities to get bigger in direct lending type activities. Because the shadow banks are unregulated, they may have become too big, which is why they are now having an outsized impact on financial markets as they lever, like last year,and then de-lever like last month.

Of course, it is hardly news to anyone (at least on this site), that the same factor that crushed the system last time around, is also the same one that led to the current crisis - namely debt. The coronavirus was just the selling catalyst; and once the liquidation feedback loops kicked in and the debt had to be unwound, we got the quad-witching disaster of March 20 when the S&P was trading at levels below Trump's inauguration. In any case, we compliment Wilson for daring to something which is increasingly frowned upon in the country of "free speech" - and twitter - tell the truth, especially when it is inconvenient. With that in mind, the good news, according to Morgan Stanley, is that the regulated banking system is stronger than normal for this part of the cycle – when we are entering a recession – which means credit should still remain available. The Fed has a viable system to get the capital they are providing to the places that need it most as the economy contracts and cash flows dry up. From that perspective, "this is very different than 2008-09 and one reason we believe the Fed’s extraordinarily aggressive actions to date, which include intervening in the corporate credit markets directly, will ultimately shorten the duration of this recession even if they can’t stop the severity of the slowdown in the very near term."

And here is another instance of Wilson admirably telling the truth about what the Fed is doing:

They are, in effect, bailing out the bad actors in the corporate credit market, which should truncate the pain for both investors and issuers, and – eventually – the economy.

One final truth:

The fact that a health crisis is now the villain of this recession arguably makes this correction less painful than it would have been otherwise for credit markets, and the shadow banks.

After all one can't really depose or sue a virus. In fact, one can almost claim that the coronavirus outbreak was perhaps the most "convenient" thing that could have happened to the US financial and debt bubble: by forcing a global economic reset, it gave a carte blanche to triple down on the same debt that crashed the system twice already... and will crash it again.

But not for some time... which is why in its response to the question that is number one among its clients (incidentally the same question posed by Goldman clients), namely "will US equity markets make fresh lows in this bear market", Wilson answer that his short answer is no "for the major averages and most stocks." The longer answer is based on several key factors Wilson thinks are unique to this correction:

  • 1. Recent lows were made during what can only be described as a forced liquidation bylevered players – aka shadow banks... Both systematic strategies and active managers are now basically "sold out" and have very low risk/leverage at this point. In other words, it's hard to imagine the kind of liquidation that we just witnessed in March could happen again from these much lower levels of leverage.

  • 2. This past week, credit markets stabilized thanks to unprecedented support from the Federal Reserve and other central banks. After the past 10 years, we have no doubt in their resolve to stabilize both the funding and credit markets. Most investors we speak with agree and are actively looking to put capital into IG, Mortgages, Agency, Securitized paper and anything else the Fed has said they will be buying directly. Even high yield has responded positively, which the Fed is not buying. Perhaps the most positive market signal last week was the fact that high yield remained in positive territory on Friday even after equity markets sold off sharply into the close. The weaker US dollar is also a good sign that policy (both monetaryand fiscal) is now viewed as getting ahead of the curve.

  • 3. Economic and earnings data will be grim over the next month, but equity markets may have already discounted these revisions based on valuation and some simple relationships we track. First, the equity risk premium for the S&P 500 got as high as 700bps last Monday; it's the second-highest level we have on record (2011 was higher post the downgrade of Treasuries to AA). If we look at this from a sector and stock standpoint, we are at all-time highs. We think this suggests the index can hold the old lows even if some of the most favored sectors and stocks do not. As for some simple relationships, we compare the y/y change in the S&P to the y/y change in earnings growth and revisions breadth, PMIs,and consumer confidence. Based on the 20% y/y decline in the S&P 500, a very rare event usually associated with recessions, we think the market has discounted the recessionary economic and earnings data we expect to see next month (Exhibits 1-4). Having said  that, it has not discounted a full-blown financial crisis like we experienced in 2008-09.

  • 4. Finally, from our hundreds of conversations with clients the past few weeks, there is a strong consensus for lower lows on a retest over the next month or two. While that doesn't mean the consensus can't be right, we would remind readers that we never got a retest of the December 2018 lows which happened under a similar type forced liquidation. Time-tested technical tools like retests with a positive divergence may not work as well in a world dominated by oversized shadow banks which have become the marginal buyer/seller that really sets the price in the short term

Wilson's bullish conclusion is also the reason why the most bearish strategist on Wall Street just may be the most bullish one:

... rarely do markets become so dislocated as they have in the past month, but such are the conditions from which great investment opportunities are born. We have been less bullish than most over the past several years under the view we were  headed toward the end of the cycle. While we never know what will tip us into a recession, the conditions for one have to be in place and the excesses in the credit world were exhibit A in that regard. Now that we are here, we would like to remind readers that bear markets end with recessions, they don’t begin with them.

And, ironically, this means that MS is now flipped with Goldman, which has turned bearish and is loathe to recommend buying here, anticipating another leg lower after the bear market rally ends, while Wilson and Morgan Stanley are now the most bullish bank (with the possible exception of JPMorgan):

Given that most stocks have been in a bear market for two years or longer, we recommend investors start buying stocks now because we cannot be sure if the next pull back will lead to lowers lows or not given we already experienced forced liquidation. Bottom line, we believe 2400-2600 on the S&P 500 will prove to be very good entry points for those with a time horizon of 6-12 months.

We'll be sure to check back in 6-12 months. And speaking of "checking back", last July another Wall Street bull, JPM's Marko Kolanovic thought he spotted a similar bullish trade in the collapse of value stocks which he thought were a "once in a decade" buying opportunity while low vol/growth stocks were to be shorted. ALmost a year later, we can safely say that anyone who put on this "once in a decade" trade, which has seen the total obliteration of value stocks, has now been fired. We can only hope that Wilson doesn't follow Kolanovic's fate.

Tyler Durden

Tue, 03/31/2020 - 14:35

S&P Downgrades Ford To Junk - Biggest Fallen Angel Yet

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S&P Downgrades Ford To Junk - Biggest Fallen Angel Yet

Given where Ford's CDS was trading - more in line with B1/BB- rated American Axle - it should hardly come as a surprise that S&P has finally bitten the bullet and downgraded Ford debt to junk.

Via S&P,

The decision to downgrade Ford Motor Co. from investment grade to speculative grade reflects that the company’s credit m

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etrics and competitive position became borderline for the investment-grade rating prior to the coronavirus outbreak, and the expected downturn in light-vehicle demand made it unlikely that Ford would maintain the required metrics.

Ford Motor Co. announced it is suspending production at its manufacturing sites in Europe for four weeks and halting production in North America to clean these facilities and boost containment efforts for the COVID-19 coronavirus. We expect Ford's EBITDA margin to remain below 6% on a sustained basis and believe that its free operating cash flow to debt is unlikely to exceed 15% on a consistent basis.

Ford has drawn $13.4 billion on its corporate credit facility and $2 billion on its supplemental credit facility. We believe the company's current cash position stands at about $36 billion.

We are downgrading our long-term issuer credit rating to 'BB+' from 'BBB-'. At the same time, we are assigning issue-level ratings of 'BB+' on Ford's unsecured debt.

We are also placing the ratings on CreditWatch with negative implications, which reflects at least a 50% chance that we could lower the ratings depending on factors such as the duration of the plant shutdowns, the rate of cash burn, and the adequacy of Ford's liquidity position.

This S&P move follows Moody's cutting Ford's long-term corporate family rating to Ba2 from Ba1 earlier in the day.

With a total amount of public bonds & loans outstanding around $95.8 billion, according to data compiled by Bloomberg, Ford has just become one of the largest fallen angels yet.


Will this sudden large fallen angel lead to further repricing in the junk bond market, just as the market is dead-cat-bouncing on Fed intervention?

Tyler Durden

Wed, 03/25/2020 - 17:09

Stocks Suffer Worst Week Since Lehman Despite Biggest Fed Bailout Ever

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Stocks Suffer Worst Week Since Lehman Despite Biggest Fed Bailout Ever

This has been the sharpest market selloff in history...

This was the worst week since Lehman (and worst 4 weeks since Nov 1929) for The Dow Jones Industrial Average...(Dow was down 18% during the Lehman week and 17.35% this week)

Source: Bloomberg

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Despite The Fed gushing a stunning $307 billion into the markets - almost double its previous biggest liquidity injection (in March 2009)...


Maybe it was the 'stock' and not the 'flow' after all...

Source: Bloomberg

Stocks still have a long way to go to erase all the delusion (compared to actual profits)...

Source: Bloomberg

And if you think stocks already fell too much, think again... Total market cap to GDP is just now retesting the peak of the housing bubble levels!

Source: Bloomberg

As @TaviCosta notes, "This puts into perspective... We truly were at absurd valuations."

Never Forget!!

Chinese markets are mixed since the Wuhan flu began with tech-heavy super-leveraged ChiNext still green as the the megacaps get pummeled...

Source: Bloomberg

In Europe, "Whatever it takes" wasn't enough...

Source: Bloomberg

Nasdaq remains notably higher since President Trump's inauguration, S&P is barely higher but The Dow, Transports, and Small Caps are all underwater now (the latter two crushed)...

Source: Bloomberg

And US stocks are testing a serious trendline...

Source: Bloomberg

With the Median US Stock down over 50% from its highs...

Source: Bloomberg

The US Stock markets have lost almost $30 trillion in the last few weeks...

Source: Bloomberg

And US stock market volatility has not been this extreme since Black Monday in 1987 and Black Monday in 1929...

Source: Bloomberg

Credit markets are utterly collapsing with nothing The fed did this week helping... HY is the worst since the financial crisis...

Source: Bloomberg

And HY has a long way to go if it catches up with fundamentals...

Source: Bloomberg

And investment grade credit is getting crushed at a record rate...

Source: Bloomberg

Treasury bond vol has exploded - at its sharpest rate ever...

Source: Bloomberg

Bonds and stocks have completely decoupled, trading down together and breaking the 'normal' correlation regime...

Source: Bloomberg

Very volatile week in bond-land but thanks to today's buying pressure, most of the curve ended lower in yield (dominate dby the short-end) as stocks collapsed...

Source: Bloomberg

10Y yields were marginally lower on the week (amid a massive 65bps intra-week range) and back below 1.00%...

Source: Bloomberg

Muni yields ended up 60bps today - refusing to improve despite The Fed's new facility...

Source: Bloomberg

Amid all this carnage, negative-yielding-debt worldwide has evaporates rapidly as bonds have been dumped everywhere (sending yields higher)...

Source: Bloomberg

The dollar is up a stunning 9 days in a row...as the global dollar shortage creates an unstoppable bid every day after Europe opens...

Source: Bloomberg

This is the biggest 9-day surge in the dollar (a shocking 8%-plus) ever - more than when Soros broke the Bank of England...

Source: Bloomberg

Cryptos had a big week, extending gains from last week...

Source: Bloomberg

With Bitcoin up 85% from last week's lows...

Source: Bloomberg

Absolute carnage in commodities this week as a strong dollar and ugly fundamentals slammed copper and crude...

Source: Bloomberg

Precious Metals were pummeled this week as the dollar soared with Platunum worst and gold best...

Source: Bloomberg

But oil was the real headline on the week - utterly devastated and Putin's comments today spoiled the party from yesterday's best day ever... This was WTI's worst week since 1991...

Finally, as a reminder, Santiago Capital explains why The Fed Swap Lines aren't working... (and in fact are making things worse)...

For a month, global stock markets refused to take any notice of the virus that was taking hold in China... not our problem... we'll be fine... Fed will rescue us... v-shaped recovery... and then...

Source: Bloomberg

And the prediction market says that the Wuhan flu has done what Schiff and the Democrats couldn't with three years of bullshit narratives...

Source: Bloomberg

And what happens next?

Source: Bloomberg

And this is not very reassuring - as all the chatter of helicopter money has sent USA sovereign credit risk notably higher...

Source: Bloomberg

Tyler Durden

Fri, 03/20/2020 - 16:01

Bitcoin Tested As A Safe Haven After Biggest Stock Crash Since 2009

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Bitcoin Tested As A Safe Haven After Biggest Stock Crash Since 2009

Authored by Horus Hughes via CoinTelegraph.com,

Gold and Bitcoin react to global panic

Amid all of yesterday's chaos in bond, commodity, and stock markets, with the yield on the 10-year US Treasury note dropping below 0.5% for the first time in history - a strong indicator that investors are desperately looking for safe harbors

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rong> - two supposed safe-havens in 'alternative currencies' behaved quite differently.

Gold prices remained flat over the day at $1.673 per ounce after reaching a historic high at $1,700 last night. The commodity is up 5.6% in March, displaying a healthy performance during the Coronavirus epidemic which has now spread to nearly every country on the planet. 

On the other hand, Bitcoin (BTC) is down 13% in 48 hours, testing its lowest level since early January at $7,750.

Brian Armstrong, co-founder and CEO at Coinbase, was caught off guard by the recent price move as expressed by his shock by tweeting: 

“Surprised we’re seeing the Bitcoin price fall in this environment, would have expected the opposite. 

BlockTower co-founder Ari David Paul, also tweeted that despite a recent 25% drop in less than 30 days, Bitcoin remains up 7.5% year to date.

Earlier in the day derivatives trader Tony Stewart tweeted that options skew indicator - an important he interprets as a good measure of fear - rose significantly over the past week. According to Stewart, “this skew measures a fear for further downside moves.”

Bitcoin 25d skew. Source: Skew.com

Analysts warn that the financial crisis could deepen

Dennis Dick, head of markets structure and proprietary trader at Bright Trading LLC, raised a red flag on the potential outcome of today’s market reaction. Dick said:

“There is potential that we could be at the start of a financial crisis part two… It’s a possibility right now that wasn’t on the table until we had this oil plunge over the weekend.”

Bitcoin daily price chart. Source: Coin360

As Bitcoin price corrects, altcoins have also taken on heavy losses. Ether (ETH) has dropped 8.86%, Bitcoin Cash (BCH) is down 7.72% and Litecoin (LTC) lost 10.42% to trade below $50.

The overall cryptocurrency market cap now stands at $222.2 billion and Bitcoin’s dominance rate is 64%.

Tyler Durden

Tue, 03/10/2020 - 10:59

Breaking: Everything... In Biggest Stock-Selling Day In 20 Years

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Breaking: Everything... In Biggest Stock-Selling Day In 20 Years

At its lows today, this was the market's biggest down day since 1987 (by the close the biggest since Oct 2018!

Source: Bloomberg

Did the 11-year-long, almost unstoppable bull run that started on March 9, 2009, just end on March 9, 2009?

Source: Bloomberg


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anks to the market perceiving President Trump's response as remaining one of "denial" of the scale of the problem, and concerns that any fiscal stimulus will be underwhelming, things were already anxious as markets opened Sunday night. But the situation was worsened considerably as both Russia and Saudi Arabia stood poised to flood the market with cheap crude (supply) in an all-out price war just as the coronavirus is spurring the first contraction in demand since 2009.

“The situation we are witnessing today seems to have no equal in oil market history,” said IEA Executive Director Fatih Birol.

“A combination of a massive supply overhang and a significant demand shock at the same time.”

Oil futures fell by about one-third in New York and London on Monday, the biggest drop since the Gulf War in 1991, before pulling back to a 20% decline.

Source: Bloomberg

Crashing below $30!

US markets were a bloodbath from Sunday night future open (ETFs showed things were uglier than the 5% limit down in futs) and stocks were unable to show any real resilience...

Early selling pressure today - judged by NYSE's advance-decline line - was at its strongest since the DotCom collapse...

Source: Bloomberg

Extreme Fear has reached its extreme-est level...

Source: CNN

The shrill cry from the asset-gatherers and commission-rakers - "TURN THE BUY-THE-DIP MACHINES BACK ON!!!!"

Chinese stocks - somewhat uncharacteristically - tumbled overnight... finally...

Source: Bloomberg

European stock markets just suffered their worst decline since Lehman... Oct 2008...

Europe is now down over 22.5% - a bear market - from highs just 3 weeks ago...

Source: Bloomberg

The selling was absolutely across the board...

Source: Bloomberg

European banks crashed to their lowest since March 2009... but judging by EU bank credit, there's more to come...

Source: Bloomberg

And European credit is crashing...

Source: Bloomberg

Gilt yields fall below 0% in two- and five-year segments, with BOE’s buyback seeing the institution buy at a sub-zero rate

Source: Bloomberg

But, Italian yields surged, rising 30bps in 2-year to 10-year segments.

Source: Bloomberg

And US markets were an ever bigger bloodbath... The Dow dropped 2019 points!!! Worst day for stocks since Oct 2008

And while China began to drop, US and Europe lead the way since the start of the Covid-19 headlines...

Source: Bloomberg

Russell 2000 entered a bear market today (down 23.5% from January highs), dropping most since Lehman...

Source: Bloomberg

Dow Transports have erased all of the post-Trump election gains...

Source: Bloomberg

S&P broke key technical support...

Source: Bloomberg

All the major US equity indices have broken below their 200DMA...

US Banks were crushed today...

Source: Bloomberg

The big banks are down a stunning 30-40% in the last 3 weeks...

Source: Bloomberg

The Energy sector suffered its biggest loss ever, crashing over 18% on the day...

Source: Bloomberg

Virus-related sectors have been destroyed...

Source: Bloomberg

VIX exploded above 60 today - the highest since Lehman...

Source: Bloomberg

And VIX's term structure is the most inverted since Lehman...

Source: Bloomberg

Credit markets have completely collapsed (but are slightly under-pricing relative to VIX) - today was biggest jump in IG credit since Lehman...

Source: Bloomberg

Today's crash in Treasury yields was the biggest since Nov 2008

Source: Bloomberg

At its trough in yields overnight - it was the biggest yield drop in history...

Source: Bloomberg

10Y yields hit their lowest ever at 31.3bps...

Source: Bloomberg

The entire Treasury curve is now below Fed Funds...

Source: Bloomberg

The Yield curve crashed into inversion as yields plunged overnight but stabilized later - still flatter on the day...

Source: Bloomberg


Amid all this carnage, the dollar ended only modestly lower...

Source: Bloomberg

Cryptos were crushed along with almost everything else...

Source: Bloomberg

Gold managed very modest gains, copper and silver were down over 2% as crude collapsed...

Source: Bloomberg

Gold/Oil spiked to its second highest level ever today...

Source: Bloomberg

Once again oil's drop today coincided with dollar weakness and in fact, as Bloomberg details, the relationship between oil and dollar has turned on its head: The lower the crude prices are, the weaker the U.S. currency.

Source: Bloomberg

Since the turn of the century, the two have typically had a negative correlation. A strong dollar has meant weak oil prices and vice versa, partly because oil is priced in dollars. Granted, the relationship hasn’t been stable in recent years, but a positive correlation has been rare.

There could be several explanations:

  • For one, lower oil prices add deflation pressure and lower the bar for the Fed to ease monetary policies.

  • Second, with the U.S. a net energy exporter now, weaker oil prices reduce investment in the shale industry.

  • Third, oil prices signal weak global demand, causing unwinding of carry-trade positions funded by the euro.

And finally, we wonder - has Ray Dalio lost his touch?

Source: Bloomberg

And don't forget it's also the anniversary of 1933's Banking Crisis Holiday

h/t @Not_Jim_Cramer

And in case you're wondering. The 2K analog is holding very well... implying we should get a decent bounce here before the finally catastrophic collapse...

Source: Bloomberg

The market is now demanding 3 rate-cuts at or before the next Fed meeting (on March 18th)...


Source: Bloomberg

Tyler Durden

Mon, 03/09/2020 - 16:04

The Dow Is Down 8% - The Biggest Drop Since 1987

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The Dow Is Down 8% - The Biggest Drop Since 1987

The Dow is making new lows for the day, down almost 2100 points, or more than 8%...

But there is no circuit-breaker on the second break below the 7% loss threshold...

If this holds it will be the biggest daily market drop since October 1987's complete collapse...

Not much to add... this is historic.

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Tyler Durden

Mon, 03/09/2020 - 14:13

World's Biggest Oil Hedge Fund Plunges 8% In January Following Two Years Of Losses

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World's Biggest Oil Hedge Fund Plunges 8% In January Following Two Years Of Losses

Back in 2008 Forbes Magazine placed Pierre Andurand in its list of the top 20 highest-earning hedge-fund managers. That was the year after the French commodity trader co-founded the hedge-fund BlueGold with $300 million AUM. In June of 2008, just before oil crashed, BlueGold's returns were described by the New York Post as "eye-popping" and "monstrous". although it was a very diffe

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rent story just a few months later when oil plunged from $145 to $40. In any case, riding the dramatic recovery in the price of oil from 2009 to 2011 helped BlueGold cement its position as one of the largest oil-focused hedge funds, with AUM hitting $2.4 billion after returning 210% in 2008, 55% in 2009, 13% in 2010, and -34% in 2011.

Then, after BlueGold shuttered in April 2012, Andurand launched a new hedge fund: Andurand Capital, which once again invested mostly in oil but also has a secondary focus on other commodities such as metals and as of May 2018, the firm managed $1.2bn in assets.

And while Andurand timed the 2014 oil crash perfectly, returning 38% the year when the near OPEC-breakup sent oil plunging from above $100 to $30, it has been a challenging time for the commodity investor who turned bullish on oil in 2016, only to suffer a very choppy oil market for the past several years. So choppy, in fact, that after two years of losses, Andurand suffered another dramatic loss in January, when oil prices once again tumbled, this time on fears the coronavirus was hurting global economic growth, which in turn hit demand for oil and roiled global commodity markets.

The furious January drop was so unexpected that the Andurand Commodities Fund, dubbed by Bloomberg as "one of the oil market’s last remaining hedge funds", plunged 8.4% last month, according to Bloomberg. The loss was the fund's biggest monthly decline since October 2018 when it plunged 21% as global stocks swooned amid fears the Fed was hiking rates into a recession. Last month's loss followed two prior painful years for Andurand who was down 7.1% in 2019 and 20% a year earlier.

So is another name for "brilliant hedge fund investor" just "that guy who uses a ton of leverage to boost his beta" and picked the right side of the coin toss? What about picking the wrong side for three years in a row? If so, one wonders if an even better description for someone like Andurand is just "lucky", something has has not been for the past three years when he desperately hoped that oil prices would skyrocket higher even as China's economic slowdown meant that oil demand would suffer so much even OPEC now agrees.

As Bloomberg notes, oil had its worst start to a year since 1991 on concern the spread of the coronavirus will curb demand in China for energy. Brent fell 16% in January as China, the world’s largest oil importer, locked down its cities in a bid to prevent the spread of the virus.

According to various sources from Goldman to commodities trading giant Vitol, the market is facing a 200 million-barrel demand loss in the first quarter, culminating in a 4 million-barrels-a-day decrease in China currently as the virus hits economic activity and restricts travel.

Tyler Durden

Sun, 02/23/2020 - 18:55

Two Years After Handing It The Biggest Ever Bailout Loan, IMF Finds Argentina Debt Levels Are "Unsustainable"

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Two Years After Handing It The Biggest Ever Bailout Loan, IMF Finds Argentina Debt Levels Are "Unsustainable"

Back in the summer of 2018, when the IMF handed Argentina an unprecedented $56 billion bailout loan, the largest in IMF history, some warned that this is a case of deja vu similar to the 2001/2002 precedent when Argentina eventually defaulted on its foreign creditors, while humiliating the IMF which had signed off on Argentina's economic policies

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that ended up in bankruptcy court. The IMF, however, was confident that this time would be different, and rushed - under now-ECB head Christine Lagarde - to hand to Argentina the greatest amount of money the IMF had ever disbursed to a struggling nation.

It turned out that this time wasn't different, and after completing a week of meetings in Argentine, the IMF - which so generously handed out other people's money to prop up the crumbling, corrupt Latin American nation less than two years aqo - finally threw in the towel and admitted that Argentina’s debt load is unsustainable, paving the way for the government to ask private bondholders to take on losses as it prepares to renegotiate its obligations.

The last time IMF officials commented on Argentina’s debt was in the fourth review of the credit line in July 2019, when they called it "sustainable, but not with a high probability."

Oops. But it gets better.

A "meaningful contribution" will be necessary from private bondholders to restore the country’s debt sustainability, the IMF wrote in a statement Wednesday following talks with Argentine officials during its first technical mission in Buenos Aires under Alberto Fernandez’s presidency.

"The primary surplus that would be needed to reduce public debt and gross financing needs to levels consistent with manageable rollover risk and satisfactory potential growth is not  economically nor politically feasible,” the Fund said, in what may be the most embarrassing moment in the Fund's history.

Why embarrassing? Because as Hector Torres, a former executive director at the Fund who represented South American countries, said last summer, "The IMF has put a lot in -- not just money, but prestige," to avoid a default. "The fact that the arrangement is not performing well right now is an embarrassment,” he said. Little did he know just how embarrassing it would get.

As discussed previously, Fernandez is seeking to renegotiate billions of dollars in debt with private creditors, including the infamous $56 billion loan with the Washington-based organization.

Argentina’s record IMF loan has been on hold since August after Fernandez pulled off a shock upset of incumbent Mauricio Macri in a presidential primary vote, sending markets reeling.

“IMF staff emphasized the importance of continuing a collaborative process of engagement with private creditors to maximize their participation in the debt operation,” according to the statement. Meanwhile, Argentina's economy has collapsed, the currency has plunged, bonds prices have been in freefall and debt rose to nearly 90% of GDP at the end of 2019, the Fund said.

But the biggest pain now await bondholders, some of whom were so dumb to actually buy 100 year bonds from Argentina. Guzman warned investors (or at least their replacement since those who made the original investment were surely summarily fired) last week they’ll probably be frustrated with negotiations, which he intends to wrap up by the end of March. South America’s second-largest nation owes over $38.7 billion to bondholders just this year, and payments peak in May. There is no way it can make those payments without magic.

Tyler Durden

Wed, 02/19/2020 - 22:45

BofA: We Are Witnessing The Biggest Asset Bubble Ever Created By A Central Bank

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BofA: We Are Witnessing The Biggest Asset Bubble Ever Created By A Central Bank

Back in March 2018, when commenting on what was then the 2nd longest central-bank induced bull market of all time (it is now the longest ever) Bank of America's CIO Michael Hartnett pointed out that "bull market leadership has been in assets that provide scarce “growth” & scarce “yield”. Specifically, the "deflation" assets, such as bonds, credit, growth stocks (315%)

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, have massively outperformed inflation assets, e.g., commodities, cash, banks, value stocks (249%) since QE1. At the same time, US equities (269%) have massively outperformed non-US equities (106%) since launch of QE1."

And, as happens every time the Fed tries to manage asset prices, it had blown another bubble: commenting on the hyperinflation in risk assets, Hartnett said that the "lowest interest rates in 5,000 years have guaranteed a melt-up trade in risk assets", which the strategist had called the Icarus Trade since late 2015, noting that the latest, "e-Commerce" bubble, which consists of AMZN, NFLX, GOOG, TWTR, EBAY, FB, is up 617% since the financial crisis, making it the 3rd largest bubble of the past 40 years."

Fast forward two years, one failed attempt at normalizing interest rates, one QE4, and one historic P/E multiple expansion meltup later, when the same bull market leadership in "growth" assets has led to the unprecedented result that the top 5 stocks now account for a greater share of S&P500 market cap than ever before...

... and when what in 2018 was the third largest bubble of all time only has - thanks to 800 rate cuts by central banks since the Lehman bankruptcy - now been rebranded to "e-Commerce" by BofA's Hartnett, and which as shown in the chart below has - after rising more than 1,000% from its crisis lows - become the single biggest asset bubble of all time.

Commenting on this biggest ever asset bubble in his latest Flow Show report, Hartnett explains it as follows:

... the US dollar off to best start to year since 2015, DXY threatening to breakup toward 104 post-GFC high… bullishly driven by positioning (consensus bearish US$), politics (probability of Trump or Bloomberg victory in US presidential election at fresh high of 77% according to poll aggregator Oddschecker.com), and bubble with global capital flowing to US tech disruption bubble.

Ironically, and confirming the barbell strategy pursued by investors, even as global capital floods into the "growth" sector, a "twin bubble" continues to grow, with inflows into bonds seemingly neverending, and just this week investors poured the most money ever into IG corporate bonds ($13.4BN)...

... in addition to a $1.2BN inflow into tech funds, despite broader FTC "Big Tech" antitrust action into what is now America's least regulated sector:

Meanwhile, easing COVID-19 fears have lent a strong weekly bid to HY corporate bonds ($3.4bn), EM equity ($2.7bn), & EM debt ($2.1bn). In short investors appear to be buying anything that is not nailed down, resulting in record annualized inflows into bond and equity funds.

Of course, the bubble may be the biggest ever, but the action observed now is hardly new, and there is a familiar word to describe what is going on: distribution... as the smartest and richest money in the room - private clients - continue to quietly sell stocks to retail investors even as the buy more and more and more bonds.

Putting it all together, what does Hartnett - who like Morgan Stanley's Michael Wilson - has been reluctantly bullish into this meltup, think happens next, and when will he finally sell? His answer below:

We stay "irrationally bullish" in Q1: positioning not yet "euphoric" & Fed caught in "liquidity trap"; we expect rising probability of a "Minsky moment" to coincide with peak positioning & peak liquidity in Q2 triggering "big top" in risk assets; sell S&P500 when PE >20X, go short credit & stocks when new lows in bond yields & US$ appreciation becomes disorderly bearish signaling tighter Fed liquidity & sparking recession/default fears.

Tyler Durden

Fri, 02/14/2020 - 14:10

Impeachment's Biggest Absurdity: Our Toxic Fixation On Useless And Corrupting Ukraine Aid

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Impeachment's Biggest Absurdity: Our Toxic Fixation On Useless And Corrupting Ukraine Aid

Authored by James Bovard via JimBovard.com,

The campaign to convict and remove President Donald Trump in the Senate hinges on delays in disbursing U.S. aid to Ukraine. Ukraine was supposedly on the verge of great progress until Trump pulled the rug out from under the heroic salvation effort by U.S. government bureaucrats. Unfortuna

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tely, Congress has devoted a hundred times more attention to the timing of aid to Ukraine than to its effectiveness. And most of the media coverage has ignored the biggest absurdity of the impeachment fight.

The temporary postponement of the Ukrainian aid was practically irrelevant considering that U.S. assistance efforts have long fueled the poxes they promised to eradicate – especially kleptocracy, or government by thieves.

A 2002 American Economic Review analysis concluded that “increases in [foreign] aid are associated with contemporaneous increases in corruption” and that “corruption is positively correlated with aid received from the United States.”

Then-President George W. Bush promised to reform foreign aid that year, declaring, “I think it makes no sense to give aid money to countries that are corrupt.” Regardless, the Bush administration continued delivering billions of dollars in handouts to many of the world’s most corrupt regimes.

Then-President Barack Obama, recognizing the failure of past U.S. aid efforts, proclaimed at the United Nations in 2010 that the U.S. government is “leading a global effort to combat corruption.” The following year, congressional Republicans sought to restrict foreign aid to fraud-ridden foreign regimes. Then-Secretary of State Hillary Clinton wailed that restricting handouts to nations that fail anti-corruption tests “has the potential to affect a staggering number of needy aid recipients.”

The Obama administration continued pouring tens of billions of U.S. tax dollars into sinkholes such as Afghanistan, which even its president, Ashraf Ghani, admitted in 2016 was “one of the most corrupt countries on earth.” John Sopko, the Special Inspector General for Afghan Reconstruction (SIGAR), declared that “U.S. policies and practices unintentionally aided and abetted corruption” in Afghanistan.

Since the end of the Soviet Union, the U.S. has provided more than $6 billion in aid to Ukraine. At the House impeachment hearings, a key anti-Trump witness was acting U.S. ambassador to the Ukraine, William B. Taylor Jr. The Washington Post hailed Taylor as someone who “spent much of the 1990s telling Ukrainian politicians that nothing was more critical to their long-term prosperity than rooting out corruption and bolstering the rule of law, in his role as the head of U.S. development assistance for post-Soviet countries.” A New York Times editorial lauded Taylor and State Department deputy assistant secretary George Kent as witnesses who “came across not as angry Democrats or Deep State conspirators, but as men who have devoted their lives to serving their country.”

After their testimony spurred criticism, a Washington Post headline captured the capital city’s reaction: “The diplomatic corps has been wounded. The State Department needs to heal.” But not nearly as much as the foreigners supposedly rescued by U.S. bureaucrats.

The Wall Street Journal reported on Oct. 31 that the International Monetary Fund, which has provided more than $20 billion in loans to Ukraine, “remains skeptical after a history of broken promises [from the Ukraine govt]. Kiev hasn’t successfully completed any of a series of IMF bailout packages over the past two decades, with systemic corruption at the heart of much of that failure.”

The IMF concluded that Ukraine continued to be vexed by “shortcomings in the legal framework, pervasive corruption, and large parts of the economy dominated by inefficient state-owned enterprises or by oligarchs.” That last item is damning for the U.S. benevolent pretensions. If a former Soviet republic cannot even terminate its government-owned boondoggles, then why in hell was the U.S. government bankrolling them?

Transparency International, which publishes an annual Corruption Perceptions Index, shows that corruption surged in Ukraine in the late 1990s (after the U.S. decided to rescue them) and remains at abysmal levels. Ukraine is now ranked as the 120th most corrupt nation in the world — a lower ranking than received by Egypt and Pakistan, two other major U.S. aid recipients also notorious for corruption.

Actually, the best gauge of Ukrainian corruption is the near-total collapse of its citizens’ trust in government or in their own future. Since 1991, the nation has lost almost 20% of its population as citizens flee abroad like passengers leaping off a sinking ship.

And yet, the House impeachment hearings and much of the media gushed over career U.S. government officials despite their strikeouts. It was akin to a congressional committee resurrecting Col. George S. Custer in 1877 and fawning as he offered personal insights in dealing with uprisings by Sioux Indians (while carefully avoiding awkward questions about the previous year at the Little Big Horn).

Foreign aid is virtue signaling with other people’s money. As long the aid spawns press releases and photo opportunities for presidents and members of Congress and campaign donations from corporate and other beneficiaries, little else matters. Congress almost never conducts thorough investigations into the failure of aid programs despite their legendary pratfalls. The Agency for International Development ludicrously evaluated its programs in Afghanistan based on their “burn rate” – whether they were spending money as quickly as possible, almost regardless of the results. SIGAR’s John Sopko “found a USAID lessons-learned report from 1980s on Afghan reconstruction but nobody at AID had read it.”

After driving around the world, investment guru Jim Rogers declared: “Most foreign aid winds up with outside consultants, the local military, corrupt bureaucrats, the new NGO [nongovernmental organizations] administrators, and Mercedes dealers.” After the Obama administration promised massive aid to Ukraine in 2014, Hunter Biden jumped on the gravy train – as did legions of well-connected Washingtonians and other hustlers around the nation. Similar largesse assures that there will never be a shortage of overpaid individuals and hired think tanks ready to write op-eds or letters to the editor of the Washington Post whooping up the moral greatness of foreign aid or some such hokum.

When it comes to the failure of U.S. aid to Ukraine, almost all of Trump’s congressional critics are like the “dog that didn’t bark” in the Sherlock Holmes story. The real outrage is that Trump and prior presidents, with Congress cheering all the way, delivered so many U.S. tax dollars to Kiev that any reasonable person knew would be wasted. If Washington truly wants to curtail foreign corruption, ending U.S. foreign aid is the best first step.

*  *  *

James Bovard is the author of “Attention Deficit Democracy,” “The Bush Betrayal,” “Terrorism and Tyranny,” and other books. Bovard is on the USA Today Board of Contributors. He is on Twitter at @jimbovard. His website is at www.jimbovard.com

Tyler Durden

Thu, 01/30/2020 - 17:00




UBS Tumbles After Biggest Swiss Bank Misses Key Targets As Investors Pull Money

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UBS Tumbles After Biggest Swiss Bank Misses Key Targets As Investors Pull Money

The rift between the US (where rates are still positive) and European banks (where rates have never been more negative) continues to grow.

While US banks have so far reported mostly better than expected results for Q4, the same can not be said for Europe, where UBS shares are down 5% as the bank misses fiscal year profitability and cost targets in addition to trimmin

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g its mid-term goals. As Saxobank notes, "UBS has been hit by wealth management outflows, negative rates and poor performance in its investment banking division" and notes that "this obviously sends a warning to investors if they thought overweight European banks was a good idea." To be sure, negative rates will continue to haunt European banks until the ECB changes its mind on negative rates.

It's not just NIRP though: the great conundrum of 2019 struck again, because even as stocks hit all time highs, the largest Swiss bank missed key targets for 2019 as investors pulled money late in the year when stocks were soaring, underscoring the challenge for new wealth management co-head Iqbal Khan as he seeks to turn around its most important business.

As Bloomberg reports, the Swiss bank failed to meet several metrics set during a revamp of its goals just over a year ago, highlighting mounting headwinds for European lenders while U.S. rivals post record profits. The downgrades were across the board - on profit, cost efficiency and dividend growth - while the private bank unexpectedly saw $4.7 billion of outflows last quarter.

The lower targets, and higher outflows overshadowed a strong finish to the year in which the bank posted better than expected net income and investment banking results while boosting its core financial strength. UBS also gave a moderately positive outlook for the first quarter, saying client activity is picking up and the favorable credit environment and partial resolution of trade disputes should help mitigate slowing global economic growth.

Here are the key numbers and new targets from UBS’s results:

  • Wealth management outflows of $4.7 billion driven by Americas

  • Return on CET1 capital of 12.4% in 2019 below 15% target.

  • Now targeting CET1 capital metric at 12%-15% to 2020-2022

  • Adjusted cost-to-income ratio of 78.9% missed target of 77%

  • Now targeting cost-to-income metric at 75%-78%

  • 1 cent a share dividend rise going forward; had sought mid-to-high single digit percent

  • $722 million net income beats company compiled estimate of $682 million

The downgrades marked a reversal for CEO Sergio Ermotti after he restructure goals in Oct. 2018 under pressure from investors. To help restore the bank’s edge and strengthen the bench of potential CEO successors, Ermotti in in October brought in Khan from Credit Suisse. The new executive is cutting jobs, speeding up decision making and giving more autonomy to the regions in an effort to revive the wealth business.

UBS joins other European bank giants such as Credit Suisse and Deutsche Bank in dialing back its ambitions in an era of negative rates, investor caution and escalating trade tensions. Last month the largest German bank warned that its mid-term profitability goal now appears to be “more ambitious,” and it will rely more on volatile investment banking to reach its revenue target; it also slashed banker bonuses by up to 30%, while Italy’s UniCredit SpA is cutting 8,000 jobs as part of its new multi-year plan to boost returns in the face of limited growth prospects.

UBS shares declined as much as 5.9%, the biggest one-day drop since May.

Tyler Durden

Tue, 01/21/2020 - 08:15

The EU Is The Biggest Loser From US-China Agreement

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The EU Is The Biggest Loser From US-China Agreement

Authored by Daniel Lacalle via DLacalle.com,

Market participants’ excess of optimism with the trade agreement between the United States and China is clearly exaggerated, once we have the details.

Both the United States and China’s economy have suffered a mild impact from trade disputes. The United States saw a mild slowdown in growth but did not suffe

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r inflationary pressures from the tariffs, while its trade deficit shrunk reduced to the lowest level in 17 months and unemployment is at a minimum of 50 years. In the case of China, the growth of the economy (even adjusted for inflated data) was less affected by the trade war than many feared. Although its exports grew much less than expected, it has been able to increase them somewhat, 0.5% in 2019.

In the trade dispute, it is clear that China has been comparatively worse off. The country had to make an urgent devaluation of the yuan, bail out dozens of domestic entities and their total foreign currency reserves remained flat, barely covering their credit commitments … But, at the same time, China’s trade surplus increased by 25% even if it was mainly due to lower imports.

China has shown an acceptable relative strength but its Achilles heel remains its shortage of dollars. Its apparent huge reserves of 3 billion are not operational due to its growing foreign currency debt.

China FX debt

The so-called trade war has had a relative impact on the two giants, showing that tariffs were only a tactic to negotiate, that is why they have lasted so little. Almost no one doubts that the effects could have been much greater if these tariffs were maintained. 

Of course, the trade war has been widely used as an excuse to justify the effects of global debt saturation and overcapacity. Now it will no longer be valid as a wild card.

This entire negotiation process has led to a “phase one” agreement which raises many questions. Is it enough? Are the details clear enough to put it into practice? How will it be accomplished without rising idle inventories? Can China increase its US imports so much with its growing shortage of dollars? What is the impact on the rest of the world?

That is the key.

The agreement between China and the United States is actually more similar to a global zero-sum game

China has committed to buying an additional $200 billion in US goods between 2020 and 2021 … a figure will come from lower purchases from others. The figure is not small since China’s total trade surplus is 421.5 billion. That is, it accounts for almost 23% of the annual trade surplus divided into two years.

Why is it probably a zero-sum game? China will acquire more United States goods with the following breakdown: $32.9 billion in the manufacturing and industrial sector, $18.5 in energy, $12.8 billion in services and $12.5 billion in agricultural goods in 2020, rising to $44.8, $33.9, $25.1 and $19.5 billion respectively in 2021.

All that increase benefits the United States but there is no evidence that China is currently importing less than it needs, quite the opposite, as shown by its inventory levels. Therefore, China will likely import more from the United States and less from other countries.

How does it affect the European Union?

The European Union is the first or second in market share of total Chinese imports in various sectors. According to Morgan Stanley, the most affected sectors would be agriculture (11% of the total China imports, only surpassed by Brazil, which will also be negatively affected by the agreement), chemicals (25%), precision instruments (19%), transport equipment (50%), machinery and electrical equipment (11%, behind Taiwan, Korea, and Japan).

It is important to warn of the low impact on global growth of this agreement and on the negative collateral damage to other countries. There are risks for countries that are very dependent on energy exports. Brazil, Qatar, and Australia are the most affected by the agreement on energy imports, but also on other sectors. The impact on world GDP could be null. What is penalizing global growth and trade is more debt saturation and excess capacity than the so-called trade war which is also negative but not as important as structural problems in the global economy.

The second phase of the agreement will be the most complex. The first phase is basically a set of minimum agreements that include few real commitments regarding China’s capital controls, legal security, and respect for intellectual property. The second phase will focus on the most relevant aspects of the trade relationship between the US and China, including industry relocation, capital movements, and cross-subsidies. However, bringing China’s trade surplus with the US to zero is virtually impossible and, in my opinion, unnecessary.

So far, the evidence shows that the weakest link in the China-US deal negotiations was the European Union. China and the Us will probably benefit from the deal at the expense of lower trade with a European Union that has been unable to defend its position.

The US is already in negotiations with the European Union on the projected “digital tax” which hides an undercover tariff on US- tech giants, and barriers to traded agricultural products and the auto sector remain. The US-China deal may unveil the numerous barriers to free trade disguised under the thousands of pages of EU regulations.

Let us not forget that we are facing a negotiation with the EU as the largest client with its suppliers. The process will be slow, perhaps complicated, but a negotiation nonetheless. The so-called trade war with China has only lasted a few months. The next stop is in the European Union.

Tyler Durden

Mon, 01/20/2020 - 05:00


Business Finance


These States Face Biggest Job Losses From Automation

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These States Face Biggest Job Losses From Automation

Aside from the rantings of a small group of eccentric billionaires, humanity is mostly unprepared for the advent of automation and its impact on an economy that is already exhibiting unprecedented levels of wealth concentration among the wealthy. Some have estimated that automation will destroy 800 million jobs over the next ten years.

But if you're trying to plan a career,

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or a life, that can withstand the transformative impact of automation, a team of researchers at Kempler Industries has analyzed data from the BLS Occupational Employment Statistics and determined the percent of potential job loss in different industries across all 50 US states.

Their findings are broken down in the map below:

The study also breaks job losses down by metropolitan area, with Las Vegas and Orlando taking the top two slots.

In order to create a foundation for this analysis, we looked at the top 170 most "at-risk" occupations, according to the University of Oxford’s "The Future of Employment: How Susceptible are Jobs to Computerisation" study.

When looking at the data, it’s clear that no state is immune to automation. Overall, roughly 41 million, or 28% of all U.S. jobs, are most susceptible to automation. Occupations within the service industry are some of the hardest hit in terms of being at risk for automation, specifically cashiers, retail salespersons and fast food employees.

Tyler Durden

Sun, 01/19/2020 - 23:20




Here Are The Biggest Winners & Losers From US-China Trade Deal

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Here Are The Biggest Winners & Losers From US-China Trade Deal

After a roughly two-year trade war fraught with delays and periods of intense acrimony between the world's two largest economies, President Trump and Vice Premier Liu He have signed the 'Phase 1' trade deal.

Now, Washington's initial insistence that a 'partial' trade agreement was out of the question - and that Beijing must be ready for an all-or-nothing deal - seems almost comical i

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n retrospect.

But as investors digest the newly released text of the deal, the BBC has published a quick guide outlining the winners and losers from the deal.

* * *

Winner: Donald Trump

Some critics say there is little substance, but the signing offers an opportunity for US President Donald Trump to put the trade war behind him and claim an achievement heading into the 2020 presidential election.

That may be a relief: Polls show that most Americans agree with the president that China trades unfairly, but they generally support free trade and oppose tariffs. Indeed, Republicans lost several congressional seats in 2018 - a change economists have linked to the trade war.

Winner: President Xi Jinping

China appears set to emerge from the signing having agreed to terms it offered early in the process, including loosening market access to US financial and car firms. In many cases, companies from other countries are already benefiting from the changes.

While President Xi can claim he did not simply bow to America's demands, that doesn't mean the Chinese are celebrating. The Federal Reserve estimates that China's economy has taken a 0.25% hit, as US demand for its goods fell by about a third.

Loser: American companies and consumers

The new deal halves tariff rates on $120bn worth of goods, but most of the higher duties - which affect another $360bn of Chinese goods and more than $100bn worth of US exports - remain in place. And that's bad news for the American public.

Economists have found that the costs - more than $40bn so far - are being borne entirely by US companies and consumers. And that figure does not even try to measure lost business due to retaliation.

Overall, the Congressional Budget Office estimates that tariff-related uncertainty and costs have shaved 0.3% off of US economic growth, while reducing household income by an average of $580 since 2018.

The CBO's estimates take into account all new tariffs imposed since January 2018 - not just those involving China - but analysts say a more limited look would yield similar findings.

Loser: Farmers and manufacturers

The new deal commits China to boost purchases in manufacturing, services, agriculture and energy from 2017 levels by $200bn over two years.

Mr Trump has said that could include as $50bn worth of agricultural goods a year.

But other officials have put the figure lower and analysts are sceptical. So far, the primary effect on business has been pain.

Farmers, who have been targeted by China's tariffs, have seen bankruptcies soar, prompting a $28bn federal bailout.

Among manufacturers, the Federal Reserve has found employment losses, stemming from the higher import costs and China's retaliation.

Over the long-term, American firms may reroute supply chains away from China to avoid the tariffs - but that's an expensive prospect.

Winners: Taiwan/Vietnam/Mexico

Globally, economists estimate that the trade war will shave more than 0.5% off of growth. But some countries have benefited from the fight, which redirected an estimated $165bn in trade.

Analysts at Nomura identified Vietnam as the country that would gain the most, while the UN found that Taiwan, Mexico and Vietnam saw US orders ramp up last year.

The Fed found that the increased American imports boosted Mexico's economic growth by just over 0.2%.

Some of those arrangements are likely to stick, even with a deal.

Loser: Washington China critics

The US has said that China has agreed to new protections for intellectual property, including lowering the threshold for criminal prosecution and increasing penalties. Critically, the two sides say they have agreed to a way to resolve such disputes.

Those were among the issues that ostensibly triggered the trade war.

But analysts say it's not clear if the new commitments are any different from promises that China has made before. And the new deal does not address some of America's chief complaints about China's trade practices - such as the subsidies it provides to certain industries.

The White House has said it will tackle additional issues in a second, "phase two" deal but analysts say they don't expect anything concrete anytime soon. The administration has also discussed how to address the subsidies with Japan and Europe.

Source: BBC

* * *

Now that the full text has been released, the takeaway is pretty clear: Beijing is benefiting from the deal.

Since details of the deal were embargoed until President Trump actually signed the pact, most investors have only just begun to read into it, and many are finding that the deal isn't as meaty as they expected, said UBS floor manager Art Cashin. That's caused stocks to move off their highs of the session.

But now that the deal is done and dusted, where will the market look next for the bullish headlines it needs to sustain the rally? That remains to be seen.

Tyler Durden

Wed, 01/15/2020 - 14:10


Business Finance


The Biggest Crypto Winners And Losers Of 2019

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The Biggest Crypto Winners And Losers Of 2019

Authored by Jinia Shawdagor via CoinTelegraph.com,

Even though the cryptocurrency industry is not new to ups and downs, 2019 has turned out to be the year with the most surprising reveals. The long-lasting bear market of 2018 moved market analysts to call it the year of regulatory reckoning, leaving many jurisdictions uncertain about how to treat cryptocurrencies.

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image courtesy of CoinTelegraph

However, 2019 also turned out to be the year of the comeback, as big tech giants like Facebook moved from banning crypto to embracing it. 

Escalating global events such as the trade war between the United States and China have shifted investors’ point of view on the utility of cryptocurrencies like Bitcoin, but there is still a lot to be done even as the U.S. Securities and Exchange Commission continues to turn down every other Bitcoin ETF proposal. 

As the year comes to a close, here is a look at the companies, individuals and various crypto projects that managed to come out on top in 2019, as well as those that failed to mark the year as a positive in their books.

The winners

Bitcoin’s double growth

This year, Bitcoin and the entire blockchain and cryptocurrency industry celebrated its tenth anniversary as proof of the resilience of Satoshi Nakamoto’s creation. However, at the beginning of 2019, the cryptocurrency industry was just recovering from the so-called crypto winter of 2018. 

Fortunately, Bitcoin kicked off the year with a bullish trend that resulted in an approximate price increase of 11% higher by the end of the first quarter. Anthony Pompliano, the co-founder of Morgan Creek Digital asset management firm, shared his view with Cointelegraph:

“Bitcoin’s price is up significantly in 2019 [as there are] more buyers than sellers on a net basis this year.”

As the trading volume and market capitalization increased throughout the second quarter of the year, Bitcoin led the market with a 165% gain as its price surged from $4,103 to $10,888. Furthermore, Bitcoin’s market dominance increased from 54.6% to 65%.

Among the reasons that have promoted Bitcoin’s continued growth despite a struggling market is the view that the digital currency can act as a hedge in the wake of increasing global uncertainty. This year, the U.S.–China trade war saw most investors look to Bitcoin and gold as hedges. Pompliano also told Cointelegraph that there were other contributing factors:

“The biggest moments probably revolve around the announcement of Libra and the subsequent reactions, both positive and negative, from various folks across the traditional and cryptocurrency markets.”

However, it was not all sunshine for Bitcoin in 2019. Over the third quarter of the year, a bearish outlook emerged as Bitcoin’s price decreased significantly as 100 billion in market capitalization was lost. Fortunately, even as the market struggled to gain ground against the bears, Bitcoin not only closed the quarter with the least amount of loss but also increased its market dominance by 5.4%. Ultimately, of all cryptocurrencies, Bitcoin’s performance has been the best so far.

Compared to assets from other markets, Bitcoin’s performance throughout the year is still far from tenuous. For instance, even though gold is regarded as a reliable store of value, its price has only increased by 17% since January. Even the S&P 500 Index, although with an excellent performance of +21%, is still dwarfed by Bitcoin’s growth throughout the year. Beyond price, Bobby Lee, CEO of the Ballet crypto wallet, told Cointelegraph that Bitcoin has benefited from several major technological developments:

“2019 was a great year for Bitcoin bulls because of the advances in the open-source ecosystem. Lightning Network is increasing Bitcoin’s transaction capacity, wallets with built-in, user-friendly features (Wasabi, Samourai) are improving privacy.”

Gods Unchained’s rise to popularity

According to reports, Gods Unchained, a blockchain-based virtual card game built on Ethereum, emerged as one of the highest-grossing and most popular blockchain games in 2019. This came about after the platform completely sold out its Genesis Card Pack to the tune of about $6.2 million. This came about after Blizzard, the creators of Hearthstone (a digital trading card game) banned Hearthstone player Chung Ng Wai (also known as Blitzchung) for expressing support for the Hong Kong protests. The Hearthstone game developer also stripped Blitzchung of his winnings. 

In addition to the backlash received from the gaming community, Blizzard’s actions were criticized in a tweet by Gods Unchained that claimed Blizzard “care[s] about money more than freedom.” Gods Unchained also promised to compensate Blitzchung for his lost winnings while offering him an invitation to their $500,000 tournament.

The tweet by Gods Unchained was retweeted over 10,000 times, and Google searches for the game have since surged. Unlike Hearthstone, Gods Unchained is decentralized and uses blockchain to ensure that players truly own in-game items and have the freedom to trade them at will.

In a move to give online game players long-term incentives, James Ferguson, CEO of Gods Unchained said that the game is “leveling up the outdated practices of the gaming industry.”

Coinbase’s continued expansion 

In the past, Coinbase maintained a reputation for employing a rather selective strategy for adding coins to its exchange. As one of the big league exchanges in the crypto space, Coinbase is also known for having significantly fewer large-scale hacks. In a year that saw other major exchanges like Binance fall victim to large scale security breaches, leading to the loss of thousands of Bitcoin, Coinbase stands out as a reliable and safe platform.

However, the company was heavily scrutinized by Twitter users this year over its acquisition of Neutrino, a startup that collects cryptocurrency transactional data using the blockchain. For most Twitter users, this move seems to facilitate the exchange’s spying on its customers. 

However, Coinbase’s move to acquire Neutrino is, according to a Coinbase blog post, part of its goal to support all assets while complying with applicable laws. In addition to acquiring Neutrino, Coinbase has doubled the number of listed cryptocurrencies on its exchange since 2018. Coinbase’s aggressive listing approach has seen the addition of coins such as Dash, Cosmos and Waves, to mention just a few.

The company has almost constantly been making news throughout the year, from making acquisitions to denying them, as well as securing multiple patents along the way. Meanwhile, Coinbases’s Visa debit card solution has also seen exponential growth this year, now available for use in even more countries. 

In May 2019, the company also expanded its reach to more than 100 countries while making its USDC stable coin — previously only available in the U.S. — available in 85 of those supported countries. In comparison, Coinbase was only available in about 32 countries last year. Its aggressive expansion appears to be in direct competition to other global players like Binance.

Binance ventures further

Ask any market analyst and they will admit that initial exchange offerings have grown into a big business in 2019. Reports have revealed a high demand for IEOs right from Q1 2019 to Q3, not to mention the fact that they collectively raised over $1.5 billion in the first half of 2019 alone. Unlike initial coin offerings, the biggest determining factor for a successful IEO is the availability of liquidity, and what better way to access liquidity than launching an IEO on a popular exchange. 

That is why Binance and its native cryptocurrency BNB have had one of the best years yet. As one of the biggest marketplaces for digital assets, Binance enjoys a significant share of the trading volume. The exchange’s performance has been so exceptional that the Binance Coin has gained value by 150% over the year. When taking everything into account and considering year-on-year growth, Binance Coin has even slightly outperformed Bitcoin.

Also, Binance expanded its reach with the launch of a fully independent U.S. arm of its trading platform. Despite heavy regulatory pressure that keeps the Binance exchange in the U.S. from operating in states such as New York, the company’s partnership with BAM, a registered money service in the U.S., has so far given the exchange some leeway.

The losers

Facebook’s uncertain Libra launch in 2020 

Facebook’s announcement of its Libra cryptocurrency has been one of the major events of 2019. However, on the unveiling of Libra as a stablecoin backed by a select number of national currencies, U.S. lawmakers reacted with skepticism, summoning Facebook CEO Mark Zuckerberg to multiple hearings.

At its core, Libra is a stablecoin backed by real money and lets users buy, sell and send money at nearly zero fees across borders. According to the project’s white paper, Libra’s overall mission is “to enable a simple global currency and financial infrastructure that empowers millions of people.”

Libra’s white paper further claims that it will use “a new decentralized blockchain, a low volatility cryptocurrency, and a smart contract platform” to empower about 1.7 billion unbanked people. This will be achieved through the use of Facebook’s WhatsApp, Messenger and Calibra, which is a digital wallet designed for Libra users.

Despite Libra’s ambitious plan to empower the unbanked, the Libra project has not only come under heavy scrutiny from lawmakers but also faced internal problems of its own. While sharing his thoughts with Cointelegraph, Ballet wallet’s Lee expressed optimism about Libra, saying that although “legislators and regulators in the United States and Europe understand that non-government currencies are a threat to their power, government opposition will diminish over time.” Lee further explained:

“Governments will change their stance because they will come to understand that they can’t control or stop Bitcoin, and they will prefer to have their citizens use centralized corporate coins that can easily be regulated, monitored, and pegged to fiat currency.”

Despite Libra’s ambitious plan to empower the unbaked, the Libra project has not only come under heavy scrutiny from lawmakers but also faced internal problems of its own. 

The U.S. Congress has asked Facebook to pause further development of the Libra projects, and cynics now believe that the project will not get out of the starting blocks without the government’s approval. Multiple European countries have also spoken out against the proposed cryptocurrency, while China announced that it will soon launch its own stablecoin, a national central bank digital currency, likely as a retaliatory measure. Furthermore, in the wake of increased scrutiny from government regulators, some of Libra’s high profile backers like Visa, eBay, MasterCard and PayPal have abandoned the project.

A rocky year for Circle

In October 2018, Circle, a cryptocurrency firm based in Boston and backed by Goldman Sachs teamed up with Coinbase to launch the Centre consortium. Counting on its reputation as one of the most well-funded crypto startups, the two companies aimed to help accelerate adoption of cryptocurrencies. Through the Centre consortium, Coinbase and Circle would increase liquidity to the crypto industry through the issue of a stable coin called the USD Coin. 

In July this year, Coinbase and Circle broadened participation into their consortium in a move that will allow other financial entities interested in the project to issue the USD Coin. In the announcement, the Centre network mentioned that “a natural next step is to imagine a new global digital currency” that would include a basket of tokens backed by a variety of stablecoins. Simply put, Centre’s plan is to go with a Facebook-like approach to create a global currency.

However, Circle has had a rocky experience throughout 2019. Even though the USD Coin has received a positive reception, with Centre claiming that the stablecoin has been used to clear on-chain transfers worth over $11 billion, Circle closed its mobile app, reduced its fundraising goal by 40%, and laid off 10% of its staff between May and June this year. Just recently, the company let go of 10 more of its employees, citing efforts to streamline its services. 

The latest news of layoffs from Circle comes after the recent transition of the company’s co-founder Sean Neville from his position as CEO to a seat at the company’s board of directors. However, a representative of Circle has denied any connections between the recent layoffs and Sean’s transition, telling Cointelegraph that: 

“None of this is related to Sean transitioning out of the co-CEO role. Sean will continue to serve on Circle’s board.”

Craig Wright’s court battles

When Australian-born technologist Craig Wright claimed to be Satoshi Nakamoto back in 2015, most people in the crypto community were skeptical and thought nothing of it. 

Most people expected that the Satoshi Nakamoto impersonator would have scurried back into obscurity by now. However, Wright and his claims have continued to headline the news throughout 2019. Wright claims that he invented Bitcoin a decade ago and mined over 1 million BTC along with his late business partner Dave Kleiman. After Kleiman’s death in 2013, Wright claims that he put the mined Bitcoin in the “Tulip Trust.”

However, the Australian entrepreneur and computer scientist was sued by Kleiman’s estate in 2018 for allegedly stealing up to 1 million Bitcoin. In the past, it is said that Wright and Kleiman worked together on mining and developing Bitcoin. According to Kleiman’s family, Wright stole between 550,000 to 1 million Bitcoin — worth about $10 billion. 

The ongoing case led to Magistrate Judge Bruce’s ruling that ordered Wright to turn over half of his Bitcoin holdings and intellectual property from before 2014 to Kleiman’s estate, presuming he is indeed Nakamoto. On Oct. 31, the trials re-emerged after Wright pulled out of the settlement agreement to forfeit half his Bitcoin and intellectual property.

In addition to his court battles, Wright was scrutinized by the crypto community after presenting what was considered forged documents as evidence of him being Nakamoto in another case of Wright against Peter McCormack. Wright’s case against McCormack is based on the fact that McCormack’s repeated statement that Wright is not Satoshi is harmful to Wright’s reputation. Most recently, Wright presented another document that allegedly proves how he came up with the Satoshi Nakamoto pseudonym.

Bitcoin ETF’s continual rejection by the SEC 

Even though U.S. regulators have always left a window for the possibility of approving Bitcoin exchange-traded funds in the future, up until now, every single attempt to license a Bitcoin ETF has been met with failure. In October this year, an ETF proposal filed by Bitwise Asset Management in conjunction with NYSE Arca was rejected by the Securities and Exchange Commission for failing to meet legal requirements that prevent illicit market manipulation. 

In fact, all Bitcoin ETF proposals presented to the SEC have been rejected on concerns about fraudulent activities and market manipulation. One of the main criteria for approving an ETF is establishing the underlying market of a new commodity-based ETF.

If the underlying market is resistant to manipulation, regulators can give the ETF the go-ahead. Given the complexities of the Bitcoin market, it seems approval from the SEC is unlikely. Despite the earlier rejection of Bitwise’s application, the SEC later announced that it would review Bitwise’s proposal once again.

While speaking to Cointelegraph on the realistic timeline of the first Bitcoin ETF approval, Charles Lu, the CEO of the Findora fintech toolkit provider said, “For a Bitcoin ETF proposal to gain SEC approval, the sponsor will need to prove that real price discovery is happening as opposed to market manipulations.” In Lu’s opinion, this will not happen anywhere soon, since the SEC would require “surveillance sharing agreements” with the big exchanges.

2019 and 2020

Overall, the crypto industry has shown some significant growth over the past year. Although volatile, Bitcoin is showing significant signs of growth. More institutional investors are looking into the industry to find more ways to invest as well. Even though there is a downtrend in market cap and trading volumes, prominent traders believe that a turn of fate might just be around the corner, especially for Bitcoin holders.

Out of all the winners and losers of 2019, perhaps Facebook Libra is one that stands to be most impactful in 2020. For most onlookers, it will be interesting to see whether Facebook’s Libra project will turn a new leaf and launch successfully in 2020. If it does, there is a high likelihood that big changes will take place throughout the entire industry.

Tyler Durden

Tue, 12/31/2019 - 19:35


Business Finance


German Arms Exports Surge To Record High, Hungary Biggest Buyer

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German Arms Exports Surge To Record High, Hungary Biggest Buyer

After three years of declines, German arms exports exploded higher in 2019 as critics suggest this proves controls on weapons deliveries are not working.

Following requests for the data from the socialist Left Party and the Greens, DW.com reports that, according to documents they have seen from the Economy Ministry, German arms exports rose 65% from January to mid-December 2

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019 compared to 2018 and hit a record of €7.95 billion ($8.8 billion).

The largest number of German weapons deliveries in 2019 went to Hungary, where exports reached €1.77 billion.

Exports to Budapest made up almost a quarter of the total value of all approvals. Prime Minister Viktor Orban's right-wing, nationalist government is currently engaged in a massive military upgrade.

However, in spite of government assurances that Germany would no longer arm countries involved in the Yemen conflict as part of the coalition deal reached in 2018, DW reports that the documents showed that two of Germany's top 10 arms export customers, Egypt at number two and the United Arab Emirates (UAE) at number nine, were also active participants in the war in Yemen.

"The most important thing is to ask is where the war weapons go, and to which countries," Katja Keul, Green party parliamentarian and arms policy spokeswoman, told DW.

"And the number of war weapons exports have doubled since last year."

The most controversial exports are those to so-called third countries: defined as neither European Union or NATO members (or "NATO-equivalent," such as Australia).

"That is certainly striking, because the government has said it is being more restrictive," said Keul.

"If you export weapons of war into crisis regions to countries that are not bound to us by any kind of alliance, you are of course destabilizing the region." 

Economy Minister Peter Altmaier blamed the huge increase on a backlog caused by the monthslong wrangling to form a coalition following Germany's 2017 election.

"More important is the type of goods and their purpose," he wrote. "The government pursues a restrictive and responsible arms export control policy."

However, Left party Bundestag member Sevim Dagdelen, who filed one of the information requests, said in a statement:

"These sizable figures show that the entire export control system is simply not working. We need clear legal bans on arms exports."

Tyler Durden

Tue, 12/31/2019 - 02:45


War Conflict


Venezuela Is Fast Becoming World's Biggest Refugee Crisis

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Venezuela Is Fast Becoming World's Biggest Refugee Crisis

According to UN data, Venezuela is fast becoming the world's biggest refugee crisis. By the end of 2020, 6.5 million Venezuelans are expected to have been forcibly displaced outside of their home country.

You will find more infographics at Statista

This is up from just 300,000 in 2017. Syria, the biggest global refugee

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crisis to date, reached its height in 2018 with 6.7 million displaced people. With resettlement programs ongoing, that number is expected to have been reduced to 5.6 by the end of 2019 and might further fall in 2020.

While the number of Syrian refugees and those in a refugee-like situation had been rising since 2011, Statista's Katharina Buchholz notes that Venezuelan refugee numbers jumped up quickly, testing the preparedness of humanitarian organizations in the region.

You will find more infographics at Statista

Brookings Institution, which analyzed the data, notes that compared to the Syrian crisis, the Venezuela refugee situation is severely underfunded, putting the lives of hundred thousands of people at risk because of the lack of food and medical assistance.

Tyler Durden

Sat, 12/28/2019 - 07:35


Social Issues
War Conflict


The Biggest Empires In Human History

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The Biggest Empires In Human History

In 1913, 412 million people lived under the control of the British Empire, 23 percent of the world's population at that time. As Statista's Niall McCarthy notes, it remains the largest empire in human history and at the peak of its power in 1920, it covered an astonishing 13.71 million square miles - that's close to a quarter of the world's land area.

At its height, it was

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described as "the empire on which the sun never sets" but of course the sun finally did set on it.

You will find more infographics at Statista

Today, Britannia no longer rules the waves and its remnants consist of 17 small dependent and unincorporated territories scattered across the world such as the Falkland Islands and Gibraltar.

The Mongol Empire existed during the 13th and 14th centuries and it is recognized as being the largest contiguous land empire in history. It of course originated in Mongolia and once stretched from Eastern Europe to the Sea of Japan, extending into the Indian subcontinent and the Middle East, covering 9.27 million square miles.

The Russian Empire comes third on the list with a peak land area of 8.8 million square miles.

The data for this infographic was published by website World Atlas.

Tyler Durden

Tue, 12/24/2019 - 20:10


Human Interest


Gundlach On The Biggest Risk Facing Bond Investors And The Likely Next President

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Gundlach On The Biggest Risk Facing Bond Investors And The Likely Next President

Authored by Robert Huebscher via AdvisorPerspectives.com,

Fear among bond investors is focused on rising rates, but Jeffrey Gundlach says you should worry about something more sinister. In his webcast this week, he also offered his updated 2020 presidential election prediction.

Gundlach is the founder an

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d chief investment officer of Los Angeles-based DoubleLine Capital. He spoke via a webcast with investors on December 10. His talk was titled, “A Rolling Loan Gathers No Moss,” and the focus was on his firm’s flagship mutual fund, the DoubleLine Total Return Fund (DBLTX). The slides from his presentation are at the bottom of this note.

His talk’s title is a play on the phrase, “A rolling stone gathers no moss.” Gundlach said his title was originally coined by the hedge fund investor, Kyle Bass, to signify that investors will continue to be paid on the bonds they own as long as issuers can keep rolling over their debt.

The credit worthiness of corporate debt is the number one risk that should concern bond investors. Gundlach issued his strongest warnings ever over the leverage taken on by U.S. corporations and the unrealistically favorable ratings that debt has been given.

Based on Morgan Stanley research, he said that 39% of the bond universe should be rated “junk” and 10% of it rated single-B or lower.

“There is a lot of potential for downgrades,” he said, which would be amplified if foreigners start selling the debt they own and the dollar weakens.

“This is the biggest risk facing bond investors,” Gundlach said.

As for U.S. politics, Gundlach said the field of Democratic nominees is in such disarray that Trump will likely win reelection. Readers may recall that Gundlach was among the few who predicted Trump’s victory in 2016. But Gundlach did not endorse Trump or any other candidate.

I’ll come back his comment on bonds and politics, but let’s start with what he said about the September 17 incident when repo rates spiked to abnormally high levels.

The great repo fiasco revisited

Gundlach called that incident the “overnight funding dust up,” but that characterization belies his concerns. He said there is growing sentiment over whether “we will ever get back to whatever we think was normal,” specifically a global bond market free of negative interest rates. Excluding the U.S., 34% of the Barclay’s global aggregate index is negative-yielding debt. It was more than half earlier this year, he said.

“It is clear that sustained negative rates have changed attitudes and behavior in Europe,” Gundlach said. “People are wondering whether bonds should be excluded from asset-allocation decisions,” because of their negative yields. On his recent trip to Europe, Gundlach told investors not to own them.

Fed Chair Jay Powell understands that negative rates in the U.S. would be “devastating for the global financial system,” Gundlach said. “The system could not survive very long.”

He said the repo crisis was blamed on a “timing need” to cover tax payments. But that need was known before September 17. He said the crisis was a “very bad sign,” showing lack of liquidity to accommodate the repo market.

“This overnight repo thing is a harbinger of lack of liquidity,” Gundlach said.

The addition of repo reserves to address the problem reversed 40% of the quantitative tightening (QT) the Fed hoped to achieve.

The dollar and global “yield starvation”

The U.S. is not planning on fighting its next economic downturn with negative interest rates, according to comments by Powell that Gundlach cited. But Gundlach criticized other Fed actions, such as the stopping of QT and starting a form of quantitative easing (QE), after promising four rate hikes at the beginning of the year. Gundlach said the Fed plans large-scale asset purchases in the event of a downturn, which could create a buying opportunity for investors prior to that move.

In the next downturn, he said rates will be higher on the long end. He based that on the history of the three-month to 10-year yield spread. It steepened during QE1 when the Fed was buying bonds and stimulating the economy. In QE2 and QE3 the spread behaved the same way. During QT, he said, the yield curve flattened. With the repo facility expansion, he said the yield curve is steepening again.

The dollar is putting a “significant top,” Gundlach said. Its last top was in January 2017. The dollar has been “incredibly stable” this year, he said. “I expect the dollar to weaken, since the Fed is easing.” It was strong because of “yield starvation” across the globe. Foreigners need to buy U.S. bonds because of their yields, but can’t hedge their exposure back to local currencies, because it will drive their effective yields back below zero. Those investors must buy U.S. bonds “naked,” he said, driving the dollar up.

But emerging market debt has been a good investment this year, with a 12% overall return, despite a -70% return in Argentinean bonds. High-yield bonds are up 12.6% and investment-grade bonds have done even better, with a return of 14.2%. Treasury bonds returned 7.2%.

Gundlach showed historical data that illustrated that dollar weakness has been correlated to current account and budget deficits. When the two combined grow as a percent of GDP, he said, the dollar weakens. “As deficits continue to widen,” he said, the dollar will get “in sync” and weaken further. But, he said, it may take economic weakness in the U.S. to initiate a strong move down in the dollar.

Retuning to a common theme in his webcasts, he said U.S. debt outstanding has “exploded” since the 1940s. Corporate debt has been “put on turbochargers” and is accelerating faster than ever. He warned about similar fiscal deficit expansion at the federal level. There is no hope that the Democratic Party will produce a nominee who would curb deficits, he said.

Gundlach thinks the deficit will go to 13% of GDP in the next recession. That is why, he said, there will be a greater supply of bonds and higher yields.

In previous webcasts, Gundlach has said there was 65% chance of a recession by end of 2020. But now, based on consumer confidence and the leading economic indicators (LEIs), which are above zero (and heading up), the odds are 35% by the end of 2020. Those odds, he said, are the same as the consensus.

Germany is running a current account surplus and rest of Europe has small deficits, which led Gundlach to wonder whether positive rates in the U.S. are a result of our need to issue debt to fund our deficits.

He noted that Greek 10-year yields are lower than those in the U.S. In 2011, they were 20% and as recently as 2016 those yields were 12%.

The problem in corporate bonds

In the near term, he said the long end of the curve is “heading up” and the yield curve will steepen, until the Fed decides to implement large-scale asset purchases.

The copper-gold ratio suggests that the 10-year should be approximately 2%, according to Gundlach. Based on nominal 10-year GDP and the German bund yield, an indicator he has found to be highly reliable, the projected 10-year yield is 1.76% to 1.9%, depending on the next release of nominal GDP.

At the end of October, Powell said that he needs to see a significant spike in inflation before raising rates. “The Fed is basically telling you it wants sustained real inflation before it would consider raising rates,” Gundlach said. “Maybe they will cut rates, but they won’t raise them. I am surprised the long end of the market isn’t weaker.”

Foreigners have been buying U.S. assets, he said, but that is unstable. If the economy weakens, those investors will want to “get out.” A lot of “potential selling” could happen, Gundlach said. Broker dealers outside the U.S. are not regulated with the same type of circuit breakers in the U.S. that prevent rapid declines, according to Gundlach.

In the U.S. corporate bond market, dealer inventories are “nonexistent,” Gundlach said, despite continued issuance over the last 20 years. The quality has collapsed in the last 30 years. Bonds rated single-A and above were 68% of the market in 1998, but are now only 40%. The lowest tier of investment grade (BBB) has filled the gap, according to Gundlach.

“That’s a real problem when the next recession comes,” Gundlach said. “Those bonds are close to junk status.”

Corporate debt as a percent of GDP went from 40% to 47% over the last decade. That ratio historically collapses in recessions, Gundlach said. “When that happens it will be very difficult to get out in the middle of it.”

He reminded listeners that in past recessions bond downgrades outnumbered upgrades by two-to-one.

He said that corporate leverage, based on the ratio of investment-grade and high-yield (ex-commodities) bonds to corporate EBITDA, is “very high” on a historical basis. If one were to include commodities in that ratio, “it would be much worse,” he said.

The political outlook

Assessing the potential Democratic nominees, Gundlach said that Joe Biden has “no chance.” Nobody will vote for him who watched what he was doing, Gundlach said, particularly that he can’t formulate sentences.

Elizabeth Warren has completely “petered out,” he said, citing data from the betting markets (predictit). Wall Street has completely discounted the possibility that she might win and implement policies that would threaten economic growth. Gundlach said the market “foresaw her demise and got it right.”

Pete Buttigieg is “really impressive,” he said, and the best candidate on his feet since Ronald Reagan. But he is 37 years old and “looks 21, which can’t be overcome.”

Bernie Sanders could emerge as a nominee if he gets Warren’s support, Gundlach said, but otherwise has a small chance of getting the nomination.

He doesn’t see Michael Bloomberg winning either.

The strongest candidate among the Democrats is Hillary Clinton, Gundlach said. She is at 10% in the betting markets, tied with Bloomberg. But he doubts she will enter the race.

“The base case is that Trump will win,” Gundlach said, “because the Democrats are a mess.” He added that Trump will not be removed through the impeachment process.

*  *  *

Tyler Durden

Sat, 12/21/2019 - 17:30


Business Finance


British Billionaire Property Tycoon Brothers Stuck In The Art World's Biggest Multi-Million Dollar Scandal

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British Billionaire Property Tycoon Brothers Stuck In The Art World's Biggest Multi-Million Dollar Scandal

The billionaire Reuben brothers of Britain - best known as property tycoons that are worth a collective $12.6 billion - have found themselves in smack dab in the middle of the art world's biggest controversy.

One of the biggest question marks in the industry is the true owner of Guzzini Properties, Ltd., which is an investo

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r claiming ownership of a work sold by Inigo Philbrick, an art dealer who has mysteriously vanished after being sued repeatedly for various types of alleged fraud involved art he allegedly owned and helped broker sales of. 

An attorney in New York who represents Guzzini, Wendy Lindstom, confirmed that David and Simon Reuben are its owners, according to Bloomberg. 

Guzzini has filed a lawsuit over the work, Rudolf Stingel’s 2012 untitled portrait of Pablo Picasso, as of October. The complaint stated that Guzzini had bought the painting from Philbrick in 2017, along with two other pieces, for $6 million. Guzzini reportedly cosigned the work to Christie's for its May auction, where it fetched $6.5 million.

Except there was one problem: two other firms apparently had stakes in the painting prior to Guzzini. 

Satfinance Investment Ltd. bought a 50% share in the work for $3.35 million from Philbrick in January 2016 and German art investment firm FAP GmbH says that it agreed in February 2016 to buy the Stingel from Philbrick in its entirety for $7.1 million. Guzzini is now seeking a legal declaration that it is the sole owner of the work and is seeking its return. 

Lindstrom said: “My clients are philanthropic collectors, who, unfortunately, must now litigate to secure their rightful title to artworks after their good-faith, arm’s-length purchases.”

Until now, it had been a mystery as to who was behind Guzzini - and Christie's, the auction house holding the work, is waiting for the courts to decide who the rightful owner is.

A spokesperson for the auction house said: “Given the ongoing nature of the multiple legal cases in this matter, Christie’s agrees that determination of rightful ownership of the Stingel work by the courts is the next necessary step forward.”

The Reubens have been lenders to landmarks like New York's Plaza Hotel and the Grosvenor House hotel in London. Last week they committed to helping finance Dreamscape Co.'s acquisition of the Rio All-Suite Hotel from Caesars. 

Recall, days ago, we wrote about the disappearance of Philbrick amidst allegations of double dealing and inflating the prices of art he was purchasing with business partners. 

Tyler Durden

Mon, 12/16/2019 - 02:45

By 2100, Five Of The Ten Biggest Countries In The World Will Be In Africa

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By 2100, Five Of The Ten Biggest Countries In The World Will Be In Africa

In the 21st century so far, populous countries and strong population growth were most often associated with Asia – but, as Statista's Katharina Buchholz notes, this view of the world will have to change in the future, data by the United Nations and Pew Research Center shows.

While in 2020, five out of the ten most populous countries in the world were located in Asi

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a, the picture will look different in 2100, when five African countries – Nigeria, Ethiopia, Tanzania, Egypt and the Democratic Republic of the Congo – will be among the world’s ten largest.

You will find more infographics at Statista

While some Asian countries will continue to grow, they will do so at a lower rate and will be surpassed in population by African countries exhibiting faster growth. Others, like China and Bangladesh are actually expected to shrink until 2100, mainly a result of higher standard of living and education that has already begun to lower birth rates.

In 1950, four European countries were still among the world’s largest. That number will have decreased to one in 2020 and none in 2100.

The number of children born worldwide is already decreasing, but at currently 2.5 children born per woman, world population is still growing. UN population researchers found that if the global fertility rate kept dropping at the rate it currently is, it would reach 1.9 children per woman in 2100, at which point the world population would actually be decreasing.

Tyler Durden

Mon, 12/16/2019 - 04:15


Social Issues


The Swiss Are The World's Biggest Chocoholics

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The Swiss Are The World's Biggest Chocoholics

While Augustus Gloop - a young German boy with a cocoa addiction - may be the most infamous...

...when it comes to the league of chocoholics, Switzerland is out in front with annual per capita consumption amounting to an impressive 8.8 kilograms.

You will find more infographics at Statista

The country

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is well known for its excellent chocolate industry with Toblerone one of its more recognizable brands. Neighboring Austria and Germany are also high up on the list with 8.1 and 7.9 kilograms respectively.

The consumption data was published by Swisss chocolatier and confectionery company Lindt.

Tyler Durden

Sun, 12/15/2019 - 07:35

US To Lead Biggest Military Drill In Europe Since Cold War, Showing NATO How It's Done

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US To Lead Biggest Military Drill In Europe Since Cold War, Showing NATO How It's Done

Coming off last week's 70th anniversary NATO conference in London where deep cracks in the Western alliance were felt more than ever, and where its mission scope is now proposed as including China (given many are questioning 'what's next?') — a summit which President Trump also abruptly departed early after the 'hot mic' incident involving world leaders laughing at him

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, Washington is signalling its abiding commitment to NATO by planning massive war games on European soil in April. 

This also after Trump lambasted low-spending European allies as "delinquent" but also hit back at French President Macron's prior "brain death" of NATO comments as "very nasty" remarks. When in doubt, hold a massive military show of force, apparently:

The United States will send 20,000 troops to Europe next April and May in its biggest military exercises on European soil since the Cold War to underscore Washington's commitment to NATO, a senior allied commander said on Tuesday.

Prior NATO war games, US Army file image.

US Air Force Allied Powers Europe commander, Maj. Gen. Barre R. Seguin in the days following the London summit announced the Germany-based exercises will be the largest of their kind in 25 years, Reuters reports. 

"This really demonstrates transatlantic unity and the U.S. commitment to NATO," Gen. Seguin told reporters from Belgium. "We have not demonstrated this ability to rapidly reinforce, from a transatlantic perspective ... for 25 years or so," he added. And speaking to the continued 'relevance' of NATO, Gen. Seguin said, "We're going into an era of strategic competition in peacetime" as "the alliance has reorientated." 

In total the exercises are expected to involve some 37,000 total NATO troops, the bulk of them American forces, from 18 NATO allied countries. The last such similar major drills in the heart of Europe were the 'Return of Forces to Germany', or 'REFORGER' maneuvers, of the 1980s.

Crucially, the games will specifically simulate readiness for another 'annexation of Crimea' heightened situation aimed at Russia, according to Reuters:

Eager to deter Russia from any repeat of its 2014 annexation of Crimea from Ukraine, the U.S. Army will test its ability to transport the soldiers across the Atlantic to Belgium and the Netherlands and then move quickly east through Germany into Poland and along NATO's eastern flank.

The timing of this announcement and consciously invoking the 'Russian threat' in Ukraine is also interesting given the unprecedented face to face meeting between Ukrainian President Zelensky and Vladimir Putin this week in Paris to find a way forward in resolving the Donbass crisis. 

At the talks also hosted by France's Macron and Germany's Merkel, significant headway was reportedly made on agreement toward a ceasefire in Ukraine's war-torn east, however, details have been sparse.

Tyler Durden

Thu, 12/12/2019 - 04:15


War Conflict


"Forget The KKK, Modern-Day Liberals Are The Biggest Impediment": Clarence Thomas Reflects On Biden Experience

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"Forget The KKK, Modern-Day Liberals Are The Biggest Impediment": Clarence Thomas Reflects On Biden Experience

Supreme Court Justice Clarence Thomas says that modern day liberals posed the biggest impediment to his career, as opposed to what he was taught to believe.

"I felt as though in my life I had been looking at the wrong people as the people who would be problematic toward me. We were told that, 'Oh, it's gonna b

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e the bigot in the pickup truck; it's gonna be the Klansmen; it's gonna be the rural sheriff," Thomas says in a forthcoming documentary, "Created Equal: Clarence Thomas in His Own Words."

"But it turned out that through all of that, ultimately the biggest impediment was the modern day liberal," he added. "They were the ones who would discount all those things because they have one issue or because they have the power to caricature you," according to ABC News.

Thomas has joined public criticism of former Vice President and 2020 Democratic candidate Joe Biden, whose handling of Thomas's 1991 Supreme Court hearings when he was a Senator has fallen under harsh scrutiny.

Thomas sat for more than 22 hours of interviews over a six-month period in 2018, according to the film's publicist. Manifold has advertised the movie as a chance to "tell the Clarence Thomas story truly and fully, without cover-ups or distortions."

The movie also casts a spotlight on Biden, who has faced renewed criticism from his fellow Democrats for his treatment of Anita Hill, an African-American law professor who had accused Thomas of sexual harassment and testified publicly before the committee during the 1991 hearings. Biden called Hill to apologize earlier this year for his handling of the case. -ABC News

Thomas denied Hill's allegations, which he referred to during the Biden-led hearings as a "high-tech lynching."

"Do I have like stupid written on the back of my shirt? I mean, come on. We know what this is all about," Thomas says in the documentary.

"People should just tell the truth: ‘This is the wrong black guy; he has to be destroyed.’ Just say it. Then now we’re at least honest with each other. The idea was to get rid of me. And then, after I was there, it was to undermine me."

While Thomas does not mention Biden by name, he is asked by filmmakers to respond directly to Biden's line of questioning during the hearings on his views of natural law.

"I have no idea what he was talking about," Thomas says of Biden.

"I understood what he was trying to do. I didn't really appreciate it," he added. "Natural law was nothing more than a way of tricking me into talking about abortion." -ABC News

In response to the documentary, Biden's deputy communications director Bill Russo said in a statement to ABC: "Then-Senator Biden voted against Clarence Thomas in the Senate Judiciary Committee, he argued against him on the Senate floor, and he voted against his confirmation to a lifetime seat on the Supreme Court. It is no surprise that Justice Thomas does not have a positive view of him."

Thomas was eventually confirmed in the Senate by a slim margin of 52 to 48 on Oct. 15, 1991. 

"Most of my opponents on the judiciary committee cared about only one thing," Thomas says in the film. "How would I rule on abortion rights. You really didn't matter and your life didn't matter. What mattered is what they wanted and what they wanted was this particular issue."

Thomas speaks at length about his journey from childhood in impoverished rural Georgia, to a stint in a Roman Catholic seminary, and on to the elite classrooms of Holy Cross and Yale. He describes his grandfather, a fuel oil deliveryman in Savannah, as one of the biggest influences on his life, teaching him determination and self-reliance.

Thomas says those values are what sustain him in the face of persistent criticism as a black conservative.

"There's different sets of rules for different people," he says. "If you criticize a black person who's more liberal, you're a racist. Whereas you can do whatever to me, or to now (HUD Secretary) Ben Carson, and that's fine, because you're not really black because you're not doing what we expect black people to do." -ABC News

The documentary is set for theatrical release in early 2020 and will air on PBS next spring.

Tyler Durden

Fri, 11/29/2019 - 17:10

World's Biggest Hedge Fund Bets $1.5 Billion That Market Will Crash By March

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World's Biggest Hedge Fund Bets $1.5 Billion That Market Will Crash By March

At the beginning of 2018, Ray Dalio said during one of his annual speeches at Davos that investors would feel "pretty stupid" if they were holding cash. Over the following 11 months, one of the biggest market blowups since the crisis left US stocks in the red for the year. But somehow, Bridgewater emerged as one of the best-performing firms of 2018, with one of its funds up double digits

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Almost two years later, Dalio has made it clear that he's increasingly worried about the state of the global economy, and he's willing to risk losing 1% of his firm's assets to make sure Bridgewater is protected.

Ray Dalio

A few months back, the world's biggest hedge fund enlisted Goldman Sachs and Morgan Stanley to help structure a massive bet that will pay off if, between now and the end of the first quarter, global stocks retreat. According to WSJ, Bridgewater has amassed a giant $1 billion bet using put options.

If the S&P 500, Stoxx 50 or both decline before Bridgewater's put options expire, the firm will make money from the bet. If stocks rise, then those options will likely expire worthless.

The firm paid $1.5 billion - or roughly 1% of its $150 billion net worth - for the options, which have a notional value of $100 billion.

WSJ broke the story, but its reporters couldn't say for sure what Bridgewater's motives are. The options could constitute a directional bet in their own right, or simply a hedge against Bridgewater's sizable long exposure to equities.

According to WSJ, Bridgewater's buying up of put options had become the subject of Wall Street gossip. But as far as we can tell, Bridgewater's buying might have been spurred by the firm's appreciation for a bargain. Because as far as we can tell, with stocks climbing to fresh highs, traders haven't been as interested in hedging their positions, for whatever reason.

Some speculate that Dalio, who has espoused increasingly progressive political opinions in recent months, might have concocted a bet that will pay off if progressive Dems like Elizabeth Warren notch victories in the earliest primaries, though a Bridgewater spokesperson denied that the firm is making big bets on politics.

As WSJ points out, George Soros lost $1 billion when his firm bet on a big market drawdown in the wake of President Trump's surprise electoral victory.

So far this year, Bridgewater's performance has been mixed: the firm's macro fund has lost 2.7% through October, while its All Weather fund is up 14.5% for the period. But with the S&P 500 having achieved is longest bull run in its 90-plus-year history, it's hardly surprising that traders suspect it might have finally run out of steam, especially given the Democrats' unsettling shift to the left.

Tyler Durden

Fri, 11/22/2019 - 11:55


Business Finance


West African Coastal States Are Failing To Curb The World's Biggest Piracy Problem

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West African Coastal States Are Failing To Curb The World's Biggest Piracy Problem

Pirates are thriving off of the coast of West Africa, despite what is supposed to be a concerted effort to prevent them. And with business starting to boom in areas like Togo, dealing with the threat has become more important than ever. 

The coastline's failure to coordinate a unified response is allowing the attacks to continue, Togolese Presiden

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t Faure Gnassingbe told Bloomberg.  

Earlier this month, pirates boarded two ships off the coast of Togo, marking the latest attacks in an area where piracy is rampant: the Gulf of Guinea between Senegal and Angola. 15 states and western partners signed a pact in 2013 to collaborate against piracy in the area, but the region still accounts for 40% of the world's reported piracy incidents. 

Togolese forces are left to pursue pirates in their own waters, which span a coastline of about 31 miles. They often need to hand over the chases to neighboring states to pursue pirates, but cooperation is spotty between states.

Gnassingbe said: “Individually countries are doing what needs to be done. Where we are a little bit weak is how to cooperate. We need to cooperate and take some measures.”

The Gulf of Guinea area makes up 82% of all kidnappings globally, driving up the costs associated with shipping in the area, like insurance and security.

Togo is a $5 billion economy that is made up mostly of agriculture and mining. The country is now implementing regulatory reforms to reduce public debt and lure investments. The country is up 40 places this year in the World Bank's ease-of-doing-business ranking to 97, as a result of introducing reforms to lower electricity costs and fees for construction permits.  

"Over the next year, the government will seek to strengthen the judiciary to ease business litigation and implement digital platforms for the administration of taxes and payments," Gnassingbe said. “It will increase the efficiency, that is for digital, and it will give confidence, that’s for the justice system.”

In early November, Nigerian billionaire Aliko Dangote announced a $2 billion investment in a phosphate mining project in Togo, which shows people's willingness to do business in the area. The reforms and influx of business make dealing with the coastline's piracy problems even more crucial. 

Gnassingbe has been in power since 2005, when his father, who seized power in a 1967 coup, died. Lawmakers in the country recently introduced constitutional reforms in May to limit the number of Presidential terms to two. The reforms aren't retroactive, which means that Gnassingbe will be able to extend his rule by another decade. The country's next election is slated for 2020. 

Tyler Durden

Wed, 11/20/2019 - 04:15




"Biggest Fire Loss In Fort Lauderdale History:" Two Mega Yachts Worth $24 Million Ignite In Fiery Blaze

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"Biggest Fire Loss In Fort Lauderdale History:" Two Mega Yachts Worth $24 Million Ignite In Fiery Blaze

Two large superyachts in a Fort Lauderdale marina on Sunday burned to the ground as dozens of firefighters worked for hours to contain the blaze. 

Fort Lauderdale Battalion Chief Stephen Gollan told Sun-Sentinel that the yachts were valued at $24 million and were the "biggest fire loss in Fort Lauderdale history."

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br />

Gollan said the cause of the fire is unknown, but said the yachts were docked in the marina, pending renovation work.

"We haven't even begun the investigation yet," Gollan told the Sun-Sentinel Sunday night. "[Monday] morning we plan to go in with ourselves and other resources from [the Bureau of Alcohol, Tobacco, Firearms and Explosives] and begin our investigation." he added.

Gollan said the fire broke out early Sunday morning on Trinity Yachts, a 161-foot superyacht, worth around $12 to $16 million. 

Northwestern winds at the time of the incident spread the fire to an adjacent 107-foot Christensen yacht, valued around $6 to $7 million.

Over 60 firefighters from several different fire departments fought the fire on both yachts for 5 hours on Sunday morning. 

A dramatic video of the fire was posted on the Fort Lauderdale Fire Reserve's Facebook page. 

"At 04:30 on Saturday November 16th, FLFR crews responded to a report of two large yachts on fire in the 2500 block of State Road 84. Upon arrival the fire was located at Universal Marine on the docks closest to the New River.

Due to the large volume of fire and the difficulty of access, a second alarm was immediately requested. Over the next five hours more than 60 fire fighters and 3 fire boats would battle this blaze, preventing it from spreading to other yachts in the marine.

Thankfully no one was injured during this intense fire," the fire department said. 

Gollan said investigators would be reviewing video surveillance on Monday to see if the fire was intentionally set. He said if the fire turns out to be an accident -- it would be tough to determine the cause considering the significant damage on both vessels. 

Tyler Durden

Mon, 11/18/2019 - 22:05


Disaster Accident


Baltimore State's Attorney: "Over-Militarization Of Police Departments" Biggest Threat To Civil Rights

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Baltimore State's Attorney: "Over-Militarization Of Police Departments" Biggest Threat To Civil Rights

Baltimore State's Attorney Marilyn J. Mosby was quoted at the University of Baltimore Law's 400 Years: Slavery and the Criminal Justice System conference in saying one of the most significant civil rights issues facing African Americans in Baltimore City is the "flawed" criminal justice system that has kept many in a perpetual state of mass inc

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arceration and economic oppression, reported The Baltimore Sun.

"Black people are six times more likely to be arrested and become a part of the criminal justice system [than] whites," Mosby said at the two-day conference on Saturday.  

Mosby blamed the "over-militarization of police departments" in inner cities and unfair laws as a significant contributor to the economic disparities affecting African American communities not just in Baltimore but in major cities across the country.

"You have an over-militarization of police departments all across the country, racially unjust application of laws against poor black and brown people, [and] collateral consequences of these convictions that have kept black and brown people and communities [as] second-class citizens," she said.

Other speakers shared similar views at the conference, such as defense attorneys, law students, academics, community leaders, and city residents. 

Mosby said the civil rights of African Americans in the poorest Baltimore City neighborhoods are being threatened by city police officers who are enforcing racist laws. Mass incarceration in the city has created limited economic mobility for black youth, she added.

She said her decision to stop prosecuting marijuana possessions is a new direction for the criminal justice system that would help to address racial inequities built into the system that has led to the mass oppression of low-income communities. 

Mosby's five years of laissez-faire attitude on crime in Baltimore City has coincided with five-years of homicides climbing over 300 or more per year. 

David Fakunle, the acting chairman of the Maryland Commission on Truth and Reconciliation, was recently quoted by The Sun as saying there needs to be a significant overhaul of the city's criminal justice system that is disproportionately affecting African Americans. 

Fakunle was recently heard at a separate conference in saying, "Respect my existence, or expect my resistance." 

And referring to Fakunle's comments, Law Enforcement Today said, "Hopefully citizens don't take those words out of context or use them to the extreme while dealing with police encounters, as resistance to members of law enforcement is dangerous for both the officers and the subject."

There's no question that Baltimore's criminal justice system needs a drastic overhaul, and it certainly seems that the city is nowhere close in determining which reforms will be the best solutions to end mass incarcerations that could one day liberate hundreds of thousands out of poverty. 

In the meantime, Baltimore City will continue its death spiral until meaningful reform is seen. It could be decades before the real change arrives.

Tyler Durden

Sun, 11/17/2019 - 17:00


Social Issues
Law Crime


Global Debt Tops $188,000,000,000,000 – Officially The Biggest Debt Bubble The World Has Ever Seen

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Global Debt Tops $188,000,000,000,000 – Officially The Biggest Debt Bubble The World Has Ever Seen

Authored by Michael Snyder via TheMostImportantNews.com,

The world is now 188 trillion dollars in debt, and that number continues to grow rapidly each year.

It is a form of enslavement that is deeply insidious, because most of those living on the planet do not even understand ho

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w the system works, and even if they did most of them would have absolutely no hope of ever getting free from it. The borrower is the servant of the lender, and the global financial system is designed to funnel as much wealth to the top 0.1% as possible. Of course throughout human history there has always been slavery, and the primary motivation for having slaves is to extract an economic benefit from those that are enslaved. And even though most of us don’t like to think of ourselves as “slaves” today, the truth is that the global elite are extracting more wealth from all of us than ever before. So much of our labor is going to make them wealthy, and yet most people don’t even realize what is happening.

Let’s start with a very simple example to help illustrate this.

When you go into credit card debt and you only make small payments each month, you can easily end up paying back more than double the amount of money that you originally borrowed.

So where does all that money go?

Well, of course it goes to the financial institution that you got your credit card from, and in turn that financial institution is owned by the global elite.

In essence, you willingly became a debt slave when you chose to go into credit card debt, and the hard work that it took to earn enough money to pay back that debt with interest ended up enriching others.

On a much larger scale, the same thing is happening to entire nations.

Today, the United States government is nearly 23 trillion dollars in debt. In essence, we have been collectively enslaved, and we have been obligated to pay back all of that money with interest. Of course at this point it is literally impossible for us to ever pay back all that debt, and every year we add another trillion dollars or so to the balance. The global elite are now extracting more than 500 billion dollars in interest from this debt on an annual basis, and it is expected that number will greatly escalate in the years ahead.

It is not an accident that the Federal Reserve and the federal income tax were both instituted in 1913. The Federal Reserve system was designed to create an endless debt spiral that would get the federal government in as much debt as possible, and since that time the size of our national debt has gotten more than 7000 times larger. And the federal income tax was needed as the mechanism through which our wealth is transferred to the government to service all of this debt.

It is truly a deeply, deeply insidious system, and the American people should refuse to back any politician that does not favor shutting it down, but at this point this isn’t even a major political issue in our nation.

And of course the United States is far from alone. Even though we can’t get the whole world to agree on much of anything, somehow virtually the entire planet has been convinced that debt-based central banking is the way to go.

In fact, at this point 99.9 percent of the population of the world lives in a country that has a central bank.

According to Wikipedia, there are only 9 very small nations that do not have a central bank at this point…


-Isle of Man






-Marshall Islands

-Federated States of Micronesia

If you combine the populations of all of those 9 nations together, it comes to much less than 0.1% of the total global population.

Do you think that this is just a coincidence?

The global elite do not want humanity to be free. They want us to be in as much debt as possible so that we can make them richer.

When you realize how badly the game has been rigged, then a lot of things start to make a whole lot more sense.

For example, for those that understand how the system works it is certainly not surprising that the total amount of debt in the world has hit a new all-time record high of 188 trillion dollars…

The global debt load has surged to a new all-time record equivalent to more than double the world’s economic output, IMF chief Kristalina Georgieva warned Thursday.

While private sector borrowing accounts for the vast majority of the total, the rise puts governments and individuals at risk if the economy slows, she said.

“Global debt — both public and private — has reached an all-time high of $188 trillion. This amounts to about 230 percent of world output,” Georgieva said in a speech to open a two-day conference on debt.

That number has risen by 24 trillion dollars since 2016, and it is the biggest debt bubble that the world has ever seen by a very wide margin.

Of course at some point this debt bubble is going to burst in a global disaster of epic proportions, but meanwhile the global elite are going to continue to milk all of us for as long as they possibly can.

Here in the United States, we have been on the greatest debt binge in the history of our nation since the last financial crisis. U.S. government debt has more than doubled, state and local government debt has ballooned to ridiculous proportions in much of the nation, corporate debt has doubled, student loan debt has more than doubled, auto loan debt just keeps hitting new record highs, and U.S. consumers are now 14 trillion dollars in debt.

Our mountain of debt has become so colossal that the only way to keep the game going is to borrow even more money, but by borrowing more money we make our enslavement even worse.

Meanwhile, those that are holding our debt just continue to live the high life as they laugh all the way to the bank.

Tyler Durden

Fri, 11/08/2019 - 17:05


Business Finance


Gulfstream Is Back In The Race For The World's Biggest Private Jet

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Gulfstream Is Back In The Race For The World's Biggest Private Jet

Gulfstream is now (again) gunning for bragging rights to the world's biggest private jet, according to Bloomberg. Gulfstream's G650 was unseated as the world's largest luxury jet by Bombardier's Global 7500 last year. 

But now, Gulfstream's new G700, a roomier version of its flagship G650, is set to debut in 2022 and will be capable of flying 7,500 nautic

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al miles and cruising at just under the speed of sound.

Gulfstream President Mark Burns said on Monday that the plane has “the tallest, widest, longest cabin in our industry.”

Gulfstream is making a bet that the $76 million G700 will entice some of the richest flyers in the world with its large cabin and upgraded range. Qatar Airways has already ordered 10 of the aircraft for its charter service, Qatar Executive.

But the luxury jet market is anything but booming right now. A recent study by Honeywell concluded that deliveries could begin flagging in 2021 as a result of a slowdown in orders. And even though new luxury jet offerings are coming to market this year and next, the industry still faces threats from the ongoing U.S./China trade war, Brexit and a slowing global economy.

Bombardier's Global 7500 came to market two years later than planned and was a product of a full-on new design layout. 

David Coleal, president of Bombardier’s aviation unit said: “Global 7500 is the industry flagship. It’s a clean sheet design, built to perform like no other. Remember, anything else out there is just a stretch.”

Bombardier's plane has a range of 7,700 nautical miles and can fly at Mach 0.925, also slightly less than the speed of sound. It costs $73 million, has a wingspan of 104 feet and has a cabin with four distinct seating zones.

Gulfstream waited on announcing its new plane until it had delivered two new smaller jets: one G500 and one G600. The G600 began shipments in June and the G500 debuted about a year earlier. Both models were introduced in 2014, whereas the flagship G650 debuted in 2012.

Tyler Durden

Wed, 10/23/2019 - 22:50

Escobar: Syria May Be The Biggest Defeat For The CIA Since Vietnam

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Escobar: Syria May Be The Biggest Defeat For The CIA Since Vietnam

Authored by Pepe Escobar via ConsortiumNews.com,

What is happening in Syria, following yet another Russia-brokered deal, is a massive geopolitical game-changer.

I’ve tried to summarize it in a single paragraph this way:

It’s a quadruple win. The U.S. perfor

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ms a face saving withdrawal, which Trump can sell as avoiding a conflict with NATO ally Turkey. Turkey has the guarantee – by the Russians – that the Syrian Army will be in control of the Turkish-Syrian border. Russia prevents a war escalation and keeps the Russia-Iran-Turkey peace process alive.  And Syria will eventually regain control of the entire northeast.”

Syria may be the biggest defeat for the CIA since Vietnam.

Yet that hardly begins to tell the whole story.

Allow me to briefly sketch in broad historical strokes how we got here.

It began with an intuition I felt last month at the tri-border point of Lebanon, Syria and Occupied Palestine; followed by a subsequent series of conversations in Beirut with first-class Lebanese, Syrian, Iranian, Russian, French and Italian analysts; all resting on my travels in Syria since the 1990s; with a mix of selected bibliography in French available at Antoine’s in Beirut thrown in.

The Vilayets

Let’s start in the 19thcentury when Syria consisted of six vilayets Ottoman provinces — without counting Mount Lebanon, which had a special status since 1861 to the benefit of Maronite Christians and Jerusalem, which was a sanjak (administrative division) of Istanbul.

The vilayets did not define the extremely complex Syrian identity: for instance, Armenians were the majority in the vilayet of Maras, Kurds in Diyarbakir – both now part of Turkey in southern Anatolia – and the vilayets of Aleppo and Damascus were both Sunni Arab.

Nineteenth century Ottoman Syria was the epitome of cosmopolitanism. There were no interior borders or walls. Everything was inter-dependent.

Ethnic groups in the Balkans and Asia Minor, early 20th Century, Historical Atlas, 1911.

Then the Europeans, profiting from World War I, intervened. France got the Syrian-Lebanese littoral, and later the vilayets of Maras and Mosul (today in Iraq). Palestine was separated from Cham (the “Levant”), to be internationalized. The vilayet of Damascus was cut in half: France got the north, the Brits got the south. Separation between Syria and the mostly Christian Lebanese lands came later.

There was always the complex question of the Syria-Iraq border. Since antiquity, the Euphrates acted as a barrier, for instance between the Cham of the Umayyads and their fierce competitors on the other side of the river, the Mesopotamian Abbasids.

James Barr, in his splendid “A Line in the Sand,” notes, correctly, that the Sykes-Picot agreement imposed on the Middle East the European conception of territory: their “line in the sand” codified a delimited separation between nation-states. The problem is, there were no nation-states in region in the early 20thcentury.

The birth of Syria as we know it was a work in progress, involving the Europeans, the Hashemite dynasty, nationalist Syrians invested in building a Greater Syria including Lebanon, and the Maronites of Mount Lebanon. An important factor is that few in the region lamented losing dependence on Hashemite Medina, and except the Turks, the loss of the vilayet of Mosul in what became Iraq after World War I.

In 1925, Sunnis became the de facto prominent power in Syria, as the French unified Aleppo and Damascus. During the 1920s France also established the borders of eastern Syria. And the Treaty of Lausanne, in 1923, forced the Turks to give up all Ottoman holdings but didn’t keep them out of the game.

Turkish borders according to the Treaty of Lausanne, 1923.

The Turks soon started to encroach on the French mandate, and began blocking the dream of Kurdish autonomy. France in the end gave in: the Turkish-Syrian border would parallel the route of the fabledBagdadbahn — the Berlin-Baghdad railway.

In the 1930s France gave in even more: the sanjak of Alexandretta (today’s Iskenderun, in Hatay province, Turkey), was finally annexed by Turkey in 1939 when only 40 percent of the population was Turkish.

The annexation led to the exile of tens of thousands of Armenians. It was a tremendous blow for Syrian nationalists. And it was a disaster for Aleppo, which lost its corridor to the Eastern Mediterranean.

Turkish forces under entered Alexandretta on July 5, 1938.

This emergent Syria — out of conflicting Turkish, French, British and myriad local interests —obviously could not, and did not, please any community. Still, the heart of the nation configured what was described as “useful Syria.” No less than 60 percent of the nation was — and remains — practically void.Yet, geopolitically, that translates into “strategic depth” — the heart of the matter in the current war.To the eastern steppes, Syria was all about Bedouin tribes. To the north, it was all about the Turkish-Kurdish clash. And to the south, the border was a mirage in the desert, only drawn with the advent of Transjordan. Only the western front, with Lebanon, was established, and consolidated after WWII.

From Hafez to Bashar

Starting in 1963, the Baath party, secular and nationalist, took over Syria, finally consolidating its power in 1970 with Hafez al-Assad, who instead of just relying on his Alawite minority, built a humongous, hyper-centralized state machinery mixed with a police state. The key actors who refused to play the game were the Muslim Brotherhood, all the way to being massacred during the hardcore 1982 Hama repression.

Secularism and a police state: that’s how the fragile Syrian mosaic was preserved. But already in the 1970s major fractures were emerging: between major cities and a very poor periphery; between the “useful” west and the Bedouin east; between Arabs and Kurds. But the urban elites never repudiated the iron will of Damascus: cronyism, after all, was quite profitable.

Damascus interfered heavily with the Lebanese civil war since 1976 at the invitation of the Arab League as a “peacekeeping force.” In Hafez al-Assad’s logic, stressing the Arab identity of Lebanon was essential to recover Greater Syria. But Syrian control over Lebanon started to unravel in 2005, after the murder of former Lebanese Prime Minister Rafiq Hariri, very close to Saudi Arabia, the Syrian Arab Army (SAA) eventually left.

Bashar al-Assad had taken power in 2000. Unlike his father, he bet on the Alawites to run the state machinery, preventing the possibility of a coup but completely alienating himself from the poor, Syrian on the street.

What the West defined as the Arab Spring, began in Syria in March 2011; it was a revolt against the Alawites as much  as a revolt against Damascus. Totally instrumentalized by the foreign interests, the revolt sprang up in extremely poor, dejected Sunni peripheries: Deraa in the south, the deserted east, and the suburbs of Damascus and Aleppo.

Protest in Damascus, April 24, 2011. (syriana2011/Flickr)

What was not understood in the West is that this “beggars banquet” was not against the Syrian nation, but against a “regime.” Jabhat al-Nusra, in a P.R. exercise, even broke its official link with al-Qaeda and changed its denomination to Fatah al-Cham and then Hayat Tahrir al-Cham (“Organization for the Liberation of the Levant”). Only ISIS/Daesh said they were fighting for the end of Sykes-Picot.

By 2014, the perpetually moving battlefield was more or less established: Damascus against both Jabhat al-Nusra and ISIS/Daesh, with a wobbly role for the Kurds in the northeast, obsessed in preserving the cantons of Afrin, Kobane and Qamichli.

But the key point is that each katiba (“combat group”), each neighborhood, each village, and in fact each combatant was in-and-out of allegiances non-stop. That yielded a dizzying nebulae of jihadis, criminals, mercenaries, some linked to al-Qaeda, some to Daesh, some trained by the Americans, some just making a quick buck.

For instance Salafis — lavishly financed by Saudi Arabia and Kuwait — especially Jaish al-Islam, even struck alliances with the PYD Kurds in Syria and the jihadis of Hayat Tahrir al-Cham (the remixed, 30,000-strong  al-Qaeda in Syria). Meanwhile, the PYD Kurds (an emanation of the Turkish Kurds’ PKK, which Ankara consider “terrorists”) profited from this unholy mess — plus a deliberate ambiguity by Damascus – to try to create their autonomous Rojava.

A demonstration in the city of Afrin in support of the YPG against the Turkish invasion of Afrin, Jan. 19, 2018. (Voice of America Kurdish, Wikimedia Commons)

That Turkish Strategic Depth

Turkey was all in. Turbo-charged by the neo-Ottoman politics of former Foreign Minister Ahmet Davutoglu, the logic was to reconquer parts of the Ottoman empire, and get rid of Assad because he had helped PKK Kurdish rebels in Turkey.

Davutoglu’s Strategik Derinlik (“Strategic Depth’), published in 2001, had been a smash hit in Turkey, reclaiming the glory of eight centuries of an sprawling empire, compared to puny 911 kilometers of borders fixed by the French and the Kemalists. Bilad al Cham, the Ottoman province congregating Lebanon, historical Palestine, Jordan and Syria, remained a powerful magnet in both the Syrian and Turkish unconscious.

No wonder Turkey’s Recep Erdogan was fired up: in 2012 he even boasted he was getting ready to pray in the Umayyad mosque in Damascus, post-regime change, of course. He has been gunning for a safe zone inside the Syrian border — actually a Turkish enclave — since 2014. To get it, he has used a whole bag of nasty players — from militias close to the Muslim Brotherhood to hardcore Turkmen gangs.

With the establishment of the Free Syrian Army (FSA), for the first time Turkey allowed foreign weaponized groups to operate on its own territory. A training camp was set up in 2011 in the sanjakof Alexandretta. The Syrian National Council was also created in Istanbul – a bunch of non-entities from the diaspora who had not been in Syria for decades.

Ankara enabled a de facto Jihad Highway — with people from Central Asia, Caucasus, Maghreb, Pakistan, Xinjiang, all points north in Europe being smuggled back and forth at will. In 2015, Ankara, Riyadh and Doha set up the dreaded Jaish al-Fath (“Army of Conquest”), which included Jabhat al-Nusra (al-Qaeda).

At the same time, Ankara maintained an extremely ambiguous relationship with ISIS/Daesh, buying its smuggled oil, treating jihadis in Turkish hospitals, and paying zero attention to jihad intel collected and developed on Turkish territory. For at least five years, the MIT — Turkish intelligence – provided political and logistic background to the Syrian opposition while weaponizing a galaxy of Salafis. After all, Ankara believed that ISIS/Daesh only existed because of the “evil” deployed by the Assad regime.

The Russian Factor

Russian President Vladiimir Putin meeting with President of Turkey Recep Erdogan; Russian Minister of Foreign Affairs Sergei Lavrov standing in background, Ankara, Dec. 1, 2014 Ankara. (Kremlin)

The first major game-changer was the spectacular Russian entrance in the summer of 2015. Vladimir Putin had asked the U.S. to join in the fight against the Islamic State as the Soviet Union allied against Hitler, negating the American idea that this was Russia’s bid to restore its imperial glory. But the American plan instead, under Barack Obama, was single-minded: betting on a rag-tag Syrian Democratic Forces (SDF), a mix of Kurds and Sunni Arabs, supported by air power and U.S. Special Forces, north of the Euphrates, to smash ISIS/Daesh all the way to Raqqa and Deir ez-Zor.

Raqqa, bombed to rubble by the Pentagon, may have been taken by the SDF, but Deir ez-Zor was taken by Damascus’s Syrian Arab Army. The ultimate American aim was to consistently keep the north of the Euphrates under U.S. power, via their proxies, the SDF and the Kurdish PYD/YPG. That American dream is now over, lamented by imperial Democrats and Republicans alike.

The CIA will be after Trump’s scalp till Kingdom Come.

Kurdish Dream Over

Talk about a cultural misunderstanding. As much as the Syrian Kurds believed U.S. protection amounted to an endorsement of their independence dreams, Americans never seemed to understand that throughout the “Greater Middle East” you cannot buy a tribe. At best, you can rent them. And they use you according to their interests. I’ve seen it from Afghanistan to Iraq’s Anbar province.

The Kurdish dream of a contiguous, autonomous territory from Qamichli to Manbij is over. Sunni Arabs living in this perimeter will resist any Kurdish attempt at dominance.

The Syrian PYD was founded in 2005 by PKK militants. In 2011, Syrians from the PKK came from Qandil – the PKK base in northern Iraq – to build the YPG militia for the PYD. In predominantly Arab zones, Syrian Kurds are in charge of governing because for them Arabs are seen as a bunch of barbarians, incapable of building their “democratic, socialist, ecological and multi-communitarian” society.

Kurdish PKK guerillas In Kirkuk, Iraq. (Kurdishstruggle via Flickr)

One can imagine how conservative Sunni Arab tribal leaders hate their guts. There’s no way these tribal leaders will ever support the Kurds against the SAA or the Turkish army; after all these Arab tribal leaders spent a lot of time in Damascus seeking support from Bashar al-Assad.  And now the Kurds themselves have accepted that support in the face of the Trukish incursion, greenlighted by Trump.

East of Deir ez-Zor, the PYD/YPG already had to say goodbye to the region that is responsible for 50 percent of Syria’s oil production. Damascus and the SAA now have the upper hand. What’s left for the PYD/YPG is to resign themselves to Damascus’s and Russian protection against Turkey, and the chance of exercising sovereignty in exclusively Kurdish territories.

Ignorance of the West

The West, with typical Orientalist haughtiness, never understood that Alawites, Christians, Ismailis and Druze in Syria would always privilege Damascus for protection compared to an “opposition” monopolized by hardcore Islamists, if not jihadis.  The West also did not understand that the government in Damascus, for survival, could always count on formidable Baath party networks plus the dreaded mukhabarat — the intel services.

Rebuilding Syria

The reconstruction of Syria may cost as much as $200 billion. Damascus has already made it very clear that the U.S. and the EU are not welcome. China will be in the forefront, along with Russia and Iran; this will be a project strictly following the Eurasia integration playbook — with the Chinese aiming to revive Syria’s strategic positioning in the Ancient Silk Road.

As for Erdogan, distrusted by virtually everyone, and a tad less neo-Ottoman than in the recent past, he now seems to have finally understood that Bashar al-Assad “won’t go,” and he must live with it. Ankara is bound to remain imvolved with Tehran and Moscow, in finding a comprehensive, constitutional solution for the Syrian tragedy through the former “Astana process”, later developed in Ankara.

The war may not have been totally won, of course. But against all odds, it’s clear a unified, sovereign Syrian nation is bound to prevail over every perverted strand of geopolitical molotov cocktails concocted in sinister NATO/GCC labs. History will eventually tell us that, as an example to the whole Global South, this will remain the ultimate game-changer.

Tyler Durden

Sun, 10/20/2019 - 00:00



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