Wednesday, June 18, 2014

China’s Arab March

"BEIJING – The growing bloodshed in Iraq and Syria is being watched as keenly in China as anywhere else in the world. Indeed, the greater Middle East is becoming an ever greater focus of Chinese foreign policy.
At the just-concluded sixth ministerial conference of the China-Arab States Cooperation Forum, held in Beijing, Chinese President Xi Jinping called upon his Arab counterparts to upgrade their strategic relationships with China, by deepening bilateral cooperation in areas ranging from finance and energy to space technology. This reflects China’s broader goal – established partly in response to America’s “pivot” toward Asia – of rebalancing its strategic focus westward, with an emphasis on the Arab world.
Of course, economic ties between China and Arab countries have been growing stronger for more than a decade, with the trade volume increasing from $25.5 billion in 2004 to $238.9 billion in 2013. China is now the Arab world’s second-largest trading partner, and the largest trading partner for nine Arab countries. Within ten years, the volume of China-Arab trade is expected to reach $600 billion. Engineering contracts and investment have also enhanced ties.
Under Xi’s leadership, China is attempting to reshape its relationships with Arab countries according to its new “march west” strategic framework. The most notable component of this strategy is the “Silk Road economic belt,” which is to run along the ancient Central Asian Silk Road and the modern maritime Silk Road – an initiative that Xi promoted heavily at the recent meeting in Beijing.
This effort highlights China’s goal of establishing hub-and-spoke relationships with key developing economies around it. To this end, Prime Minister Li Keqiang has proposed an economic corridor linking China to Pakistan, and has spoken of other corridors running through Bangladesh, India, and Myanmar.
Unsurprisingly, energy has been a key factor in economic ties with the Arab world. From 2004 to 2013, China’s crude oil imports from Arab countries grew by more than 12% annually, on average, reaching 133 million tons per year. And China’s “march west” strategy furthers its goal of safeguarding access to these resources. As the director of the State Council’s Development Research Center, Li Wei, pointed out in February, at the current rate, China will be consuming 800 million tons of oil annually, and importing 75% of its petroleum, by 2030..."


12 Numbers About The Global Financial Ponzi Scheme That Should Be Burned Into Your Brain

"When Americans think about the financial crisis that we are facing, the largest number that they usually can think of is the size of the U.S. national debt.  And at over 17 trillion dollars, it truly is massive.  But it is actually the 2nd-smallest number on the list below.  The following are 12 numbers about the global financial Ponzi scheme that should be burned into your brain...
-$1,280,000,000,000 - Most people are really surprised when they hear this number.  Right now, there is only 1.28 trillion dollars worth of U.S. currency floating around out there.
-$17,555,165,805,212.27 - This is the size of the U.S. national debt.  It has grown by more than 10 trillion dollars over the past ten years.
-$32,000,000,000,000 - This is the total amount of money that the global elite have stashed in offshore banks (that we know about).
-$48,611,684,000,000 - This is the total exposure that Goldman Sachs has to derivatives contracts.
-$59,398,590,000,000 - This is the total amount of debt (government, corporate, consumer, etc.) in the U.S. financial system.  40 years ago, this number was just a little bit above 2 trillion dollars.
-$70,088,625,000,000 - This is the total exposure that JPMorgan Chase has to derivatives contracts.
-$71,830,000,000,000 - This is the approximate size of the GDP of the entire world.
-$75,000,000,000,000 - This is approximately the total exposure that German banking giant Deutsche Bank has to derivatives contracts.
-$100,000,000,000,000 - This is the total amount of government debt in the entire world.  This amount has grown by $30 trillion just since mid-2007.
-$223,300,000,000,000 - This is the approximate size of the total amount of debt in the entire world.
-$236,637,271,000,000 - According to the U.S. government, this is the total exposure that the top 25 banks in the United States have to derivatives contracts.  But those banks only have total assets of about 9.4 trillion dollars combined.  In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 25 to 1.
-$710,000,000,000,000 to $1,500,000,000,000,000 - The estimates of the total notional value of all global derivatives contracts generally fall within this range.  At the high end of the range, the ratio of derivatives exposure to global GDP is about 21 to 1.
Most people tend to assume that the "authorities" have fixed whatever caused the financial world to almost end back in 2008, but that is not the case at all.
In fact, the total amount of government debt around the globe has grown by about 40 percent since then, and the "too big to fail banks" have collectively gotten 37 percent larger since then.
Our "authorities" didn't fix anything.  All they did was reinflate the bubble and kick the can down the road for a little while.
I don't know how anyone can take an honest look at the numbers and not come to the conclusion that this is completely and totally unsustainable.
How much debt can the global financial system take before it utterly collapses?
How recklessly can the big banks behave before the house of cards that they have constructed implodes underneath them?
For the moment, everything seems fine.  Stock markets around the world have been setting record highs and credit is flowing like wine.
But at some point a day of reckoning is coming, and when it arrives it is going to be the most painful financial crisis the world has ever seen.
If you plan on getting ready before it strikes, now is the time to do so."


The United States Of Debt: Total Debt In America Hits A New Record High Of Nearly 60 Trillion Dollars

"What would you say if I told you that Americans are nearly 60 TRILLION dollars in debt?  Well, it is true.  When you total up all forms of debt including government debt, business debt, mortgage debt and consumer debt, we are 59.4 trillion dollars in debt.  That is an amount of money so large that it is difficult to describe it with words.  For example, if you were alive when Jesus Christ was born and you had spent 80 million dollars every single day since then, you still would not have spent 59.4 trillion dollars by now.  And most of this debt has been accumulated in recent decades.  If you go back 40 years ago, total debt in America was sitting at about 2.2 trillion dollars.  Somehow over the past four decades we have allowed the total amount of debt in the United States to get approximately 27 times larger.  This is utter insanity, and anyone that thinks this is sustainable is completely deluded.  We are living in the greatest debt bubble of all time, and there is no way that this is going to end well.  Just check out the chart..."
Total Debt


Faber : The Media doesn't like Gold

"Investors are shunning gold "because the media doesn't like gold" Faber said by phone Tuesday from Thailand. "Nobody at CNBC owns gold. Nobody at Bloomberg owns gold. Gold is being constantly talked down by the media, and Fed officials, and economists, who also don't own any gold. They're all stocked up in equities.""When people talk about people who are optimistic about gold, they call them 'gold bugs.' A bug is an insect. I don't call equity bugs 'cockroaches.' Do you understand? There is already a negative connotation with the expression of 'gold bug.'"


The Bubble is Back

"For all those analysts (including this one) who thought the debt binge of the previous decade marked end of the Age of Leverage, well, not so fast. It turns out that memories are short and government printing presses are powerful, and this combination has turned the “Great Deleveraging” into a minor speed bump on the road to something even more extreme. As the following chart illustrates, the growth in total US debt flattened in 2009 and 2010, with government borrowing more-or-less offsetting a decrease in consumer and business loans. But now the trend is once again onward and upward across the board.
US total debt 2014
Prudent Bear’s Doug Noland publishes a quarterly analysis of the Fed’s Z.1 report of US credit market activity. This is always a must-read, but last Friday’s was truly extraordinary. Among other big, ominous trends, Noland notes the following:
• Total (financial and non-financial) Credit jumped $484bn during Q1 to a record $59.399 TN, or 347% of GDP.
• Total Non-Financial Debt (NFD) expanded at a 5.0% rate.
• Corporate borrowings grew at a robust 9.3% pace
• Federal government debt mounted at a 7.1% rate
• Consumer credit rose at a 6.6% rate
• Household net worth surged $7.98 TN, or 10.8%, over the past year.
• Over the past four years, household holdings of financial assets have surged $22.0 TN, or 49%, to a record $67.2 TN.
What’s happening? The short answer is that zero interest rates have finally begun to work their magic. Corporations, for instance, are using the proceeds from low-rate bonds to buy back stock on a vast scale. See Zero Hedge’s Here’s the mystery and completely indiscriminate buyer of stocks in the First Quarter.
And now cheap credit is leading consumers to start buying cars and using plastic. Here’s an excerpt from a Financial Sense article asking how US consumer spending could be rising while incomes are not:..."


Strange Headlines & Possible Panic In A Major Global Market

"...Bizarre Headline #1 – Our friend, Wall Street icon, Jeff Saut of Raymond James wrote yesterday that we seem to be living in a "Bizarro World" where everything is opposite of normal expectations.  He began his piece with this very apt quote from the HBO series The Newsroom:
We stood up for what was right. We fought for moral reasons. We passed laws, struck down laws for moral reasons. We waged wars on poverty, not poor people. We sacrificed, we cared about our neighbors, we put our money where our mouths were and we never beat our chests. We built great big things, made ungodly technological advances, explored the universe, cured diseases, and cultivated the world’s greatest artists and the world’s greatest economy. We reached for the stars, acted like men, we aspired to intelligence, we didn’t belittle it, and it didn’t make us feel inferior. We didn’t identify ourselves by who we voted for in the last election and we didn’t scare so easy. We were able to be all these things and do all these things because we were informed, by great men, men who were revered.
                            . . . Jeff Daniels, delivering a biting soliloquy on American decline (HBO’s The Newsroom)
In the last few days, I've seen several headlines that certainly seemed bizarre to me.  Here is one from today's Financial Times:
Fed looks at exit fees on bond funds

Federal Reserve officials have discussed whether regulators should impose exit fees on bond funds to avert a potential run by investors, underlining concern about the vulnerability of the $10tn corporate bond market.
Officials are concerned that bond funds are becoming “shadow banks”, because investors can withdraw their money on demand, even though the assets held by the funds can be hard to sell in a crisis. The Fed discussions have taken place at a senior level but have not yet developed into formal policy, according to people familiar with the matter.
Considering surcharge to prevent panic withdrawals?  What kind of panic might start if word leaks out before the surcharge is set.
Bizarre Headline #2 – Also from the FT:
Central banks shift into shares as low rates hit revenues
Central banks around the world, including China’s, have shifted decisively into investing in equities as low interest rates have hit their revenues, according to a global study of 400 public sector institutions.
“A cluster of central banking investors has become major players on world equity markets,” says a report to be published this week by the Official Monetary and Financial Institutions Forum (Omfif), a central bank research and advisory group. The trend “could potentially contribute to overheated asset prices”, it warns.
Central banks are traditionally conservative and secretive managers of official reserves. Although scant details are available of their holdings Omfif’s first “Global Public Investor” survey points out they have lost revenues in recent years as a result of low interest rates – which they slashed in response to the global financial crisis.
The report, seen by the Financial Times, identifies $29.1tn in market investments, including gold, held by 400 public sector institutions in 162 countries.
And Michael Lewis thinks markets are rigged by high frequency trading.
There are several more weird headlines but they will have to wait for another day."


Marc Faber’s Chilling Warnings About The United States

"Faber:  “Well I think we have had in the 70’s rapidly escalating commodity prices, and in some cases they went up much more than what we’ve seen so far in the last ten years.  Of course the financial position of the US is much worse than what we had in the 70’s....

“In the 70’s, total credit as a percent of the economy was just at 140%, we’re now at 379% and we have the unfunded liabilities which we didn’t have at that time.  So I would say the financial position of the US has continuously worsened over the last 30 years.

If you print money everything will go up ... and now the money printing doesn’t go into housing because we have an oversupply of housing, but it goes into equities and for Mr. Bernanke unfortunately into commodities.  And this is lifting the cost of living of the median household, of the typical household in the US. ..."


Here Is The Chart That Has The Central Planners Concerned

"With global stock markets hitting new recent and in some cases all-time highs, the spread between the bulls and bears is in incredibly dangerous territory as shown in the remarkable sentiment chart below.  Bullish sentiment is at extremes as the markets have traded near highs...

The spread between the bulls and bears narrowed fractionally to 45.2%, from 45.4% a week ago. Recent readings have been above 35% signaling elevated risk and the last four differences were above 40%. It was 46.4% at the end of 2013 and stocks sold off to start this year. By early February the difference had narrowed to 24.4%. The last favorable spread occurred in August 2013 at 13.4%, close to the 10% (or less) reading that allows for broad buying. Bears haven't outnumbered bulls (negative spread) since October 2011."


Sentiment Chart

Monday, June 9, 2014

Russian Companies Plan to Denominate More Trade in Renminbi

"The lead story in tonight’s Financial Times is Russian companies prepare to pay for trade in renminbi, on how Russian companies are seeking to protect themselves from the impact of possible increasing US sanctions against Russia by denominating more of their foreign transactions in the renminbi and other non-dollar currencies.
The critical question is: how serious a development is this? The short answer is that there is less here than there appears to be. In general, the eagerness to see a declining and increasingly aggressive and inept hegemon get its comeuppance has led a lot of commentators to look forward to the demise of the dollar. However, changes of currency regimes are protracted affairs that typically entail a great deal of instability.
Nevertheless, the US’s deliberate and heavy-handed use of its influence over the international payment system to engage in economic warfare is leading countries like Russia and China to look more seriously than they would have otherwise into to building up independent payment and financing networks. Here, the Rothchilds were far shrewder players. Precisely because they knew their ability to make and break governments would lead to resentment and challenges, they went to some lengths to reduce the visibility of their role in state affairs.
Russian companies are preparing to switch contracts to renminbi and other Asian currencies amid fears that western sanctions may freeze them out of the US dollar market, according to two top bankers..."


Thanks Draghi: Spanish 10 Year Yield Slides Below US

"Earlier today something happened which we haven't seen since a very brief period of time in 2010, and then going all the way back to 2007: Spanish 10 Year bond yields tumbled below those on US 10 Year Treasurys.
So is this an indication that the Spanish bond market is suddenly safer, and more credible than that of the US? Of course not. All we are seeing is merely the manifestation of the latest ECB carry trade pushing local banks not to lend the ECB's cheap money out to consumers, but to engage in yet another Draghi-subsidized carry trade..."


Deutsche Warns Markets Have Left The "Complacency" Phase, Have Entered Full Blown "Mania"

"With a closing P/E ratio over 17 and a VIX under 11, Deutsche Bank's David Bianco is sticking with his cautious call for the summer. Their preferred measure of equity market emotions is the price-to-earnings ratio divided by the VIX. As of Friday's close, this sentiment measure has never been higher and is in extreme "Mania" phase. Deutsche's advice to all the summertime-'chasers' - "wait for a better entry."
Via Deutsche Bank,
We find the current PEs demanding.

S&P median PE at 18.9, non-financial PE at 18.1 and trailing PE at 17.5 are all elevated vs. history.

And the P/E to VIX ratio suggests we have shifted from compacency into mania...


What Is Driving The Market Right Now According To Mainstream Media

"We are sure somewhere deep in the bowels of mainstream media's list of 'personalities', they will find a bullish (contrarian) excuse for the fact that such a mainstream media channel as CNN has expressed the emotion driving the market right now is... "Extreme Greed." For the rest of the 'irrational' investing public (who were all selling last month), it is time to watch in awe as yet another self-created spectacle of insanity unfolds (with no one seeing it coming).

CNN Money's model consists of 7 indicators...

We can only imagine the Fed is in full panic mode by now...
The Fed realizes investors do not act rationally... blowing up their models entirely..."


Jim Rogers Warns about The Artificial Ocean of liquidity

"What worries me the most is that for five or six years, all the major central banks have been printing huge amounts of money. It's the first time in recorded history that we have the Japanese, British, European and Americans all printing money at the same time. So we have this artificial ocean of liquidity, which is making markets do well, but it's not doing much for the economy worldwide. When it ends, we will all pay a terrible price..."


Friday, June 6, 2014

America’s Late Imperial Dilemma

"US President Barack Obama is under attack – from so-called liberal hawks, more or less to the left of center, as well as from active interventionists on the right – for being a weak president, leading a war-weary (even world-weary) America in retreat.
Obama’s critics, whether on the left or the right, believe that the United States has a unique calling to impose its will on the world. The only difference is that the former justify their views with talk of democracy and human rights, while the latter do not need any such justification, because, after all, America is the greatest country on earth.
Either way, the premise that the US should lead forcefully rests on the idea that without a benevolent hegemonic power to police the world, chaos will ensue and more malevolent forces will take over. This opinion was expressed most clearly in a recent article by the conservative foreign-policy thinker Robert Kagan.
Kagan’s argument is that other countries cannot be relied upon to behave responsibly without strong US leadership. Like other hawks, he warns not only that dictators will behave badly if given the chance, which is certainly plausible, but also that democratic allies need to be kept in their place by a firm hegemonic hand.
In East Asia, for example, China must be “hemmed in” by strong US allies. But if Japan, America’s main ally in the region, were “much more powerful and much less dependent on the United States for its security,” it, too, should not be trusted.
Kagan may be right in thinking that a precipitous US retreat from East Asia could have dangerous consequences. But this argument has the familiar whiff of the late stages of empire. The European imperial powers of the twentieth century would periodically hold out the distant prospect of independence to their colonial subjects – but not yet, not before they were ready, not before their Western masters had educated them to take care of themselves responsibly. How long this education might take was anybody’s guess.
That is the paradox of imperialism. As long as the colonized are under the imperial cosh, they can never truly be ready, because the authority to run their own affairs, responsibly or not, was taken away from them.
Empires can impose order and stability for a long time; but imperialists – rather like many Americans today – become tired, and their subjects grow restless. The imperial order becomes brittle, and, as Kagan rightly notes, when the old order finally breaks down, mayhem often follows..."


No, The Surge In Treasurys Wasn't Due To "Pension Fund Buying"

"...So, confusion.
But one thing is apparently clear: anyone who wants to blame the constant contrarian buying in Treasurys (but... but... the economy is improving) on exogenous factors or reverse rotations, has so far been proven wrong. Which means the one most probably option still remains on the table: bonds are simply being bid because the economy continues to grind slower, despite what Fed-manipulated equities are telegraphing, and until there is real, credible proof that the economy is once again improving, expect the pundits to continue scratching their heads or other parts of their bodies."


Welcome to the Currency War, Part 16: Interest Rates Go Negative

"This morning the European Central Bank tried something different. As Bloomberg reported:

Draghi Takes ECB Deposit Rate Negative in Historic Move

The European Central Bank cut its deposit rate below zero and said it would announce further measures later today as policy makers try to counter the prospect of deflation in the world’s second-largest economy.
ECB President Mario Draghi reduced the deposit rate to minus 0.10 percent from zero, making the institution the world’s first major central bank to use a negative rate. Policy makers also lowered the benchmark rate to 0.15 percent from 0.25 percent.

The promise of further measures today “has stoked up hopes that the ECB is going to unleash a huge bazooka on the market in the press conference,” said Philip Shaw, chief economist at Investec Securities Ltd. in London. While he thinks that quantitative easing is “very unlikely” now, “it may well be that what the ECB just said is stoking up hopes that QE could be on the cards after all...”


Jim Rogers : America will Collapse too

"SS: So, if you’re saying that other players will move away from the dollar eventually, where does that leave the American economy?
Jim Rogers : The US has been the world’s reserve currency, has had the world’s medium of exchange and so far we’ve been able to do a lot of things because we can just print more US dollars. We have a huge balance of trade deficit; we have huge government deficits, because we can print more money. If there comes a time that we cannot print money, when the world will not just take US dollars because we say “here they are!” – then that cripples America in many-many ways. The Pentagon, the Defense Department of the US has already said that the deficit in the US is a major potential weakness from the military point of view. Just recently, the space people said “every country in the world has eventually collapsed” and the way America is going, we might collapse too. This is not me, this is the Defense Department of America, and this is the Space Agency of America saying these things. If you read history, Sophie, it’s true, it’s correct. When people do not have the money that they used to have – they’re limited in many ways. You cannot have as many soldiers, you cannot have as many airplanes, you cannot send ships all over the world, because somebody has to pay for it, and if you don’t have the money to pay for it anymore, you’re in trouble.- in a recent May 2014 RT interview"


Thursday, June 5, 2014

A Chinese Monroe Doctrine?

"Chinese Foreign Minister Wang Yi’s upcoming visit to India will include his first meetings with India’s new government, including Foreign Minister Sushma Swaraj and, more important, Prime Minister Narendra Modi. But the trip is about more than getting acquainted. The leaders of both countries will be taking one another’s measure, and their conclusions will determine how the relationship between the world’s two most populous countries evolves.
In some ways, the bilateral relationship is already moving in a positive direction, especially on the economic front. But, as trade imbalances favoring China become apparent, India is growing increasingly frustrated. Wang, an establishment figure well versed in Indian affairs, will make every effort to downplay these imbalances and promote deeper ties..."


Mike Maloney - New Global Monetary System Coming

"Yes Vanessa Collette is back! Oh and she talks to Mike Maloney about coming changes in the global monetary system and how gold plays a critical roll in wealth protection. From Cambridge House"


Wednesday, June 4, 2014

Bull / Bear Spread Surges Into Even More Dangerous Territory

"The spread between the bulls and bears expanded further to 44.8%, from 41.0% a week ago. Recent readings have been above 35% signaling elevated risk and the last two differences were above 40%. It was 46.4% at the end of 2013 and stocks sold off to start this year. By early February the difference had narrowed to 24.4%. The last favorable spread occurred in August 2013 at 13.4%, close to the 10% (or less) reading that allows for buying. Bears haven't outnumbered bulls (negative spread) since October 2011..."

Sentiment Chart

Tuesday, June 3, 2014

The West Is Studying The Flashpoints That Could Lead To A New 'Great War'

"WASHINGTON (Reuters) - After more than a decade focused on combating Islamist militancy, Western military planners are once again contemplating potential war between major powers - and how to prevent one happening by accident.
Although the Cold War rivalry with Moscow has never been forgotten, current and former Western officials say Russia's annexation of Crimea has NATO powers tearing up strategic assumptions and grimly considering both conventional and nuclear fights.
As late as March, most NATO powers - with the exception of eastern members such as the Baltic States long worried by Moscow - had assumed Europe itself faced no imminent military threat.
It is still the case that few believe Russia would attack any NATO state, but, in order to deter, Western officials say they must consider and plan for the contingency.
The threat to U.S. allies in the Pacific from a stronger China has also focused military minds on how to contain the risks there, and ensure any localized conflict does not spill over into global war.
In a major foreign policy speech at the West Point military academy last month, President Barack Obama spoke mostly on counterterrorism and the Afghanistan withdrawal. But while he said the risk from other nations was now much lower than before the Berlin Wall fell, he made clear it still existed.
"Regional aggression that goes unchecked, whether in southern Ukraine or the South China Sea or anywhere else in the world, will ultimately impact our allies and could draw in our military," he told graduating cadets.
Tensions with Moscow and Beijing have increased faster than almost anyone in government in Washington expected. They are expected to dominate a meeting between Obama and Russian President Vladimir Putin in Normandy for the 70th anniversary of D-Day later this week.
Last weekend's annual Shangri-La Dialogue strategic conference in Singapore, meanwhile, showcased the growing gulf between Washington and Beijing on issues from regional maritime disputes to cyber security.
In recent weeks, current and former officials say, the Obama administration has been insistently reassuring allies and signaling foes where Washington's true red lines are.
Washington might not be prepared to act militarily in Ukraine but an attack on a NATO state such as one of the Baltics or a formal Asian ally like Japan, the Philippines or Australia would commit it irrevocably to war. Those treaty obligations are not new, but U.S. officials say it is important to make clear that they are taken extremely seriously.
They hope that will reduce the risk of an accidental war where a state takes action wrongly assuming other powers will not respond.
"It's not that the leadership in Russia or China is looking for a war - and the United States certainly isn't," says Kathleen Hicks, a U.S. undersecretary for defense until last July who now works for the Center for Strategic and International Studies in Washington.
"The real worry is miscalculation."


One hundred years after the start of World War One, books on the period have become increasingly popular in Washington, Whitehall and NATO headquarters in Brussels, current and former officials say, and not purely for their historical interest.
In June 1914, the killing of Austria's Archduke Franz Ferdinand by a Serb nationalist triggered actions and alliances that brought war in barely a month.
Now, experts say flashpoints could range from a clash over disputed South China Sea islands or ethnic strife in Russia's former Soviet neighbors to a wrongly attributed cyber attack.
Even as Washington reassures allies, Moscow and Beijing have asserted their might against Ukraine and Vietnam which lack such formal alliances. The risk, experts say, is that they become overconfident and misjudge.
"The parallels with 1914 can definitely be overstated," said Nikolas Gvosdev, professor of national security studies at the U.S. Naval War College.
"But they do show us that war can start through unintended consequences and an economically interdependent world does not necessarily stop it from happening."
As in 1914, no one really knows what a modern great war would be like.
While much military thinking assumes conflict would remain conventional, nuclear powers have kept their atomic war planning up to date, maintaining target lists for mutually assured destruction, current and former officials say.
Cyber attacks, some experts say, could be almost as destructive, as could the effects on global trade in an unprecedentedly interconnected world.
Meanwhile, some of the systems supposed to prevent conflict may be starting to weaken.


U.S. officials had embarked on a campaign to build formal and informal communications channels with Beijing, mimicking the hotlines and procedures set up with Russia.
Moscow and Washington have used those systems themselves in recent months to notify each other of missile tests and reconnaissance flights over each other's territory.
Links with Russia, however, have weakened this year as NATO states canceled conferences and military exchanges with Moscow in protest at the annexation of Crimea.
Contacts with China have also deteriorated in the last month, particularly since Washington indicted five Chinese officials for cyber espionage, a charge Beijing denies.
A near collision between U.S. and Chinese warships in January, a mock Russian attack on a U.S. destroyer in the Black Sea in April and periodic confrontations between long-range bombers and other aircraft show the risks, experts warn.
Last week on Japan and China accused each other of "dangerous" and "over the top" actions after warplanes came within a few dozen meters.
Any additional challenge to the West, some analysts say, is that both Russia and China know Washington would struggle to handle simultaneous confrontations.
U.S. forces are spread around the world while Moscow's and Beijing's, while smaller, are almost exclusively focused on their immediate neighborhood. Since 2008, they have increased military spending 30 and 40 percent respectively, according to London's International Institute for Strategic Studies.
The 2012 Asia "pivot", which saw the U.S. Navy in particular moving to increase its Pacific footprint, aimed to make crisis response easier.
In Europe, in contrast, NATO has little developed thinking beyond its post-Crimea strategy of putting small numbers of U.S. troops and jets on the frontline in eastern member states they fear Moscow might target next.
Until Ukraine, European states had viewed their primary military focus as occasional intervention, peacekeeping and counterinsurgency in the Middle East and Africa.
"We are in uncharted territory," said one senior Western official who spoke on condition of anonymity. "It means ... reconstituting high end fighting skills and properly thought through doctrine for both conventional and nuclear deterrence."
(Editing by Robin Pomeroy)"


Wall Street Firms Using Their Dark Pools To Make Markets in Their Own Stocks

"These self-named dark pools are operating as private exchanges, with a faux type of specialist system managing the order book, with all the insight and power that it entails.  The layman may not quite comprehend this, but anyone familiar with Wall Street operations and history will certainly do so.

That they are trading for their own parent company stocks, and possibly for their own books, ought to raise more than a few eyebrows.  

We ought to have internalized the lesson by now that markets are not naturally efficient and self-regulating.  But even moreso when the business of price setting and order matching is being done in darkness, and apparently with lax regulatory oversight and institutionalized conflicts of interest.

The lack of integrity in the Western financial system must seem appalling to anyone whose ears are not firmly taped to the corporate news feeds droning out of New York and London to their jaded listeners.  Another lie, another fraud, another abuse of oaths and trust.    Tra la, tra la, comme ci comme ça.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

After Charges of Running a Price Fixing Cartel on Nasdaq in the 90s, 
Wall Street Banks Are Now Trading Their Own Stocks in Darkness
By Pam Martens and Russ Martens: June 3, 2014

On July 17, 1996, the U.S. Justice Department charged the biggest names on Wall Street, names like Merrill Lynch, JPMorgan and predecessor firms to Citigroup, with pricing fixing on the electronic stock market known as Nasdaq...

Yesterday we learned that the very same Wall Street firms charged with price fixing in the 90s have somehow conned their regulators into allowing them to own their own dark pools – effectively unregulated stock exchanges – and make markets in the stock of their very own Wall Street bank.

The Financial Industry Regulatory Authority (FINRA) – a self-regulatory Wall Street body (which under a previous name was responsible for missing the Nasdaq price fixing for more than a decade) released trading data yesterday for the dark pools operating the week of May 12 – 16. This was the first time such data has been released. The data releases are set to continue..."

Read the entire article with the details here."


Smoke and Mirrors Hide the Collapse in Corporate Profits

"Did you notice the collapse in corporate profits? 

John Hussman, Steen Jakobsen, and Albert Edwards at Society General did. Hussman tweeted the following chart this morning.

The Minsky Moment Meme

"Today you can’t go 10 minutes without tripping over an investment manager using the phrase “Minsky Moment” as shorthand for some Emperor’s New Clothes event, where all of a sudden we come to our senses and realize that the Emperor is naked, central bankers don’t rule the world, and financial assets have been artificially inflated by monetary policy largesse...."