ZeroHedge. Alternative view on facts Zero Hedge Tue, 16 Jan 2018 18:23:45 +0300 <![CDATA[Despite Stock Strength; US, German Bond Yields Are Tumbling]]> As stocks surge to record-er-est highs, so bond yields and the yield curve are collapsing further...

Buy all the things...


So much for that 'tantrum'... 10Y Bund yields are tumbling...


Treasury yields are erasing the tantrum spike too...

Perhaps Gundlach was right - Gross' bear call was premature?


And the US yield curve continues to collapse...


And while bank stock prices do not care, Citi's Net Interest Margin slid to an all-time low...

]]> Tue, 16 Jan 2018 18:03:18 +0300
<![CDATA[BofA: "Investors Are Long, Unprotected And Partying Like It's 2019"]]> In Bank of America's latest monthly survey of Fund Managers which polls 183 participants with $526bn in AUM, BofA Chief Investment Strategist Michael Hartnett found what many had expected: euphoria is officially the only sentiment that matters in the market, to wit: "Investors are long, unprotected, & say equity bull market continues to 2019."

As part of this "Party like it’s 2019" mentality, Hartnett believes that the bull capitulation means "a vol spike is imminent but requires surge in inflation & yields to satisfy bond paranoia." Meanwhile, fund managers are rotating into pro-cyclical sectors like tech, industrials, EMs, equities, and out of telecom, bonds, utilities, UK.

Below we lay out the main findings from the January poll:

Average cash balance falls from 4.7% in December to 4.4% this month, a five-year low:


Did we mention everyone is all in? Because they are: the net hedge fund equity market exposure climbs nine percentage points to net 49%, the highest level since 2006.


Allocation to equities jumps to two year highs of net 55% overweight - the current allocation is high at 1.1 std. devs above its long-term average - while allocation to bonds falls to four year lows of net 67% underweight; Investors are the most overweight equities relative to government bonds since August 2014


The net % of investors saying they are taking out protection against a near-term correction in the markets falls to net -50%, the lowest level since 2013.


A majority of investors now expect the equity market to peak in “2019 or beyond” pushing back the timing by two quarters from December, when the majority expected a top in Q2 2018.


The net share of investors saying global corporate earnings will rise 10% or more over the next year comes in at net 15%, the highest level since 2011; furthermore, 57% of investors would like to see companies increase capital spending

Meanwhile, in terms of most crowded trades, for the first time being Short Volatility (28%) has overtaken Long FAANG+BAT (26%) and Long Bitcoin (24%) as the trade considered most crowded


Looking ahead, understandably inflation - which mysteriously no central bank can measure accurately any more - and bond crash (36%), i.e. the anti-goldilocks trade, tops the list of tail risks cited by investors; the top three are rounded out by a policy mistake by the Fed/ECB (19%) and market structure (11%)


Also of note, a net 11% of investors surveyed expect the U.S. yield curve to flatten in 2018, the highest level in over two years


When asked about preferred regions, global investors say they would most like to overweight and Japan; he UK continues to be deeply out of consensus, falling once more to a new record low since 2001


Investors rotate into cyclical plays:tech (the largest monthly rise since July 2014), industrials, EM and equities; they moved out of defensive plays ike telecom (second lowest level since 2005), bonds, utilities, and the UK.



BofA's Bottom line, it's a meltup:

Exhibit A: Jan FMS asset allocation reflects "buy the first rate hike, sell the last rate hike" playbook; investors are long, unprotected, & say equity bull runs to '19; bull capitulation means vol spike imminent but requires surge in inflation & yields


Exhibit B: FMS investors now say no equity peak in 2018 (Dec FMS said Q2'18 peak); level of investor hedging lowest since Jan'14; drop in cash level from 4.7% to 4.4%, 5-year low.

Exhibit C: FMS investors most OW stocks relative to govt bonds since Aug'14; bond paranoia rife (#1 tail risk = inflation/bond crash) as FMS inflation expectations fourth highest since 1995, but until rising rates affect EPS asset allocators are determined to stay long

Exhibit D: FMS Jan rotation is pro-cyclical: into tech (biggest monthly rise since Jul'14), industrials, EM, equities; out of telecom (2nd lowest since '05), bonds, utilities, UK

Finally, everyone is shorting the VIX:

"FMS most crowded trade = short Vol, followed by long FAANG+BAT; contrarian relative trade is now buying bond proxies & the US dollar should growth unexpectedly falter; by end-Q1 we expect peak Positioning to combine with peak Profits & Policy to create spike in volatility."

As a reminder, this is a problem, because as Goldman noted last week in "This Has Only Happened Twice In History" - Goldman Asks "Should We Worry?", it could take only a 3 vol VIX jump to trigger a sharp market correction as all those who are short Vol rush to cover.

]]> Tue, 16 Jan 2018 17:49:26 +0300
<![CDATA[Dow Opens Above 26,000 After Fastest 1000-Point Surge In History]]> Well that escalated quickly...

Having surpassed 25,000 at the open on January 4th (surging from 24k to 25k in a record 23 days), The Dow Jones Industrial Average has opened today above 26,000...


Crossing that 1000-point gap in a record-smashing 7 trading sessions...


And more accurately, this is the most-aggressive rise in The Dow ever... triple the pace of the 24k to 25k advance

Hat-makers cannot keep up...

Interestingly, as US equities are opening notably higher after their day off, VIX is also significantly higher...

Additionally, bonds are bid alongside stocks...

The S&P is now less than 50 points away from Goldman's year end target of 2850.. at this rate it will hit that by week-end.


]]> Tue, 16 Jan 2018 17:31:20 +0300
<![CDATA[After The Carillion Collapse: Who Is To Blame?]]> Submitted by Bill Blain of Mint Partners

“Look back at the past and the changing empires that rose and fell, and you can foresee the future….”

Why and How did it happen? And who should we blame?

Welcome to the X-Factor Economy: Carillion, once the darling of infrastructure, is exposed as a debt-addled fraud. Shock! Horror!

Tabloids full of “Carillion executive ate my Hamster” headlines. Brek-Drek morning TV is full of insights: the tragedy of small local suppliers likely to suffer enormous losses as invoices go unpaid, starving schoolkids as their lunches don’t turn up, prisoners running amok because their guards have been sent home. Hospitals half finished, train-tracks un-laid, and a government follolopping around like a fish out the water. (Again.) Even the banks elicit some sympathy for the losses they will suffer.

Someone has to take the blame – and Theresa May’s hapless government is the obvious target.

Whoa. Steady. Step back. What you pay for, you get.

Don’t bleat for the financiers. Carillion has been a massive short across the smart money for ages. Don’t bleat for the banks who are fully provisioned. I do feel a tinge of sympathy for the German investors sold the firms Schulschein private placements.

Why did it happen? Over the past 5 years Carillion has taken revenues of some $20 bln from Government contracts. Despite paying its 13 layers of management and sales teams handsome salaries and bonuses, and awarding its owners inflated dividends, the company’s pension fund is left massively underfunded, and the firm was about financially stable as a chocolate teapot. (As bonds yield rise that pension deficit would lessen – but too late for the 20k Carillion employees in the UK who are now consigned to the Government scheme.)

There is a great quote from Julian Assange, that well known Ecuadorian, on corporate collapse: “When Enron collapsed, through court processes thousands and thousands of internal emails came our, and it provided a window into how the whole company was managed. It was all the little decisions that supported such flagrant violations.” I can’t wait to learn how Carillion won its business….

And, government knew all about what was happening. They were collectively complicit – but were happy because Carillion apparently delivered Rolls Royces at Mini prices. Government ministers could happily preside over the ribbon-opening of a new hospital pontificating platitudes about value-for-money, budget responsibility, and value for tax-payers. Utter b*ll*x.

Despite watching the company gorge and fatten from the contract trough, and stumble into increasing debt, the government continued to award them contracts. Outsourcing became a mantra of government efficiency. Carillion embraced the need. It ate itself on increasingly less lucrative contracts and increasing debt.

Of course, you could blame the civil servants who approved the contracts. Civil servants on massive pension guarantees (paid by our taxes) were quite happy to do their job – which was awarding contracts to the cheapest bid and going out for regular and expensive dinners with the Carillion bid teams to “review contracts”. Due diligence means cheapest. But, they appear to have paid absolutely no attention to ability of the contractor to actually deliver or opine on its financial prospects.

In this modern World we need know who is responsible.

More to the point, what happens next? In the short-term – and I mean the next 48 hours – civil servants will “courageously” and “tirelessly” scramble to cover Carillion contracts, and cover up their tracks. I hear they are sending firemen to ensure kids get fed this lunchtime. But guess what? All these busted contracts won’t be replaced at low-ball bid levels. The new providers will charge real money – and mark ‘em up a bit/ a lot. Government officials will attempt to justify the hit to the public purse. Civil servants “can’t possibly comment.” Inflation will rise as service costs go up. Unhappy electors will moan a little bit more.

There are some £28 bln of future government contracts up for grabs by the next Carillion. These need to be reviewed. Strip out the numpties that award them, and the nonsense of giving them to the lowball bid. Real contracts are great for the economy – providing real trickle down to contractors, staff up-skilling and honest returns. Award contracts on the basis of ability, quality and deliverables. Watch productivity go up, and the infrastructure base of the economy move from barely satisficing to genuinely good.

Meanwhile. Let’s find someone to shoot! And speaking of chocolate teapots, it might as well be the Prime Minister. A bit of creative political destruction might not be a bad thing. If it wasn’t for the fact an election would make Brexit even more messy and uncertain, and a few years of Corbyn might prove too many, why not? Time to press the reset button. It might be a darn good thing for May and the rest of the Tory dinosaurs to tumble into the political abyss, giving the opportunity for the smart young mammals of the party to float to the surface..

Meanwhile, I really ought to be talking about market stuff – like inflation, rising bond yield prospects, oil prices rising but looking toppy around $70!, rising global growth forecasts and all that stuff. Or, why Asia is so strong this morning, as Japan closes on yet another high. It can all wait for tomorrow.

]]> Tue, 16 Jan 2018 17:14:22 +0300
<![CDATA[Dylan Grice Exposes Three Untrue "Truths" In Our Age of Disruption]]> Authored by Robert Huebscher via Advisor Perspectives,

Challenging conventional wisdom is a mainstay of financial conference speakers. I have seen few do so as effectively as Dylan Grice, who dismissed three mainstays of accepted beliefs, most notably that the value premium will deliver risk-adjusted outperformance.

Grice is a portfolio manager at Switzerland-based Calibrium AG. He previously served as an investment strategist at Societe Generale, and he spoke at that firm’s annual investment conference in London on July 9.

Grice referred to his claims as “heresy from the mountains.” Here’s what he said.

1. Value investing is an intellectual fraud

“What is investing if not for value?” Grice asked, rhetorically. He defined traditional value investing as betting with the odds in your favor or buying dollars for $.75.

The “value” adjective is not necessary, Grice said. “It is like fast sprinting or wet swimming.”

Grice then drew a distinction between fundamental, Graham and Dodd-style value investing, and factor, or quantitatively-based, strategies. He acknowledged that the 1992 Fama-French research showed that you could exploit statistical patterns of cheapness.

He then presented data comparing the small-cap Russell 2000 index relative to its value counterpart, going back 15 years. The annual value premium has been -44 basis points, Grice said. It is not just the Russell indices where value has failed. He said that using the MSCI world index data, the value premium has been -38 basis points over the same period; with emerging markets it was -12 basis points.

It is widely known that growth stocks have outperformed value in the U.S. over most of the last decade, and that value has been the winning strategy over longer time frames. Grice’s analysis was important because he compared value to a broader index and over multiple markets, using only the last 15 years.

But what he said next should be carefully considered by devotees of quantitative investing.

The value premium is not like the liquidity premium, Grice said, which inherently justifies a higher return for its risk. The same is true of the premia associated with credit risk or duration.

“Why should I get persistent risk premium for a cheap multiple?” Grice asked.

“Value investing is far too easy,” he said. “Anyone with a Bloomberg for Factset terminal can do this. It was a historical anomaly because it was cheap.”

“It’s now gone,” Grice said. “The value anomaly has been arbed [arbitraged] out. Value does not equal cheap.”

Quantitatively-based value investing is not the same as fundamental research, he said. Fundamentally-based investing is “hard,” he said, “and it’s got to be harder than quantitative analysis.”

The challenge for advisors is that there is no way to conclusively prove Grice’s claim. We know that quantitatively-based value strategies, unlike the broad capitalization-weighted index, cannot be pursued by all investors. Eventually capital flows to value strategies must erode returns, but we have no way to know for sure when this will happen – or if it already has.

Grice’s assertion should not be dismissed. One cannot be certain that value will “revert to the mean” and resume its long-term outperformance relative to growth the broader market. We’ll have to await further research to see the extent to which asset flows to value strategies, which have been substantial over the 15-year period he studied, have eroded returns.

2. Absolute return is a myth (everything is relative)

It is generally understood that valuations, using metrics such as the Shiller CAPE ratio, are predictive of returns over long time horizons. The U.S. market is in the top quintile of historical valuations, Grice said, implying a sub-2% real return over the next decade.

“That seems clear cut and obvious,” he said, “but look closer and you see cracks.”

Grice provided data on the range of those return forecasts. Top decile valuations imply returns ranging from -2.4% to 8.7%. Thus, for the next 10 years one could “quite reasonably” make 8.7%, he said. “So how practically useful is this information? It should be a warning sign.”

Using U.S. equities, Grice then compared a buy-and-hold strategy to one based on market timing. His timing model was based on the CAPE ratio and it adjusted allocations depending on the quintile of historical valuations (he did not provide more specific details). His market timing model beat buy-and-hold, he said, but the bulk of the returns came in 1920s.

“There was no value added in the last 70 years,” he said. In addition to the S&P 500, Grice said that finding held for the FTSE 100, DAX 30 and Nikkei 225.

“Valuations matter,” Grice said, “but they’re difficult to measure and get right.”

Forward-looking return estimates are better than naïve extrapolations, he said. But the problem with focusing on U.S. equities is that there have been only seven signals in 100 years, based on valuations being in the top or bottom quintile. “There is not enough data to have statistically significant results,” he said. “The problem is that we don’t get enough movement.”

But if you look at signals across multiple asset classes, you get more useful data. Grice has analyzed valuation-based strategies using bonds and equities. He constructed a model that determines the equity-bond allocation based on the relative valuations of the two asset classes, and said that it outperforms a naïve buy-and-hold strategy. (He said his model used mean-variance optimization based on Sharpe ratios, but did not provide additional details.) Indeed, he said, his relative performance-driven portfolio “did very well.”

“The importance of valuation reveals itself when you add more asset classes to the portfolio,” he said. He has tested his findings for markets in Japan, across Europe and in different European countries. “Valuation is phenomenally powerful but only on a relative basis,” Grice said.

Right now, he said, equities are attractive relative to bonds. “Equities are not that bad,” he said, “given the unattractiveness of the opportunity set.”

3. There is no bond “bubble”

Bubbles, Grice said, are characterized by a get-rich-quick mentality. That was the case with the dot-com and real-estate bubbles, and is the case today with bitcoin.

But bonds, especially those with negative yields, “are not a get-rich-quick” scheme, he said.

With quantitative easing, many have wrongly claimed that there has to be an inflation problem, he said. But it hasn’t happened and that belief was clearly wrong.

“Bubbles are destined to pop,” Grice said. “Bonds are distorted but not destined to pop.”

The risk premia for bonds are not out of kilter with historical levels, he said. Spreads for BAA-rated corporate bonds versus 10-year Treasury bonds are at their 100-year historical average. The duration risk on the 10-year Treasury bond is normal, according to Grice. Even the equity risk premium is not overly distorted, he said, only slightly below average.

The issue is with the risk-free portion of the market – real yields, Grice said. This is evident in German government real yields, which have been negative since 2011. It is true in other markets as well, he said.

The underlying explanation for bond valuations lies in nominal GDP growth, he said, which historically tracks 10-year yields over time. Nominal GDP growth is low in Germany and elsewhere. “The current stretch in government yields relative to nominal GDP growth has never been seen before,” he said.

“Just because we don’t like negative bond yields,” he said, “it doesn’t mean that they have to go up.”

“We are in a low nominal GDP growth world,” Grice said. “Yields are low because nominal GDP growth is low.”

]]> Tue, 16 Jan 2018 16:59:48 +0300
<![CDATA[Empire Fed Survey Stumbles To 6-Month Lows As Orders, Employees, & Work Hours Plunge]]> Having equaled its highest print since 2009 late last year, the Empire Fed manufacturing survey has tumbled for 3 straight months, dropping to a disappointing 17.7 in January - the lowest since July.

Under the covers it was a disaster with New Orders plunging from 19.0 to 11.9, Number of Employees crashing from 22.9 to 3.8 and Work Hours cratering from 9.3 to just 0.8 - barely growing.

Of course, while reality sank, hope soared, Six-month general business conditions rose to 48.6 from 46.3.

As good as it gets?

]]> Tue, 16 Jan 2018 16:37:15 +0300
<![CDATA['Shithole-Gate' Might Lead To Government Shutdown As Democrats Balk At Deal]]> The Democrats’ critics on the left are demanding that the minority party use all of its leverage to stymie the Trump agenda, even if that means forcing a government shutdown. Fortunately, more mainstream party members can now use Trump's "Shithole"” comment as a pretext to drop their support for an immigration compromise in the hope of eventually coaxing Republicans into a better deal.

Meanwhile, the GOP had concluded that it would be unable to reach a long-term spending accord by the Friday deadline, which means that chances of a government shutdown have increased this week as yet another "stop-gap" deal is the only option. The government has been operating on short-term spending authorizations since the last two-year budget expired in September. The current short-term spending bill expires Friday at midnight.


Last week, members of a bipartisan senate group that had been negotiating a DACA compromise for four months said they'd reached an agreement in principle. Then the Washington Post  published its story about Trump's response to leaving measures protecting Haitian and El Salvadoran immigrants intact.

There also appears to be some resistance from the White House. This morning, Trump retweeted a tweet he had sent Monday accusing Illinois Senator Dick Durbin, a member of the Democrat’s congressional leadership, of lying about the “shithole” remark, an affront that, Trump suggested, could preclude a DACA deal, the Washington Post reported.

Should a deal be reached, the most likely outcome would be another short-term spending stopgap that would expire in mid-February. According to WSJ, Freedom Caucus leader Rep. Mark Meadows suggested that his faction would agree to a short-term compromise if there was no other alternative to avert a shutdown. Extending the deadline would require what is known as a continuing resolution.

“There’s a great pushback to another CR, but with that being said, I don’t see that a shutdown’s an option, so obviously a CR is probably the only thing we’ve got in our tool bag before the 19th,” he said.

But some lawmakers, tired of perpetual can-kicking, have said they might not vote for a short-term bill.

“There’s a double chance I might not vote for it,” Rep. Tom Rooney (R., Fla.), a member of the House Appropriations Committee, said about his support for a short-term spending bill. Among other things, he is concerned that disaster-relief money needed by orange growers in his state would be left out.

Of course, there are several other issues in addition to reauthroizing DACA that could disrupt the negotiations. Congress is also figuring out how to pay for a long-term reauthorization of the Children’s Health Insurance Program and lawmakers in areas affected by recent natural disasters are asking for an increase in relief funding, which could complicate negotiations over even a short-term solution.

Aides to key negotiators from both parties planned to meet Tuesday in an effort to rekindle budget talks, setting up a Wednesday meeting of the leaders themselves. If they cannot agree, the government would shut down at midnight Friday for the first time since 2013.

Per Politico, Democrats will try to push Republicans into some sort of promise on DACA in exchange for cooperation with spending, but Republicans and Trump could blame them if a deal isn't reached. Despite the finger-pointing, Politico reckons that Speaker Ryan may have the most to lose.

"A government shutdown would be nettlesome for him, to say the least. He and his leadership team are seeing projections that they could lose something like 40 seats - which would cost them their majority. A shutdown does not do him any good. Ryan will need to cobble together 218 Republican votes to proceed without any Democratic votes.

Separately, one Forbes writer argued that Trump needs a shutdown to reassure his base that he’s still in control of the Republican Party.

Given the various firestorms that have occured just this past week - the book, the remark about Haiti and African countries and the hush money paid to a porn star - Trump may want to reassure his base that he is still very much in charge by refusing to sign even a simple, clean and short-term extension of the current continuing resolution. Even if it doesn't include anything about immigration, Trump could still demand funding for his wall and say he is more than willing to shut down the government until he gets it.

Trump would say this shows he is indeed the toughest of negotiators, that he's still determined to protect the U.S. and that he's keeping his campaign promises. All of these would be red meat for the Trump base and, in the White House's mind, would move the narrative away from the book, the remark and the porn star to something politically positive.

But rest assured: If a shutdown occurs, it  probably wouldn’t last longer than a couple of days. According to Forbes, Trump would then tell Congress that he will accept a short-term bill because “progress” had been made during weekend negotiations. This, of course, presupposes that Democrats and Republicans agree on a deal first.

But unless Trump decided to do something extraordinary like shutting the air traffic control system, the only real direct impact over the weekend would be on the very few people trying to use the suddenly closed national parks.The positive political impact Trump would be seeking from the shutdown would be immediate, however.

For that reason, if there is a Trump-induced shutdown this week, it wouldn't be at all surprising if it only lasted until next Monday. Trump would then tell Congress he will sign a short-term CR to reopen the government because (regardless of whether or not it was true) there was progress made over the weekend.

He would also at least hint that he'll shut the government again in the future if that's what it will take to get what he wants.

Meanwhile Republicans are already accusing Democrats of hamstringing the military, but Democrats, like Trump, have an optics problem: They need to prove to the #resistance that they’re capable of standing up to Trump and the Republicans. Since the start of his administration, they’ve appeared to be retreating. With the midterm elections coming up later this year, the pressure to change that perception will only intensify.

]]> Tue, 16 Jan 2018 16:33:29 +0300
<![CDATA[GE Tumbles After Massive Finance-Arm Charge]]> Having enjoyed a phoenix-like renaissance in 2018 so far, GE is tumbling in the pre-market, erasing 2018 gains, following reports that the company will record an after-tax charge of $6.2 billion in its fourth quarter results as part of an ongoing review of its finance arm’s insurance portfolio.

Additionally, as WSJ reports, GE will have to set aside $15 billion over seven years to bolster insurance reserves at its GE Capital unit, surprising investors with deeper than expected problems in a business many thought the company had left behind.

The upshot is that the GE Capital unit, which had been paying dividends in recent years to the parent company, won’t pay dividends to GE for the foreseeable future. GE had suspended the GE Capital dividend last year and slashed its payout to shareholders by half.

Shareholders are not impressed...

GE’s looming charge is one of the biggest yet in a corner of the insurance industry that has reeled from pricing miscalculations made decades ago.

Chief Executive John Flannery expressed frustration at the review’s results while saying the actions will restore GE Capital ratios to appropriate levels.

“At a time when we are moving forward as a company, a charge of this magnitude from a legacy insurance portfolio in runoff for more than a decade is deeply disappointing,” he said.

Probably not as frustrated as the shareholders.

]]> Tue, 16 Jan 2018 16:13:54 +0300
<![CDATA[Frontrunning: January 16]]>
  • GE to Take Massive Charge to Shore Up Insurance Reserves (WSJ)
  • GOP Leaders Struggle to Avert Shutdown After Immigration Blow-Up (BBG)
  • DACA Squabbling Imperils Ability to Avert a Shutdown (WSJ)
  • Bitcoin Plunges 20% (WSJ)
  • China Escalates Crackdown on Cryptocurrency Trading (BBG)
  • Wall St. Braces for a Different Year of U.S. Inflation (BBG)
  • Days after Hawaii alert gaffe, Japan issues false alarm about a missile launch (Reuters)
  • Under Trump, the Business World Notches a Net Success (WSJ)
  • Lawmakers urge AT&T to cut ties with Huawei (Reuters)
  • Not just Florida: Tourism big in other states opposing coastal drilling (Reuters)
  • U.S. Warned Jared Kushner on Wendi Deng Murdoch (WSJ)
  • Trust in news media takes a hit during Trump presidency (AP)
  • Sell the New York Times. Now (Politico)
  • Battle Stations: U.S. and China Prepare for Trade Clash of the Titans (WSJ)
  • Platinum Industry Faces a Crisis (WSJ)
  • Saudi Aramco snubs UBS and Bank of America for listing roles (Reuters)
  • Pentagon Plans New Nuclear Weapons (WSJ)
  • Sweden’s Worst Housing Slump Since 2008 Is Ripe for Sanity Check (BBG
  • Spotify Challenges Bankers on IPOs (WSJ)
  • Five Potential Risks to the Oil Rally (WSJ)
  • Uber to introduce mandatory rest breaks for UK drivers (Reuters)

    Overnight Media Digest


    - Fiat Chrysler Automobiles NV's, chief executive said Monday he has no plans to sell its Jeep business or split up the company, cooling speculation but leaving the company's long-term strategy unclear.

    - SoftBank Group Corp said Monday it may list shares of its profitable Japanese cellphone operator, a move that could raise nearly $20 billion and help SoftBank make big bets on technology companies.

    - Apple Inc and Chinese technology giant Tencent Holdings Ltd have settled their tiff over tips, allowing users of Tencent's popular WeChat messaging app to resume giving monetary gifts to their favorite video-streaming stars and content creators.

    - Royal Dutch Shell PLC said Monday it is selling for an undisclosed amount a stake in the West Qurna 1 oil field in Iraq to Japan's Itochu Corp, giving up on its last oil fields in Iraq.

    - Airbus SE Chief Executive Tom Enders has flatly accused the Trump administration of protectionism, while criticizing rival Boeing Co for exploiting such sentiments.



    Airbus was prepared to shut down production of its A380 superjumbo aircraft if it does not resolve its stand-off with the Emirates airline over a $15 billion order for the world’s largest passenger jet, according to the company’s outgoing sales chief John Leahy. “If we can’t work out a deal with Emirates, there is no choice but to shut down the programme,” Leahy said.

    Royal Dutch Shell Plc said it would redevelop the Penguins field northeast of the Shetland Islands, together with its partner Exxon Mobil Corp, in a project expected to cost more than $1 billion, its first major new project in the ageing basin in six years.

    William Hill Plc was considering a sale of its Australian business after the British bookmaker complained that a regulatory crackdown will put pressure on profits in the country. The company said it was “undertaking a strategic review” of its business in Australia, one of the world’s most liberal gambling markets



    - Laurence Fink, founder and chief executive of the investment firm BlackRock Inc, is going to inform business leaders that their companies need to do more than make profits - they need to contribute to society as well if they want to receive the support of BlackRock.

    - At the Detroit auto show on Monday, officials of GAC Motor, based in Guangzhou, outlined a broad plan to build up its operations in the United States and begin selling a vehicle here next year, possibly in partnership with Fiat Chrysler Automobiles.

    - A blazing Iranian tanker that sank in the East China Sea, producing a 10-mile-long oil slick, is drawing concern from environmentalists about the threat to sea and bird life in the waterway.



    ** Canada's six biggest banks are facing a lawsuit filed with a New York court that alleges they conspired with three other global banking giants to rig a Canadian interest-rate benchmark and boost profits.

    ** The British government is scrambling to cope with the collapse of global construction giant Carillion Plc, which has thrown the future of 43,000 jobs worldwide into question, including thousands in Canada.

    ** The Liberal government is set to introduce carbon-tax legislation that will give breaks to industrial emitters as Ottawa seeks to limit the economic impact of an ambitious environmental agenda to be enacted this year.

    ** A major, government-backed investment in Ontario by Linamar Corp is a "vote of confidence" in Canada's position in the ongoing North American Free Trade Agreement negotiations, according to the president of the Automotive Parts Manufacturers Association.

    ** The Bank of Canada is already well into the process of raising interest rates to more normal levels and another increase is expected on Wednesday, after the economy's stellar performance last year.



    The Times

    - Financial Reporting Council warned that it may launch an investigation into KPMG over its audit of Carillion Plc . The company has collapsed into liquidation putting thousands of jobs at risk.

    - The value of the pound has risen above $1.38 for the first time since the Brexit referendum, thanks to a weakening dollar and rising hopes that other European Union members will seek a relatively "soft" Brexit.

    The Guardian

    - Silvana Tenreyro, one of the nine members of the monetary policy committee, warned the Brexit uncertainty is deterring companies from investing and hampering Britain’s ability to close its productivity gap with other leading developed countries.

    - A no-deal Brexit would cost the remaining 27 EU nations 112 billion euros ($137.39 billion)in lost economic output, according to research by Oxford Economics.

    The Telegraph

    - Turnaround specialist Melrose sketched out its strategy to turn around acquisition target GKN Plc, saying the engineering company lacks "clear focus" and "needs fundamental change".

    - Airbus SE said it would cut the rate at which builds the double-decker jet to just six a year by 2019, from a peak of 27 a few years ago.

    Sky News

    - The RAF scrambled two Typhoon jets to intercept Russian planes near the UK's airspace, the Ministry of Defence (MoD) said. The jets were scrambled from RAF Lossiemouth in Moray, Scotland, on Monday morning.

    - Virgin Trains will once again stock copies of the Daily Mail, after a decision to ban sales of the paper on the company's trains led to accusations of censorship.

    The Independent

    - Vaccitech, a UK company developing a vaccine that would be the first in the world to fight all types of flu has raised 20 million pounds from investors including venture capital arm of Google parent Alphabet Inc, GV.


    ]]> Tue, 16 Jan 2018 15:54:57 +0300
    <![CDATA[China Downgrades US Credit Rating From A- To BBB+, Warns US Insolvency Would "Detonate Next Crisis"]]> In its latest reminder that China is a (for now) happy holder of some $1.2 trillion in US Treasurys, Chinese credit rating agency Dagong downgraded US sovereign ratings from A- to BBB+ overnight, citing "deficiencies in US political ecology" and tax cuts that "directly reduce the federal government's sources of debt repayment" weakening the base of the government's debt repayment.

    Oh, and just to make sure the message is heard loud and clear, the ratings, which are now level with those of Peru, Colombia and Turkmenistan on the Beijing-based agency’s scale of creditworthiness, have also been put on a negative outlook.

    In a statement on Tuesday, Dagong warned that the United States’ increasing reliance on debt to drive development would erode its solvency. Quoted by Reuters, Dagong made specific reference to President Donald Trump’s tax package, which is estimated to add $1.4 trillion over a decade to the $20 trillion national debt burden.

    “Deficiencies in the current U.S. political ecology make it difficult for the efficient administration of the federal government, so the national economic development derails from the right track,” Dagong said adding that "Massive tax cuts directly reduce the federal government’s sources of debt repayment, therefore further weaken the base of government’s debt repayment."

    Projecting US funding needs in the coming years, Dagong said a deterioration in the government’s fiscal revenue-to-debt ratio to 12.1% in 2022 from 14.9% and 14.2% in 2018 and 2019, respectively, would demand frequent increases in the government’s debt ceiling.

    “The virtual solvency of the federal government would be likely to become the detonator of the next financial crisis,” the Chinese ratings firm said.

    * * *

    In a preemptive shot across the bow in the coming trade wars, last week Bloomberg reported that Beijing officials reviewing China’s vast foreign exchange holdings had recommended slowing or halting purchases of U.S. Treasury bonds. That warning spooked investors worried that sharp swings in China’s massive holdings of U.S. Treasuries would trigger a selloff in bond and equity markets globally. The report sent U.S. Treasury yields to 10-month highs and the dollar lower, although China’s foreign exchange regulator has since dismissed the report as "fake news."

    Still, Dagong was quick to point out that not much would be needed to crush the public's confidence in the value of US Treasurys:

    The market’s reversing recognition of the value of U.S. Treasury bonds and U.S. dollar will be a powerful force in destroying the fragile debt chain of the federal government,” Dagong said.

    * * *

    To be sure, China's move is far more political than objectively economic, and is meant to send another shot across the bow as the Trump administration prepares to launch a trade war with Beijing in the coming weeks. Still, while both Fitch and Moody’s give the United States their top AAA ratings (and the S&P is the only agency to infamously downgrade the US to AA+ in 2011), US raters have also expressed concerns similar to Dagong‘s. From Reuters:

    S&P Global said last month’s proposed U.S. tax cuts would increase the federal deficit and looser fiscal policy could prompt negative action on U.S. credit ratings if Washington failed to address long-term fiscal issues.

    In November, Fitch said the tax cuts would give a short-lived boost to the economy, but add significantly to the federal debt burden. It warned that the United States was the most indebted AAA-rated country and ran the loosest fiscal policies.

    Moody’s said in September any missed debt payment as a result of disagreement over lifting the debt ceiling, a perennial point of partisan contention in Washington, would result in the United States losing its top-notch rating.

    China is rated A+ by S&P Global and Fitch and A1 by Moody‘s, with the three agencies citing risks mainly related to corporate debt, which is estimated at 1.6 times the size of the economy and mostly attributed to state-owned firms. 

    ]]> Tue, 16 Jan 2018 15:50:25 +0300
    <![CDATA[Bitcoin Crashes 20% Amid Growing Fears Of Crypto Crackdown]]> As first discussed last night, the selling in bitcoin and across cryptocurrencies - which began as Asia opened, and appeared to be catalyzed by headlines from South Korea's finance ministry that a cryptocurrency exchange shutdown is still an option...

    ... accelerated overnight with bitcoin plunging as much as 20% as the prospect of regulatory crackdowns appeared to spread across Asia. Having traded just above $11,000 this morning, the lowest level since late December, and down more than 40% from its all-time high of $20,000 set just a month ago, bitcoin fell 12.3% to $12,130 as at 7:30am ET.


    As bitcoin halted a two-day rally, rival cryptocurrencies also plunged, and the losses in bitcoin are largely in line with those seen across the cryptocurrency space. As of writing, Ripple (XRP), stellar lumens (STR) and cardano (ADA) are down at least 25 percent on the day each. Ethereum's ether (ETH) token has shed 18 percent in value in the last 24 hours.


    As discussed last night, traders continue to focus largely on South Korea, one of the busiest markets around the globe for cryptocurrencies, where finance minister Kim Dong-yeon said overnight that shutting down cryptocurrency exchanges is still an option, but in what appeared a backtracking from last week's vow to crack down on bitcoin by the Justice Ministry, Kim said that measures first need “serious” discussion among ministries, holding out hope for traders that a crackdown won’t go that far. Kim said there’s irrational speculation and that rational regulation was needed.

    “The finance minister made it clear they’re definitely considering banning crypto trading - and it’s probably the third-largest market,” said Neil Wilson, senior market analyst in London for online trading platform ETX Capital. “The news is hitting prices and broader sentiment, and it follows China’s move to shutter mines.”

    Meanwhile, according to Bloomberg, China - which first began targeting the industry last year - is escalating its clampdown on cryptocurrency trading, particularly online platforms and mobile apps that offer exchange-like services, although with China no longer a notable player in the crypto space, it is unclear what if any impact further halts of China's already halted exchanges will have, besides just making cryptos that much more attractive of course.

    As Reuters adds, a report today says that a PBoC official has said that centralized trading of virtual currencies should be banned, as well as individuals and businesses that provide related services. This is according to an internal memo that refers to PBoC Vice Governor Pan Gongsheng who reportedly said the government would continue to apply pressure to the virtual currency trade and prevent the build up of risks in that market.

    “We’ve heard reports that South Korea, China and Japan have considered a shared approach, a path, to regulation,” ETX’s Wilson said, also citing a challenge to digital coins from a bill in the U.S Senate. “It looks like the light touch that has allowed the crypto-boom to explode may be coming to an end,” he wrote in a note to investors.

    Also on Monday night, Steven Maijoor, chairman of the European Securities and Markets Authority, said investors “should be prepared to lose all their money” in bitcoin, in a Bloomberg TV interview in Hong Kong. “It has an extremely volatile value, which undermines its use as a currency,” he said. “It’s also not broadly accepted.”

    What he really meant is that unlike stocks, traders should not expect a central bank bailout on their crypto investment when things turn rough. Which, of course, is the biggest part of the attraction.

    So to summarize the speculated catalysts behind the selloff from CoinDesk:

    • Firstly, comments on social media indicate there is unease in the investor community over talk of a cryptocurrency trading ban in South Korea and further possible crackdowns on trading and mining in China.
    • And secondly, BTC futures contracts are trading at a discount to bitcoin's global average calculated by CoinMarketCap. The January expiry futures contract on the CBOE is trading at $11,510 and CME's is changing hands at $11,530. Meanwhile, BTC spot is trading at $11,816. The discount (futures price lower than spot price) indicates that the market participants are bearish on the underlying asset (BTC).

    For the technicians, the chart analysis indicates scope for a drop to below $10,000 levels if the bulls can't muster a response today.


    The above chart (prices as per Coinbase) shows:

    • The rising trendline (blue line) has been breached.
    • A downside break of the triangle pattern, indicating the sell-off from the record high of $19,891.99 9 (Dec. 17 high) has resumed.
    • The relative strength index (RSI) has turned bearish (below 50.00), indicating scope for further losses.
    • The 50-day moving average (MA) has shed bullish bias (flattened).
    • The 5-day and 10-day MAs carry a strong bearish bias (downward sloping).

    * * *

    Finally, the selling wasn't confined to tokens: U.S. stocks with exposure to cryptocurrencies also plunged in pre-market trading:

    • Riot Blockchain, a diagnostic machinery maker that rebranded as a blockchain company in October, falls 8.1% pre- market
    •, which has a blockchain subsidiary called Medici Ventures, falls 7.5%
    • Kodak, which said this month it’s working with WENN Digital to offer a blockchain-based service for paying photographers, drops 8.7%
    • Metropolitan Bank, the issuing bank for a bitcoin debit card called Shift Card, is down 4.5%. On Jan. 14, Fortune reported that the bank halted all cryptocurrency-related international wires, citing an unidentified Metropolitan customer
    • Seven Stars Cloud Group, which operated as an on-demand video service in China before buying a 51% stake in a blockchain company in June, drops 3.4%
    • Square, which has a bitcoin service on its Square Cash app, falls 2.6%

    Other cryptocurrency-exposed stocks to watch, according to Bloomberg, include: OTIV, SRAX, XNET, CRCW, RCGR, AMD, NVDA, MARA, MGTI.

    ]]> Tue, 16 Jan 2018 15:30:20 +0300
    <![CDATA[Dow To Open Above 26,000 As Global Stock Meltup Turns Parabolic, Dollar Rebounds]]> When markets open for trading today, the S&P will rise above 2,800 and the Dow Jones will not only make a new record high (those have become a bit of a boring daily occurrence lately) it will do so in historic fashion with just 12 days needed to move from 25,000 to 26,000, the fastest 1,000 point move in history, nearly twice as fast as the previous record when it took just 23 days for the DJIA to move from 24,000 to 25,000. And yes, get ready for the imminent (self-)congratulatory tweet from Donald Trump...


    And as the DJIA makes history, and breaks every possible record, Asia and Europe’s bourses similarly kept world shares on their record-breaking run on Tuesday, though a steadier dollar halted the sizzling start to the year for the euro, yen and yuan and sent metals markets sprawling.

    MSCI's all-country world index notched its third consecutive all-time high as Japan's heavyweight Nikkei rose to its best level since 1991 during a lively Asian session. In Europe, the STOXX 600 index crawled 0.3% higher as technology and insurance stocks offset a 0.5% drop in miners caused by the buckling metals prices.

    After ending its record streak of upward days at 15 yesterday, the Hang Seng nonetheless closed at a post-2007 record high, soaring 1.8% to a new record high of 31,904.


    S&P futures move through 2800 and European equity markets are lifted by technology sector. Core fixed income markets also rally, UST and bund curves flatten and ASW widens due to limited long-end supply outlook. Metals continue overnight selloff after bearish Barclays note on iron ore.

    Overnight, the dollar rebounded following its widest two-day drop in ten months and the yen snapped a five-day rally after Japan’s Finance Minister Aso said sudden moves are a concern. The euro was headed for its first drop in five days amid profit-taking, and a report that German coalition talks are still facing hurdles and speculation that the ECB will not change its forward guidance any time soon. Speculation over a Chinese intervention to slow the yuan’s gains also prompted short-covering of the dollar. In addition to equities, Euro-area bonds and Treasuries also advanced.

    Looking at the macro picture, Bloomberg notes that it’s a peculiar European session, "with asset classes moving independently from each other." Of note, the USD is finally stronger against G-10 overall as the DXY index attempts to bounce from close to important 90.00 level. The EUR spikes lower in early trade after reports of potential German coalition jitters, however regional impact is later downplayed. A later dovish report that ECB is unlikely to drop its bond-buying pledge next week pushes EUR/USD toward 1.22. GBP softer after core CPI is lower than expected, USD/ZAR runs downside stops through yesterday’s low to hit lowest since June 2015 amid little news.

    “The yen’s appreciation against the dollar has stopped and this brightened sentiment, along with expectations for robust company quarterly results,” said Sumitomo Mitsui Asset Management’s Masahiro Ichikawa about Tokyo’s gains.

    Japanese Finance Minister Taro Aso said on Tuesday that he did not see problems with the dollar weakening to around 110.80 yen, but that big swings in currencies would be problematic.

    Also notable: Bitcoin led a slump in cryptocurrencies, tumbling as much as 20 percent. Emerging-market stocks jumped, consolidating at the highest level in almost a decade.


    Copper slumped 1.8 percent, while nickel plunged almost 4 percent. For both it was their biggest drop since early December, after which they went on to surge 10 and 20 percent respectively. Analysts put the wobble partly down to supply issues after stockpiles of iron ore at China’s ports leapt to the highest since at least 2004, but also the dollar - used to price commodities - pulling out of a four-day dive.

    “Everything this year (in commodity markets) has been largely about the dollar,” said Crédit Agricole FX Strategist Manuel Oliveri. “It has been selling off regardless of rate expectations, regardless of the growth outlook,” he added, saying he expected it to start to stabilize.

    The steadier dollar also brought an end to the euro’s four-day hot-streak. The single currency was also being buffeted by reports that parts of Germany’s main opposition party are resistant to reforming a ‘Grand Coalition’ with Angela Merkel’s conservatives.

    The euro slipped back to $1.2235 but was still up 2 percent since the start of the year, helped by talk of a quicker end to European Central Bank stimulus. The yen was 0.15 percent lower at 110.6 per dollar.

    Euro zone government bond yields switched direction too, with German Bunds coming off recent highs and low-rated Italian and Portuguese debt outperforming as investors returned to some of 2017’s most profitable trades

    Market Snapshot

    • S&P 500 futures up 0.4% to 2,800.50
    • STOXX Europe 600 up 0.3% to 398.98
    • MSCI Asia Pacific up 0.4% to 182.83
    • MSCI Asia Pacific ex Japan up 0.4% to 594.38
    • Nikkei up 1% to 23,951.81
    • Topix up 0.6% to 1,894.25
    • Hang Seng Index up 1.8% to 31,904.75
    • Shanghai Composite up 0.8% to 3,436.59
    • Sensex down 0.2% to 34,781.66
    • Australia S&P/ASX 200 down 0.5% to 6,048.64
    • Kospi up 0.7% to 2,521.74
    • German 10Y yield fell 1.4 bps to 0.573%
    • Euro down 0.3% to $1.2224
    • Italian 10Y yield rose 1.9 bps to 1.734%
    • Spanish 10Y yield fell 2.5 bps to 1.506%
    • Brent Futures down 0.6% to $69.85/bbl
    • Gold spot down 0.4% to $1,334.59
    • U.S. Dollar Index down 0.3% to 90.68

    Top News

    • Republican leaders are weighing a stopgap spending bill until Feb. 16, as they don’t believe they have the time to complete a fiscal year spending deal by Friday, according to a person familiar with the talks
    • Crypto: PBOC official says China’s centralized virtual currency trade needs to end, according to people familiar: Reuters
    • The European Central Bank is unlikely to drop a pledge to keep buying bonds at next week’s meeting as rate setters need more time to assess the outlook for the economy and the euro, Reuters reports, citing unidentified people
    • The EU has stepped up the demands it will make of the U.K. for the transitional period that follows Brexit, calling for more rights for EU citizens, according to revised draft guidelines seen by Bloomberg
    • Russia’s government is said to be discussing a proposal to turn on the fiscal taps in the biggest domestic spending spree since Putin last ran for re-election in 2012
    • Bitcoin slumped as much as 20 percent, giving more impetus to a January selloff in cryptocurrencies, after South Korea’s finance minister repeated that the country may ban trading in one of the world’s most active markets
    • The Fire & Police Pension Association of Colorado alleged in a New York court filing that Canada’s six biggest banks and three foreign lenders of conspiring to manipulate the Canadian Dealer Offered Rate to boost “illegitimate profits" on derivatives trades for several years until 2014
    • Government Shutdown: GOP leaders don’t believe they have time to complete a fiscal year spending deal by Friday, considering a short-term extension until Feb. 16, according to people familiar
    • ECB is unlikely to change forward guidance at Jan. meeting; March meeting a more likely option due to updated forecasts, according to people familiar: Reuters
    • German Coalition: Berlin regional SPD reject coalition deal with Merkel bloc; Berlin SPD hold 23 out of 600 delegates at SPD congress for Jan. 21: Spiegel
    • UK Dec. CPI y/y: 3.0% vs 3.0% est; Core CPI 2.5% vs 2.6% est; ONS notes decline largely driven by a technical reweighting of airfares in the inflation basket
    • Japan Finance Minister Aso: current USD/JPY rate isn’t a major issue, referring to a level of 110.80

    Asia equity markets were overwhelmingly positive as region digested corporate updates and picked up the pace from the holiday-quietened lead due to the US market closure for Martin Luther King Jr Day. Nikkei 225 (+0.9%) and ASX 200 (-0.5%) traded mixed as Japan coat-tailed on a rebound in USD/JPY, while sentiment in Australia was dampened by weakness across commodity names including Rio Tinto which was pressured despite a beat on Q4 iron ore shipments, as the Co. also maintained full year guidance against expectations for an upgrade. Elsewhere. Hang Seng (+1.1%) outperformed and is on course for a record close, while Shanghai Comp. (+0.2%) was also in the green amid several positive profit alerts and after a firm liquidity operation by the PBoC, which resulted to a net daily injection of CNY 270bln. Finally, 10yr JGBs were flat with prices range-bound throughout the day amid a lack of catalysts and after mixed results from a 5yr JGB auction. PBoC injected CNY 160bln via 7-day reverse repos, CNY 150bln via 14-day reverse repos and CNY 10bln via 63-day reverse repos. PBoC set CNY mid-point at 6.4372 (Prev. 6.4574)

    Top Asian News

    • Thousands of Palm Oil Farmers March Against EU Restrictions
    • Race for Lithium Sees Quarter Billion Investment From Toyota

    Most of the major bourses traded in positive territory with the FTSE 100 benefitting from a decline in the GBP after the inflation data. Continental and Michelin topped their respective bourses after reports that the former has hired JPMorgan to look at a break up of the business. There was more to cheer for the UK high street as Greggs and JD Sports both reported strong sales over the Christmas period. In European fixed income, following the UK inflation data, the 10 year gilt inched closer to 124.00 at 123.98 and Short Sterling futures climb another tick or so to stand 0.5-3 ticks above yesterday’s settlement levels. Bunds also revisiting their Eurex session peaks (160.70), but just shy on Monday’s intraday high despite upside hedging for latest sovereign and corp supply via swaps, while USTs have edged a few ticks higher with the curve still flatter ahead of the return of US participants after the long holiday weekend. Only Empire State manufacturing scheduled, but another White House funding bridge to be crossed this week after IP data on Wednesday.

    Top European News

    • ECB Could End QE After September, Hansson Tells Boersen- Zeitung
    • Bundesbank Says China’s Yuan to Be Included in Currency Reserves
    • Rep. of Macedonia Plans to Cut Budget Deficit to 2%/GDP by 2020
    • EU’s Tusk Says the U.K. Can Have ‘Change of Heart’ on Brexit
    • Dubai Oil Refiner Said to Have Held Talks on Retail Unit IPO
    • Brexit to Drive Dublin Office Real Estate in 2018, CBRE Says
    • Israel’s Discount Investment May Propose Eurocom Creditor Deal

    In FX, there has been broad, albeit modest recovery gains for the USD which have helped the Index rebound above 90.500, but it seems to be a fragile move awaiting confirmation and the return of US traders following Monday’s MLK market holiday. In the meantime, some short covering/long liquidation or position paring and profit taking, with the EUR seeing a bit of negativity on reports the Berlin branch of the SPD vote against a grand coalition – EUR/USD now around 1.2250 vs 1.2217 low and near 1.2300 peak yesterday. 1.2302 remains the nearest upside chart objective (another December 2014 high) before strong tech resistance at 1.2350, while support comes in around 1.2188-70. Cable retreated after (and before) the UK inflation data although the moves were relatively as the headline was in line with forecasts.

    In commodities, WTI and Brent crude futures are trading mixed with a number of big banks commenting on prices this morning. Goldman Sachs said they see increasing upside risks to their calls for the two major benchmarks, although this isn’t too surprising considering both trade above Goldman’s average forecast this year. Morgan Stanley, Soc Gen and Bank of America have all lifted their forecasts. Precious metals have slipped back as the USD has regained some ground, with palladium pulling back from the record high hit on Monday. Base metals have seen similar price action with copper down just shy of 1% on the LME.

    Brexit update (via RanSquawk):   EU is said to toughen conditions for a post Brexit agreement, as draft documents showed revised directives for EU chief negotiator Barnier with stricter conditions for a transition deal. (FT) BOE’s external member Tenreyro said that at December meeting, she saw 'ample time' before the BOE would need to raise rates and expects a couple more hikes over next three years if economy performs as expected. (Newswires) UK PM May is planning a speech to outline Brexit policy next month, while reports also stated that the EU withdrawal bill is expected to move to the House of Lords this week and pass. (Newswires) ECB's Lane said he sees an abrupt Brexit to be a genuine shock that would risk the stability of the European financial system. (FT)
    Norwegian officials tell Brussels they may seek radical rethink of their terms if UK has access to single market for key sectors. (The Guardian)

    Looking at the day ahead, final December CPI reports are due in Germany and Italy. In the UK, there is the December CPI, PPI and RPI along with the November house price index, while in the US the January empire manufacturing print is due. Away from the data, Canada’s Foreign Affairs Minister Chrystia Freeland and US Secretary of State Rex  Tillerson are due to meet to discuss stability on the Korean Peninsula. Citigroup are due to report Q4 earnings.

    US Event Calendar

    • 8:30am: Empire Manufacturing, est. 19, prior 18

    DB's Jim Reid concludes the overnight wrap

    I hope you all got over Blue Monday - supposedly the most depressing day of the year. This is calculated on a model that includes the weather, debt levels, the amount of time post Xmas, time since failing New Year’s resolutions, low motivational levels and the feeling of needing to take charge of your life. Feel familiar? I spent this uplifting day in Paris and during a communication with a taxi driver I realised the most odd thing that a lot of us do. I was trying to tell my taxi driver where I wanted to go in what can only be described as hideously bad French. However as I was talking I heard myself trying to pronounce everything in an absurdly strong French accent. It made me stop and think as to why when speaking certain foreign languages we feel the need to try to do an impression of a person from that country? If you think about it, if you went to Birmingham, New York or Sydney you wouldn’t tell a taxi driver where you were going in a strong regional accent so why should you in France? Indeed imagine you were in the Caribbean and spoke in a strong West Indian accent when ordering something or an Indian accent in Mumbai. You may get locked up and rightly so. So if anyone can tell me why we try to speak in accents in certain languages and not others then I’d be interested to know. Or maybe it’s only me in France. Yikes!!

    In reality it was a good day to be out of the office given the US holiday and fairly dull markets. However the highlight was the continued weakness in the dollar, with the US dollar index down for the fourth consecutive day (-0.58%) and extending on its three year low. Conversely, Sterling rose 0.47% and the Euro was up 0.51% to 1.227. As a reminder, our FX team believes that flows out of USD will matter more in 2018 than rate differentials and they have a target of 1.30 (EURUSD) on the currency.

    Staying in FX, China’s RMBUSD rose to a two year high (+0.49%) after the central bank strengthened the Yuan fixing by 0.55% (the biggest increase in fixing in three months). Notably, the Bundesank has decided to add the Yuan to its currency reserve, albeit starting with a small amount.

    Over in government bonds, 10y Bunds and French OATs yields rose c1bp, partly weighed down by the hawkish tone from the ECB’s Hansson. He noted that if growth and inflation continue to evolve broadly in line with the ECB’s projections, it would “certainly be conceivable and appropriate to end the (QE) purchases after September”. Further, in terms of how to end QE, he added that “the last step to zero is not a big deal anymore” and “I think we can go to zero in one step without any problems”. On the higher Euro, he noted it “is not a threat to the inflation outlook” up to now and one “should not overdramatize it”. Finally, on policy guidance, he added “there are certainly good reasons to reduce the importance of the net purchases in our communication soon”. Elsewhere, 10y Gilts yields fell for the first time in five days (-1.6bp) while peripherals rose 1-3bp.

    In the UK, the BOE’s Tenreyro has echoed other MPC member’s view that if the central bank’s forecasts are accurate, then the UK economy will potentially have two more rate hikes over the next three years. Notably, she noted that “a different outturn for productivity growth would affect that rate path” and that based on her analysis, it leads her to think that “in the medium term, the risks to productivity may be skewed to the upside”. Looking ahead, she noted that as of December, she saw “ample” time to assess current policy before potentially hiking rates again.

    This morning in Asia, equities are trading higher. The Hang Seng has rebounded (+1.22%) with all sectors in the green, while the Nikkei (+0.98%), Kospi (+0.77%) and China’s CSI300 (+0.71%) are all higher. Elsewhere, China’s RMBUSD is up 0.05% as we type. The Japanese Finance minister Aso noted the Yen’s current exchange rate is not a major issue but sudden movements are a big problem for the currency.

    Now recapping other markets performance from yesterday. European equities were broadly lower with the Stoxx 600 down 0.17%, partly weighed down by the stronger Euro and weakness in healthcare stocks. Across the region, key bourses were all modestly lower (FTSE -0.12%; CAC -0.13%; DAX -0.34%) while Italy’s FTSE MIB bucked the trend to be up 0.49%.

    In commodities, Brent crude oil rose 0.47% to above $70/bbl and is up c40% from its recent lows in August. Yesterday’s strength was partly supported by Iraqi oil minister al-Luaibi comments over the weekend, where he noted that OPEC production curbs should remain until the end of 2018. Gold has edged higher (+0.18%) to a four month high and is up c8% since mid-December. Elsewhere, other base metals were mixed with softness in aluminium prices (Copper +0.16%; Zinc flat; Aluminium -0.79%).

    Away from the markets and onto Germany’s efforts to form the next coalition government. The SPD’s caucus whip Mr Schneider said he is “firmly convinced” that this Sunday’s party convention will support the coalition talks with Ms Merkel’s bloc. Elsewhere, according to a Forsa poll conducted last Friday, 56% of SPD voters and 70% of CDU/CSU voters would back a renewed grand coalition between Ms Merkel’s bloc and the SPD.

    Turning to Brexit, the FT has reported that EU member states have drawn up revised directives that will toughened its conditions on the UK’s post Brexit transition deal. Based on a draft seen by the FT, the conditions include: i) restricting the UK’s ability to apply a new immigration system to EU national arriving in the transition period, which implies that individuals arriving in the UK after Brexit but before 2021 are eligible to stay indefinitely, ii) British ministers will not be able to enter into agreements with non-EU countries to replace the benefits of those lost trade deals unless authorised to do so by the EU and iii) no change to fishing rights in UK waters.

    Finally, the latest ECB holdings were released yesterday. Net CSPP purchases last week were €1.4bn and Net PSPP purchases €7.1bn. This left the CSPP/PSPP ratio at 19.4% last week (vs. 11.5% before QE was trimmed in April  2017), which is in line with our expectations of “around 20%” post the latest taper. That said, this is the first week of relevant data after the QE was halved and the data can be lumpy, so we believe it’s too early to make material conclusions until additional readings. However one of the reasons we thought Q1 would be strong for credit was that the CSPP technicals will improve initially. After Q1 macro issues will start to offset this though and the overall end of QE will come into view.

    Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In Europe, the Eurozone’s November trade surplus was higher than expected at €22.5bln (vs. €22.3bln) with exports up 7.7% yoy and imports up 7.3% yoy. In the UK, the January Rightmove index reported that asking prices for homes rose 1.1% yoy, slightly higher than the prior month’s reading of 1%.

    In Japan, the BOJ’s regional economic report noted that six of nine regions had been expanding or expanding moderately, with the remainder continuing to recover moderately. Elsewhere, three of the nine regions revised up their economic assessment from that made in October.

    Looking at the day ahead, final December CPI reports are due in Germany and Italy. In the UK, there is the December CPI, PPI and RPI along with the November house price index, while in the US the January empire manufacturing print is due. Away from the data, Canada’s Foreign Affairs Minister Chrystia Freeland and US Secretary of State Rex  Tillerson are due to meet to discuss stability on the Korean Peninsula. Citigroup are due to report Q4 earnings.


    ]]> Tue, 16 Jan 2018 15:06:42 +0300
    <![CDATA[Japanese Public Broadcaster NHK Issues False Alarm Over North Korean Missile Launch]]> It's deja vu, all over again.

    Just four days after residents of Hawaii lived through 38 minutes of doomsday hell, after a false public broadcast alarm announced that a ballistic missile launch was headed for the island, only to reverse and announce later it was a mistake, moments ago Japan's National broadcaster NHK’s app issued a false J-Alert to phones over a North Korean missile launch at 6:55 p.m. Tuesday evening local time.

    The message, received by phone users with the NHK app installed on their devices, read: "NHK news alert. North Korea likely to have launched missile. The government J alert: evacuate inside the building or underground. "

    It then promptly corrected the error just 5 minutes later, at around 7 p.m.

    After the false alert, NHK issued an on-air apology on Tuesday evening local time, saying "the news alert sent earlier about NK missile was a mistake. No government J alert was issued."

    "Around 6:55pm earlier we reported on the NHK's news site and NHK's news disaster prevention application ‘Pattern of North Korean missile launch’ but this was incorrectly issued. J alert has not appeared. I must sincerely apologize,” the news outlet wrote.

    The bizarre coincidence of two false alarms announcing the start of nuclear war is certainly suspicious.

    The false alert came on the same day as the US and Canada planned to host talks in Vancouver over the crisis on the Korean Peninsula after a year of missile tests and threats from the North.

    As a reminder, on Saturday, an emergency alert notification sent out to residents of Hawaii warning of an incoming "ballistic missile threat" turned out to be a false alarm. The error was blamed on an employee who "pushed the wrong button." "BALLISTIC MISSILE THREAT INBOUND TO HAWAII. SEEK IMMEDIATE SHELTER. THIS IS NOT A DRILL," the emergency alert read.

    The warning went out on television and radio as well as cell phones, according to Hawaii Gov. David Ige, sparking panic amongst some residents. A second emergency alert was sent to phones in Hawaii 38 minutes after the initial message confirming the false alarm.



    ]]> Tue, 16 Jan 2018 14:02:51 +0300
    <![CDATA[Putin Pals Panic Over US "Corrupt Oligarchs" List, Begin Liquidating Assets]]> As we reported last Friday, Russian oligarchs are growing increasingly nervous over the U.S. Treasury's upcoming "Official Oligarch" list, which is being created pursuant to an Aug. 2, 2017 law requiring that the Treasury and State Departments identify officials and oligarchs as determined by "their closeness to the Russian regime and their net worth" in order to penalize the Kremlin for its alleged meddling in the 2016 election.


    (Artist's impression of a Russian oligarch)

    The report, due in two weeks on January 29, must include “indices of corruption with respect to those individuals” and any foreign assets they may have. And according to Bloomberg, Russian businessmen are scrambling right now to protect assets and avoid the list. 

    Some people who think they’re likely to land on the list have stress-tested the potential impact on their investments, two people with knowledge of the matter said. Others are liquidating holdings, according to their U.S. advisers.

    Russian businessmen have approached former Treasury and State Department officials with experience in sanctions for help staying off the list, said Dan Fried, who previously worked at the State Department and said he turned down such offers. Some Russians sent proxies to Washington in an attempt to avoid lobbying disclosures, according to one person that was contacted.

    And with Russia-friendly lobbyists such as the Podesta Group and Paul Manafort's operations shuttered, many desperate Russian oligarchs have been cut off from their D.C. influence peddlers. 

    Meanwhile, Treasury officials are reportedly growing concerned over the list, as they worry some people will conflate it with Obama-era sanctions. Moreover, portions of the report may be classified and issued in the form of a letter - as opposed to releasing it through the Office of Foreign Assets Control (OFAC) which is responsible for issuing sanctions. 

    “You’re going to have people getting shamed. It’s a step below a sanction because it doesn’t actually block any assets, but has the same optics as sanctions -- you’re on a list of people who are engaged in doing bad things.” -Erich Ferrari, Ferrari & Associates

    Corruption Index

    The Treasury's report must include "indices of corruption,which will list any foreign assets next to an oligarch considered corrupt. “Because of the nervousness that the Russian business community is facing, a number of oligarchs are already beginning to wind back businesses, treating them as if they are already designated, to stay ahead of it,” said Daniel Tannebaum, head of PricewaterhouseCoopers LLP’s global financial sanctions unit. 

    Vladimir Putin has warned wealthy nationals over worsening U.S. sanctions, and provided them with a capital amnesty program designed to allow oligarchs to repatriate some of their overseas assets. Meanwhile, Putin has issued special bonds which will allow the wealthy to hold assets outside of the reach of the U.S. Treasury. 

    Kremlin spokesman Dmitry Peskov told reporters on Friday that Russia will react to any punitive measures against its businessmen, stating "The principle of reciprocity remains," suggesting that Putin would employ a commensurate response to a U.S. crackdown on oligarchs. 

    * * *


    Trump's new Executive Order may explain asset shuffle

    Perhaps one of the main drivers behind Russian oligarchs shedding assets before the U.S. Treasury's "indices of corruption" are released is an Executive Order signed quietly in Late December which freezes the U.S. housed assets of foreign government officials or executives of foreign corporations deemed to be corrupt

    In fact, anyone in the world who has "materially assisted, sponsored, or provided financial, material or technological support for, or goods or services" to foreigners targeted by the Executive Order is subject to frozen assets. This would apply to D.C. lobbyists working for corrupt Russian oligarchs, or U.S. government officials who have, say, effectuated a uranium deal deemed corrupt.

    While it has yet to be seen whether the asset liquidations will affect any specific sectors, one should keep an eye out for any red-dawn related volatility over the next two weeks.

    ]]> Tue, 16 Jan 2018 13:56:30 +0300
    <![CDATA[US Urges EU To 'Fix' Iran Deal: Brussels Between A Rock And A Hard Place]]> Authored by Peter Korzun via The Strategic Culture Foundation,

    President Trump said it was the final waiver extending Iran nuclear deal. He did it with strings attached. The president’s demands include: immediate inspections at sites by international inspectors and “denying Iran paths to nuclear weapons forever” (instead of 10 years as stipulated under current law). New sanctions were issued against 14 people and entities involved with Iran’s ballistic missile programs and a crackdown on government protesters. The president wants the deal to cover Iran's ballistic missile programs.

    Restrictive measures were extended three times last year. And Donald Trump never certified the agreement. Senator Bob Corker, the current chairman of the Senate's Committee on Foreign Relations, said “significant progress” had been made on bipartisan congressional legislation to address “flaws in the agreement without violating US commitments.”

    According to President Trump, there are only two options: either the deal is fixed or the US pulls out. This time he wants to pass the buck, emphasizing that the decision to do it the last time is explained by his desire to secure the agreement of US European allies to fix what he calls “the terrible flaws” of the Joint Commission Plan of Action (JCPOA) or the Iran nuclear deal.

    Europeans have 120 days to define their position. From now on, Europe is facing a real hard choice: it’s either dancing to the US tune or being adamant in its support for the deal. The latter will bring it closer to Russia.

    Germany said on Jan.12 that it remained committed to the deal and that it would consult with “European partners to find a common way forward”. The European Union remains committed to support the implementation of the JCPOA.

    The US plan hardly has a chance of success. Even if Europe joins the US, which is not the case, at least for now, the introduction of any changes to the deal requires the consent of other participants: Russia, China and Iran. Tehran has taken a tough stance, flatly refusing any talks on changes.

    Another element of US proposal is also a tall order. The president wants a separate follow-on deal on Iran with the EU “to enshrine triggers that the Iranian government could not exceed related to ballistic missiles.” The consent of other participants is not needed but a separate agreement will bury the JCPOA as the provisions of the two deals will contradict each other. Iran will have to pull out and it will not be its fault and responsibility.

    A unilateral US withdrawal is the most feasible option. But it will provoke an international outcry. It’s better to face the consequences being a member of an international coalition. So, the US is aggressively pursuing its goals. The stakes are high and Europe will have to make its choice. If it does not back the deal, its image as a reliable partner will be damaged internationally. The EU has economic interests in Iran. It’ll lose a lot pulling out from the JCPOA. On the other hand, Europe is not at all happy at the prospect of deteriorating relations with the United States.

    There is another important aspect not to be forgotten. It’s a win-win situation for Moscow. Russia does not want the Iran deal threatened. Its contribution into it was important enough. But if Brussels succumbs to pressure, it’ll be a political win for Russia to bolster its image as a reliable partner remaining faithful to its obligations. Even with the JCPOA in place, some restrictions on economic and military cooperation remain in force. If the US tears up the deal, there will be no formal obligation to comply with them. Tehran will be pushed to develop even closer ties with Moscow and Beijing.

    If the EU stands tall and has it its way, the US European partners may not back the United States in the United Nations, undermining what is called “Western unity”. Brussels and Moscow will get closer. Iran will become a field for cooperation. The process of rapprochement will be spurred if the US imposes restrictive measures on European companies participating in joint projects with Russia, such as Nord Stream-2, for instance. That’s how US sticking with tough stance on Iran may backfire. Acting high and mighty on international stage does not always bring the desired results. Taking well-thought-out foreign policy moves as elements of grand strategy does pay off but the US prefers to act otherwise. By doing so, it risks shooting itself in the foot.

    ]]> Tue, 16 Jan 2018 13:00:00 +0300
    <![CDATA[Visualizing All Of The World's Borders By Age]]> Defined borders are a relatively new concept in many parts of the world. In fact, as Visual Capitalist's Nick Routley notes, until the latter half of the 20th century, most of the world was still wide open territory with loosely or completely undefined borders.

    On the European continent, however, jurisdiction over territory has been a fact of life for thousands of years. In some cases, they’ve left a paper trail. In other cases, there are more concrete remnants. For example, over 3,000 miles (5,000 km) of simple frontier fortifications – known as limes – marked the edges of the Roman Empire at its greatest extent in the 2nd century.

    Over time, as territorial jurisdiction changed hands through war, marriage, and other arrangements, the map has been redrawn countless times. The video below demonstrates just how dramatically many of Europe’s dividing lines have shifted (even as recently as the 1990s).

    Even today, borders are far from set in stone. Belgium and the Netherlands recently swapped land in order to simplify an overly complex piece of their border along a river. Also, India and Bangladesh worked together to solve a notoriously complicated situation involving enclaves within enclaves.


    Creating a map that shows the age of all the world’s borders seems like an impossible feat, but Reddit user, PisseGuri82, was up to the challenge. PisseGuri82, acknowledging the extreme complexity of the undertaking, outlined some caveats to consider:

    – The map looks at the date a border was officially set to its current form (excluding minute changes).
    – The dates are derived from publicly available border treaties and documents.
    – Exact dates are difficult to pin down as ratification, surveying, and physical marking can take place over a number of years.

    These issues aside, the final product is a fascinating look at how we’ve divided the world up into nations.

    Courtesy of: Visual Capitalist

    Here are some highlights from the map:

    Static Spain
    In contrast to the patchwork of territories left in the wake of the Holy Roman Empire, the southwest part of Europe has remained remarkably static. The border dividing Spain and Andorra, weaving its way through the rocky Pyrenees mountain range, has remained unchanged since 1278, when a feudal charter solidified Andorra’s geography. The Portugal–Spain border has been in place since 1297.

    War and Pieces
    Many of the oldest borders in the world were established by treaties following a war. One particularly noteworthy example is the border between Iraq and Turkey, which was established by the Treaty of Zuhab (1639) following the sack of Baghdad by the Ottoman Empire.

    The Legacy of the “Scramble for Africa”
    It’s remarkable to note that a full third of the world’s borders are less than 100 years old. This is especially apparent in Africa, where many existing borders still resemble those haphazardly set by colonial powers around the turn of the 20th century. The average border on the continent is only 111 years old.

    We have been giving away mountains and rivers and lakes to each other, only hindered by the small impediment that we never knew exactly where the mountains and rivers and lakes were.

    -Lord Salisbury, British PM in 1890

    In 1964, independent African states chose to maintain colonial borders, primarily to prevent widespread conflict over territory. Though colonial divisions were maintained in theory, only about one third of Africa’s 51,000 miles (83,000 km) of land borders are demarcated – an issue that continues to cause headaches today. For example, South Sudan has numerous border conflicts with neighbors; a situation that is complicated by the presence of natural resources.

    A recent study pointed out that the likelihood of conflict in Africa is approximately 40% higher in areas where “partitioned ethnicities reside, as compared to homelands of ethnicities that have not been separated by national borders”.

    Ice Slices
    There are seven sovereign states with pie-slice-shaped territorial claims in Antarctica. It’s worth noting that the claims have been recognized only between the countries making claims. There is currently a treaty in place that preserves freedom of scientific investigation and bans military activity on the continent.

    Saudi Arabia’s Lines in the Sand
    Saudi Arabia’s oldest border section – shared with Kuwait – is a remnant of the Uqair Convention circa 1922, but most of its international borders were established in the latter part of the 20th century. The Yemen–Saudi border was only officially demarcated in the year 2000, and a 1,100 miles (1,800 km) border fence soon followed.


    Where there is a war and upheaval, border changes often follow. Syria’s descent into chaos and the annexation of Crimea are two situations which could result in new international borders. Breakaway states – an independent Catalan state, for example – are always a possibility as well.

    For now, the most likely changes to borders will continue be minor adjustments to fix lawless gaps between nations. These corrections are rarely easy to negotiate, but irregularities, like the one that led to founding of Liberland, can cause even bigger headaches for governments and local officials.

    ]]> Tue, 16 Jan 2018 12:15:00 +0300
    <![CDATA[Is Facebook 'Championing' Blasphemy Laws Across Europe?]]> Authored by Judith Bergman via The Gatestone Institute,

    • What is "harmful content" according to the new Facebook guide for Muslims? "Islamophobia, anti-Muslim hatred, far right extremism and terrorist inspired violent extremist content".
    • The guide does not mention Islamic incitement to violence, which is rampant on social media and -- unlike the other content mentioned -- has deadly and tragic consequences in the real world. Most of those who perpetrate terrorist attacks in the real world are Muslims -- not "Islamophobes," anti-Muslims or right wing extremists.
    • Lakin v. Facebook is a lawsuit, representing 20,000 Israeli plaintiffs, which aims to stop Facebook from "allowing Palestinian terrorists to incite violent attacks against Israeli citizens and Jews on its internet platform."
    • Khan convened a special meeting of Muslim ambassadors to discuss how effectively to "raise the voice of the entire Muslim world against the madness unleashed against Islam and holy personalities in the name of freedom of expression". — Pakistani Interior Minister Chaudhry Nisar Ali Khan.

    Facebook, in cooperation with a British Muslim group, Faith Associates, recently launched a new "guide" developed especially for Muslims: "Keeping Muslims Safe Online: Tackling Hate and Bigotry".

    The launch of the guide was hosted on November 29 at the British Parliament, where Karim Palant, Facebook's UK Public Policy manager, acknowledged "the partnership of Facebook with Faith Associates and said this was a first step in a line of activities being planned to protect the Facebook family". Simon Milner, Head of Policy UK at Facebook, stated:

    "We're proud to be supporting Faith Associates in the development of their online safety guide. Facebook welcomes all communities, and there is no place for hate on the platform".

    It is curious that of all the groups Facebook could have chosen to "protect" -- if one is to believe that Facebook intends to "protect" other groups as well -- it chose Muslims. Are Muslims the most targeted group in the world today? In Canada, according to fresh statistics, hate crimes against Muslims have fallen while hate crimes against Jews have risen. In the United States, according to Gatestone's A. Z. Mohamed:

    "Since 1992... anti-Semitic incidents have been higher than those perpetrated against other groups... To this day, the greatest number of reported religion-based hate crimes have been directed at Jews, and the second greatest against Muslims... in 2015... there was a sharp rise in religion-based hate crimes, particularly against Islam and Muslims. Yet even then, Jews were 2.38 times more likely than Muslims to become victims of a hate crime."


    Facebook, in cooperation with a British Muslim group, recently launched a "guide" developed especially for Muslims: "Keeping Muslims Safe Online: Tackling Hate and Bigotry". Mark Zuckerberg, Facebook's CEO, wrote about making Facebook a "safe space" for Muslims. He has made no similar supportive statements in favor of Jews or Christians. Pictured: Parts of the cover of the new guide co-produced by Facebook.


    In the UK, anti-Semitic hate crimes were at the highest recorded level ever in 2016 -- 1,078 offenses registered in 2016 compared to 938 in 2015. According to the Guardian, the Metropolitan Police (MET) recorded "1,260 incidents of Islamophobic hate crime in the 12 months to March 2017" in London alone. However, the MET police's definition of "Islamophobia" -- which the MET police claims is widely accepted, including by the EU Agency for Fundamental Rights -- is exceedingly wide. According to the definition, as described in the 2012 report, "Hate Crimes Against London's Muslim Communities 2005-2012", Islamophobia is present when:

    1. Islam is seen as a monolithic bloc, static and unresponsive to change.
    2. Islam is seen as separate and 'other'. It does not have values in common with other cultures, is not affected by them and does not influence them.
    3. Islam is seen as inferior to the West. It is seen as barbaric, irrational, primitive and sexist.
    4. Islam is seen as violent, aggressive, threatening, supportive of terrorism and engaged in a 'clash of civilisations'.
    5. Islam is seen as a political ideology and is used for political or military advantage.
    6. Criticisms made of the West by Islam are rejected out of hand.
    7. Hostility towards Islam is used to justify discriminatory practices towards Muslims and exclusion of Muslims from mainstream society
    8. Anti-Muslim hostility is seen as natural or normal.

    Not even Orwell could have made this list up.

    Even if there is no statistical basis for Facebook's new guide for Muslims, its creation should not come as a surprise. On December 10, 2015, in the wake of the San Bernardino terrorist attack, Mark Zuckerberg, founder and CEO of Facebook, wrote a Facebook post about making Facebook a "safe space" for Muslims. His post did not contain a word of condemnation of the terrorist attack, or allude to any of the widespread Islamic terrorist incitement that his social media platform hosts. Zuckerberg wrote:

    "I want to add my voice in support of Muslims in our community and around the world... After the Paris attacks and hate this week, I can only imagine the fear Muslims feel that they will be persecuted for the actions of others... If you're a Muslim in this community, as the leader of Facebook I want you to know that you are always welcome here and that we will fight to protect your rights and create a peaceful and safe environment for you."

    The guide appears to be one of the ways in which Zuckerberg has kept his promise. The recently released guide was "...produced in partnership with Facebook to empower you, as a Muslim user on the platform, with the tools, resources and knowledge to identify and deal with harmful content and keep you and your friends safe".

    What is "harmful content" according to the new Facebook guide for Muslims? "Islamophobia, anti-Muslim hatred, far right extremism and terrorist inspired violent extremist content", which "all manifest themselves online and can have a detrimental effect on confidence and mental wellbeing". The guide goes on to detail how "harmful content" should be reported to Facebook and in some cases even to the police.

    The guide does not mention Islamic incitement to violence, which is rampant on social media and -- unlike the other content mentioned -- has deadly and tragic consequences in the real world, with thousands of people murdered in Islamic terrorist attacks. Most of those who perpetrate terrorist attacks in the real world are Muslims -- not "Islamophobes", anti-Muslims or right wing extremists. Nevertheless, the only -- obfuscating and vague -- reference to Islamic terrorism is at the very end of the guide:

    "If you see someone sharing terrorist content and encouraging others to join extremist groups, report them and then make or share posts that show true Islamic messages of peace, mercy and tolerance".

    Zuckerberg has made no similar supportive statements in favor of Jews or Christians. So far, no guides have been released on how to keep Jews or Christians safe on Facebook, despite the fact that Jews are overwhelmingly targeted by Muslim anti-Semites and jihadists. Considerably more is at stake in these cases than "a detrimental effect on confidence and mental wellbeing". Two ongoing legal cases against Facebook attest to this fact. One is Lakin v. Facebook, a lawsuit, representing 20,000 Israeli plaintiffs, which aims to stop Facebook from "allowing Palestinian terrorists to incite violent attacks against Israeli citizens and Jews on its internet platform."

    Facebook is acting out of a political concern to show Muslim countries that Facebook is willing to respect Islamic blasphemy laws. In July, Vice President of Facebook Joel Kaplan promised Pakistan -- in a call with Interior Minister Chaudhry Nisar Ali Khan -- that Facebook will "remove fake accounts and explicit, hateful and provocative material that incites violence and terrorism". Khan told the VP of Facebook:

    "the entire Muslim Ummah was greatly disturbed and has serious concerns over the misuse of social media platforms to propagate blasphemous content... Pakistan appreciates the understanding shown by the Facebook administration and the cooperation being extended on these issues".

    Prior to the Pakistani government's talk with Facebook management in July, Khan convened a special meeting of Muslim ambassadors to discuss "blasphemous content" on social media, and how effectively to "raise the voice of the entire Muslim world against the madness unleashed against Islam and holy personalities in the name of freedom of expression". Khan also met with the secretary general of the Organisation of Islamic Cooperation (OIC) on this issue specifically, before talking to Facebook management.

    Enforcing Islamic blasphemy law is one of the OIC's main causes. How convenient for the OIC that Facebook has decided to champion it.

    ]]> Tue, 16 Jan 2018 11:30:00 +0300
    <![CDATA[Investors Are Buying Power Stations In Russia To Mine Cryptocurrency]]> Two electric power stations in Russia were recently sold to a cryptocurrency miner looking to expand his operations – the latest sign that the country’s government-supported push to become a cryptocurrency mining hub has been successful.

    The two stations are situated in the Perm Region on the western slopes of the Middle Ural Mountains, and in the neighboring Republic of Udmurtia. The facilities will be used as data centers as well as housing for cryptocurrency mining equipment and a center for cryptocurrency mining. The price paid for the two stations? Roughly 160 million rubles (about $3 million), according to RT.

    After initially approaching cryptocurrencies with skepticism, the Russian government last summer signaled that it would instead try to regulate and embrace the markets.


    That trend has culminated with the Russian Ministry of Finance drafting a bill to legalize the trading of cryptocurrencies on approved exchanges, according to Deputy Finance Minister Alexei Moiseev, who has indicated that the government is seeking to provide greater oversight. President Vladimir Putin has ordered the government to create legislation governing the status of bitcoin, other cryptocurrencies, mining, and initial coin offerings, as well as defining everything that relates to digital money, by July.


    image courtesy of CoinTelegraph

    The bill will open the door to more open cryptocurrency trading and investment within Russia, as some countries like China have sought to stamp out both mining and trading.

    In August, a company known as Russian Miner Coin, or RMC, announced that it would try to raise $100 million in an initial coin offering, promising to allocate 18% of the company’s mining revenue to holders of their tokens. The company was founded by a close aide to Putin.

    The law currently being written by the Duma will be the country’s first targeting cryptocurrencies. Back in December, Moiseev suggested that mining bitcoin and other cryptocurrencies could be made illegal, though he quickly back-tracked from those comments.

    The new owner of the power stations, businessman Aleksey Kolesnik, has indirectly confirmed the acquisition – though he added that he will wait to begin mining cryptocurrencies from the facilities until after Russia adopts the relevant legislation.

    Furthermore, the Russian government and its state-owned energy companies have reportedly considered launching a digital currency that could be used in partnership with Venezuela, Iran and Russia to circumvent US sanctions in accepting payment for their oil exports, similar to Venezuela’s Petro, an oil-backed digital currency that is being developed by Latin America's favorite Socialist Paradise.


    ]]> Tue, 16 Jan 2018 10:45:00 +0300
    <![CDATA[5 Reasons Why Egypt And Sudan Might Be About To Go To War]]> Authored by Middle Easy Eye's Mohammed Amin via The Anti Media,

    Cairo and Khartoum have allied themselves with opposing power blocs, building on inherent tension between the neighboring countries...


    Turkish media reported on 4 January that Egyptian forces have arrived in Eritrea, which borders eastern Sudan, with backing from the UAE and opposition groups from the region.

    That same day, Sudan recalled its ambassador from Cairo, then two days later declared a state of emergency in Kassala state, which neighbours Eritrea, and shut the border without explanation. Eyewitnesses in Kassala have since said that large numbers of troops have passed through, heading towards the border area.

    Ahmed Abu Zeid, Egyptian foreign ministry spokesman, said Cairo was “comprehensively assessing the situation with a view to making the appropriate response”.

    The increase in tension comes just weeks after Turkish President Recep Tayyip Erdogan arrived in Khartoum, the first visit by a Turkish leader since the Ottoman Empire withdrew from Sudan in 1885. Sudan and Turkey signed 13 agreements during the December visit, including military accords.

    Cairo didn’t officially comment on Erdogan’s visit, but pro-government media have accused it as being a conspiracy against Egyptian national security. Khartoum in turn has denied the Egyptian accusations and says that Cairo has no right to interfere in Sudanese issues.

    During the past year Sudan and Egypt, which have a long-standing enmity, have increasingly allied themselves with opposing Middle Eastern power blocs. Egypt has the backing of Saudi Arabia and UAE, the key advocates of a months-long blockade against Qatar. Sudan meanwhile has allied itself with Qatar and Turkey, which has a military base in the Gulf kingdom.

    This is not the first time the two countries have fallen out.

    Reason 1: Disputed Borders

    Aside from Eritrea, two other territorial disputes have strained Sudanese-Egyptian relations during the past half century.

    The province of Darfur, in western Sudan, has been riddled by war for the past two decades, with up to 300,000 dead and at least 2.7 million displaced.

    In May last year, President Omar al-Bashir said: “The Sudanese army has captured several Egyptian armored vehicles in recent fighting in Darfur.” He has also previously accused Egyptian intelligence services of supporting opposition figures fighting his troops in the conflict zones of Blue Nile and South Kordofan.


    Member of the Sudan Liberation Army (Abdul Wahid faction) in North Darfur in May 2012 (UNAMID)

    However, Egyptian President Abdel Fattah al-Sisi dismissed the accusations and said Cairo was not playing a role in Darfur. Rebel leaders have also rejected Bashir’s comments.

    Then there is the Halaib Triangle to the north of Sudan, run in effect by Egypt for the past two decades and which Cairo says is Egyptian territory. The region, rich in minerals and oil, has been disputed by Egypt and Sudan since the latter became independent in 1956.

    Cairo has increased its military presence in the area since 1996, despite Khartoum’s repeated complaints to the UN Security Council and calls that the dispute be solved through arbitration.

    In January 2016, Sudan put its forces on standby on the border with Egypt, the first time it has done so in 60 years, saying that Egypt’s military was “provoking” the Sudanese army in the disputed area.

    Reason 2: Deals With Turkey

    Khartoum has been diplomatically and economically impoverished during the past decade. The country is still subject to international sanctions as a result of the conflict in Darfur, while Bashir is still wanted by the International Criminal Court for crimes of genocide. South Sudan took three-quarters of the country’s oil revenue when it became independent in 2011.

    Small wonder then that Sudan has sought international alliances where it can. During his visit, Erdogan said that the two countries aimed to boost two-way trade from $500mn a year to $1bn in an initial stage and then to $10bn.


    Turkish President Recep Tayyip Erdogan (L) is embraced by President of Sudan Omar al-Bashir during an official welcoming ceremony at Khartoum international airport on 24 December (AFP)

    Turkey, meanwhile, wants to boost its influence in the region, not least near international trade routes that pass through the Suez Canal to the north and the Gulf to the east.

    Ankara has been active militarily in neighbouring Somalia since 2009, when it joined the multinational counter-piracy task force off the Somali coast.

    In September 2017, Turkey opened its largest overseas military base in the Somali capital, Mogadishu. It reportedly cost $50mn and will train 10,000 Somali troops, according to Turkish and Somali officials.

    Ahmet Kavas, a former Turkish ambassador to the republic of Chad and an adviser to the prime minister on African affairs, told Middle East Eye that Turkey’s presence in Africa made more sense than that of any other country.

    “If you were to think of any one country that should be present in Africa, that country would be Turkey,” said Kavas. “The anomaly was the 20th century, when we were largely absent from the continent and the western Europeans stepped in.”


    Two of the deals signed during the Erdogan drew particular drew sharp attention from Cairo.

    The first leases Sudan’s Red Sea island of Suakin to Turkey for 99 years. Over the centuries the island has been a commercial crossroads between Africa, Europe and the Gulf, as well as a gateway heading to the Arabian peninsula for Hajj. Historically, it is home to several ancient sites, dating back to when the Ottoman Empire colonised Sudan in the 18th century.

    Turkey has said that parts of the island will be restored by the Turkish Cooperation and Coordination Agency and the ministry of culture and tourism.

    But Asma Al-Hussieni, editor in chief of the Egyptian daily state newspaper Al-Ahram Egyptian, said in early January that Khartoum and Turkey have secretly agreed to establish a military base on the island, threatening the shipping lanes of the Red Sea.

    The second deal allows Turkey to have an enhanced presence in in Sudan’s territorial waters across police, security, military and defence ministries, ostensibly to protect Sudanese naval ships as well as fight terrorism.

    Sudanese security expert and retired general Alabas Alamin said that Turkey’s increased presence in the Red Sea is a “breakthrough for Turkish ambitions, which worries the Arab countries aligned with Saudi Arabia, especially Egypt”.

    There have been complaints about the deals from within Sudan. Abdallah Musa is a leading member of the Beja congress party, which represented a former rebel movement in eastern Sudan that signed a peace deal with the government in 2006.

    Reports suggest Khartoum and Turkey have secretly agreed to establish a military base on the island of Suakin (Bertramz wiki commons)

    He said the move is “a violation of the Sudanese sovereignty that will put Sudan in a critical situation amid regional conflicts” and that Egypt and Gulf states could be blackmailed if the waters were closed, disrupting oil routes to international markets.

    However, the Turkish ambassador to Sudan, Irfan Neziroglu, denied Turkey would become involved in international affairs on Sudanese territories. “Turkey and Sudan have nothing to hide over the Red Sea or Suakin island,” he told MEE. “What we announced openly is what will going to happen in the Red Sea.”

    Reason 3: Gulf Alliances

    The Gulf crisis which began in summer 2016 saw the Middle East divided between a power bloc opposed to Qatar which included Saudi, Bahrain, UAE and Egypt, and supporters of Doha, which include Turkey and Iran.

    Emad Hussien, editor in chief of Sudan’s Alshorooq newspaper, said: “Khartoum is clearly pragmatic and opportunistic as it jumps from one camp to another without any strategic goals other than to break the isolation of the regime.”

    Alhaj Warag, a political analyst and editor-in-chief of Turkey’s Hurriyat online, said on Egyptian TV that Turkish ambitions have pushed Khartoum to build its current partnership with Ankara – but that this could put Sudan in a difficult position.

    Sudan, Warag observed, had shifted from alliances with Iran to the Saudi-led coalition in Yemen to Turkey and Qatar. “Playing the regional axis to draw some benefits will end up having a serious effect on Sudan.”

    Musa warned that Sudan risked becoming the next Yemen. There, three years of war between sides backed by rivals Saudi Arabia and Iran have ripped the country asunder.

    “To solve its economic crisis, Khartoum is putting the entire country in the middle of the regional polarisation,” Musa said, “but that will lead to serious consequences.”

    Reason 4: Africa’s Biggest Dam

    Egypt is deeply worried about the impact on its water supply of the Grand Ethiopian Renaissance Dam, now being built near the border between Ethiopia and Sudan and set to be the largest on the continent.

    Addis Ababa hopes the $5bn project will lift a large segment of its more than 80 million people out of poverty as well as allow it to sell on the energy produced and boost the economy.


    Workers build the Grand Renaissance Dam near the Sudanese-Ethiopian border in March 2015 (AFP)

    But in Egypt, where around 90 percent of the population live on or near the banks of the Nile, there are fears that there will be less water for irrigating crops. Cairo is also concerned that Sudan, through which the Nile flows, will side with Ethiopia in talks over the dam.

    In December, Ethiopian media reported that Egypt wanted to exclude Sudan from the talks and invite the World Bank to arbitrate.

    The Egyptian foreign ministry has denied the suggestion, stressing that Sudan is part of the talks that can’t be excluded.

    But a Sudanese diplomat asked for anonymous because he is not authorized to the talk to the media told MEE the report was correct, adding: “The Egyptian stance regarding the dam is regrettable. Such moves from Egypt are unacceptable as they will only lead to more complications during the talks over the dam rather than solving the disputes.”

    Reason 5: The Muslim Brotherhood

    Egyptian President Abdel Fattah el-Sisi came to power after he drove his predecessor, Mohamed Morsi, from office in July 2013. Morsi was a member of the Muslim Brotherhood, which is now banned in Egypt and whose members have been subject to unfair trials and torture, according to human rights groups.


    Mohamed Morsi, former Egyptian president and member of the Muslim Brotherhood, is currently in prison (AFP)

    In contrast, Sudan’s Bashir rose to power in 1989 amid a military coup backed by the brotherhood and its leader, Hassan Alturabi, whom the current president later ousted when the organisation split in 1999.

    Egyptian pro-government media have repeatedly accused Sudan of harbouring Egyptian members of the brotherhood, an accusation which has been denied by the Sudanese authorities.

    Under the title of “Al-Bashir and the political suicide” Emad Adib, a columnist for Al-Watan, daily Egyptian newspaper wrote that “Sudan is conspiring with Turkey and Qatar against Egypt”.

    Turkey has been supportive of the brotherhood: in February 2017, Erdogan said he did not consider it “an armed group, but is in actual fact an ideological organisation” and that if they had been associated with terrorism then they would have been driven from Turkey.

    Hassan Ali, a political science professor at Alazhari University, believes the tension over the brotherhood is a sign of the ideological divide between Khartoum’s Islamist government and the leadership in Egypt, which is increasingly having to deal with attacks in Sinai since the ousting of Morsi.

    “These ideological differences are the main cause of tension between the two sides. The remaining issues including Halaib, the Ethiopian dam, and others are pending issues that been used as cards by the two sides to put pressure on each other.”

    So Will There Be War?

    Yet despite the disagreements over dams and brotherhoods, islands and power blocs, experts believe it is in neither country’s interest to engage in war.

    Abdul Moniem Abu Idriss, a Sudanese political analyst, believes that the current tension is unlikely to descend from diplomatic and media spats into open military conflict.

    Both countries, he said, are suffering deep economic crises, which will curtail their ability to fight or engage in escalation.

    “Since 2011, these two neighbors have been suffering economic deterioration. Sudan has lost has the majority of its oil revenues since the separation of South Sudan in that year.

    “Meanwhile Egypt’s tourism, which is a vital sector for the Egyptian economy, has been hit by the continuous terror attacks.”

    Egypt also goes to the polls in March – and a wave of nationalist fervour, sparked by relations with Sudan, might strengthen the hand of Sisi with his previous background as defence minister, commander-in-chief of the armed forces and director of military intelligence.

    Idriss also believes that each side is “attempting to create an imaginary enemy to draw the attention of the two nations from their realistic and daily life needs that they failed to provide”.

    “Even the Egyptian military presence in Sudan, especially in Halaib, is old and dates back to 1996, so I don’t think that there is something new in this regard,” he added.

    And despite Turkey’s pledges to back Khartoum in any Egyptian attack on the Red Sea coast, both sides are too fatigued for war.

    Alhaj Hamad, director of the Sudanese Centre for Social and Human Development, said: “The two dictatorships in these two countries actually want to draw the attention of the people away from their domestic crises.”

    He said that neither side could afford even the pretense of engaging in open war. “I don’t think that they will go further. This current situation is best called the balance of weaknesses.”

    ]]> Tue, 16 Jan 2018 10:00:00 +0300
    <![CDATA[Paul Craig Roberts: "Amnesty International Is Barking Up The Wrong Tree"]]> Authored by Paul Craig Roberts,

    I have received a letter from Margaret Huang, Amnesty International’s executive director.

    She is fundraising on the basis of President Trump’s “chilling disregard for our cherished human rights” and his exploitation of “hatred, misogyny, racism and xenophobia,” by which he has “emboldened and empowered the most violent segments of our society.”

    Considering the hostility of Identity Politics toward Trump, one can understand why Ms. Huang frames her fundraiser in this way, but are the Trump deplorables the most empowered and violent segments of our society or is it the security agencies, the police, the neoconservatives, the presstitute media, and the Republican and Democratic parties?


    John Kiriakou, Ray McGovern, Philip Giraldi, Edward Snowden, and others inform us that it is their former employers, the security agencies, that are empowered by unaccountability and violent by intent. Certainly the security agencies are emboldened by everything they have gotten away with, including their conspiracy to destroy President Trump with their orchestration known as Russiagate.

    The violence that the US government has committed against humanity since the Clinton regime attacked Serbia was not committed by Trump deplorables. The violence that has destroyed in whole or part eight countries, murdering, maiming, and displacing millions of peoples, was committed by the Clinton, George W. Bush, and Obama regimes, their secretaries of state such as Hillary Clinton, their national security advisers, their military and security establishments, both parties in Congress. The murder of entire countries was endorsed by the presstitute media and the heads of state of Washington’s European, Canadian, Australian, and Japanese vassals. Trump and his deplorables have a long way to go to match this record of violence.

    Whether she understands it or not, Ms. Huang with her letter is shifting the violence from where it belongs to where it does not. The consequence will be to increase violence and human rights violations.

    The most dangerous source of violence that we face is nuclear Armageddon resulting from the neoconservative quest for US hegemony. Since the Clinton regime every US government has broken tension-easing agreements that previous administrations had achieved with Moscow. During the Obama regime the gratuitous aggressions and false accusations against Russia became extreme.

    Why doesn’t Amnesty International address the reckless and irresponsible acts of the US government that are violating the rights of people in numerous countries and pushing the world into nuclear war? Instead, there have been times when Amnesty International aligns with Washington’s propaganda against Washington’s victims.

    By jumping on the military/security complex’s "get Trump movement", human rights and environmental organizations have increased the likelihood that rights and environment will be lost to war.

    There can be no doubt that Trump is undoing past environmental protections and opening the environment and wildlife to more destruction. However, the worst destruction comes from war, especially nuclear war.

    Would things be different if the liberal/progressive/left had rallied to Trump’s support in reducing tensions with Russia, in normalizing the hostile relations that Obama had established with Moscow? Would the support of the liberal/progressive/left have helped Trump resist the pressures from the neoconservative warmongers? In exchange for support for his principal goal, would Trump have mitigated industry’s attacks on the environment and vetoed the renewal of the Foreign Intelligence Surveillance Act that violates human rights?

    We will never know, because the liberal/progressive/left could not see beyond the end of its nose to comprehend what it means for the environment and for human rights for nuclear powers to be locked into mutual suspicion.

    Thanks to the failure of the liberal/progressive/left and to the presstitute media to understand the stakes, the military/security complex has been successful in pushing Trump off his agenda. The damage that a mining company and offshore drilling can do to the environment is large, but it pales in comparison to the damage from nuclear weapons.

    ]]> Tue, 16 Jan 2018 07:50:00 +0300