Friday, May 8, 2015

Today's Links

1--Kerry in Riyadh: A meeting of war criminals, wsws

The White House and the Pentagon have backed Saudi Arabia to the hilt since the war began, rushing it fresh arms, including deadly cluster bombs, banned by the vast majority of the world’s nations because of their murderous effect upon civilians. It has set up a US command center in Riyadh to supply the Saudi Air Force with targeting intelligence, and it has dispatched US Air Force KC-135 Stratotankers to the region to carry out daily aerial refueling of Saudi warplanes, so that the airstrikes can continue around the clock...

The US president is scheduled to hold a summit at Camp David next week with the crowned royals of the Gulf Cooperation Council. He is prepared to offer them an advanced ballistic missile defense system as well as bunker buster bombs.
CNN quoted a senior US official as saying that “the president’s goal is building a defense infrastructure and architecture for the Gulf region that also includes maritime security, border security, and counter-terrorism.”
In other words, the Obama administration is further solidifying US reliance on the Saudi monarchy as a key pillar of its drive for domination of the strategically vital and oil-rich Middle East. Even as the US and the other major powers negotiate an agreement over Iran’s nuclear program, Washington is building up Saudi Arabia and the other reactionary Gulf states for a possible war against Iran....

Even as it continued bombing Yemeni cities, the Saudi air force, with Washington’s blessings, dropped arms and supplies this week to Al Qaeda of the Arabian Peninsula (AQAP) forces in Yemen, a movement that the Obama administration had previously portrayed as the paramount terrorist threat. As the most rabidly sectarian enemies of the Houthis—inspired by the Saudi monarchy’s state religion of Wahhabi Islamism that animates similar movements, from ISIS to Boko Haram—AQAP has now been recast as Yemeni patriots.

2---The Erdogan-Salman Pact Over Syria Creates Un-Islamic State 2.0

 it's being widely reported that Turkish President Erdogan and new Saudi King Salman agreed to a de-facto alliance over Syria when the former visited the new regent last March, meaning that pro-Muslim Brotherhood groups led by Turkey are fighting alongside Wahhabist ones led by the Saudis, or put another way, that mortal Mideast enemies are now wartime comrades...

When ISIL fell out of favor with the West and the Gulf States and was no longer the fully controllable vanguard of regime change that it once was, that's when the US suggested that the Saudis and Turks, its regional Lead From Behind partners and official "Syrian rebel" trainers, sit down and reach an agreement in order to create the un-"Islamic State" 2.0, now called the Army of Conquest. Just like ISIL, it would receive state support in its planned meteoric rise as it brings together a hodge-podge of anti-government and terrorist misfits, and as with its precursor and other terrorist forefathers (notably the Libyan Islamic Fighting Group, the Taliban, and Al Qaeda), it too will likely spiral out of its creators' control and rapidly go rogue. In any case, the Army of Conquest/un-Islamic State 2.0 couldn't have been created had it not been for the resolution of the Qatari-Saudi Cold War and Doha's bequeathing of Muslim Brotherhood leadership to Ankara.....

The subsequent combination of the Muslim Brotherhood, Wahhabis, and al-Nusra forms the core of the Army of Conquest.
3--A warning from the generals of the former GDR: "Haven’t the recent US/NATO wars brought enough grief ?"

4--Runs still threaten the repurchase market: 2014 in review, repowatch

The structure of the repurchase market makes it particularly vulnerable to runs. Here’s how that works.
On the repurchase market, lenders make short-term loans to borrowers. Because these repo loans are only for overnight or for just a few days, the lenders can quickly withdraw in times of trouble, by refusing to renew the old loan or to make a new one. The lender just suddenly demands its money back.

We’re talking big money here.  More than $3 trillion is outstanding on the U.S. repurchase market every day, compared to less than $300 billion that typically trades daily on the U.S. stock markets. The $3 trillion flows throughout the financial markets, making its way to investors, corporations, businesses, governments, pension plans, insurance companies, and speculators.
If that flow stops, commerce stops.
Repo lenders are almost any large pool of money, like money market funds, hedge funds, government and corporate treasuries, pension plans, and endowments. Repo borrowers are almost any large participants in the financial markets, but especially investment banks and their broker-dealer operations.

When the repo lenders withdrew in 2007 and 2008, this created a panic that threatened to bankrupt the investment banks, most prominently the Big Five: Bear Stearns, Lehman Brothers, Merrill Lynch, Morgan Stanley and Goldman Sachs. All five were saved by becoming parts of commercial bank companies except Lehman Brothers which failed.

5--White House psychologist implicated in CIA torture now helping FBI
6--Gazprom, Ankara agree to start Turkish Stream gas deliveries in Dec 2016

7--Iran: Europe gas pipeline not a priority  press tv

8--A top Iranian energy official says a total of 14 domestic consortia have voiced readiness to finance the construction of a pipeline that will transport natural gas from Iran to its western neighbor, Iraq., press tv

9--Trans Adriatic Pipeline project open to Iran when sanctions removed

At the beginning of 2012, the US and EU imposed sanctions on Iran’s oil and financial sectors with the goal of preventing other countries from purchasing Iranian oil and conducting transactions with the Central Bank of Iran.
The sanctions were imposed over allegations about possible diversion in Iran's nuclear program toward military objectives. Iran has categorically rejected the allegation, noting that its civilian nuclear program is only meant for peaceful purposes.
After eight days of marathon talks, Iran and the six members of the P5+1 group – the US, France, Britain, Russia, China, and Germany – reached a mutual understanding on the Islamic Republic’s nuclear program in the Swiss city of Lausanne on April 2.
The pipeline project is currently co-owned by the British Petroleum (BP) (20%), Azerbaijan’s state oil company, SOCAR (20%), Norway’s Statoil (20%), Belgium’s Fluxys (19%), Spain’s Enag├ís (16%), and Swiss-based Axpo (5%).

10--Iran says US firms to lose to EU rivals once sanctions lifted

11--Nations ready to move beyond Iran bans despite US Congress move: German envoy

12--Stock Buybacks Hit New Records, WSJ
Stock buybacks are notching new records on several fronts.
U.S. companies announced $141 billion of new stock buyback programs last month, the highest level ever for new buyback programs during a single month and an increase of 121% from April 2014, according to a count by Birinyi Associates Inc.
The rise now puts 2015 on pace to reach $1.2 trillion worth of announced buyback programs, shattering the 2007 record of $863 billion in authorized buybacks, Birinyi said Thursday.
The research firm attributes the April rise to new programs of $50 billion a piece by Apple Inc. and General Electric Corp.GE +1.39% Those programs, for their part, are tied for the largest ever for an individual company.
Stock buybacks have been widely cited as giving fuel to the bull market in stocks, now in its sixth year. Corporations have amassed massive cash stockpiles in the years since the financial crisis, plowing much of it into shareholder friendly activities like buybacks and dividends. Cash held by S&P 500 companies stood at a record $1.43 trillion as of the end of the fourth quarter, according to FactSet.
To be sure, Birinyi’s count includes only buyback authorizations, which give companies the ability—but not the obligation—to repurchase stock. But history shows that companies come close to maxing out their programs; last year, companies bought back $677.5 billion of stock, or 81% of their authorized amount

13--Worse not better: Bond market sell-off signals mounting financial crisis

In addition to the gyrations on the bond market, another indication of mounting financial instability is contained in a report issued today which claims that emerging markets—a target for speculators in search of higher profits—have suffered a bigger exit of capital over the last three quarters than that experienced in the financial crisis of 2008–2009. The total outflow from the 15 largest such markets in the nine months the end of March was just over $600 billion, compared to an outflow of $545 billion in the same period to March 2009.

A spokesman for the firm publishing the results said the selloff could continue into the second quarter of the year. An even bigger contraction has been recorded in the foreign currency reserves of emerging markets; these have plummeted by more than $374 billion from December last March, amid falling growth rates—down to 3.9 percent in February from 4.1 percent the previous month.
While it is not clear yet where the losses in European financial markets have been sustained—and they could run into many billions of dollars—the potential for another financial catastrophe was made clear in a report issued by the Joint Committee of European Supervisory Authorities earlier this week.
It covered conditions in financial markets from September 2014 to March this year in the lead-up to this week’s sell-off. The report began by noting that since the last report in August “financial system risks” had “intensified further.”

Persistent low interest rates had sustained the demand for riskier investments and provided investors with incentives for enhancing their returns. “This is frequently achieved by renewed build-up of leverage [that is, increased debt]” with such increases “mainly limited to financial institutions outside the banking system.”...

The report also gave the lie to the claim, advanced by financial authorities in support of the program of quantitative easing, that in the long run it will provide a boost to the real economy.
Describing investment levels as “anaemic” and remaining below the pre-2008 trend, it said that with low growth rates, savers turn to bubbles to reach their targets and “over time, productive investments are crowded out, as real resources are misdirected.”
That is to say, far from leading to an improvement in the real economy via increased investment, the policies of the central banks, which have fuelled bubbles and enabled the accumulation of vast profits via financial speculation, make an already dire situation even worse.
The worsening state of the global economy has also been highlighted by figures on the American economy, which show that it all but stagnated in the first quarter this year, recording an expansion of just 0.2 percent. It would have been negative but for a build-up of inventories, often an indicator of recession

14--Mystery" Buyer Of Stocks In The First Quarter Has Been Identified

15--Liquidity illusions

Mohamed El-Erian, chief economic advisor at Allianz, told Business Insider. He went on:
Aided and abetted by ultra-loose central bank policies, investors have collectively embraced a liquidity illusion – or, to be more precise, stumbled into a liquidity delusion.
As a group, they believe that, should conditions cause them to change their collective mind, there will be enough liquidity in markets to reposition their portfolios with relative ease and at a relatively low cost. But this belief runs counter to both structural conditions on the ground and recent market signals

16--Confidence tanks

17--Why are stocks so high?

Despite all the claims that U.S. companies are awash with cash and have “never had it so good,” an analysis by investment bank SG Securities calculates that in reality Corporate America has “overspent” in recent years to the tune of hundreds of billions of dollars.
Over the past five years, equity prices have almost doubled — but so has the net debt of nonfinancial companies. Both have outstripped a 60% rise in profits.

Or, to put it another way, since March 2009, the cash pile of non-financial U.S. corporations has risen by $570 billion, but debt has risen by $1.6 trillion.
Indeed over the past year net debt has risen about 20%,SG estimates — while gross cash flows have risen a more modest 4%.
Indeed, “it is also those companies with the weakest sales growth that are buying back the most,” warns SG quantitative strategist Andrew Lapthorne in a new report for clients ...

According to Federal Reserve data, non-financial corporate businesses owe 37% of the value of their net worth. That’s down from a peak of 45% in 2009. But that’s still higher than the 34% registered in 2007, at the peak of the last boom.
It’s no mystery why so many companies have been ramping up debt, either.
The money is virtually free. The Federal Reserve’s policy of zero percent interest rates has made savers so desperate for income that they’ve been willing to buy corporate bonds at pitifully low yields. The average yield on BAA-rated corporate bonds touched an all-time low of 4.29% in January, according to ratings agency Moody’s. (BAA is the lowest level of investment grade bond). In May, 2000, the yield approached 9%.

Corporate CEOs get paid these days for driving up stock prices. Their performance targets are often compared to the total returns on their company stock. Their biggest rewards come in the form of restricted stock units and options. So borrowing other people’s money for free and using it to drive up the stock price is a great deal for them.
Where does this leave the ordinary investor?
They say “the trend is your friend,” and maybe this game will just keep going for a long time. Anyone trying to call the next correction in the stock market is probably on a fool’s errand.
Yet it is a financial certainty that rising debt levels imply rising risks. The most interesting question is whether the bulk of that risk is being carried by stock investors or bond investors. Time will reveal all.

18--Violent bond moves signal tectonic shifts in global markets, AEP

'It is absolute pandemonium in the fixed income markets. Everybody has been trying to get out at the same time but the door is getting smaller,' says RBS

19--98% Of Q1 Consumer Credit Was Used For Student And Car Loans

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