Friday, August 5, 2016

Today's links

1--Bank of England Cuts Key Interest Rate to New Low--

Central bank to buy government and corporate bonds in bid to stimulate economy after Brexit vote

It said it also would purchase £10 billion of corporate debt over 18 months, beginning in September, in the hope of fueling business investment. The BOE said bonds issued by 150 companies could be eligible....

The Bank of England cut its benchmark interest rate to the lowest in its 322-year history and revived a financial crisis-era bond-buying program to cushion the U.K. economy from the aftershocks of the vote to leave the European Union....

The BOE sharply cut its growth forecast for 2017, marking the biggest downgrade since it began publishing such forecasts in 1993, saying the outlook had “weakened materially.”

Central banks, including the Federal Reserve and the European Central Bank, say they are watching closely in case the move toward Brexit sparks another damaging bout of financial-market contagion and economic instability. However, the fallout so far appears confined to the U.K., with early signs that the U.S. and eurozone economies have shrugged off the surprise result....

The stimulus package contained four elements. The BOE cut its benchmark interest rate to 0.25% from 0.5% and said it expects to cut it further toward zero in the months ahead. It revived a program to buy U.K. government bonds that has been on pause since 2012, and announced it would begin buying corporate bonds, too. The final part was a new term-funding program for banks, offering lenders ultracheap four-year loans to finance lending to households and businesses.

2--New Tool for Central Banks: Buying Corporate Bonds  

--Bank of England to purchase up to £10 billion in corporate loans

(Central Banks continue to steal as much as they can as fast as they can)

Central banks have a new favorite tool for boosting lackluster growth: corporate-debt purchases.
Two months after the European Central Bank started buying corporate bonds, the Bank of England said Thursday that it would adopt a similar strategy. It will buy as much as £10 billion ($13.33 billion) of U.K. corporate debt starting in September as part of a larger package of stimulus measures, including £60 billion of additional government-bond purchases.

The move, investors and analysts say, is likely to drive down borrowing costs even further around the globe for large companies already benefiting from ultralow interest rates.

But the decision again raises concerns about possible side effects of unconventional monetary policies, including excessive risk taking by investors, and faces substantial skepticism from investors who doubt such programs meaningfully address the global economy’s core deficiencies, centering on soft demand for goods and services.

Already this year, negative-interest-rate policies and aggressive bond buying by central banks in Japan and Europe have helped create trillions of dollars of negative-yielding government bonds. That in turn has driven down corporate-bond yields, leading to robust debt issuance among companies in the U.S., if not all developed countries....

Any time a central bank is going to engage in or expand a bond-buying program, it’s going to lead more capital in search of Treasurys and corporate bonds within the U.S. market because this is the only place within the developed world that offers any yield,” said Scott Kimball, a portfolio manager of the $1 billion BMO TCH Core Plus Bond Fund....

In their policy statement, BOE officials argued that corporate-bond purchases could help the economy more than buying an equal amount of government bonds.....

Some analysts also cast doubt on the BOE’s ability to boost economic output through corporate-bond purchases, particularly given how low corporate-bond yields are already.
The yield on Barclays Sterling Aggregate: Corporate index was at a near-record low of 2.45% on Wednesday. That compares with 3.53% at the end of 2015.
“I’m skeptical that corporate-bond purchases will have a material impact on economic activity in the U.K.,” said Hans Lorenzen, head of European credit strategy at Citigroup. (No mention of buybacks???)

3--Sterling Falls, Bonds Rise on BOE Rate Cut   -- Bank of England announces larger-than-expected package of stimulus measures

The Japanese yen has gained about 19% against the dollar this year despite fresh rounds of monetary easing from the Bank of Japan, which cut a key interest rate into negative territory in February and has boosted its asset-purchase program. Such measures would usually be expected to weaken a currency....

The U.K.’s FTSE 100 reversed the day’s earlier losses to end up 1.59%, while European stocks also ticked higher. The FTSE 100 is now above its prereferendum levels in local- currency terms and even the more domestically focused FTSE 250 has clawed back most of its losses.
The pound is now down 11.2% since the June 23 referendum but is still up from its post-Brexit low of $1.2798. On Thursday, analysts predicted further falls for the currency.
Perhaps the biggest surprise for investors was the BOE’s decision to start buying corporate bonds from September. That pushed yields in this market lower.

4--Banks’ capital return plans: Big stock buybacks, dividend increases

(Fed sets the stage for more stock buybacks) Following Federal Reserve stress test results, several banks released plans late Wednesday outlining a round of share buybacks and dividend hikes

5--Wall Street banks seen benefiting from Bank of England rate cuts-- Cheaper money means the opportunity for more deals, bigger dividends and additional buybacks

The Bank of England delivered a shocker to the market Thursday morning, and potentially a little bit of good news to banks.

The decision by the central bank to cut interest rates from 0.5 percent to 0.25 percent might mean investors' margins get crimped. But the British central bank's renewed commitment to buying bonds could help banks around the world. For investment banks, in particular, it may lead to a flood in new revenue, since the BOE's rate-cut and bond buying decision may well spur more revenue on Wall Street and for U.K. and European Union banks.

"Rate cuts and other stimulus measures will allow hard-hit companies to boost buybacks and take other measures to regain their footing and buoy their share price," said lawyer Steve Wolosky, who represents activist investors for Olshan Frome Woloksy. "We would expect this type of activity to attract investors of all types, including activist investors."

Having worn a path to many companies' doors to demand buybacks and dividends in the U.S., activist investors taking on new targets on the other side of the Atlantic would potentially mean more revenue to Wall Street banks, if they can succeed yet again in forcing dividends, buybacks and M&A.

Debt underwriting is big business to Wall Street banks, particularly investment banks. The Bank of England's rate cut may spur dividends and buybacks, which means more business for Wall Street investment banks that arrange billion-dollar bond deals

6--Zero Forever: Chart Of The Day: Japanese Interest Rates. R.I. P

7--What to do when containing the Syrian crisis has failed Michael O' Hanlon military analyst Brookings-- Will this be Hillary's blueprint for escalation in Syria?

in terms of military assets on the ground, there are several things we should do differently. For one, we need to be somewhat more willing to work with groups that are tainted by past association with the Nusra Front, as long as we can vouch for the fact that they are not themselves Nusra members.

We should give them anti-tank missiles—though not anti-aircraft missiles—and much more help in terms of ammunition, logistics assistance, and food, to help them build up their forces. We must also be clever about employing various options for no-fly zones: We cannot shoot down an airplane without knowing if it’s Russian or Syrian, but we can identify those aircraft after the fact and destroy Syrian planes on the ground if they were found to have barrel-bombed a neighborhood, for example. These kinds of operations are complicated, no doubt, and especially with Russian aircraft in the area—but I think we have made a mistake in tying ourselves in knots over the issue, since there are options we can pursue.

  • Finally, we should push the debate about what creating safe havens really means. I don’t think we should start declaring safe havens, but rather try to help them emerge. The Kurds are making gains in Syria’s northeast, for instance, as are some forces on the southern front—so, if the United States, in cooperation with its allies, accelerates and intensifies its involvement on the ground in those areas, safe havens can essentially emerge. An important advantage of this approach is that it doesn’t require putting American credibility on the line, but does help local allies build up and reinforces successes on the ground.

  • 8--EU on edge as Putin, Erdogan set to meet

    9--Russia Creating Coalition in the Gulf to Resolve Syrian Crisis

    10--Putin encourages Iran to join Russia-led Eurasian alliance

    The Russian leader also welcomed the possible creation of a free trade zone between Iran and the Eurasian Economic Union – the bloc that currently unites Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan. He said that work has already started to research the possibility of such a move, adding that Russia would continue to support Iran's pursuit of full membership in the Shanghai Cooperation Organization – the Eurasian military-political bloc comprised of Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.

    On August 8, Putin is expected to visit Baku and take part in the first-ever trilateral summit of the leaders of Russia, Azerbaijan and Iran.

    In November last year, Russia and Iran agreed to develop economic ties, with Moscow promising to provide a $5 billion state loan to Tehran for the promotion of industrial cooperation. The loan is expected to boost trade between the two countries, with the target set at $10 billion, up from the current $1.6 billion

    11--"Thinking Through the Unthinkable”---RAND Corporation lays out scenarios for US war with China

    Driven by the worsening economic and political breakdown of capitalism, another catastrophic war on a global scale is not only possible, but inevitable ...

    The paper states: “As its military advantage declines, the United States will be less confident that a war with China will conform to its plans. China’s improved military capabilities, particularly for anti-access and area denial (A2AD), mean that the United States cannot count on gaining operational control, destroying China’s defences, and achieving decisive victory if a war occurred.”

    The unstated conclusion, which underpins all of the Pentagon’s planning and preparations, is that a war with China must be fought sooner rather than later. The US military build-up envisages 60 percent of all air and naval assets in the Indo-Pacific region by 2020—now just over three years away. Moreover, Washington’s deliberate inflaming of dangerous flash points in Asia, especially in the South China Sea, is aimed at portraying Beijing as “aggressive” and “expansionist” and concocting the necessary casus belli....

    The RAND Corporation paper is a chilling confirmation of the warnings made by the International Committee of the Fourth International (ICFI) in its statement of February 18, 2016 titled “Socialism and the Fight Against War.” The statement notes that at a certain point, military fatalism becomes a significant contributing factor to the outbreak of war. It cites an international relations specialist who wrote: “Once war is assumed to be unavoidable, the calculations of leaders and militaries change. The question is no longer whether there will or should be a war, but when the war can be fought most advantageously.”
    The new study indicates that such a shift in thinking is underway in Washington. And while the RAND Corporation study dismisses the possibility of nuclear war, other imperialist strategists are planning for such an eventuality

    12--New York Times covers up Obama administration’s role in Turkish coup

    it was precisely the “cooperation” of the Erdoğan government that had been called into question in recent months, particularly in relation to its attempt to achieve rapprochement with Moscow under conditions of rising US-Russian tensions. Relations had further deteriorated over Syria, where the US military has forged an alliance with Kurdish separatists, which Ankara views as an existential threat to the Turkish state.

    “The Turks,” the Times tells us, are “playing a duplicitous and cynical game” in suggesting that the US had anything to do with the failed coup.
    When it comes to cynicism and duplicity, the Times has no equal. How can it claim that the US had nothing to do with the coup?

    It is well-established that much of the coup was organized out of Incirlik air base in southeastern Turkey. The base is not only the center of the US air war against Iraq and Syria, housing 1,400 US military personnel and hundreds more American contractors, it is also the site of the largest stockpile of US nuclear weapons on the European continent, as many as 90 B-61 tactical nuclear bombs, each capable of delivering a destructive power over ten times greater than the bomb dropped on Hiroshima.

    After the coup had failed, the base’s commander, one of the many military figures with close ties to the Pentagon who played a prominent role in the plot, asked his American colleagues to grant him asylum.
    If the CIA and other US intelligence agencies had known nothing about the impending coup, organized under the noses of the US military, it would constitute one of the greatest intelligence failures in US history. What if it had been an Islamist coup, with the nuclear bombs turned over to Al Qaeda, ISIS or a similar organization? Such a failure would warrant the resignations of CIA Director John Brennan, Adm. Michael Rogers, director of the NSA and others. Needless to say, no such resignations were forthcoming.

    Moreover, the only reason that Erdoğan escaped shortly before a military assassination squad arrived at the door of his vacation home was that Russian intelligence, which had apparently picked up military communications between the coup plotters, had given him enough advance warning.
    Is it frankly credible that the US military, which likely heard these same communications from adjoining offices, or the CIA and NSA, whose spying capacities in a country where they have operated for decades have to be far superior than those of their Russian counterparts, did not have the same or even more extensive prior knowledge?

    Their decision not to issue Erdoğan a similar warning can only have one interpretation: Obama and the US military and intelligence chiefs preferred to see the Turkish head of state dead.

    13--Billionaires for Clinton:  Clinton steps up right-wing appeal to Republicans and billionaires

    The Washington Post carried a similar report Thursday night on Clinton’s “outreach to potential Republican converts, including donors, elected officials, and business and foreign policy leaders. The message is simple: Even if you have never before considered voting for a Democrat, and even if you don’t like Clinton, choosing her this year is a moral and patriotic imperative.” The informal slogan of the outreach effort, according to the newspaper, was “duty, honor, country,” an indication of the extremely right-wing posture being taken by the Clinton campaign...

    Several groups have been formed to harness the support of wealthy Republicans behind the Democratic nominee. These include Republicans for Her 2016, led by Republican lobbyist Craig Snyder; R4C16, led by officials from President George W. Bush’s administration; and the Republican Women for Hillary, which is led by US Chamber of Commerce official Jennifer Pierotti Lim.

    Other prominent billionaires (Democrats and Republicans) supporting Clinton include Walmart heiress Ann Walton (net worth $5 billion); LinkedIn founder Reid Hoffman ($3.8 billion); Univision television network owner Haim Saban ($3.6 billion); Hyatt Hotel chain heir J.B. Pritzker ($3.4 billion); Slim-Fast founder Daniel Abraham ($2 billion); Marc Benioff of ($4 billion); Facebook executive Sheryl Sandberg ($1.4 billion); medical industry heirs Jon and Pat Stryker ($2.3 billion); television personality Oprah Winfrey ($3.1 billion); and Hollywood producers Steven Spielberg ($3.6 billion) and Jeffrey Katzenberg ($1 billion).
    Especially noteworthy is the large number of Wall Street financiers
    backing Clinton. These include speculator George Soros ($24.9 billion), hedge fund managers James Simons ($14 billion), David E. Shaw ($4.7 billion) and Tom Steyer ($1.6 billion); venture capitalist John Doerr ($4.7 billion); and banker Herbert Sandler ($1.2 billion).

    The combined wealth of the aforementioned billionaires openly backing Clinton is roughly $200 billion—divided among 21 individuals. This is roughly the same amount that the Obama administration proposes for education, housing, transportation and science in its 2016 budget.
    This line-up demonstrates the worthlessness of Vermont Senator Bernie Sanders’s claims, as he ended his campaign and endorsed Clinton, that the Democratic Party had been fundamentally changed by his “political revolution.” Sanders denounced “the billionaire class” throughout his campaign, rallying the support of millions, including large numbers of young people and students. But he delivered his supporters to the tender mercies of a candidate who is a trusted servant of that billionaire class

    At his speech to the Democratic convention, Sanders claimed that Clinton’s campaign had “the most progressive platform” in history. Within days, America’s financial aristocracy has reminded everyone just who owns Clinton and the entire Democratic Party.

    Sanders did not create the mass opposition of working class and youth that found brief expression in his campaign. His aim, as he repeatedly stated, was to absorb that opposition within the Democratic Party, which, he argued, could be made a vehicle of social reform.

       14-- U.S. Not Persuaded to Extradite Imam Over Turkey Coup  ---Officials aren’t convinced by evidence against Fethullah Gulen, Pennsylvania-based imam who Turkey says masterminded the failed putsch

    officials suspect Mr. Gulen is an American intelligence asset and that is why the Americans are protecting him....

    ... American authorities have yet to be persuaded there is a valid case for extradition, these people said. Mr. Gulen, who lives in rural Pennsylvania, has denied playing any role in the plot to overthrow President Recep Tayyip Erdogan....

    Turkey has demanded that Mr. Gulen, 75 years old, be extradited because, they say, he directed the failed coup which led to the deaths of 271 people, though Turkey hasn't made a formal request. U.S. officials have asked Turkey to provide their evidence for this assertion.

    Turkish officials said two batches of evidence have been provided, but the Americans view the evidence provided to date by the Turks as not usable in court, according to people familiar with the matter....

    Last month the country’s prime minister, Binali Yildirim, told The Wall Street Journal, “The evidence is crystal clear. We know the terrorist cult responsible for vicious attacks against us and the Turkish people…We simply cannot understand why the U.S. just can’t hand over this individual.’’

    Turkey’s state news agency reported Thursday that prosecutors have issued an arrest warrant for Mr. Gulen for allegedly giving instructions for the coup, a claim he denies....

    Mr. Erdogan has called Mr. Gulen and his supporters a terrorist network, a charge that U.S. officials have long discounted...

    15-- Fallout From Turkey Coup Leaves Syria Rebels in the Lurch-- Many military leaders involved in support programs are now in jail (Today's "must read")

    Some of the most intense fighting in the five-year Syrian war erupted after last month’s failed Turkish coup—and it is probably no coincidence.
    Turkish President Recep Tayyip Erdogan was an early and indispensable backer of the uprising against President Bashar al-Assad’s regime. Since 2011, Turkey served as a rear base and supplier for a variety of Syrian rebel groups, including those on the Islamist fringe.

    That support is now under threat. Many of the top Turkish military and intelligence officials involved in programs to assist the rebellion, including the commander of Turkey’s 2nd Army responsible for borders with Syria and Iraq, have been detained for alleged involvement in the July 15 putsch.

    The generals who were leading the Turkey-Syria policy and the Turkish policy on Syrian Kurds are all in jail now, and we now see the crumbling of the Turkish security establishment,” said Gonul Tol, director of the Center for Turkish Studies at the Middle East Institute in Washington. “This makes Turkey very vulnerable and weak, and will make it less confrontational.”

    Such a sea change in the regional balance of power appears to have had the immediate effect of emboldening Mr. Assad. Within days of the coup attempt, Mr. Assad’s forces, aided by Iran, Hezbollah and Syrian Kurdish militias, pushed to complete the encirclement of the rebel-held eastern half of Aleppo, Syria’s largest city.

    The lifeline between eastern Aleppo and the rest of rebel-held northern Syria, Castello Road, had become increasingly perilous. But until recently, it could still be used to ferry supplies to some 300,000 people living in eastern Aleppo. Those people now face a humanitarian disaster.

    In response, an unusually broad alliance of Syrian rebel factions launched one of the war’s biggest offensives, attempting to break the siege of Aleppo at a different point, in the city’s southwest. That alliance includes the Syria Conquest Front, formerly the Nusra Front. The group, in a bid to broaden its appeal, announced it was severing its ties with al Qaeda just before the offensive began last week

    For the Syrian rebels, the Aleppo offensive—which resulted in territorial gains but has yet to break the siege—is a now or never moment. While these groups still have the resources supplied by or via Turkey, they can’t be sure such assistance would continue in the future.
    “What is happening now in Turkey is undermining any future offensives that the rebels could launch,” said Mohamed Hineidi, senior analyst at the Delma Institute think tank in Abu Dhabi.
    It isn’t just that Turkey is distracted by the purges of its security and intelligence apparatus. More important, Mr. Erdogan appears to be fundamentally shifting the country’s foreign policy posture—something that could have direct implications for the Syrian conflict.

    Turkey’s ties with the U.S., its North Atlantic Treaty Organization ally, have dramatically deteriorated since July 15, with Mr. Erdogan accusing Pennsylvania-based preacher Fethullah Gulen of organizing the coup attempt (something that Mr. Gulen has denied) and demanding his extradition.

    Several Turkish officials have gone even further, alleging that the U.S. colluded with the putsch. President Barack Obama has strongly denied any involvement.
    Mr. Erdogan’s relationship with Russia, the main sponsor of the Assad regime, has just as dramatically improved. Mr. Erdogan laid the groundwork before the attempted coup by apologizing for the November shooting down of a Russian warplane on the Syrian border.

    Since then, the Turkish pilots involved in that incident have been detained for their alleged roles in the coup attempt, and Turkish officials have portrayed the entire episode as part of the Gulenist conspiracy. Mr. Erdogan is due to visit Russia for talks with President Vladimir Putin on Aug. 9, their first meeting since the warplane’s downing.
    It isn’t clear whether Messrs. Putin and Erdogan could agree on how to move forward in Aleppo, and in Syria in general.

    “Russia retains a sense of caution vis-à-vis Erdogan. Russia didn’t backtrack on its previous actions in Syria, and Russia and Turkey still back cardinally opposing sides in Syria,” said Yuri Barmin, a Middle East expert at the Russian International Affairs Council, a think tank affiliated with the Russian foreign ministry.

    Others in the region, however, see a possible deal in the cards.

    “Now that Turkey is moving away from NATO and Washington, Russia has an enormous interest in bringing Turkey into its fold,” said Lebanese parliament member Basem Shabb. “If Syria is important, Turkey is infinitely more important, and Russia isn’t going to sacrifice Turkey to please Assad, Hezbollah, or Iran.”

    1 comment:

    1. eToro is the best forex broker for newbie and established traders.