Don’t Risk War With Russia

By Philip Giraldi  –  The American Conservative

Back in the good old days of the Cold War, the Central Intelligence Agency (CIA) would do whatever it could to discredit the Soviet Union. We used to place articles in friendly newspapers exposing Soviet human rights violations, arrange for Russian front companies to buy technology that had been tampered with so that it would damage assembly lines when put into place, and send money and samizdat publications to groups like Solidarity that were opposing the communists. But there was a real war going on, even if it was tepid, and because the two sides were in dead earnest it was anything goes and more was always better.

Today, more than 20 years after the collapse of the Soviet Union, there are many indications that Washington is slipping into a new and completely unnecessary confrontation with Moscow, only this time it is not being run largely out of sight by the CIA. Much of the new conflict is being conducted openly, with sanctions and resolutions by Congress, regular appearances in unstable regions overseas by senior state department officials and politicians, and trainings in new media political organizing funded by quasi non-governmental organizations like the National Endowment for Democracy (NED).

This is not to suggest that there is not a covert side to it all. The funding and training of opposition groups frequently take place outside of the country being targeted, meaning that the players and their sources of income are carefully hidden from sight. The actual training and organizing are frequently carried out by a private contractor rather than any agency linked to the U.S. government, increasing the plausible deniability of an official connection.

A Different Kind of Inversion

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

One of the most curious aspects of the FOMC’s apparent rush to end its “accommodation” is the distinct lack of any market-based reinforcement. Using only statistical analysis of economic accounts, the Fed is, in effect, saying that it is ignoring all market indications contrary to its main assessment. That extends not just to overall economic measures but also, referring to its primary mandate (supposedly), setting aside its preferred metrics for “inflation.” The PCE deflator has remained under the Fed’s own target for almost three years and the 5-year/5-year forward calculation is saying that is not going to improve any time soon.

The treasury yield curve is the most prominent market-based signal because modern finance forms its rational basis out of premiums inferred from it. That includes especially term premium, also known as time value. In an economic context, term premiums can tell us a lot about relative “demand” for “money” (really credit) and thus an indirect though market-based measure of future expectations for economic growth and monetary variability.

The most prominent example of that visibility is when the treasury curve inverts. Yield curve inversions are highly indicative of recessions in the near future. Again, that makes sense in the context of term premiums and time value – if there is negative term premium down the curve than in comparison with shorter term interest rates, then it would make sense that credit market investors are highly concerned about future opportunities for “money” (really credit).

There have been numerous “studies” published regarding curve inversion, though they usually amount to some regression trying to measure predictability in a normal distribution format. FRBNY features one in particular that normalizes the spread between the 3-month T-bill and the 10-year Note to forecast one-year forward. In other words, based on historical data as a starting point (normal distribution assumption) the inversion of the yield curve at the 3m10s offers a statistical prediction variable.

Oh how much they hate and fear Russia and Putin

Submitted by Jim Quinn  –  The Burning Platform

Guest Post from Vineyard of the Saker

A (well anonymized) anonymous reader sent me a very interesting link today.  It is an opinion piece by Strobe Talbott for Reuters entitled “In 2015, Vladimir Putin may witness his empire’s death knell” in which Talbott predicts that:

The year ahead could see the outbreak of the third Chechen war, which, in turn, could be the death knell of the Russian Federation in its current borders. (…)  For the past five years, the situation has been more or less quiescent, though neighboring republics have been rocked by violence. The lull in Chechnya, however, ended in early December with a series of bloody incidents in the Chechen capital of Grozny.   The group behind the resurgence of unrest is advocating a “Caucasus Caliphate,” with ties to al Qaeda and, more recently, Islamic State. There is at least an indirect tie between outside support for Islamic radicalism in the Caucasus and Putin’s sponsorship of Russian secessionism in eastern Ukraine.   By proclaiming ethnicity and religion as the basis for Russian statehood and aggression against its neighbors, Putin is inadvertently stoking the forces of secessionism in those parts of Russia that are historically and culturally Islamic.

Needless to say, Talbott, himself a former Deputy Secretary of State under Bill Clinton, member of both the Council on Foreign Relations and the Trilateral, married to Brooke Shearer, also a member of the Council on Foreign Relations and a senior aide to Hillary Clinton with links to banks Commission, is the archetypal US “deep-stater”.  He is also considered a “Russia specialist” which, in Foggy Bottom parlance means a rabid russophobe.  A person like Talbott is very much “plugging in” the US deep state and if he says that next year there will be an insurgency in Chechnia, we can be darn sure that the US will try to create one.

The New Boremal

Submitted by Timothy Knight – The Slope of Hope

This market has had the “market” beaten out of it. If I had any sense – – or, more precisely, if I had the sense to not have any sense – – I’d just throw charts and reason out the window and dump my entire net worth into SPY calls so I could spend the next ten years cleaning out my nostrils. But I’m not dumb enough to be smart, so I can only sit back and watch, slack-jawed.

Take the chart below, for instance, from which I’ve removed the price bars; I merely show a trio of exponential moving averages (50, 100, 200) against the S&P 500 index.

The “market” didn’t die in late 2008, when the Fed began its massive intervention. Although trillions of dollars of money from thin air gave the market a bottom, which allowed it to commence a turnaround on March 6, 2009, we still had a market to play with. I’ve marked this section as “1”.

Drilling Our Way Into Oblivion

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

DPC Broadway from Chambers Street, NYC 1910

Oh, that sweet black gold won’t leave us alone, will it? West Texas Intermediate went through some speedbumps Friday, but ended over +5%, though still only at $57. Think them buyers know something we don’t? I don’t either. I see people covering lousy bets. And PPT (and that’s not the one we used to spray our crops with).

The damage done must be epic by now, throughout the financial system, but we’re not hearing much about that yet, are we? We will in time, not to worry. Everyone’s invested in oil, and big time too, and they’ve all just become party to a loss of about half of what both oil itself and oil stocks were worth just this summer.

There’s those who can ride it out and wait for sunnier days, but many funds don’t have that luxury. Who wants to be manager of Norway’s huge oil-based sovereign fund these days? With all these long-term obligations entered into when oil was selling for $110, no questions asked? The Vikings must be selling assets east, west, left and right. But they’re not going to tell us, not if they can help it.

American Apathy Will Lead to a Far Larger Death Toll From a Far Larger Bear

Submitted by Thad Beversdorf  –  The First Rebuttal Blog

We talk a lot about how the media is a tool for the government to sell a storyline to the American people.  We saw it back in the early post 9/11 era when the government was lying to the world about Iraq and we see it today.  The media is willing to disseminate any blatant lie the government is dishing out.  I want to give you a prime current example because apparently the US government lies regarding Iraqi WMD’s and warehouses of anthrax with our names on them that led to 12 years marked with the completely unnecessary deaths of 4500 American soldiers with another 32000 wounded and 1.5 million Iraqi’s dead, have now been lost on Americans.  Ignoring these recent entirely avoidable atrocities are about to lead us to far greater losses as we poke a far larger bear.

I like reading CNBC.com because it tells me exactly what the government storyline is.  I don’t have to read between the lines they just simply state it word for word.  Sort of like the banks writing their own regulations and legislation.  So let me show you an excerpt from an article on CNBC.com recently written by two assclowns, that’s right, in order to pile bullshit this high it literally took two assclowns to handle the job. So without further adieu I give you the storyline from Jason Bordoff and Carlos Pascual…

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

• Saudi Arabia and UAE Blame Non-OPEC Producers For Oil Price Slide (FT)
• Calculating The Breakeven Price For The Median Bakken Shale Well (Zero Hedge)
• How Oil Price Fall Will Affect Crude Exporters – And The Rest Of Us (Observer)
• UAE Urges All World’s Oil Producers Not To Raise Output In 2015 (Reuters)
• Goldman Sees Little Systemic Risk For Banks From Oil Price Drop (MarketWatch)
• Russian Crisis Kills Big German Gas Deal (CNNMoney)
• ECB’s Constancio Sees Negative Inflation Rate In Months Ahead (Reuters)
• For Rome, All Roads Seem To Lead Away From A Single Currency (Observer)
• Poll Shows Majority Of Brits Want To Quit EU (RT)
• Retirement Index Shows Many Still At Risk (MarketWatch)
• Despite Job Growth, Native US Employment Still Below 2007 (HA)
• Go West, Young Han (Asia Times)
• The Fed’s Too Clever By Half (Guy Haselmann, Scotiabank)
• Women To Take Brunt Of UK Welfare Cuts (RT)
• Derivatives And Mass Financial Destruction (Alasdair Macleod)
• How To Get Ahead At Goldman Sachs (Jim Armitage)
• David Stockman Interview: The Case For Super Glass-Steagall (Gordon T. Long)
• There Is Hope In Understanding A Great Economic Collapse Is Coming (Snyder)

Continue Reading: Debt Rattle December 20 2014 – The Automatic Earth