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  • Developed-Country Growth Slows, OECD Says (WSJ)
  • Charter Agrees to Buy Time Warner Cable for About $55 Billion (BBG)
  • Dollar hits one-month high as periphery woes weigh on Europe (Reuters)
  • IMF Says Yuan No Longer Undervalued Amid Reserve-Status Push (BBG)
  • Hanergy secured $200m loan ahead of solar group stock tumble (FT)
  • Congressional Inaction Threatens NSA Spy Program (WSJ)
  • Germany sees progress on Greece, EU officials to confer on Thursday (Reuters)
  • Hayes ‘motivated by greed’, prosecutor says in Libor case (FT)
  • Whistleblowers Find SEC Rewards Slow and Scarce (WSJ)
  • JPMorgan’s Guilty Plea Puts Wealth Unit in Spot With Regulators (BBG)
  • Jony Ive Named Apple’s Chief Design Officer (WSJ)
  • Fight over hot new cholesterol drugs may be won in milligrams (Reuters)
  • Who Will Be the Swing Voters in 2016? (WSJ)
  • China Unveils Plans for Greater Naval Role Beyond Its Coasts (BBG)
  • Big Banks Shut Border Branches in Effort to Avoid Dirty Money (WSJ)
  • Bolivar Plunges in Black Market as Venezuelans Stash Dollars (BBG)


Overnight Media Digest


* Charter Communications is close to a deal for Time Warner Cable that would give cable-mogul John Malone the prize he has been chasing. (

* A Securities and Exchange Commission program, set up under a 2010 law, offers financial rewards for information on wrongdoing. Many tipsters have found it tough to collect, however. (

* The U.S. Justice Department has reached a tentative settlement with the Cleveland police on a probe into patterns and practices of policing, according to a person familiar with the matter. (

* Jony Ive, the man responsible for many of Apple Inc's breakthrough designs, is now the company's chief design officer. (

* Subsidies that made insurance plans affordable face a crucial test with decision expected in June. The court is expected by the end of June to rule on a lawsuit seeking to invalidate subsidies to more than 7.5 million people who bought plans on the federal exchange. (



World's largest consumer goods company Procter & Gamble has become the first company in the world to explore 3D bioprinting, a technique that can make it possible to print living human tissues. This innovation could have several applications for P&G, including testing its products for toxicity and efficacy.

Having secured the necessary approvals from U.S. authorities, Royal Dutch Shell PLC may start drilling two wells in the Chukchi Sea of Alaska by late July. The success of this project will determine the future of oil exploration and drilling in Alaska.

PureTech Health, a Boston-based healthcare science and technology R&D company, is seeking to raise $160 million in an initial public offering of its shares on the London stock exchange.

British Prime Minister David Cameron will push ahead with his plans for providing discounted homes to more than 1.3 million people via the expanded "Right to Buy" housing bill. The bill may attract controversy since it forces not-for-profit landlords to sell their possessions at a discount.



* Charter Communications Inc is close to buying Time Warner Cable Inc, and a deal could be announced as soon as Tuesday, people close to the talks said. (

* Similac's maker, the global health care company Abbott Laboratories, said it would first offer a "non-G.M.O." version of its best-selling Similac Advance, followed by a non-G.M.O. version of Similac Sensitive. Depending on sales, Abbott may offer other formulas free of such ingredients. (

* The investigation into the rigging of global benchmark interest rates at last yields a trial, which may also prove a measure of British controls on the finance industry. The British authorities have charged Tom Hayes, a 35-year-old former trader from Citigroup and UBS Group AG with eight counts of conspiracy to commit fraud. (

* A ruling against pension cuts and political divisions have made a dire situation worse for Illinois, as well as Chicago and its schools, which face shortfalls of their own. The shortfalls could potentially mean sharply higher taxes and cuts in spending. (

* The European Court of Justice is expected to issue a preliminary decision over whether Facebook Inc can continue transferring data between Europe and the United States. (




** Royal Bank of Canada won't complete its $5.4 billion purchase of Los Angeles-based City National Bank for months, but the two banks are already getting a jump on doing business together. (

** Jaguar Land Rover Ltd officials took a close look at Canada as the location for a new assembly plant - including visiting a potential site in Windsor, Ontario - but the company is now planning to locate the factory in a low-cost country. (

** More than half of Canada's largest companies have adopted formal policies for increasing the proportion of women on their boards of directors, but only a small minority are creating specific targets for gender diversity. (


** Highly leveraged Penn West Petroleum Ltd said it got some relief from its creditors by agreeing that proceeds from any asset sales for the next two years would be used to repay its bonds. (

** Alberta NDP premier Rachel Notley appointed Margaret McCuaig-Boyd, 62, the MLA for the rural riding of Dunvegan-Central Peace-Notley, as Alberta's new energy minister, a giant career leap for the former schoolteacher and family friend. (




- State-owned enterprises (SOEs) in China have seen their profit margin fell 5.7 percent in the first four months compared with the same period a year earlier, the Ministry of Finance said.

- More than 270 companies that are listed on China's leading OTC board, the New Third Board, have raised fund of over 25 billion yuan ($4.03 billion) in May, the paper calculated.


- Brokerages should strengthen their management on higher-risk margin trading businesses, said Zhang Yujun, assistant chairman at China's Securities Regulatory Commission (CSRC).


- Leshi Internet Information and Technology Corp said it would withdraw last year's refinancing plan of 4.5 billion yuan, and take out a new plan to raise 7.5 billion yuan instead. Jia Yueting, the founder and the chairman of the company, said he would reduce his shareholding in the next six months by less than 8 percent, or some exceeding 10 billion yuan.



The Times

Greece is bankrupt and will default on a debt repayment to the International Monetary Fund that is due in two weeks, the country's interior minister, Nikos Voutsis, said on Monday. (

The FBI is investigating claims that British users of Uber, the online taxi booking service, have had money taken from their accounts fraudulently for fictitious journeys often made abroad. (

The Guardian

Greek Prime Minister Alexis Tsipras convened an emergency meeting of his political negotiation team on Monday following a stark warning from Athens that default was looming. Tsipras instructed officials to act speedily as his government sought to defuse tensions, saying it would do its best to honour its debts. (

Sidestepping Britain's demands to renegotiate the Lisbon treaty and Britain's place in the EU, the German chancellor, Angela Merkel, and the French president, Francois Hollande, have sealed an agreement aimed at fashioning a tighter political union among the single-currency countries while operating within the confines of the existing treaty. (

The Telegraph

Andrew Wilson, the European chief executive of Goldman Sachs Asset Management, has warned the world is sinking under too much debt and an ageing global population means countries' debt piles are in danger of growing out of control. (

Tom Hayes, a former trader at UBS and Citigroup in Japan, is set to face the first criminal trial from Tuesday onwards in the multi-billion dollar forex-rate rigging scandal. (

Sky News

Stonegate, one of UK's largest owner of managed pubs, may list itself on the London stock market in 2016 for a valuation of about 1 billion pounds ($1.55 billion). (

Paul Mason, the retail veteran who chairs New Look, is to step down from his role at the fashion retailer following its 2 billion pound takeover by a South African investment vehicle. (

The Independent

Spanish olive groves are at risk of being wiped out by a strain of "olive ebola" which has ravaged the crop in Italy. The bacteria Xylella fastidiosa, believed to have originally come from the United States, has torn through southern Italy since it first appeared in late 2013. (

Major General Qassem Soleimani, general in charge of Iran's paramilitary activities in the Middle East, said the United States and other powers were failing to confront Islamic State, and only Iran was committed to the task, a news agency has reported. (

While yesterday most markets were closed and unable to express their concerns at the very strong showing of "anti-austerity" parties in Spain's municipal election from Sunday, then today they have free reign to do just that, and as a result European stocks are broadly lower, alongside the EURUSD which dripped under 1.09 earlier today, with Spanish banks among the worst performers: Shares of Banco Sabadell, Bankia, Caixabank and Popular were down 1.8 to 2.3% earlier this morning, and while the stronger dollar was a gift to both the Nikkei and Europe in early trading, after opening in the green, Spain's IBEX has since slid into the red on concerns of what happens if the Greek anti-status quo contagion finally shifts to the Pyrenees.

"Markets are trying to digest what is going on in Spain and what it means for Greece," Michael Hewson, CMC Markets analyst, told Reuters. "Anti-austerity parties in Spain have been giving the incumbent government a kicking...That's keeping investors on the back foot."

As for Greece, with not even a chance of a deal on the horizon, the various local illiquid markets are getting hit with bonds getting the brunt of it so far:


This comes as the Greek finmin does some more improv ahead of yet another Eurogroup meeting, this time proposing a 15% tax rate for deposits held abroad.

Asia was once again immune to any global newsflow, and Chinese stocks again bounced, this time by another 2% bringing the weekly gain to about 5%, on news that policymakers will allow cross-border sales of mutual funds with mainland China. The Shanghai Comp (+1.64%) and CSI 300 (+1.48%) have continued their strong start to the week, supported by the news that Beijing has invited private investors to help build and operate around $318bn of projects.This capped the biggest 6 day surge in the Composite since 2008.

And if anyone was worried that Friday's latest revelations about Hanergy could put an end to China's stock bubble, have no fear: more than 250 stocks rose by the 10% daily limit on the Shenzhen Composite, the smaller of China’s two exchanges that has doubled this year and trades at 71x reported earnings!

To be sure, nobody in China noticed or cared that Zhuhai Zhongfu Enterprise Co., which supplies bottles for Coca-Cola Co. and PepsiCo Inc. in China, said it won’t be able to fully repay a bond due May 28, raising concern it will become third company to default in onshore market this year. After all, the risk of a bond market collapse is bullish for stocks as it means even more stimulus by the PBOC to blow the mother of all bubbles.

The Nikkei was also modestly higher as the USDJPY rose to a fresh high not seen since 2007.

A closer look at European trading shows that as expected, today’s session has been dominated by news filtering out of Greece from over the weekend, with concerns mounting that the country will be unable to pay their IMF debts due in June. As many European participants come back to their desk after a long weekend, EUR has seen weakness this morning, breaking to four week lows and residing below the 1.0900 handle.

This comes after comments this weekend from the Greek Interior Minister Voutsis, who stated on Sunday that Greece will not make repayments to the IMF of EUR 1.6bln expected next, however these comments were later contradicted by Greek government spokesman Sakellaridis said Greece will make its debt repayments but wants a deal by end-May or early June and has not asked for a bailout extension. Also of note, Greece narrowly rejected a call to stop paying IMF debt & nationalize banks; voting 95-75 with one blank vote. EUR weakness has bolstered the USD, with USD/JPY (+122 pips) taking out touted barriers at 122.00 and 122.50 to trades at highest levels since 2007.

European equities trade in the red this morning (Eurostoxx: -0.37) amid concerns regarding Greece, despite the DAX initially opening higher benefiting from the weaker EUR. On an index specific basis, IBEX underperforms (-0.54) after Spanish local elections saw a strong performance from the anti-austerity Podemos party. In fixed income markets, Bunds trade around 75 ticks higher today amid concerns surrounding Greece and Spain, while the short end of the Greek yield curve has risen dramatically today, with 2 yr yields higher by over 230 bps. Also of note, in terms of corporate issuance, today may see a three tranche EUR 1.5bln deal from Ely Lilly. Looking ahead in terms of US equities, today sees earnings from AutoZone at 1200BST/0600CDT, while in fixed income at 1800BST/1200CDT there is a USD 26bln 2yr Note Auction.

Over the weekend Fed’s Fischer (voter, soft dove) said that he sees an argument for publishing the Fed’s rate path forecast but says that if they do so, the market must understand that the Fed has no obligation to stick to it. Fischer added that, while markets largely expect the first rate hike in September, it will be determined by data and not by date. While Fed's Mester (Non Voter, Hawk) said the time is near for a rate hike. Mester added that the FOMC will go into the June meeting with an 'open mind' about rate hikes and will look at the latest data. (BBG)

Looking ahead, the European afternoon sees US Durable Goods orders, Composite and Services PMI, New Home Sales and Richmond Fed Manufacturing Index.

Asian stocks mostly rose led by Chinese bourses which showed few signs of slowing down the recent rally. Shanghai Comp. (+2.02%) is on course for its biggest 6-day rally since Nov’08, as the Hang Seng (+0.92%) soared to a fresh 7yr high amid reports HK fund managers are going to be allowed to sell HK funds to Chinese investors. ASX (+0.91%) rose after breaking above its 100 DMA, while Nikkei 225 (+0.12%) is relatively unchanged amid light newsflow.

Commodities have spent the day in the red, weighed on by the aforementioned greenback strength. Brent July crude futures have so far today found support around the USD 65.00, while spot gold (1193.33) has broken below the psychological USD 1200 handle and 50 DMA at 1197.85 this morning to reach its lowest level since 7th March. As a reminder, today sees the expiry of Gold, Silver, Heating Oil, RBOB and Henry Hub NatGas June’15 options.

In summary: European shares fall with the utilities and banks sectors underperforming and travel & leisure, basic resources outperforming. Fed’s Mester yday said ‘time is near’ for U.S. interest-rate boost. IMF says yuan Is no longer undervalued amid  reserve currency bid. The German and Spanish markets are the worst-performing larger bourses, the Italian the best. The euro is weaker against the dollar. German 10yr bond yields fall; French yields decline. Commodities decline, with silver, natural gas underperforming and soybeans outperforming. U.S. consumer confidence, FHFA house price index, new home sales, Dallas Fed index, durable goods orders, capital goods orders, Richmond Fed index, Markit U.S. composite PMI, Markit U.S. services PMI due later.

Market Wrap

  • S&P 500 futures down 0.2% to 2121
  • Stoxx 600 down 0.2% to 405.8
  • US 10Yr yield down 4bps to 2.17%
  • German 10Yr yield down 6bps to 0.55%
  • MSCI Asia Pacific down 0.3% to 153.5
  • Gold spot down 0.7% to $1194.8/oz
  • 5 out of 19 Stoxx 600 sectors rise; travel & leisure, basic resources outperform, utilities, banks underperform
  • Asian stocks fall with the Shanghai Composite outperforming and the Sensex underperforming.
  • MSCI Asia Pacific down 0.3% to 153.5
  • Nikkei 225 up 0.1%, Hang Seng up 0.9%, Kospi down 0.1%, Shanghai Composite up 2%, ASX up 0.9%, Sensex down 0.3%
  • 3 out of 10 sectors rise with financials, energy outperforming and consumer, staples underperforming
  • Charter Said to Be Near Time Warner Cable Deal for $55.1b
  • BYD Said to Plan About $1.6b Private Share Sale in China
  • Euro down 0.63% to $1.0909
  • Dollar Index up 0.99% to 96.97
  • Italian 10Yr yield up 7bps to 1.92%
  • Spanish 10Yr yield up 1bps to 1.85%
  • French 10Yr yield down 5bps to 0.85%
  • S&P GSCI Index down 0.4% to 440.2
  • Brent Futures down 0.7% to $65.1/bbl, WTI Futures down 0.7% to $59.3/bbl
  • LME 3m Copper up 0.1% to $6166/MT
  • LME 3m Nickel down 0.4% to $12660/MT
  • Wheat futures down 0.5% to 512.8 USd/bu

Bulletin Headline Summary from RanSquawk and Bloomberg

  • USD trades higher by over 0.5% as EUR is weighed on by suggestions from the Greek Interior Minister that the country may not pay their IMF repayment on June 5th
  • European equities reside firmly in the red, also weighed on by Greek concerns
  • Looking ahead, today sees US Durable Goods orders, Composite and Services PMI, New Home Sales and Richmond Fed Manufacturing Index
  • Treasuries gain as wrangling continues over Greece’s aid demands; week’s auctions begin with $26b 2Y notes, WI yield 0.65%, highest since Dec., vs 0.54% in April
  • Greek officials will revive their bid to access financial aid with Finance Minister Yanis Varoufakis blaming creditors’ insistence on more austerity for the impasse
  • While PM Tsipras’s spokesman said yesterday a deal can be reached by end of May, he admitted that disagreements remain in areas such as budget targets, sales-tax rates, pension and labor market rules
  • The IMF officially dropped its long-held view that the yuan is undervalued, strengthening China’s case for the currency to win reserve status at the lender
  • Chinese stocks rallied, with the Shanghai Composite completing its biggest six-day advance since November 2008
  • More than 250 stocks rose by the 10% daily limit on the Shenzhen Composite, the smaller of China’s two exchanges that has doubled this year and trades at 71 times reported earnings
  • China set out its ambitions for a bigger naval presence far from its coasts, amid wariness among its neighbors over whether the country’s fleet will be used to back up its territorial claims
  • Iraq has announced the launch of an operation to drive Islamic State out of western Anbar province, where the extremists captured the provincial capital earlier this month: AP
  • Charter Communications Inc. is near an agreement to buy Time Warner Cable Inc. for about $55.1b in cash and stock, according to people familiar with the matter
  • Zhuhai Zhongfu Enterprise Co., which supplies bottles for Coca-Cola Co. and PepsiCo Inc. in China, said it won’t be able to fully repay a bond due May 28, raising concern it will become third company to default in onshore market this year
  • Sovereign bond yields mostly lower; Greek 10Y +60bps.  Asian stocks gain, European stocks, U.S. equity-index futures fall. Crude oil and copper lower; gold higher

US Event Calendar

  • 8:30am: Durable Goods Orders, April, est. -0.5% (prior 4.7%)
    • Durables Ex-Transportation, April, est. 0.3% (prior 0.3%)
    • Cap Goods Orders Non-def Ex-Air, April, est. 0.3% (prior 0.6%)
    • Cap Goods Ship Non-def Ex-Air, April, est. 0.3% (prior 0.9%)
  • 9:00am: FHFA House Price Index m/m, March, est. 0.7% (prior 0.7%)
  • 9:00am: S&P/Case-Shiller 20 City m/m SA, March est. 0.90% (prior 0.93%)
    • S&P/CS 20 City y/y, March, est. 4.60% (prior 5.03%)
    • S&P/CS 20-City NSA, March, est. 175.00 (prior 173.67)
    • S&P/CS US HPI m/m, March, est. 0.50 (prior 0.42%)
    • S&P/CS US HPI y/y, March (prior 4.22%)
    • S&P/CS US HPI NSA, March (prior 166.80)
  • 9:45am: Markit US Composite PMI, May preliminary (prior 57.0)
    • Markit US Services PMI, May preliminary est. 57.0 (prior 57.4)
  • 10:00am: New Home Sales, April, est. 500K (prior 481K)
    • New Home Sales m/m, April, est. 4.0% (prior -11.4%)
  • 10:00am: Consumer Confidence Index, May, est. 95.2 (prior 95.2)
  • 10:00am: Richmond Fed Mfg Index, May, est. 0 (prior -3)
  • 10:30am: Dallas Fed Mfg Activity, May, est. -12.5 (prior -16.0)
  • 1:00pm: U.S. to sell $26b 2Y note

Central Banks

  • 12:30pm: Fed’s Fischer speaks in Tel Aviv, Israel
  • 7:50pm: Bank of Japan releases April 30 mtg minutes
  • 8:10pm: Fed’s Lacker speaks in Baton Rouge, La.

DB's Jim Reid completes the overnight summary

With most major markets closed yesterday, we’ve re-attached the week ahead that Craig published yesterday at the end of the report this morning. It was an unsurprisingly quiet session yesterday from a trading volume and newsflow standpoint. The political events in Spain attracted the bulk of the attention following the Spanish local and regional elections over the weekend in which the ruling People’s Party suffered its worst election result in 24 years. The previous two-party regime is looking now more like a four-party contest after both the anti-austerity focused Podemos and (to a lesser extent) newcomer Ciudadanos made strides. Spanish equities fell 2.01% in yesterday’s session in the aftermath of the weekend’s results. Despite the People’s Party still remaining the largest political presence in Spain by number of votes, the nation is now in something of an uncertain period with a number of close calls across regions meaning lengthy coalition negotiations will now begin. There was a notable win for the Podemos backed activist Ada Colau who was elected mayor of Barcelona, while in Madrid, the fragmentation of the Spanish political scene was evident as, after 24 years of control, the People’s Party look set to lose out to a Podemos coalition should they secure sufficient backing. With a Spanish General Election due by the end of the year, Prime Minister Rajoy attempted to instill some confidence in his voters yesterday, saying that the People’s Party still remains the Spanish voters ‘first choice’ and that, although acknowledging the significant loss of votes, is still ‘very comfortable’ leading his party into a General Election. So political risk is still high in Europe. Podemos have actually been dipping in the polls all year as the economic recovery builds. Perhaps the full general election will see the main parties benefit more from the recovery but European politics remains fragile and probably will remain so for a number of years.

As well as in Spain, there were similar falls for other European peripheral equity markets yesterday as the FTSE MIB and ASE fell 2.09% and 3.11% respectively. Commodity markets were fairly muted as Gold finished +0.03% and Brent was +0.23%. The Euro meanwhile ended 0.32% down versus the Dollar as both the Spanish political situation and Greece saga weighed on sentiment. On the subject of Greece, talks are due to resume today between the Brussels Group and Greek government with issues over fiscal targets and specifically pension and labour reforms still dominating the agenda. Greek government spokesman Sakellaridis said yesterday that a deal can be made by the end of May and that ‘based on the liquidity problems that we have, there is an imperative need for us and the euro zone to have a deal as soon as possible’. The head of the ESM, Klaus Regling, was a lot more cautious however in an interview with German newspaper Bild. Regling was quoted as saying that ‘there is little time left’ and that ‘without an agreement with the creditors, Greece will not get any new loans’ before warning that ‘then there’s a threat of insolvency’.

As it currently stands, Greece has €1.6bn of redemptions due in June alone (of which €1.5bn are due to the IMF), starting on June 5th with a €310m payment. Although we have little transparency on the government’s cash position, comments from both Greece officials and its creditors suggest that it looks increasingly difficult that Greece will be able to make the payment due on the 5th. In the meantime, we appear to be no closer to a Staff Level Agreement needed to release funds. Given that progress continues to be slow and non-payment is looking increasingly more likely, we list below three potential scenarios as highlighted by DB’s Mark Wall in the Focus Europe piece last week. The first scenario is where a Staff Level Agreement is made and approved by the Eurogroup, then even before we have had the national approvals, we would expect the ECB to accommodate the non-payment through letting the ELA and T-Bill ceiling rise to allow Greece to make payment. The second scenario is similar to the first but where a referendum is called, resulting in adding 2-3 weeks to the timeframe. In this situation, we believe that the ECB would be willing to find a balanced solution and would envisage haircuts on collateral at the ELA being raised, but not enough to cap ELA and trigger capital controls. The third scenario is where there is no Staff Level Agreement and Eurogroup approval. Although a non-payment on the IMF repayment would not necessarily be deemed a ‘default’ as per credit rating agencies, we believe that the ECB would view the lack of payment as rendering Greece insolvent. A potential reaction would be to immediately cap ELA and force Greece to close its banks and reopen them under capital controls. A split deal and parallel currency have also been mentioned at various stages as other scenarios, however we deem these lower probability scenarios as of now.

If this wasn’t enough, despite PM Tsipras winning backing from his Syriza party, tensions clearly still lie internally. The WSJ has reported that when Syriza’s Central Committee debated the state of debt negotiations this weekend, the hard-line Left Platform submitted a motion calling for the government to default on the IMF loans rather than compromise. The proposal was only just rejected, with 75 voting in favour and 95 against. The Left Platform leader Lafazanis (also the Minister of industry and energy) highlighting the divergent views in the party after being quoted as saying that ‘who says that an exit from the euro and a return to the national currency is a catastrophe?’. Ultimately the situation continues to remain very tense, with internal pressures still very much an issue and the end game still uncertain. We continue to think that a Grexit will be avoided, but the path to such an outcome is not easy to predict.

Away from Greece and Spain, it was interesting to see that the ECB slowed the pace of asset purchases slightly last week after data released yesterday, despite Coeure’s comments that asset purchases are set to be front loaded over the next two months ahead of low liquidity in July and August. The data released yesterday showed that €11.8bn of government and agency bonds were purchased over the week which marks the smallest increase in three weeks.

Despite US markets being closed yesterday, there was some Fedspeak as Vice Chair Fischer and Cleveland Fed President Mester were speaking. Fischer in particular reiterated much of the other comments of late, saying that any move will be data dependent while also noting that it is ‘misleading’ to give so much importance to the first move given that any process of returning to normalization will likely take a few years. Meanwhile, the hawkish leaning Mester said that ‘the time is near’ for a move and that ‘in my mind every meeting is on the table’.

Looking at our screens this morning, bourses are mostly trading firmer and led by the Hang Seng (+1.42%) which has bounced on the news that policymakers will allow cross-border sales of mutual funds with mainland China. The Shanghai Comp (+1.64%) and CSI 300 (+1.48%) have continued their strong start to the week, supported by the news that Beijing has invited private investors to help build and operate around $318bn of projects. Elsewhere, the ASX is +0.78% and the Nikkei (+0.08%) is more or less unchanged. Treasuries have started this morning on a firmer footing, led by the 10y (-1.8bps) in particular.

Looking at the week’s calendar now, we’ve just got Japan PPI and UK CBI reported sales to look forward to in the Asia and European timezones this morning before we get a bumper data day in the US this afternoon with durable goods orders, capital goods orders, FHFA house price index, S&P/Case Shiller house price index, May flash composite and services PMI’s, new home sales, consumer confidence, Richmond Fed manufacturing index and the Dallas Fed manufacturing activity index. Tomorrow starts in China where we get industrial profits data for April and small business confidence in Japan. There are more confidence indicators in Europe on Wednesday with German and French consumer confidence. There are no releases of note in the US in the afternoon. On Thursday we get Japan retail sales in the early morning. We then turn to Europe where we get various May confidence indicators for the Euro area. Initial jobless claims and pending home sales will be due in the US on Thursday. It’ll be a busy end to the week on Friday as we get CPI, industrial production, housing starts and the jobless rate out of Japan. In Europe we start with French consumer spending, quickly following by Euro area money supply data and then the preliminary Q1 GDP report for the UK. Over in the US the second reading for Q1 GDP will be important given the expected revisions, while we also get the Chicago PMI and the final May University of Michigan consumer sentiment reading. There’s plenty of Fedspeak this week with Fisher, Mester, Lacker, Williams and Kocherlakota all due.

Some of the stocks that may grab investor focus today are:

Wall Street expects ...

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AutoZone, Inc. (NYSE: AZO) is expected to report its Q3 ...

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There is no getting something for nothing.  There is always a cost involved, even if it is feeling vaguely obligated to listen to the person giving you a gift.  We are social creatures, and we want to favor people who are kind to us.

I get a lot a pitches in the mail because I profile well to wealth managers and those like them.  The age, assets, income add up to a likely client, except that I am in a related business, and am not interested in making my assets less flexible, at least right now.

My advice to you is that you do not respond to free gifts, whether it is good food, baubles, etc.  It’s not worth it, and if you have a need, it would be far better to draw up your own story, and send it to five wealth managers, putting them in competition with one another, so that you can compare and contrast what they do and charge.

Even in my own limited experience, going to free conferences I find that I am the product being sold, and for months thereafter I have to tell marketers that I am not interested — and to the pesky ones point out some flaw in what they do.

Your time is valuable.  So is your money.  Thus remember what I always say:

“Don’t buy what someone else wants to sell you.  Buy what you have researched that you want to buy.”

Thus, make them play your game.  Don’t play their game.  Send out your proposal for competitive bid, and choose the one that is best for you.

Another day, another dip to be bought aggressively in China. The only catalyst for moar - aside from "well it was up yesterday" - is the news that the Shanghai-HK Stock Exchange aggregate quota will be abolished, leaving room for more speculative excess to flood into 500%-gainers.  CSI-300 is now up almost 6% since Friday's close and Shenzhen and CHINEXT are soaring back from underperformance yesterday. To round things out on a superlative note, the Shenzhen Composite - which contains all the ponzi-based self-collateralized idiot-makers, is now up over 100% year-to-date. Simply put, you can't keep a bad market down...



Which has sent the Shenzhen Composite above the 100% return mark for 2015...


Charts: Bloomberg

Wolf Richter

How great was the global economy in the first quarter?

We know the US economy was crummy. The revised GDP estimate will likely sink into red mire. Hence the heated proposals these days, including at the Fed, to apply “a second round of seasonal adjustment” that would “correct” the first-quarter GDP estimate, no matter how bad, into positive territory. An elegant way of covering up an unsightly sore.

So was it just a crummy quarter in the US, or was it a global thing, in which case we might have to apply a “second round of” whatever to adjust the global downturn out of the picture?

Because here is the thing: in the first quarter, one of the crucial measures of the global economy – global trade – slumped the most since the Financial Crisis. But ironically, it wasn’t because of the USA.

The CPB Netherlands Bureau for Economic Policy Analysis, a division of the Ministry of Economic Affairs, just released its latest Merchandise World Trade Monitor, which covers global import volumes as well as global export volumes. The index dropped 0.1% in March to 136.5, after having already dropped 0.7% in February, and 1.7% in January. The index, which was set at 100 in 2005, is now down 2.5% from the peak of 140.0 in December. That 3.5-point decline was the sharpest since the Financial Crisis.

This chart, going back to January 2012, doesn’t exactly inspire confidence in the current state of the global economy:


To mitigate the volatility of these kinds of monthly numbers, the CPB offers a measure of trade volume “momentum,” which it defines as “the change in the three months average up to the report month relative to the average of the preceding three months.”

That trade momentum measure slumped 1.5% in March, the largest monthly decline since April 2011, after having edged down 0.4% in February. It now amounts to the most negative “momentum” since the Financial Crisis.

This chart, going back to 2010, looks even worse than the prior chart. This sort of thing isn’t supposed to happen in an expanding, or even a stagnating, global economy:


Both of the measures above involve import and export volumes. With volumes now actually declining and with new shipping capacity coming on line throughout the period, pricing per unit, in dollars, has plunged 15% since June 2014, and nearly 20% since the peak in March 2011. It’s now at the lowest level since May 2009:


But the trade debacle wasn’t spread evenly. For March, the CPB reported:

A positive turnaround occurred in both import and export growth in advanced economies. Imports bounced back strongly in the United States. They contracted deeply in Japan however. In emerging economies, import growth accelerated, but export growth became heavily negative on account of a deep fall in emerging Asia’s exports.

And that would be mostly China.

Hard-landing gurus have been predicting an imminent end of the China bubble for years. But there was no hard landing, or a soft landing, or any landing for that matter. China just kept on flying, fueled by an enormous credit bubble and monetary propellants. But now it’s running out of air. Read…  China Momentum Indicator Plunges to “Hard Landing” Level

And just to confirm that if the US had hoped it could threaten Beijing into submission and force the Politburo into curbing its expanionist appetit, it was dead wrong, the nationalist Global Times, a paper owned by the ruling Communist Party’s official newspaper, the People’s Daily, said in a Monday editorial that war was “inevitable” between China and the United States unless Washington stopped demanding Beijing halt the building of artificial islands in the disputed waterway......

Submitted by Andrew Levine via,

American diplomacy favors (majority) white, English-speaking countries (the UK, Canada, Australia and New Zealand) and non-Hispanic European settler states (Canada, Australia and New Zealand again, but also Apartheid South Africa and, of course, Israel).

South Africa eventually fell out of favor, thanks in part to boycott, divestment and sanctions efforts in Western countries.

Similar efforts now underway directed towards Israel are beginning to change public opinion too; though elite opinion, in the United States and the other settler states especially, has, so far, hardly budged.

Thanks to its lobby and its strategic location, Israel is still, for America, the most favored nation of all.

Western European countries are also favored, though to a lesser extent – thanks, again, to cultural affinities and historical ties. Those that sent large numbers of emigrants to North America generally have a leg up. France didn’t send many emigrants, but it is also favored, at least some of the time, for philosophical and historical affinities dating back to the American and French Revolutions.

With Saudi Arabia and the other Gulf monarchies, there are no deep or longstanding cultural and historical ties; quite the contrary. Nevertheless, those nations, Saudi Arabia especially, receive favored treatment too.

The events surrounding the death of Osama bin Laden provide a window into this strange and revealing state of affairs.

*  *  *

When Barack Obama lied about how Navy Seals murdered bin Laden, he blew apart a carefully constructed cover story concocted in Washington and Islamabad intended to conceal the role of Pakistani intelligence and the Pakistani military.

According to Seymour Hersh’s account in The London Review of Books, bin Laden had been in Pakistani custody at least since 2006. American intelligence learned of this some four years later, when a “walk-in” gave them information that checked out.

The raid itself took place a year after that, in time for the 2012 Presidential election in the United States.

The Pakistanis had reasons for keeping bin Laden in custody and out of American hands. It gave them leverage with the Taliban and with the remnants of Al Qaeda, as well as with other radical Islamist groups.

The Saudis wanted bin Laden kept in Pakistan too; away from the Americans. According to Hersh, they paid Pakistan generously for their trouble.

Hersh’s article does not dwell on their motives, but, in interviews he has given after his article went on line, he is less reticent.

The Saudis didn’t want the United States to get its hands on bin Laden because they didn’t want him to talk about Saudi involvement in 9/11 and other operations directed against Western interests.

This is only a conjecture, but it makes eminently good sense. It isn’t even news. Like the fact that the Israeli arsenal includes nuclear weapons, everybody knows about the Saudis’ role, but nobody in official circles or in the media that toes its line talks about it.

Since his article appeared, official Washington and mainstream media line have gone after Hersh with a degree of vehemence reminiscent of their attack on Edward Snowden.

They hate it when their bumbling is revealed, almost as much as when the hypocrisy of their claims to respect human rights and the rule of law is exposed.

But, for all the sound and fury, they have not effectively rebutted a single one of Hersh’s contentions – nor, for that matter, any of Snowden’s.

If Hersh is right, as he surely is, then two of America’s closest allies were, to say the least, not acting the way that allies should.

Capturing bin Laden was officially – and probably also really – a high priority for the United States.   Pakistan and Saudi Arabia kept him from being captured.

However, none of this appears to have harmed U.S.-Pakistani or U.S.-Saudi relations.

The rulers of both countries depend on American support to survive.   And yet, when they choose, they defy their protector with impunity. Israel isn’t the only country that wags the dog.

Pakistan gets carte blanche because, like Israel, it has the Bomb. Keeping the Bomb out of the hands of anyone who might use it – especially, against the United States or its interests abroad — is, understandably and legitimately, a goal of American diplomacy.

And so, the United States will do what it must to keep the Pakistani military and intelligence communities happy and on board.

This is not easy: the Pakistanis have been involved with radical Islamists from Day One. By all accounts, contacts survive to this day.

The United States encouraged these connections, especially when the prospect of getting the Soviet Union bogged down in Afghanistan clouded the thinking of diplomats in the Carter and Reagan administrations.

But, since even before the Americans became involved, the Pakistanis have been going their own way in Afghanistan – partly for cultural and historical reasons of their own, and partly to keep India at bay.

For all these reasons, the Americans have found it expedient to buy off the leaders of the Pakistani military and intelligence communities.   Therefore, whenever possible, in light of the totality of their concerns, they give them what they want. What the Pakistanis wanted with the bin Laden killing was plausible deniability.

This was the point of the story that Obama blew. Therefore when he, or his political operatives, decided that, with the 2012 election looming, the moment was opportune to announce bin Laden’s death, they had to concoct a different story that would also keep the Pakistani role secret.

The one they made up had the added benefit of reinforcing the swashbuckling image that the Navy Seals, Obama’s Murder Incorporated, try to project. Hollywood got the message, and made the most of it.   So did the Obama campaign.

But, for reasons Hersh explains, the fable they concocted was transparently implausible; a point not lost on observers at the time.

To point this out, back in the day, was to risk being taken for a “conspiracy theorist” – or, worse, a Romney supporter.

Now that a definitive account of what happened has appeared, it is plain who the real conspirators were.

And so, by now, only the willfully blind – and the Washington press corps — believe the tale Obama told.

Needless to say, it is not exactly news when Obama lies; in the “man bites dog” sense, it would be news if he didn’t.

And neither is the duplicity of Pakistan’s military and intelligence leadership surprising.   Politics in the Indian sub-continent is as devious and convoluted as anywhere in the world.

In Pakistan, as in Iraq and Syria, the stewards of the American empire – the ones who worked for Bush and Cheney, and the ones who have worked for Obama and his hapless Secretaries of State — are in way over their heads. They are like the proverbial bull in the china shop; powerful and therefore destructive, but ultimately clueless.

American obeisance to the wishes of the Saudi royal family is not unusual either.  The United States has been toadying up to them since the days of Franklin Roosevelt. They have oil, and we want to control what they do with it.

However, the fact that the American public, and its counterparts in other Western countries, goes along, almost without dissent, is puzzling in the extreme.

The American way, after all, is to villainize first, and ask questions later.

The Saudi royals, and the ruling potentates in the other Gulf kingdoms, are prime candidates for villainization. They are characters out of central casting.

One would think that a public that loathes, or has been made to loathe, Vladimir Putin and Bashar al-Assad – and that still goes livid at the very thought of the Iranian Ayatollahs and Saddam Hussein — would be out with pitchforks demanding the heads of each and every member of the Saudi ruling class.

They were, after all, if not the perpetrators, at least the protectors of the perpetrators, of 9/11, a “day of infamy,” our propaganda system tells us, equal only to the day the Japanese bombed Pearl Harbor.

And yet the public’s ire seldom turns the Saudis’ way.

This is all the more remarkable because they have neither a Bomb nor a domestic lobby that the entire American political class fears.

All they have is a massive public relations operation. Evidently, the flacks they hire know their trade. No matter how much money they are paid, they earn every cent.

* * *

Ironically, the Saudis’ hold over America’s political and economic elites is an unintended consequence of American diplomacy in the days when the United States was, or seemed to be, on the side of the angels.

When Britain or France wanted Middle Eastern oil – in Iraq or Iran, for example, — they took it. They were colonial powers; this is what colonial powers do.

Before World War II, American diplomats cultivated a different image. Washington’s cupidity may have been no less than London’s or Paris’; but, in the White House and at Foggy Bottom, the idea was to present the United States as, of all things, an anti-colonial power.

Never mind Puerto Rico or the Philippines or, for that matter, Hawaii and the several other Pacific islands that the U.S. Navy coveted; and never mind America’s obvious collusion – before, during, and after World War II — with the British and French empires.

It is true, though, that in the Middle East, American domination took a different form. When American oil companies wanted Middle Eastern oil, they didn’t seize it; they bought it from the rulers of the peoples who live on top of it.

And, if there weren’t rulers willing or able to sell, the Americans created them.

The House of Saud made out like bandits. For the oil companies, it was a small price to pay.

The U.S. got control of the oil without having to administer rebellious colonies. Meanwhile, local elites got rich.   All they had to do for the money was give the Americans free rein and enforce the order that made American domination possible – with American help, of course, and with arms purchased from American corporations.

And so, until reality made the pretense unsustainable, the U.S. could present itself, throughout the Middle East, as a defender of anti-colonial, independence movements.

As other Gulf states broke free from British rule, the U.S. took over, applying the same model. This worked well — for a while.

Before long, though, the Saudi regime, and he others, became too big to fail.

This is why, even as the Clinton State Department floundered about cluelessly when the Arab Spring erupted, the prospect of allowing those regimes to fall was never seriously considered.   For official Washington, this was as unthinkable as allowing nuclear Pakistan to “go rogue,” or not kowtowing to the Israel lobby.

When there is a disconnect between public and elite opinion, elites generally win, but not always: not when too many people care too much. American elites, eager to maintain the status quo, like the PR people the Saudis hire to keep public opinion from getting out of control, therefore have their work cut out for them.

Some of the reasons for this reflect poorly on the moral probity of public opinion in the West.

In their appearance, manner and demeanor, the Saudi ruling class epitomizes the Western idea of the Arab.

Even before Europeans inserted themselves into the Arab world, Arabs have occupied a special place in the imaginations of Western peoples.

Like many of the other peoples of the East, they were deemed mysterious and exotic, highly sexualized, and vaguely dangerous.

But, unlike Turks and Persians or the peoples of South Asia and the Far East, and like Africans and the indigenous peoples of the Americas and Australasia, Arabs were never quite regarded as fully human.

The Saudi PR machine therefore has deeply racialized attitudes to counter. The Saudis epitomize “the other”; this makes them a hard sell.

They also epitomize the retrograde, which makes them a hard sell for reasons that have nothing to do with racial or cultural stereotypes — and everything to do with modern political morality.

There is hardly a reactionary trend in the Muslim world that the Saudis haven’t supported financially; and there are few that they did not actually instigate or help shape.

Also, there are few places on earth where human rights and gender equality are less respected, or where liberal and democratic norms hold less sway, than in Saudi Arabia.

Elites in that country and in the other Gulf monarchies are rich and idle because they are sitting on top of vast oil reserves, and because they have accumulated so much wealth that they can exploit “guest workers” in the ways that masters exploit slaves. No one holds them to account for this or anything else untoward that they do.

In a world that permits, indeed encourages, private ownership of natural resources and the limitless accumulation of wealth — and that is largely indifferent to the harm petroleum extraction does — they won the lottery.

This could make them objects of envy, of course; and envy tinged with racial animosity is a lethal brew. Yet, for all practical purposes, the Saudis get a pass – not just in Western elite circles and within the political class of Western countries, but in Western public opinion too.

It has been this way ever since the phasing out of the short-lived Arab oil embargo brought on by American support for Israel in its 1973 war against Egypt.

The Saudis’ immunity from public rancor is all the more amazing because it would be easy to rationalize – indeed, to justify – turning them into objects of scorn.

Inasmuch as our moral intuitions took shape over many centuries, under conditions in which nearly everything everyone wanted was in short supply, we are inclined to think that, where the distribution of income and wealth are concerned, principles of fair play apply; and therefore that “free riding” on the contributions of others is morally reprehensible.

In existing capitalism – and, indeed, in all class divided societies – plenty of free riding nevertheless occurs. It is so commonplace that people often don’t notice it or don’t care. Sometimes, though, when people get something for nothing, it can be enough over the top to cause consternation. When the free riders stand out conspicuously, the level of consternation is typically enhanced.

Saudi Arabia’s feudal rulers, and their counterparts in other Gulf states, are about as over the top as it gets.

Other than maintaining the profoundly oppressive order that makes the status quo possible in the territories they control, it is hard to think of any contributions, productive or otherwise, that they make to justify the riches they receive.

But, as finance has superseded industry as the driving force behind the world’s overripe capitalist system, Western publics have become more accustomed than they used to be to rewarding unproductive people.

The robber barons of old, and the “industrialists” who succeeded them, at least played a role in increasing society’s wealth. The enterprises from which their riches derived made things. The money people at the cutting edge of capitalism today make money out of money, an activity even more useless than collecting rents for drilling rights.

Yet, hostility is seldom directed towards them. Quite the contrary: the richer they are, the more they are esteemed.

Could the sort of confused and obsequious thinking that has made hedge fund managers the heroes of our age account, in part, for how Saudi elites escape vilification? Is this yet another situation where, if you are rich enough, everything is forgiven?

No doubt, this is part of the explanation. But a government intent on keeping public and elite opinion on the same page is a more important factor.   Add on a lavishly funded PR campaign and an entire category of miscreants gets off scot-free.

That there is no group of people on earth today to whom the epithet “malefactors of great wealth” more justly applies hardly matters. The Western public may not like them much or respect them; but, so long as they don’t flaunt their wealth too blatantly, hardly anyone complains when Western politicians let them call the shots.

Meanwhile, Islamophobia rages and a gullible public lives in mortal fear of terrorist bogeymen.   And yet the Saudi elite gets a pass, notwithstanding the fact that nearly all the perpetrators of 9/11 — of the event that, more than any other, boosted Islamophobia and got the so-called war on terror going — were Saudi nationals. It is an amazing phenomenon.

* * *

In real democracies, governments would do what the citizens who put them in office want them to do. The United States and other Western democracies make a mockery of that ideal. But, even so, there are limits; governments cannot defy public opinion on matters of great moment indefinitely.

It is also the case, at least in the United States, that public opinion is affected significantly by the very government that is supposed to do what the people want – and therefore, ultimately, by the demands of the corporate and financial forces that corrupt democracy.

This is why propaganda matters. Keeping public opinion in line is a function, perhaps the main one, of propaganda systems. In America in the Age of Obama, that is one of the few things that works well.

We underestimate its effectiveness at our peril.

Enabling the Saudi ruling class, and the rulers of the other Gulf states, to direct American foreign policy to the extent that they do, and to get away with whatever they please, is hardly the least of it; but neither is it the only cause for concern.


Submitted by Scott Spangler via,

Most Americans today have but two connections with those who serve and have served in the military, and especially those who have perished in that service. The first is the hollow seconds it takes to utter “Thank you for your service,” an seemingly autonomic reflex when seeing someone in uniform. The other occurs should they see a film about any of our many conflicts. Since America’s last declared war, which ended 70 years ago, Memorial Day has become an annual celebration of patriotic hypocrisy, when people might notice that the American flag they ran up their front yard pole last year is faded and frayed and, maybe, add a new one to their celebration’s shopping list.

True appreciation is measured by our depth of experience and understanding.

Today, less than 1 percent of the population reaps the benefits resulting from the service and sacrifice of the less than 1 percent of the population who serve the politicians elected by the majority of people who separate, and have no direct involvement with, these two segments of society. And this disconnection and separation is no accident.

During the war Congress declared the day after the attack on Pearl Harbor, citizens didn’t thank members of the military for their service because everyone, one way or the other, was involved and contributed to a successful outcome. For many, Korea is a forgotten conflict, but it set the stage for all the undeclared conflicts that followed. War, as Eisenhower warned, is big business, and public protest is a political challenge that complicates their promotion and prosecution. Vietnam proved this, and people protested because the draft could send any one of them into harms way. And on the nightly news they would watch their loved ones suffer for a cloudy cause.

The politicians, most of whom have never served and faced the possibility of a sudden end to life, solved this problem by replacing the draft with the all volunteer force. And never again would the news media work with the unrestricted access it had in Vietnam. Nor could they show the return of flag-draped transfer cases. “Privacy,” the politicians said, but certainly a planeload of flags bedecked boxes says something more—something different—than a missing-man flyover and the single triangle-folded flag presented to the family to conclude a funeral’s full military honors.

Understanding is the antidote for hypocrisy, and films that promote and criticize America’s endless series of conflicts can contribute to it. Watching requires more involvement than saying “Thanks” to a uniformed stranger. Put yourself in the protagonist’s place and wonder how you—and your family—would feel and deal with the consequences projected on the screen. Build on this understanding, test its veracity with questions and settle for nothing less than a direct answer to it, make it a resource that guides your daily decisions.

In so doing you can honestly honor those for whom this holiday was created after the nation’s most catastrophic conflict, the U.S. Civil War, which took the lives of roughly 620,000 individuals in military service.

Up until this moment, Greece may not have had the financial wherewithal to pay its creditors, forced instead to use circular math gimmicks in which the IMF paid the IMF for the country's most recent €750 million due on May 12 when it effectively pre-defaulted and used SDR reserves as "payment", but at least it had a united facade when facing Europe and political cohesion when dealing with the Troika.

That too may have just evaporated over the weekend, when in a surprisingly close vote showing just how deeply the ruling Greek Syriza party has splintered, the hard line "Left Platform" a faction within Syriza, proposed that Greece stop paying its creditors if they continue with "blackmailing tactics" and instead seek "an alternative plan" for the debt-racked country. Its motion called for the government to default on the IMF loans rather than compromise to creditor demands, among which a change to value-added tax rates, further liberalization of the labor market and changes to the pension system, including further cuts to pensions and wages.

According to the NYT, which first reported the vote outcome, the proposal was narrowly rejected with 95 people voting against and 75 in favor.

The WSJ adds:

The Left Platform’s leader, Energy Minister Panagiotis Lafazanis, told the meeting default was preferable to surrender, even if it meant Greece tumbling out of the euro.


Who says that an exit from the euro and a return to the national currency is a catastrophe?” Mr. Lafazanis said at the meeting.

Who? Well, all those - mostly bankers - who for the past 5 years bailed out European banks at the expense of preserving Greek participation in a doomed monetary union and avoiding the collapse of the Eurozone, an outcome which would lead to massive losses for the oligarchic status quo.

But back to Greece where with a vote as close as that, the genie of the full-blown dissent within Syriza, which has a tiny majority of just 12 seats in Greece's 300 seat partliament, is out of the bottle which could mean that the Troika's long sought after goal of pushing Greece into a political crisis, may be just around the corner.

As the WSJ reports, "Tsipras’s difficulty in selling a painful compromise to Syriza’s hard left, as well as to other parts of his ideologically diverse party, has become the largest obstacle to a deal. European officials and analysts—and privately even Greek government officials—say they don’t know whether the roughly 30 lawmakers who make up Left Platform will vote as defiantly as they talk if creditors’ terms are put before the Athens Parliament."

That may be a moot point, since Greece needs a deal yesterday: as a reminder, Greece has about 10 days of cash left, and this time there is no kicking the can - if there is no deal by June 5, Greece will be in default first to the IMF, and soon to everyone else.


Worse, while Greece may not have decided to formally prioritize pensions and wages over IMF repayments, at least not yet, it has absolutely no working proposal to present to the Eurogroup ahead of this week's latest meeting.

The Central Committee agreed on a text saying any deal with creditors must involve no pension cuts, a small budget surplus before interest, increased public investment and a restructuring of Greece’s debt—terms that lenders are unlikely to accept. The text isn’t binding on Mr. Tsipras’s government but indicates how hard it will be to sell a deal to Syriza.

But while some may have harbored hope that the Troika may agree to at least the smallest of concessions, after Sunday's municipal vote in Spain which showed a dramatic plunge in popularity of the ruling PP, a harbinger of even even more "anti-austerity" platforms coming to power, Merkel will do everything in her power to make an example of Greece that nobody can dictate terms to the Troika and in the end it is a very simple choice: the German way or the autbahn.

And just like that Greece is suddenly caught between the devil and the deep red lines: an intransigent Troika and potential rebels within the party itself.

“The biggest threat may not end up being Mr. Lafazanis, but other parliamentary members who lack party discipline, who are newly elected and are completely unpredictable,” said Dimitris Keridis, an associate professor of international politics at Panteion University in Athens.


Parliamentarian Ioanna Gaitani, a self-described Trotskyite in the Left Platform, said Greece can survive a debt default and lenders aren’t respecting Syriza’s mandate.


“When faced with the pseudo-dilemma of ‘euro or national currency,’ the answer is a unilateral write-off of most of the debt, the taxation of large wealth, and the implementation of Syriza’s program,” she said. “For the Left, the needs of the people are above profits and debts.”

The best news perhaps for Greece and everyone else who has been following this ultra slow motion trainwreck for the past 5 years, is that it is nearly over (one can hope), and that when it comes to defaulting, Greece has a truly exceptional range of choices how to make sure its last Euro-denominated check bounces in the most dramatic fashion possible.

By Simon Black of Sovereign Man

Meet the veteran who’s been reduced to peddling for change online to buy a new leg

Historian Will Durant once wrote “in the last 3421 years of recorded history only 268 have seen no war.”

This is astounding. Warfare is constantly with us, often for the most absurd reasons.

These days we’re told that the War on Terror makes us more free.

We’re programed on days like Memorial Day to sing songs about our freedom and to thank the people in uniform for making us more free.

The question I would respectfully submit is, do you feel more free today than you did 5, 10, 20 years ago?

We now live in an era of unprecedented government intrusion.

Senior citizens are thrown in jail for failing to file disclosure forms.

Spy agencies arrogantly engage in illegal surveillance on their own citizens.

And excessive force is so commonplace it barely registers as newsworthy any more.

Curiously a number of polls from 2013 and 2014, including Gallup and the Washington Post, actually show that more people are afraid of the government than of terrorism itself.

This isn’t freedom. And it’s a complete myth that soldiers fight and die in the name of freedom anymore.

Warfare today means that a few people at the top of the military industrial complex, banking, and oil services companies become extremely rich. And everyone else pays the price.

The price for everyday citizens is having less freedom than before.

The price for future generations is inheriting a tremendous war debt.

And the price for soldiers themselves is coming home wounded, limbless, or not at all.

In today’s podcast, I introduce you to Joe, one of those recent veterans who lost his right leg.

I recently met him while in the US, and he has an unbelievable story.

Despite losing a limb in combat, Joe can’t get a new leg because the FDA won’t approve the procedure that he needs.

It’s called osseointegration. And the FDA thinks that it might be too risky for Joe.

Risky. Kind of like being in a combat zone in a country that never should have been invaded to begin with for reasons that were all lies, all to support a war that only makes the country less free.

So since the government doesn’t think that Joe is responsible enough to make his own decisions, he now has to go overseas and pay tens of thousands of dollars out of his own pocket.

Joe doesn’t have the money; so a family member set up a donation page on the Internet trying to get help. (I’m not publishing the link here because I’m going to take care of it myself.)

It’s amazing when you think about it– a combat veteran who lost a leg supposedly fighting for ‘freedom’ can’t have the medical procedure he needs because a destructive government bureaucracy.

That’s what freedom means today in America. And nobody’s fighting for it.

Soldiers are off risking life and limb for oil companies, banks, and defense contractors. And citizens are distracted with bread and circuses.

All the while, government power continues to expand at the expense of the individual.

So today as we’re told to remember the fallen, we might also take a moment to remember the freedom we once had.

And to think through the options for winning it back once again.

Learn more about Joe’s unbelievable story, here:

Early last month we highlighted a ThinkProgress report which suggested that more people were killed in encounters with police in the US in the month of March than were killed in encounters with UK authorities in 100 years. 

From the report:

A new report by unearthed disturbing figures when it came to the number of police-related deaths that occurred in America in the month of March alone.


Just last month, in the 31 days of March, police in the United States killed more people than the UK did in the entire 20th century. In fact, it was twice as many; police in the UK only killed 52 people during that 100 year period.


According to the report by ThinkProgess, in March alone, 111 people died during police encounters — 36 more than the previous month. As in the past, numerous incidents were spurred by violent threats from suspects, and two officers were shot in Ferguson during a peaceful protest. However, the deaths follow a national pattern: suspects were mostly people of color, mentally ill, or both.

In that context we bring you the following compare and contrast visual exercise.

The UK…

....versus the US…

Note: the suspect who was shot in the latter video clip was unarmed and died as a result of his injuries.

The officer responsible killed another suspect in 2013 — he was cleared of wrongdoing in both cases.

The following is an excerpt from William Davies' new book The Happiness Industry: How the Government and Big Business Sold Us Well-Being (Verso Books, 2015):

Since the 1960s, Western economies have been afflicted by an acute problem in which they depend more and more on our psychological and emotional engagement (be it with work, with brands, with our own health and well-being) while finding it increasingly hard to sustain this. Forms of private disengagement, often manifest as depression and psychosomatic illnesses, do not only register in the suffering experienced by the individual; they are increasingly problematic for policy-makers and managers, becoming accounted for economically.

Yet evidence from social epidemiology paints a worrying picture of how unhappiness and depression are concentrated in highly unequal societies, with strongly materialist, competitive values. Workplaces put a growing emphasis on community and psychological commitment, but against longer-term economic trends towards atomization and insecurity. We have an economic model which mitigates against precisely the psychological attributes it depends upon.

In this more general and historical sense, then, governments and businesses ‘created the problems that they are now trying to solve.’ Happiness science has achieved the influence it has because it promises to provide the longed-for solution. First of all, happiness economists are able to put a monetary price on the problem of misery and alienation. The opinion-polling company Gallup, for example, has estimated that unhappiness of employees costs the US economy $500 billion a year in lost productivity, lost tax receipts and health-care costs. This allows our emotions and well-being to be brought within broader calculations of economic efficiency.Positive psychology and associated techniques then play a key role in helping to restore people’s energy and drive. The hope is that a fundamental flaw in our current political economy may be surmounted, without confronting any serious political–economic questions.

Psychology is very often how societies avoid looking in the mirror. The second structural reason for the surging interest in happiness is somewhat more disturbing, and concerns technology. Until relatively recently, most scientific attempts to know or manipulate how someone else was feeling occurred within formally identifiable institutions, such as psychology laboratories, hospitals, workplaces, focus groups, or some such. This is no longer the case. In July 2014, Facebook published an academic paper containing details of how it had successfully altered hundreds of thousands of its users’ moods, by manipulating their news feeds. There was an outcry that this had been done in a clandestine fashion. But as the dust settled, the anger turned to anxiety: would Facebook bother to publish such a paper in future, or just get on with the experiment anyway and keep the results to themselves?

Monitoring our mood and feelings is becoming a function of our physical environment. In 2014, British Airways trialled a ‘happiness blanket’, which represents passenger contentment through neural monitoring. As the passenger becomes more relaxed, the blanket turns from red to blue, indicating to the airline staff that they are being well looked after. A range of consumer technologies are now on the market for measuring and analyzing well-being, from wristwatches, to smartphones, to Vessyl, a ‘smart’ cup which monitors your liquid intake in terms of its health effects. One of the foundational neoliberal arguments in favor of the market was that it served as a vast sensory device, capturing millions of individual desires, opinions and values, and converting these into prices. It is possible that we are on the cusp of a new post-neoliberal era in which the market is no longer the primary tool for this capture of mass sentiment. Once happiness monitoring tools flood our everyday lives, other ways of quantifying feelings in real time are emerging that can extend even further into our lives than markets. 

Concerns about privacy have traditionally seen it as something which needs to be balanced against security. But today, we have to confront the fact that a considerable amount of surveillance occurs to increase our health, happiness, satisfaction or sensory pleasures. Regardless of the motives behind this, if we believe that there are limits to how much of our lives should be expertly administered, then there must also be limits to how much psychological and physical positivity we should aim for. Any critique of ubiquitous surveillance must now include a critique of the maximization of well-being, even at the risk of being less healthy, happy and wealthy.

To understand these trends as historical and sociological does not in itself indicate how they might be resisted or averted. But it does have one great liberating benefit of diverting our critical attention outward upon the world, and not inward upon our feelings, brains or behavior. It is often said that depression is ‘anger turned inwards.’ In many ways, happiness science is ‘critique turned inwards’, despite all of the appeals by positive psychologists to ‘notice’ the world around us. The relentless fascination with quantities of subjective feeling can only possibly divert critical attention away from broader political and economic problems. Rather than seek to alter our feelings, now would be a good time to take what we’ve turned inwards, and attempt to direct it back out again. One way to start would be by turning a skeptical eye upon the history of happiness measurement itself.

Never forget...




OPEC's Next Meeting Is A mere 11 days away...

On June 5, all eyes will be on OPEC as the group convenes in Vienna to discuss its course for the second half of 2015.

It will probably be straightforward with no change to the status quo but it could be dramatic.

The most bullish scenario that could occur would be for OPEC to reverse strategy and re-introduce production quotas. 

The most bearish would be for OPEC to continue with no constraint at the same time as a nuclear agreement is reached allowing an unsanctioned Iran to re-enter the market at full throttle. 


Not everyone is happy?

Remember that prior to the November meeting, Iran, Venezuela and (non-OPEC) Russia engaged in frenetic efforts to convince the group's Gulf leaders to cut output which went unheeded. 

The facts are very clear.  No OPEC country can meet its budgetary requirements at this price level without digging deep into reserves. OPEC members face a financial crisis. They are collectively $1.6 bn poorer at this point in the year compared to last year. 

To put this in perspective, data shows that prices are south of what 10 out of OPEC's 12 members require for their annual budgets to break even. Qatar and Kuwait are exceptions, and Saudi Arabia holds $708 billion of reserves assets on which it can lean on for now. 

So not suprisingly, from November to the present, officials from some of OPEC's non-Gulf member countries have voiced concerns over OPEC's Saudi-led market share strategy, as their economies feel the full brunt of lower prices which ironically may cause them to increase supply.

Saudi's oil exports accounted for 89% of the country's total revenue last year. The fall in oil prices is decreasing the value of these exports, leading to a potential budget shortfall. In its 2015 budget, Saudi plans to spend about $230 billion but expects to accrue in $190.7 billion in revenue, yielding an overall deficit of $38.6 billion. While the oil price assumption was not specified in the budget, it was calculated in December, when oil prices were between $55 and $70/bbl.


To maintain spending they will have no choice but to tap its $708 billion Sovereign Wealth Fund, which while enough for the short term it will not last forever when $50 billion is required to be drawn annually.

Is the strategy working??

However Saudi's market share defense strategy seems to be working. As Saudi Arabia's production rose to a record high US production growth has started to slow showing that the plan may have worked?


Saudi Vs US Rig Count

To judge success, its helpful to remember what the strategy coming out of the last meeting was exactly:

• Maintain production. This will continue to drive down prices. (Saudi has done just that, in fact saying it achieved record production of 10.3m barrels a day in April.)

• These lower prices will exert economic pressure on US producers who need higher prices to break even. (1Q earnings calls were replete with references to this reality as company management teams sought to explain their rationale for curtailing Capex, projects, and implementing headcount reductions.)

• If prices are driven down to $60/barrel, a fair portion of shale production becomes uneconomical. (WTI hit its low this cycle on March 17, at $43.46. Brent previously hit its low on January 13, at $45.59. These levels were well below the breakeven prices that analysts had assessed wherein unconventional drilling would be uneconomic. More importantly, however, the falling prices presaged a curtailment of existing activities, and the cash flow derived therefrom. Less cash flow = less investment = scaleback of activity.)

• With diminishing US shale production, OPEC will in the longer-term regain its clout in the global oil market. (Though the US is losing the market share battle, this does not immediately translate to a definitive "win" for OPEC.)


US Production Starting To Slow, But Companies Preparing To Ramp Up

The price of WTI increased over 40% from the low on the assumption that the glut is easing. As noted above, OPEC's May report said this response began at the end of the third week of March. Further, the IEA's monthly report projected US shale-oil output growth to slow by 80,000 bpd in May.

A recent Wall Street Journal report claiming that a paper has been prepared by the OPEC Secretariat which sees oil prices depressed for a decade and recommending the re-introduction of quotas vigorously denied. It is rare if not unprecedented to see such a strong denial from OPEC and it demonstrates the sensitivities that surround the next meeting. It is reasonable to assume that it is indicative of divided opinion as to how OPEC should respond to the price collapse. 

Summing up there is nothing in the latest monthly reports from either OPEC or the EIA to suggest that the price fall has had a dramatic effect on global demand or non-OPEC supply. The crude supply excess was huge in 1Q and will continue to be huge in this quarter. Perhaps bulls can take some solace from the possibility that a lot of this excess has disappeared into Chinese strategic storage, never to re-appear. There is no way of being sure. Suffice it to say that last year global stocks built by an average of 900,000 bpd. This year they will grow by of the order of 1.5 mbpd. 


The Meeting Before The Meeting

It is very important to note that the days leading up to the June 5 gathering have already been marked by busy travel schedules by both OPEC and non-OPEC representatives. 

Russia's Energy Minister Alexander Novak said he and other Russian officials will meet with OPEC to discuss whether to adjust production on June 2-3, according to Bloomberg. Novak met with officials from Venezuela, Mexico and Saudi Arabia prior to the November meeting.


So What next?

Bullish fears of the risk of a cut combined with a retracement of the dollar has given the bulls the upper hand against facts and forecasts of oversupply. These factors supporting the upward momentum cannot be underestimated and could drive prices even higher in the immediate future. 

The current situation feels very similar to the first half of last year when the numbers were overwhelmingly bearish yet prices defied gravity and kept rising. A big surplus in the physical markets and very high levels of speculative length are a toxic combination. The big difference to last year is that the price level is 40% lower. 

Looking at the broader fundamental picture, however, I cannot help but compare the current price strength to the myth of Sisyphus, the king of Corinth. He was condemned by gods to ceaselessly rolling a rock to the top of a mountain only to see it roll back down to repeat this action forever. The top of the current bull mountain might not be close but unless there is a fundamental change in the physical supply/demand balance, the rock might start rolling back down shortly again just like it did in the second half of 2008 and 2014 only for the bulls to start the arduous uphill battle all over again. 







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