Monday, October 13, 2014

Interview 950 – Geneva Business Insider with David Smith

Each month James is joined by David Smith of the Geneva Business Insider to discuss the latest breaking stories in politics, finance and society. This month they tackle: Libya’s sovereign wealth fund’s billion dollar lawsuit against Goldman Sachs; the many, many fraud cases and convictions against GlaxoSmithKline; and the latest DOJ show trials against the banksters.

Opening salvoes in Libya’s $1 billion Goldman Sachs suit
Libya’s Sovereign Fund and Goldman Sachs Clash in Court
Dutch transport pension fund to sue Goldman Sachs
The mystery of Gaddafi’s gold
Libya’s loot: South African banks may hold $1B in gold, diamonds stolen by Qaddafi
Saving the world economy from Gaddafi
GlaxoSmithKline fined $490m by China for bribery
GSK faces U.K. fraud investigation
GlaxoSmithKline PLC (NYSE:GSK)
Why GSK Has Been Immune To Ebola Gains
Big Banks Face Another Round of U.S. Charges

Britain will run out of electricity unless it axes green target, warns ex-Minister

  • Owen Paterson will warn energy policy is a 'slave to flawed climate action'
  • Britain is aiming to reduce carbon emissions by 80 per cent by 2050  
  • Former Environment Secretary will argue this target is 'unaffordable' 
  • He will say the one ultimate consequence is 'the lights will go out' 

Former Environment Secretary Owen Paterson will this week deliver a stark warning – that Britain will 'run out of electricity' unless it abandons its main green energy target.
Mr Paterson, who was sacked from the Cabinet in this summer's reshuffle, will argue in a lecture that the target enshrined in the Climate Change Act – which binds the UK to reducing emissions by 80 per cent by 2050 – is unaffordable.
He will go on to say that the current energy policy is a 'slave to flawed climate action', and warn that 'in the short and medium term costs to consumers will rise dramatically'.
Former Environment Secretary Owen Paterson will argue that Britain will 'run out of electricity' unless it abandons its main green energy target
Former Environment Secretary Owen Paterson will argue that Britain will 'run out of electricity' unless it abandons its main green energy target
In Wednesday's lecture, organised by the 'sceptic' think-tank Global Warming Policy Foundation, which is chaired by former Tory chancellor Lord Lawson, he will say: 'There can only be one ultimate consequence: the lights will go out.'
Because the Act forces Britain to invest in renewable electricity sources, mainly wind, he claims it 'blocks other feasible policies that would cut both emissions and costs'.
Previous energy secretaries –Labour's Ed Miliband and the Liberal Democrats' Chris Huhne – claimed to want to help the poor, he will say.
But Mr Paterson believes their actions led to 'the most regressive policy since the Sheriff of Nottingham' – with vast subsidies on consumers' bills going straight to the pockets of landowners and green investors.
At an event organised by the 'sceptic' think-tank Global Warming Policy Foundation, the former minister will say: 'There can only be one ultimate consequence: the lights will go out'
At an event organised by the 'sceptic' think-tank Global Warming Policy Foundation, the former minister will say: 'There can only be one ultimate consequence: the lights will go out'
He will go on to stress that although he has been accused of being a 'climate denier', he accepts the main points of greenhouse theory.
But he will point out that temperatures have risen much more slowly than scientists predicted, while by some measures, the current 'pause' in global warming has already lasted for 18 years.
To stand a chance of meeting its obligations, Britain should be building a new giant nuclear power station every three years, as well as thousands more of the turbines which have 'devastated landscapes, blighted views, killed eagles and carpeted the very wilderness that [greens] claim to love'.
Instead, Mr Paterson will argue, policy should focus on supplying cheap energy and cutting emissions. This, he says, can best be done by fracking for shale gas and building small gas and nuclear-powered electricity stations.
Mr Paterson told The Mail on Sunday that adding green energy costs to people's household bills and building onshore wind farms are policies that are sending Tory voters into the arms of Ukip – the only party committed to scrapping them.
'Ukip's opposition to green energy targets and wind is tapping a tremendous tide of anger felt across the country,' Mr Paterson said, adding: 'Everywhere I go, this issue comes up all the time. You could live with that if the policy was actually working, but it's not. If we change direction on this it will make a huge difference.
'It's an opportunity for the Tories to steal one of Ukip's most popular campaigns.'
Changing course would require the Climate Change Act's suspension, and possibly its eventual repeal, while the separate targets imposed by the EU would have to be part of the treaty renegotiation Mr Cameron has promised if the Tories win next year's election.
Mr Paterson insisted he was not trying to embarrass the Tory leadership, saying: 'I want to be seen as a constructive critic.' He added: 'I represent people who are not well off, old age pensioners, people who run businesses, and they've all got to pay their bills.
'Under current policy, we will fail on emissions targets, and we will fail to deliver a reliable energy supply.
'I think a large majority of Tory MPs will be sympathetic to what I'm saying.'

The Lie Machine — Paul Craig Roberts

The Lie Machine
Paul Craig Roberts
I have come to the conclusion that the West is a vast lie machine for the secret agendas of vested interests. Consider, for example, the Transatlantic Trade and Investment Partnership and the Transpacific Trade and Investment Partnership.
These so-called “partnerships” are in fact vehicles by which US corporations make themselves immune to the sovereign laws of foreign countries in which they do business. A sovereign country that attempts to enforce its laws against an American corporation can be sued by the corporation for “restraint of trade.” For example, if Monsanto wants to sell GMO seeds in France or US corporations wish to sell genetically-modified foods in France, and France enforces its laws against GMOs, the Transatlantic Trade Partnership allows France to be sued in jurisdictions outside the courts of France for “restraint of trade.” In other words, preventing the entry into France of a prohibited product constitutes restraint of trade.
This is the reason that the US has insisted that the Transatlantic and Transpacific Partnerships be totally secretive and negotiated outside the democratic process. Not even the US Congress has been permitted knowledge of the negotiations.
Obviously, the Europeans and Asians who are agreeing with the terms of these “partnerships” are the bought-and-paid-for agents of the US corporations. If the partnerships go through, the only law in Europe and Asia will be US law. The European and Asian government officials who agree to the hegemony of US corporations over the laws of their countries will be so handsomely paid that they could enter the realm of the One Percent.
It is interesting to compare the BBC’s coverage (October 10) with that of RT (October 11). The BBC reports that the aim of the Transatlantic Partnership is to remove “barriers to bilateral commerce” and to stimulate more trade and investment, economic growth and employment. The BBC does not report that the removal of barriers includes barriers against GMO products.
Everyone knows that the European Commission is corrupt. Who would be surprised if its members hope to be enriched by the American corporations? Little wonder the European Commission declared that concerns that the Transatlantic partnership would impact the sovereignty of countries is misplaced.
RT, which is restrained in reporting truth because it operates inside the US, still manages to come to the point in its headline: “No TTIP: Mass protests slam US-EU trade deal as ‘Corporate power grab’.”
All over Europe people are in the streets in mass rallies against secret agreements by their corrupt governments for Washington to take over their lives and businesses. RT reports that “social networks have been mobilized for a mass campaign that has been calling on Europeans and Americans to take action against ‘the biggest corporate power grab in a decade’.”
RT quotes a leader of the demonstration in Berlin who says the secret agreements “give corporations more rights they’ve ever had in history.” As we all know, corporations already have too many rights.
“Protests are planned in 22 countries across Europe–marches, rallies and other public events–in over 1,000 locations in UK, France, Germany, Italy, Spain, Greece, Netherlands, Poland, The Czech Republic and Scandinavian countries.”
Did you hear about this latest American corporate power grab from Fox “News,” CNN, New York Times, London Times, ABC? Of course not. Did you hear about the massive protests against it? Of course not. You only hear what the interest groups permit you to hear.
RT reports that the main aim of the international protests is “to reclaim democracy” and to put an end to the secret deals that are destroying life for everyone but the American corporations, organizations now regarded worldwide as the epitome of evil.
These phony “trade agreements” are advocated as “free trade removal of tariffs,” but what they remove are the sovereignties of countries. America is already ruled by corporations. If these faux “trade agreements” go through, Europe and Asia will also be ruled by American corporations.

"Prepare For Runs", IMF Warns Policymakers Of "Elevated Financial Stability & Liquidity Risks"

The extended period of monetary accommodation and the accompanying search for yield are leading to credit mispricing and asset price pressures, increasing the chance that financial stability risks could derail the recovery.

Concerns have shifted to the shadow banking system, especially the growing share of illiquid credit in mutual fund portfolios.
Should asset markets come under stress, an adverse feedback loop between outflows and asset performance could develop, moving markets from a low- to a high-volatility state, with negative implications for emerging market economies.

Funds investing in credit instruments have a number of features that could result in elevated financial stability risks.
First is a mismatch in liquidity offered by investment funds with redemption terms that may be inconsistent with the liquidity of underlying assets. Many credit funds hold illiquid credit instruments that trade infrequently in thin secondary markets.

Second is the large amount of assets concentrated in the hands of a few managers. This concentration can result in “brand risk,” given that end-investor allocation decisions are increasingly driven by the perceived brand quality of the asset management firm. Sharp drawdowns in one fund of an asset manager could propagate redemptions across funds for that particular asset manager if its brand reputation is damaged, for example through illiquidity or large losses.

Third is the concentration of decision making across funds of an individual fund manager, which can reduce diversification benefits, increase brand risk, or both.

Fourth is the concentrated holdings of individual issuers, which can exacerbate price adjustments.

Fifth is the rise in retail participation, which can increase the tendency to follow the herd.
These features could exacerbate the feedback loop between negative fund performance and outflows from the sector, leading to further pressure on prices and the risk of runs on funds. These risks could become more prominent in the coming year as the monetary policy tightening cycle begins to gain traction.

Such stress might be triggered as part of the exit from unconventional monetary policy or by other sources, including a sharp retrenchment from risk taking due to higher geopolitical risks.
And, as we have discussed numerous times previously, less liquidity is available from traditional liquidity

The IMF is worried...
Policymakers and markets need to prepare for structural higher market volatility. Doing so requires strengthening the system’s ability to absorb sudden portfolio adjustments, as well as addressing structural liquidity weaknesses and vulnerabilities.

Advanced economies with financial markets at risk for runs and fire sales may need to put in place mechanisms to unwind funds should they come under substantial pressure that threatens wider financial stability.
Source: IMF

Monsanto reports $156m loss as farmers abandon GM crops

Are you invested in Monsanto stock like Bill Gates, who owns hundreds of thousand of Monsanto shares worth about $23 million?
It might be time to pull out since the company just reported over $156 million in losses for the fourth quarter.
“For the quarter ended Aug. 31, Monsanto reported a loss of $156 million, or 31 cents per share, compared with a loss of $249 million, or 47 cents per share, in the same period last year.”
It’s a tough time for biotech, and thank goodness. Monsanto’s losses were attributed to farmers in major agricultural zones favoring soy over GMO corn because of falling crop prices – largely caused by Syngenta’s release of MIR162 corn, which has been completely refused by Chinese officials repeatedly – which have depressed both local and foreign corn bushel prices.
There is a looming $1 billion dollar class action lawsuit Syngenta will face, currently pending in three states over the release of AGRISURE VIPTERA® 4. All three class action suits were filed this past week in Federal Courts by U.S. farmers.
Syngenta also just happens to be the company that has covered up the true toxicity of Atrazine, and the company has been sued in six different states to clean up more than 1000 water systems in six states where the herbicide has been found polluting rivers, streams, and lakes.
Monsanto sign
Soybeans sales are still around $200 million, doubled from previous years, but they account for a much lower market share than the GMO corn products which Monsanto sells and promotes for use with their toxic herbicide, RoundUp.
Adjusted losses for the biotech bully come to 27 cents a share, three cents worse than estimates.
While it would have been nice to take down this Agri Business giant for different reasons, it seems the company’s partner in crime, Syngenta, is doing the work of dismantling the GMO paradigm for us.
In the last two years, Monsanto has reported huge losses, so we must be doing something right. If this trend continues, and it should if we continue the good fight, then we can all hope to see the GMO Empire crumble in due time. Continue raising awareness and purchasing non-GMO, organic foods. Voice your words with your dollar.

What the Heck just Happened in Global Stock Markets?

Wolf Richter,
Bitter ironies are piling up – with very crummy consequences.
It was a crummy week for the world’s major stock markets:
One, volatility came roaring back. Forget complacency. People are still rubbing their necks from whiplash.
Two, the Fed hype-effect fizzled. The publication of the FOMC minutes – designed to pump up markets with their ambiguities – was able to generate a rally that lasted less than a day, followed by a terrific swoon. The ECB too tried to goose markets, which failed miserably. And the Bank of Japan, well, I call it Bank of Japandemonium for a reason.
Three, the relentlessly successful strategy, nay religion, that worked without fail for the last couple of years and allowed traders to earn instant bucks in a seemingly risk-free manner – “Just buy the frigging dip” – turned into a vicious back-biting monster.
The Nasdaq, after dropping 4.5% for the week, the worst since May 2012, closed on Friday below its 200-day moving average. So did the Dow. For chart decipherers and trend prophesiers, those are not exactly propitious signs.
The thing is, if everyone believes that everyone believes in this sort of line crossing and reacts to it, then a simple line either bouncing off or crossing over another line can become a magic signal for a lot of people. And they react to it in unison, and it becomes a self-fulfilling prophesy. It worked wonderfully on the way up. And because it worked so wonderfully and made people rich, more and more traders and investors became chartists, and even economists switched to becoming chartists because economic and corporate fundamentals had become irrelevant to stocks, which soared no matter what, and they had to find something else that their clients actually wanted to hear.
But it’s not just in the US. The European Stoxx 600 dropped 4.1% for the week, also its worst week since May 2012. Most of the national indices were splattered with red. Germany’s Dax dropped 4.4% to the lowest level since October last year. It’s down 12.6% from its all-time peak in January. It’s in a full-blown correction.
The UK’s FTSE 100 dropped 2.9% for the week and closed at its lowest point in a year, down 8.4% from its peak in early August. France’s CAC40 dropped 4.9% and is down 11.4% from its June high, now mired in a correction and in the hole for the year. Even India’s SENSEX, which had been on a politically motivated tear, swooned nearly 5%.
The Nikkei deserves a special word: it dropped 2.6% for the week and is now down 6% for the year. It has been in the red practically all year. The historic money-printing binge that came with Abenomics caused stocks to soar for the first seven months after it became clear in late 2012 that Shinzo Abe and his economic religion would run the show. Then the sheen wore off. What’s left? The same old economy, huge government deficits, an untenable national debt, and consumers who are learning the meaning of what I call “inflation without compensation,” the gradual process of impoverishment via inflation.
Oh, and at a time when annual inflation is 3.3% (goods inflation at 4.9%, service inflation at 1.8%), 10-year Japanese Government Bonds yield 0.50%. It’s the world’s most brutal financial repression. So, despite the pile of money the Bank of Japan has been printing, the Nikkei is now below where it was in May 2013.
The only two major indices that came out ahead were China’s Shanghai Composite (up 0.4%) and Hong Kong’s Hang Seng (up 0.1%). Maybe the markets were just lucky. It was a holiday week with only three trading sessions in Shanghai and four in Hong Kong. Did these folks simply run out of time to dump stocks?
Here are the sinners (chart by Doug Short):
Germany’s DAXK is the orange line that is sagging out at the bottom. The DAXK is the price-only version of the DAX, which includes dividends. The other indices are price-only as well, so the DAXK is an apples-to-apples comparison. This DAXK is down 12.5% from its peak in July. And it’s 11% in the hole for the year.
German stocks are smelling a rat. The economy is on the verge of heading into a recession. When it shrank in the second quarter, pundits fanned out across the planet to claim vociferously that it was just a blip, and they blamed the weather which had been unusually nice in the first quarter! But more recent economic data has been lousy, so lousy that they evoked unnerving comparisons to the unforgettably terrible year of 2009 [read...   “There’s no Reason to Panic” about the German Miracle Economy].
Now unnamed sources in the ruling coalition leaked that the German government would cut its growth forecast for this year and next year on Tuesday, when it announces its twice-a-year projections. It would amount to a “sharp cut” from the already tepid 1.8% growth projections made in April.
This despite the all-out ZIRP and QE central banks have inflicted on conservative investors and aging baby boomers in order to force them into stocks and junk-bond funds and asset-backed securities and other chimera of Wall Street. The purpose was to drive up asset prices. And it worked. Now that these folks have stashed their money in stocks at peak valuations, the whole thing is unraveling.
The bitter irony in all this? The global economy is drifting off despite massive and global application of policies that have consistently been described as “bold actions” to stimulate the economy: dizzying government deficits, massive QE, and brutal ZIRP. These “bold actions” have driven up asset values, but that’s all they’ve done. And now as things are once again wobbling, global organizations like the IMF along with various central bankers and of course the wusses on Wall Street are clamoring for more “bold action.”
In the US, mega-startups have gone parabolic as the bubble blooms into its full splendor. Read… Last Time It Was This Crazy, the Stock Market Crashed

US and UK conducting war games for banking collapse

Regulators from the United States and the United Kingdom will get together in a war room next week to see if they can cope with any possible fall-out when the next big bank topples over, the two countries said on Friday.
Treasury Secretary Jack Lew and the UK’s Chancellor of the Exchequer, George Osborne, on Monday will run a joint exercise simulating how they would prop up a large bank with operations in both countries that has landed in trouble.
Also taking part are Federal Reserve Chair Janet Yellen and Bank of England Governor Mark Carney, and the heads of a large number of other regulators, in a meeting hosted by the U.S. Federal Deposit Insurance Corporation.
“We are going to make sure that we can handle an institution that previously would have been regarded as too big to fail. We’re confident that we now have choices that did not exist in the past,” Osborne said at the International Monetary Fund’s annual meeting.
Six years after the financial crisis, politicians and regulators around the globe are keen to prove they have created rules that will allow them to let a large bank go under without spending billions in taxpayer dollars.
Currency money
They have forced banks to ramp up equity and debt capital buffers to protect taxpayers against losses, and have told them to write plans that lay out how they can go through ordinary bankruptcy. The plans are so-called living wills.
Yet salvaging a bank with operations in several countries – which is the norm for most of the world’s largest banks such as Deutsche Bank, Citigroup Inc and JPMorgan – has proven to be a particularly thorny issue.
Because the failure of a big bank is such a rare event, regulators may not be used to talking to each other. There have also been suspicions that supervisors would first look to save the domestic operations of a bank, and would worry less about units abroad.
The exercise comes as regulators are about to bring to fruition further initiatives to make banking safer.
The first would force banks to have more long-term bonds that investors know can lose their value during a crisis, on top of their equity capital, to double their so-called Total Loss-Absorbing Capacity (TLAC).
A second measure, expected to be announced this weekend, will force through a change in derivative contracts, which in their current form protect investors, and complicate the winding down of a bank across borders.

China Now #1 Economy as Unemployment, Poverty & Debt Increase in U.S!

China Just Overtook The US As The World’s Largest Economy
The decision on a new SDR structure, to be made in the next 15 months, will influence how China and its currency can play a bigger part in driving world trade, investment and capital flows. The renminbi could eventually challenge the dollar and its pivotal position in world money
The International Monetary Fund (IMF) has downgraded its global growth forecast for both this year and next
We expect the world economy to grow at about 41?2 percent a year in both 2011 and 2012
Poverty Nears 20%
Economic anxiety amid a dwindling oil and gas industry
Ebola, Hong Kong weigh as risks to business rise

Jim Grant – The Outcome Of Hyperinflation Brought About By Massive Helicopter Money

A new technique to count brain cells may help explain the cognitive superiority of humans.

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The Fed Lays a Foundation for the Next Round of QE

As Monday Looms, Experts Warn Japan's Half-Trillion Dollar Fat-Finger-Trade "Could Absolutely Happen" In The US

Just over a week ago, the Japanese stock market participants were stunned when stock orders amounting to a whopping $617 billion (yes Billion with a B) - more than the size of Sweden’s economy - were canceled for reasons still unknown in what was one of the biggest 'fat finger' trading errors of all time. Since then, US equity markets have suddenly become notably more volatile - and fallen significantly, VIX has seen odd intraday 'spikes', S&P futures saw the very odd 'satan signal', and USDJPY has suffered its worst losses in 3 years. This raises the question of whether US market microstructure is any better than Michael Lewis' Flash Boys' book describes.. (as we head into a bond market holiday, dismal liquidity, and a potential Black Monday), “That could absolutely happen here,” Tabb Group's Larry Tabb warns Bloomberg.

A week ago, this happened... (From Bloomberg)
At 9:25 a.m. Tokyo time, orders for shares in 42 companies totaling 67.78 trillion yen ($617 billion) were canceled, according to data compiled by Bloomberg from the Japan Securities Dealers Association. A representative at the organization wasn’t immediately available to comment.

The biggest order was for 1.96 billion shares of Toyota Motor Corp., or 57 percent of outstanding shares at the world’s biggest carmaker, for 12.68 trillion yen through an off-exchange transaction. Toyota declined to comment. Other stocks with scrapped transactions included Honda Motor Co. (7267), Canon Inc., Sony Corp. and Nomura Holdings Inc.

“Fat finger” trading mistakes occur periodically. In 2009, UBS AG mistakenly ordered 3 trillion yen of Capcom Co. convertible bonds. Still, today’s scrapped trades were of a different magnitude.

“I’ve never heard of orders this big being canceled before,” said Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd., which oversees about $474 billion in assets. “There must have been an error.”

While no harm’s been done because the orders were canceled, there should be an explanation to alleviate concerns, Sera said.

“It’s not rocket science that there was a fat finger here, but it reopens the question about accountability,” said Gavin Parry, managing director at Hong Kong-based brokerage Parry International Trading Ltd.
It may not be rocket science, but one wonders: just who has the potential to trade over half a trillion in market orders, let alone screw it up?
*  *  *
And since then..VIX Spikes have been frequent - and unexplained (as Nanex showed in the past)
Recently there have been frequent spikes in the VIX index such as the ones shown in the 1 minute chart below. We drilled down to the underlying data (option prices) used in calculating the VIX and found that almost all the quotes in the near term options used in the VIX calculation suddenly widened which causes the spike. Why this happens is unknown...
Stocks have dropped notably with very high intraday volatility, and USDJPY has collapsed...

*  *  *
And ahead of Monday's open, with the bond-market closed (and liquidity likely extremely low), market infrastructure experts raise a red flag...
A funny thing happened after Michael Lewis’s book “Flash Boys” put the structure of the U.S. stock market under a microscope in March: The whole system ran pretty smoothly, at least compared with its recent past.

Sure, the electronic cat-and-mouse trading game that Lewis called a “rigged” system and others called “market making” may not have changed much. On the bright side, however, there have been no major technological meltdowns like the one that almost bankrupted Knight Capital Group Inc. or fouled Facebook Inc.’s initial public offering in 2012, or caused an almost 1,000-point plunge in the Dow Jones Industrial Average in 2010.

Now today, that nascent confidence is being undermined in a big way after 67.78 trillion yen ($617 billion) of mistaken over-the-counter stock orders flooded Japan’s equity market. Don’t for a minute believe that the U.S. market structure is fine-tuned enough to avoid a similar situation, according to Larry Tabb, founder of research firm Tabb Group LLC.

“That could absolutely happen here,” Tabb said in an e-mail. “While we do have circuit breakers and pre-trade checks for items executed on exchange, I do not believe that there are any such checks on block trades negotiated bi-laterally and are just displayed to the market.”


Just a month ago, a technical error at CME Group Inc. prompted a four-hour trading halt at the world’s largest futures market, preventing buying and selling of contracts tied to major stock indexes, Treasuries, oil and gold. In May, a trading error at Barclays Plc caused split-second swings in dozens of U.S. stocks including AOL Inc. and Caterpillar Inc., people familiar with the matter told Bloomberg News at the time.

No human system is perfect and every day computer systems that interact with the markets are being upgraded and modified, said James Angel, a Georgetown University finance professor who studies market-structure issues.

“As Darth Vader said in one of the Star Wars movies, ‘Don’t put all your faith in technology,’” Angel said in an e-mail.