The main catalyst that has pushed stocks to new all time highs, and sent the Yen plunging the most in the 21st century last week, were reports that Ben Bernanke was urging Japan to unleash helicopter money. Indeed, just yesterday, the USDJPY hit new two month highs on reports Japan was considering doubling the previously rumored fiscal stimulus of JPY10 trillion to 20, with the implication that the BOJ would provide the funds. It appeared that Japan had found just the jawboning tagline to keep stocks levitating and the Yen dropped: just hint every other day that more helicopter-funded stimulus is coming and jawbone assets, the same way verbal hints of more BOJ QE worked in 2015.

Which is why we were surprised to read this morning that BOJ governor Kuroda had shut down Bernanke, saying there is no need and no possibility of helicopter money in Japan, increasing speculation about the course of monetary and fiscal policy in the world’s third-largest economy. Given the current institutional setting, there is “no need and no possibility for helicopter money,” Kuroda said in a BBC Radio 4 program that was broadcast Thursday. “At this moment, the Bank of Japan has three options with quantitative and qualitative easing with negative interest rates.”

These current policies can be expanded, he said. Kuroda also repeated that he is determined to rid Japan of its deflationary mindset, and that there are no significant limitations to further monetary stimulus if needed by the BOJ.

Which, however, is not true: like the ECB, the BOJ is rapidly running out of willing bond sellers as its universe of eligible bonds gets smaller, while NIRP has proven to be far more deflationary than anyone had expected. In fact, the only way the BOJ’s policies can continue is if the government opens the debt issuance spigot, which is all that helicopter money really is. We are confident that Kuroda gets this, and we are confident that despite his reverse-jawboning today, helicopter money is precisely what will happen.

But first there needs to be a crisis. As BofA’s Athanasios Vamvakidis said, “markets had run ahead of themselves, expecting too much. Helicopter money is the inevitable end game in Japan, but we aren’t there yet, it will be the bazooka that the BOJ will use after a crisis.” So we just need the crisis. For now however, there is none, and immediately after Kuroda’s interview, the Yen soared, strengthening against all 16 of its major peers. The USDJPY tumbled more than 1% in the minutes after Kuroda’s interview was releaesed.

“Kuroda has just given investors a bit of a disappointment,” said Peter Garnry, head of equity strategy at Saxo Bank A/S in Hellerup, Denmark. “The market had actually changed its sentiment and pricing based on the assumption that we would get something big on the fiscal stimulus side, and that Japan would be the first wave.”

Meanwhile, almost $5 trillion has been added to the value of global equities since June 27 amid signs central banks including the BOJ will boost stimulus to shore up economies after the U.K. voted to leave the European Union.

Elsewhere, the euro hovered near a three-week low amid speculation the European Central Bank will leave rates unchanged and signal further easing for later in the year when Mario Draghi speaks in two hours.

The Stoxx Europe 600 Index slipped 0.4%, with share of airlines sliding after Deutsche Lufthansa AG cut its earnings forecast. Lufthansa tumbled 8.4 percent, and EasyJet Plc slid 5 percent after posting a drop in quarterly revenue. Tele2 AB lost 6.4 percent as its earnings missed estimates. Hermes International SCA gained 3.4 percent as the luxury clothing and handbag maker said its profitability improved. Miners in the Stoxx 600 advanced for the first time in three days.

Turkish stocks fell the most worldwide after the president called for a state of emergency and S&P Global Ratings cut the country’s credit score. S&P 500 futures expiring in September lost 0.2 percent, while the MSCI All-Country World Index gained 0.1 percent, trading at its highest level since November. In the U.S., Intel Corp. slipped 2.8 percent in early New York trading after reporting slower growth in its server-chip division, while Qualcomm Inc. gained 6.5 percent as its results showed the chipmaker is overcoming hurdles in China. Joy Global Inc. rallied 20 percent after Japan’s Komatsu Ltd., the world’s second-biggest mining and construction equipment maker, agreed to buy it. Komatsu added 2.3 percent.

The Borsa Istanbul 100 Index slumped 3.8 percent. Turkey imposed a three-month state of emergency as the government pursues those responsible for last week’s failed military coup, detaining thousands of army officers, judges and prosecutors. A wider purge is under way that encompasses universities, schools and the civil service. The country won’t be under military rule, with army units taking orders from provincial governors, President Recep Tayyip Erdogan said in Ankara on Wednesday.

Germany’s 10-year bond was little changed, with the yield at minus 0.005 percent. The yield on similar-maturity U.S. Treasuries was 1.58 percent. It sank to a record 1.32 percent on July 6 and analysts see it ending the year at 1.74 percent, a Bloomberg survey shows.

Market Snapshot

• S&P 500 futures down 0.2% to 2164
• Stoxx 600 down 0.4% to 340
• FTSE 100 down 0.4% to 6703
• DAX down 0.2% to 10117
• German 10Yr yield up less than 1bp to -0.01%
• Italian 10Yr yield up less than 1bp to 1.25%
• Spanish 10Yr yield down 2bps to 1.14%
• S&P GSCI Index up 0.1% to 355.4
• MSCI Asia Pacific up 0.9% to 135
• Nikkei 225 up 0.8% to 16810
• Hang Seng up 0.9% to 22090
• Shanghai Composite up 0.3% to 3036
• S&P/ASX 200 up 0.4% to 5512
• US 10-yr yield down less than 1bp to 1.58%
• Dollar Index down 0.28% to 96.93
• WTI Crude futures up less than 0.1% to $45.79
• Brent Futures unchanged at 47.17
• Gold spot up 0.5% to $1,322
• Silver spot up 0.4% to $19.48

Global Headline News

• Kuroda Says No Need and No Possibility for Helicopter Money: Central bank Governor Haruhiko Kuroda spoke in BBC Radio 4 program
• Japan’s Komatsu to Buy U.S. Joy Global for $2.89b: Komatsu to pay $28.30 a share in cash, 20% premium to close
• Tesla’s Musk Sees Building Semi Truck in New ‘Master Plan’: CEO plans business expansion to include ride-sharing, buses
• Singapore Seizes S$240m in Assets Related to 1MDB Probe: U.S. seeks also to seize assets linked to 1MDB
• Shenhua Said to Seek CGN Merger to Form $204b Giant: China’s top coal miner said to submit proposal to regulators
• Exxon in Catbird’s Seat for InterOil as Oil Search Drops Out: Exxon bid values Papua New Guinea gas explorer at $2.5b
• Qualcomm Shows China Progress While Intel Stokes Server Fears: Intel’s data center business lags behind growth target, Qualcomm gets catch-up licensing payments, more chip orders
• Oil Extends Gains as U.S. Stockpiles Fall, Refinery Rates Rise: September futures added 0.5% in New York after gaining 0.7% Wednesday
• Trump Chooses War With Cruz at Convention Aimed at Unification
• LVMH Said to Be in Talks to Sell DKNY, DKI: New York Post

* * *

Looking at regional markets, we start in Asia where a positive picture was observed, following the latest record advance seen on Wall Street after a rally in WTI and strong financials led US higher. Nikkei 225 (+0.8%) was catapulted back into positive territory by reports that the government are preparing an additional JPY 9trl in fiscal spending to accompany the earlier reported JPY 10TRN package, however after the close Kuroda dashed Nikkei futures with his statement that helicopter money is “not possible.” ASX 200 (+0.6%) extended on its progress from yesterday’s session with widespread gains seen across sectors, although materials still lagged behind. Elsewhere, Chinese markets conformed to the upbeat tone with the Hang Seng (+0.5%) in the green, while new measures to boost the economy in China bolstered the Shanghai Comp (+0.4%). 10yr JGBs trade flat as the benefits from the BoJ entering the market to acquire JPY 1.135tr1 of government debt was capped by the bullish pressure in Japanese equities. According to sources, the Japanese government is said to be preparing an additional JPY 9trl in fiscal spending to accompany the reported JPY 10trl package and could be given the green light before the August 2nd cabinet is approved.

Top Asian News

• China Factory Gauge Suspended Again, This Time ‘Indefinitely’: Two indicators of Chinese economy have been discontinued
• PBOC Strengthens Yuan Fix Most in Three Weeks Amid Support Bets: Yuan trade-weighted basket advances most since February
• Yen Collapse Seen by Kuroda Critic Pitching Perpetual Bond Plan: Japan addicted to stimulus that isn’t working, Mitsuru Iwamura says
• Chinese-Owned Key Safety Systems Said to Plan Bid for Takata: Japanese co. is seeking buyers to tide over record air-bag recall
• RBNZ Says Likely That Further Policy Easing Will Be Required: Reserve Bank of New Zealand says decline in exchange rate is needed

Comments from BoJ’s Kuroda have shaped the European morning, with the central bank head stating that there is no need or possibility for helicopter money. In terms of a sector breakdown, airlines were among the worst performers in Europe after downbeat updates from both EasyJet and Lufthansa, while energy names also softened. Although USTs saw upside in the wake of Kuroda’s comments to head into mid-morning outperforming their European counterparts, with Bunds remaining relatively stable as participants await the ECB rate decision. Some have speculated that the ECB could alter the makeup of their asset purchases given the recent increase of bond yields slipping lower.

Top European News

• Draghi May Flag Action Ahead for ECB Under Brexit’s Shadow: President will likely address fallout from U.K. referendum
• Brexit to Halt U.K. Growth Streak With Mild Recession Seen: Survey of economists shows economy shrinking from this quarter
• Lufthansa Cuts Profit Forecast After European Terror Attacks: Terror fears depress demand for long-haul trips to Europe
• Publicis Chief Levy Sees Clear Improvement in 2017; Shares Rise: 30 years at the helm of ad firm, Levy plans to step down
• U.K. Retail Sales Fall 0.9% in Month of Brexit Referendum: Monthly survey captures week following shock vote to leave EU
• Daimler’s Mercedes Sustains Margins and Sees Boost From E- Class: Adjusted profit margin was 10% at Mercedes-Benz Cars division

In FX, the yen jumped 1.3 percent to 105.54 per dollar after Kuroda’s no helicopter money remarks. Speaking in a BBC Radio 4 program broadcast Thursday, Kuroda also repeated that he is determined to rid Japan of its deflationary mindset and that there are no significant limitations to further monetary easing if needed by the Bank of Japan. The euro was little changed at $1.1020. ECB President Mario Draghi has predicted that euro-area growth will slow as a result of Brexit, suggesting a response is needed. “Draghi will keep his options open for further easing,” helping fuel a gradual decline in the euro amid broad dollar strength, said David Forrester, a foreign-exchange strategist at Credit Agricole SA’s corporate and investment-banking unit in Hong Kong. “The yen has already sold off a lot in anticipation of the government’s fiscal stimulus package and next week’s BOJ meeting. We’re looking for it to continue tracking lower.” The Bloomberg Dollar Spot Index fell 0.2 percent, after four days of gains. A Citigroup gauge that tracks the degree to which American economic data are exceeding projections is at an 18-month high and futures put the chance of a Federal Reserve interest-rate increase this year at 47 percent, up from 9 percent at the end of June.

In commodities, oil for September delivery was little changed at $45.78 a barrel in New York after weekly U.S. government data showed crude stockpiles fell for a record ninth week and refining activity climbed to a 2016 high. Gold rose 0.5 percent to $1,322.34 an ounce

Bulletin Headline Summary from RanSquawk and Bloomberg

• There is no need and no possibility of helicopter money in Japan,
  central bank Governor Haruhiko Kuroda said; An increasing number of
  officials at the Bank of Japan are concerned about the sustainability of
  the current framework for massive monetary stimulus, according to
  people familiar with the discussions
• Treasuries little changed in overnight trading as Asian equities rise on Koruda’s dismissal of “helicopter money,” European stocks fall prior to ECB policy meeting.
• While action isn’t seen as likely straight away, when Draghi addresses reporters after the ECB meeting he might signal more stimulus to be deployed in September
• BOE’s Kristin Forbes said there’s no need to hurry to add stimulus after the U.K.’S vote to exit the European Union, citing a moderation of the immediate market turmoil, calm consumers and “quite solid” growth before the referendum
• More Fed officials are making it clear with greater urgency that they need help from elected lawmakers. In June, Fed Chair Janet Yellen told the Senate Banking Committee that fiscal policy had “not played a supportive role”
• Goldman Sachs, JPMorgan Chase and Morgan Stanley collectively reduced the amount of money they set aside for employee pay in the first and second quarters by 17%, the most in at least four years, to $19 billion
• Terrorism in France, Brexit in Britain, a coup in Turkey — political convulsions everywhere. So where’s the hot money going? It’s going to the world’s riskiest markets, where at least investors are getting paid for the risks
• Singapore vowed to take action against four banks for what it called serious lapses in their anti-money laundering controls and seized S$240 million ($177 million) in assets linked to the financial institution known as 1MDB
• The political instability in Turkey threatens to add to an already difficult year for the nation’s banks as they contend with a 33% surge in bad loans and soaring bankruptcy filings

DB’s Jim Reid concludes the overnight wrap

With little else to feed off, a steady stream of better than expected corporate earnings results continues to keep the tone in markets on the positive side for now. Reports out of Microsoft (post Tuesday’s close) and Morgan Stanley (prior to the open yesterday) kept the train chugging yesterday and once again helped Wall Street and the S&P 500 (+0.43%) and Dow (+0.19%) to new record highs. That said the actual intraday moves have been incredibly small recently – perhaps also reflecting a bit of early summer fatigue – with the intraday high to low range for the S&P 500 yesterday just 0.50%. In fact since the 11th July the average daily intraday range has been just 0.51% despite the index closing up in six of the eight sessions. This month the index has actually only had a daily range above 1% on two occasions. Compare that to the excitement in June where the average daily range over the entire month was 1.06%.

The ECB has the potential to shake things up today though when we’ll get the outcome of their policy meeting at 12.45pm BST. In a nutshell our European economists believe that it’s a close call, but on balance the ECB will wait until the September meeting before easing again, with the focus on extending QE. A few factors lead them to this. Firstly, they note that based on press reports, the ECB sees a smaller impact from Brexit than they do and that it would require negative data surprises if the ECB is to converge to our economists view, for which the data generally hasn’t been available since the Brexit vote. Secondly, the ECB is confident about the benefits of the policies it has implemented and believes the benefits from recent policy announcements like the TLTRO2 and CSPP will be slow to accrue. Thirdly, by waiting until September the ECB will have the benefit of additional information on the Brexit impact and the benefits of its new policies. It will also have the benefit of updated staff forecasts. They note that the ECB dislikes being under pressure to reconsider the policy stance at every meeting and has a tendency to coordinate action with the analysis accompanying new staff forecasts.

That said the scale of the Brexit impact is uncertain but negative. The ECB’s room for manoeuvre on policy is constrained by the political nature of the Brexit shock and the side-effects of further easing. In that case, the sooner the ECB acts the better. On top of this, the decline in European bank equity is a concern and another important factor to consider. So this makes the call a bit of a closer one.

Staying on this subject, yesterday our strategists published a note taking a look at the potential technical changes in QE purchases which could be introduced alongside an extension, including increasing issuer limits, removing the yield floor and deviating from capital keys. They assess how this could impact bund and peripheral spreads in particular should Draghi provide some meaningful indication at the press conference.

Elsewhere, the fallout from the failed coup in Turkey on the weekend continues. Yesterday evening President Erdogan declared a three-month state of emergency in the country. According to the FT officials in Turkey have said that this will allow the government to pass laws rapidly, however there will be no financial or commercial activity restrictions. Meanwhile the Turkish Lira weakened another -1.56% yesterday and to a fresh historic low after S&P cut the sovereign’s rating by one notch to BB with a negative outlook. The start of the week also saw Moody’s put Turkey’s Baa3 rating on review for downgrade. With Fitch (BBB-/Stable) still at IG that Moody’s move is the most important development given the possibility now of Turkey losing its IG status (with most global indices/index trackers requiring at least 2 IG ratings for a credit to be classified as IG). DB’s Seb Barker published an interesting note yesterday discussing the implications for the credit following this news.

Switching over to the latest in Asia this morning where bourses are generally following the lead from Wall Street last night. The Nikkei (+0.71%) in particular has bounced back, with a weaker Yen (-0.50%) this morning helping. Meanwhile the Hang Seng (+0.75%), Shanghai Comp (+0.69%) and ASX (+0.60%) are also up. US equity index futures are also a smidgen higher, helped by eBay’s better than expected results after the closing bell last night which saw shares climb as much as 8% in extended trading. In the FX space the Kiwi Dollar is down half a percent or so after the RBNZ strengthened its easing bias in an economic update overnight.

Moving on. In terms of the rest of markets yesterday, European equities also had a decent day yesterday with some corporate earnings results there also helping. German software maker SAP stood out while Volkswagen also provided some positive earnings guidance which helped sentiment to remain fairly positive. The Stoxx 600 closed up +1.03% while sovereign bond markets eased off, with yields edging up a few basis points.

Meanwhile, in what was another fairly quiet day for data yesterday the notable release was the European Commission’s flash consumer confidence report for July which weakened 0.7pts to -7.9 and more or less in line with expectations. Unlike the German ZEW survey from earlier in the week it’s hard to argue that the Brexit result has had a material detrimental impact on confidence given that data. Indeed the absolute value of the index was weaker in February-April earlier in the year. Elsewhere there was also some data out of the UK, albeit pre-Brexit. The ILO unemployment rate was reported as nudging down one-tenth to 4.9% (expectations had been for no change). The last time unemployment was this low was in 2005. Average weekly earnings including bonuses rose +2.3% yoy in the three months to May (from +2.0%) however ex bonus earnings were down one-tenth to +2.2%.

Before we look at the day ahead, there was a bit more chatter out of the BoE yesterday too. In an article on the Telegraph website, policy maker Kristin Forbes said that ‘given the substantial uncertainty and likelihood that growth slows, there is a valid case to ease monetary policy to support demand’. She did however go on to say that ‘but until more hard data is available, I believe this is a good time to keep calm and carry on’.

Looking at today’s calendar, this morning we’re kicking things off in France where we’ll get the latest confidence indicators for July. The UK will then report June retail sales data before focus of course turns to the ECB meeting just after midday, with Draghi scheduled to speak after at 1.30pm BST. Meanwhile there’s a bit of data to highlight out of the US this afternoon. Initial jobless claims is the early release along with the Philly Fed manufacturing survey for July. Existing home sales data and the FHFA house price index reading are also due out, along with the Conference Board’s leading index for June. In terms of corporate earnings we’re due to hear from 35 S&P 500 companies including General Motors (before market), AT&T (after market) and Schlumberger (after market). We’ll also get reports from 12 Stoxx 600 companies.

end

ASIA MARKETS

i)Late  WEDNESDAY night/THURSDAY morning: Shanghai closed UP 11.11 POINTS OR 0.37%/ /Hang Sang closed UP 118.01 OR 0.54%. The Nikkei closed UP 128.33 POINTS OR 0.77% Australia’s all ordinaires  CLOSED UP 0.41% Chinese yuan (ONSHORE) closed UP at 6.6761 /Oil ROSE to 45.85 dollars per barrel for WTI and 47.12 for Brent. Stocks in Europe ALL IN THE RED. Offshore yuan trades  6.6788 yuan to the dollar vs 6.6761 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS CONSIDERABLY AS TRIES TO STOP MORE USA DOLLARS LEAVING THEIR SHORES. 

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) JAPAN ISSUES

It sure looks like helicopter money is off the table.  Thus the entire global rally is a lie?

(courtesy Phoenix  Research Capital)

So… the Entire Rally Was Based on a Lie?

by Phoenix Capital…

Jul 21, 2016 9:52 AM

The Bank of Japan admitted back in June helicopter money is not on the agenda. Amazingly this is news today after the market has rallied hard based on hope that helicopter money is about to be unveiled.

The yen pared an advance against the dollar as it emerged that an interview in which Bank of Japan Governor Haruhiko Kuroda dismissed the idea of so-called helicopter money was conducted in June.

The Japanese currency earlier jumped more than 1 percent after, in comments broadcast on BBC Radio 4 on Thursday, Kuroda said there was no need or possibility for such a strategy. The interview was conducted on June 17, a BBC spokeswoman said.

Source: Bloomberg

This is not a surprise to anyone who does actual analysis. Kuroda said back in April 2016 (even before the above interview) that the Bank of Japan CANNOT implement helicopter money because it is ILLEGAL under Japan’s constitution.

But then again, we are talking about the same Central Bank head that claimed NIRP wasn’t coming… only to launch it eight days later in February 2016. However, that proved a disaster with the Yen surging while the Nikkei plunged.

This is the problem with the entire financial system today: everything is trading based on the words of a handful of Central Bankers, many of whom was perfectly willing to lie or deceive just to push stocks higher.

Indeed, the entire market move from the BREXIT lows has been a desperate manipulation by Central Banks as they begin to lose control of the financial system.

We saw the same thing happen in 2007: a final push to new all-time highs in October. What followed wasn’t pretty.

A Crash is coming… and the time to prepare is NOW, before it hits.

On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.

In it, we outline the coming crash will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.

We are giving away just 1,000 copies of this report for FREE to the public.

To pick up yours, swing by:

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Graham Summers

Chief Market Strategist

b) REPORT ON CHINA

EUROPEAN ISSUES

Draghi less accommodating as the 10 yr German bund drops again below 0%.Draghi decides to leave the QE program unchanged and thus less dovish;

(courtesy zero hedge)

10Y Bund Yield Falls Back Under 0% After Draghi Leave QE Program Unchanged In Less Dovish Announcement

Earlier we previewed the prevailing consensus which expected Draghi to announce some easing if not in monetary policy, then in the bank’s QE program to make more German securities eligible. However, that did not happen and instead Draghi said the Eurozone has weathered the Brexit fallout and that at this point the ECB did not have enough information to take decisions in regard to altering the current QE programme, with no attention paid to specific instruments.

This means that the collateral squeeze will continue over the next few months, and since the pool of securities – especially those belonging to Germany – will decline further (recall UBS forecast that the ECB may run out of Bunds to monetize as soon as several months from now), it means that paradoxically, Draghi’s less dovish than expected announcement has pushed Bund yields lower, if only for now.

And since Draghi also said hinted that it is now time for the monetary policy handover to fiscal stimulus, a move seen as less dovish than expected, the EUR has pushed modestly higher, if only in early trading.

As usual Draghi left himself a loophole, and said that the ECB remains willing to act by using all tools available.

end

Draghi hints at a public backstop to bring aid to the ailing Italian and other European banks: Germany is not happy@!!

(courtesy zero hedge)

European Banks Soar As Draghi Hints At “Public Backstops”

If ever there was a reason for more European nations to ‘exit’ the sinking ship, Mario Draghi just spewed one. Having sent European bank stocks sliding with earlier calls for reforms, Draghi’s wishful-thinking sent bank stocks soaring (especially Italian banks) after he noted a “public backstop is a measure that would be very useful and should be agreed with the Commission according to the existing rules.” We can only imagine Herr Schauble’s face when he heard this… and what about the Dijsselblom “template”?

Draghi’s wish-list…

• *DRAGHI SEES NEED TO ADDRESS NON-PERFORMING LOANS IN EURO AREA (umm yeah!)
• *DRAGHI: PROBLEM FOR BANKS IS WEAK PROFITABILITY, NOT SOLVENCY (bwuahahah!!! even if that were true, you did it! NIRP!)
• *DRAGHI SAYS PUBLIC NPL BACKSTOP POSSIBLE IN EXCEPTIONAL TIMES (rules change)
• *DRAGHI SAYS NPL PUBLIC BACKSTOP WOULD BE VERY USEFUL (indeed)

And Italian bank stocks loved the wishes…

end

George Soros  proposal will bankrupt Europe tenfold: he is asking to accept 300,000 refugees a year at an additional cost of 30 billion dollars or face an EU collapse!

(courtesy zero hedge)

George Soros Doubles Down: Accept 300k Refugees Costing $30Bn, Or Risk EU Collapse

Seemingly doubling down on his comments in April (following what he called Europe’s “flawed asylum policy”), George Soros has expanded his demands from four to seven fundamental pillars on how to prevent the collapse of the European Union. In an article penned for Foreign Policy titled “This Is Europe’s Last Chance to Fix Its Refugee Policy,” Soros details his plan (over-riding the current “piecemeal approach”) for rescuing Europe before it is too late. Simply put, the billionaire says the EU must take in hundreds of thousands of refugees a year, spend at least 30 billion euros (a minor sum, since he believes it can all be financed by debt and taxes) or Europe faces an “existential threat.”

Soros begins ominously: The EU’s piecemeal solutions are coming apart. Only a surge of financial and political creativity can avoid a catastrophe.

The refugee crisis was already leading to the slow disintegration of the European Union. Then, on June 23, it contributed to an even greater calamity — Brexit. Both of these crises have reinforced xenophobic, nationalist movements across the continent. They will try to win a series of key votes in the coming year — including national elections in France, the Netherlands, and Germany in 2017, a referendum in Hungary on EU refugee policy on Oct. 2, a rerun of the Austrian presidential election on the same day, and a constitutional referendum in Italy in October or November of this year.

Rather than uniting to resist this threat, EU member states have become increasingly unwilling to cooperate with one another. They pursue self-serving, discordant migration policies, often to the detriment of their neighbors. In these circumstances, a comprehensive and coherent European asylum policy is not possible in the short term, despite the efforts of the EU’s governing body, the European Commission. The trust needed for cooperation is lacking. It will have to be rebuilt through a long and laborious process.

This is unfortunate, because a comprehensive policy ought to remain the highest priority for European leaders; the union cannot survive without it. The refugee crisis is not a one-off event; it augurs a period of higher migration pressures for the foreseeable future, due to a variety of causes including demographic and economic imbalances between Europe and Africa, unending conflicts in the broader region, and climate change. Beggar-thy-neighbor migration policies, such as building border fences, will not only further fragment the union; they also seriously damage European economies and subvert global human rights standards.

What would a comprehensive approach look like? It would establish a guaranteed target of at least 300,000 refugees each year who would be securely resettled directly to Europe from the Middle East — a total that hopefully would be matched by countries elsewhere in the world. That target should be large enough to persuade genuine asylum-seekers not to risk their lives by crossing the Mediterranean Sea, especially if reaching Europe by irregular means would disqualify them from being considered genuine asylum-seekers.

This could serve as the basis for Europe to provide sufficient funds for major refugee-hosting countries outside Europe and establish processing centers in those countries; create a potent EU border and coast guard; set common standards for processing and integrating asylum-seekers (and for returning those who do not qualify); and renegotiate the Dublin III Regulation in order to more fairly share the asylum burden across the EU.

And, as ValueWalk’s Jacob Wolinksy notes, specifically Soros thinks the seven points below are key…

First, the EU and the rest of the world must take in a substantial number of refugees directly from front-line countries in a secure and orderly manner, which would be far more acceptable to the public than the current disorder…

Second, the EU must regain control of its borders. There is little that alienates and scares publics more than scenes of chaos…

Third, the EU needs to develop financial tools that can provide sufficient funds for the long-term challenges it faces and not limp from episode to episode…

Fourth, the crisis must be used to build common European mechanisms for protecting borders, determining asylum claims, and relocating refugees…

Fifth, once refugees have been recognized, there needs to be a mechanism for relocating them within Europe in an agreed way…

Sixth, the European Union, together with the international community, must support foreign refugee-hosting countries far more generously than it currently does…

The seventh and final pillar is that, given its aging population, Europe must eventually create an environment in which economic migration is welcome.

Soros concludes as follows:

The benefits brought by migration far outweigh the costs of integrating immigrants.Skilled economic immigrants improve productivity, generate growth, and raise the absorptive capacity of the recipient country. Different populations bring different skills, but the contributions come as much from the innovations they introduce as from their specific skills — in both their countries of origin and their countries of destination. There is plenty of anecdotal evidence for this, starting with the Huguenots’ contribution to the first industrial revolution by bringing both weaving and banking to England. All the evidence supports the conclusion that migrants have a high potential to contribute to innovation and development if they are given a chance to do so.

Pursuing these seven principles is essential in order to calm public fears, reduce chaotic flows of asylum-seekers, ensure that newcomers are fully integrated, establish mutually beneficial relations with countries in the Middle East and Africa, and meet Europe’s international humanitarian obligations.

The refugee crisis is not the only crisis Europe has to face, but it is the most pressing. And if significant progress could be made on the refugee issue, it would make the other issues — from the continuing Greek debt crisis to the fallout from Brexit to the challenge posed by Russia — easier to tackle. All the pieces need to fit together, and the chances of success remain slim. But as long as there is a strategy that might succeed, all the people who want the European Union to survive should rally behind it.

Interestingly, Soros goes back hundreds of years to give us the examples Huguenots and not fifty years to when France starting letting in migrants from Algeria and Morocco – so far the much recent plan has been a failure most would agree even before the recent terror attack in Nice. While hope continues to spring eternal (for many establishmentarians) that the EU stays together, we can’t help but suspect that spending 30 billion euros a year (funded by taxing or indebting EU citizens more) and letting in ‘even’ 300,000 refugees a year when the social fabric of the looming super-state is near collapse, terrorist attacks are increasing, and unemployment in many European countries is in double digits – will likely be a non-starter.

Soros’ full treatise can be found here…

END

The following illustrates how sharia law is practiced in Denmark and the government is trying to counter its offensive beliefs

( Judith Bergmann/Gatestone Institute)

Sharia In Denmark

Submitted by Judith Bergmann via The Gatestone Institute,

• “All the bullying happens in Arabic… The hierarchy of the Arab boys creates a very violent environment. … I have filmed the particularly vile bullying of a Somali boy. You can see the tears in his eyes. They are destroying him; it is very violent. “ — From a dissertation by Jalal El Derbas, Ph.D.
• Danish teachers are the least respected and are spoken of in denigrating and humiliating terms.
• “I am not saying that all the Arab children did ugly things, but we witnessed on a regular basis… using derogatory Arabic language towards Somalis and girls.” — Lise Egholm, former head of the Rådmandsgade school in Copenhagen.
• Whether Danish parliamentarians wish to acknowledge this problem or not, they are up against far wider issues than that of religious incitement in mosques by radical preachers.

After the television documentary, “Sharia in Denmark“, embarrassed Danish authorities by revealing how widespread the preaching of sharia is in mosques in Denmark; the Danish government, in May, concluded a political agreement about “initiatives directed against religious preachers who seek to undermine Danish laws and values and who support parallel legal systems.”

“We are doing everything we can without compromising the constitution and international agreements,” Bertel Haarder, the Minister for Culture and Church, said about the political agreement.

The agreement centers on a number of initiatives, which are supposed to compensate for the detrimental effects of all the years in which sharia was allowed to spread in Denmark while most authorities paid only scant attention to what was happening. Part of the new effort, therefore, will be the mapping of all existing mosques in Denmark.

It will now be obligatory, according to the agreement, for all priests, imams and others who are not part of the Church of Denmark, and who wish to be able to perform weddings — as well as for foreign preachers who apply for residence permits — to learn about Danish family law, freedom and democracy. At the end of the course, all will have to sign a statement that they will accept Danish law, including freedom of speech and religion, gender equality, freedom of sexual orientation, non-discrimination and women’s rights.

The government will examine how to create more transparency in foreign donations to faith communities in Denmark, including controlling and, if necessary, preventing such donations. As part of this work, on May 4 the government presented a law making it a crime to receive funding from a terror organization to establish or run an institution in Denmark, including schools and mosques.

Another element in the political agreement is the establishment of national lists with the names of traveling foreign (non-EU) religious preachers who will be excluded from entry into Denmark on the grounds that they are a threat to public order in Denmark. These named preachers will not be granted an entry visa and will be denied entry at the border. In addition, a non-public list, containing the names of such preachers who are EU citizens, will be established. The purpose of this list is to create awareness of the existence of these preachers, as, due to EU rules on free movement, they cannot be denied entry.

The final component of the agreement is the criminalization of certain speech. According to the agreement, it will become illegal explicitly to support terrorism, murder, rape, violence, incest, pedophilia, the use of force and polygamy as part of religious training, and whether or not the speech was made in private or in public. Both the activities of religious preachers and the activities of others, who speak as part of religious training, are included in the criminalization.

The political agreement is expected to become law when the Danish parliament reconvenes after the summer vacation.

Danish parliamentarians are aware that it will be difficult to measure whether these initiatives have any effect — how do you measure whether religious preachers are indeed not explicitly supporting terrorism, murder, rape and pedophilia, unless you place them under constant surveillance? Butlawmakers are nevertheless confident that the new initiatives will have an effect. “This will have an impact on what people put up with from their religious leaders.” Culture and Church Minister Bertel Haarder says.

Another parliamentarian, Naser Khader, who appears more realistic, says,

“We are well aware that more initiatives are needed. But this stops hate preachers from coming to Denmark, preachers who only want to come here in order to sow discord between population groups and who encourage violence, incest and pedophilia.”

After the documentary “Sharia in Denmark” embarrassed Danish authorities, the government reached a new a political agreement, which Danish Member of Parliament Naser Khader supported, saying, “this stops hate preachers from coming to Denmark, preachers who only want to come here in order to sow discord between population groups and who encourage violence, incest and pedophilia.”

While Danish politicians have taken yet another step on an uncertain road that may or may not succeed in stemming the rise of sharia in Denmark, other problems abound, which compound the impression that this initiative will not amount to much more than a symbolic band-aid.

A recent Ph.D. dissertation by Jalal El Derbas, as reported by the Danish newspaper, Berlingske Tidende, shows that in several Danish schools with Arab students, the latter, mainly boys, use Arabic as a means to sexually and racially harass and bully other students as well as their teachers, especially girls, Somalis and ethnically Danish teachers, who do not understand the insults hurled at them in Arabic.

According to the article, El Derbas was shocked when he went through the video footage of 12- and 13-year-olds in two different Danish public schools with a majority of pupils with minority background. The purpose of his Ph.D. was to examine the possible causes of why bilingual boys — who speak both Danish and Arabic — continue to lag behind other Danish students. He wanted to see what those bilingual boys actually do in the classroom. The footage was taken over five months and it displayed a world characterized by hierarchy, sexual and religious harassment, bullying and racism, in which the first language of the students, Arabic, played a central and leading role. According to El Derbas:

“I could see that the students used Arabic as a secret code and they only used it negatively to disturb the schoolwork. If they did not want to do the work, they simply shifted to Arabic. The schools were very flexible and allowed the students to use Arabic both inside and outside the classroom. But all that this freedom accomplished was that the students shifted from Danish to Arabic if they were getting into a fight and if there was a teacher nearby whom they did not want to understand what they were saying.”

The video footage also revealed a hierarchy consisting of sexual harassment and racism, because the Arab boys consider themselves higher-ranking than girls and Somali students.

“All the bullying happens in Arabic. All the ugly and mean words are uttered in Arabic. The hierarchy of the Arab boys creates a very violent environment. I have video footage of severe sexual harassment against Arab girls and I have filmed the particularly vile bullying of a Somali boy. You can see the tears in his eyes. They are destroying him; it is very violent.”

According to El Derbas, Sunni and Shia Muslim strife is also imported into the grounds of these Danish schools. With the majority of the boys being Sunni Muslims, they look down on the Shia Muslim students and a teacher who is a Shia Muslim is called “Satan” or “witch”, whereas a Sunni Muslim teacher is addressed courteously as “uncle” or “aunt”. Danish teachers are the least respected, and are spoken of in denigrating and humiliating terms.

El Derbas, stressed that the pupils come from ghetto areas, saying:

“Many of the teachers have given up on engaging the parents in any way, but if this is to change it has to happen through the parents. Maybe it would help if the parents took turns of being present in the classroom to see how their children behave. Most of them [the parents] are not working or studying anyway. I think that could lead to an improvement. Because no parents will accept that their children behave in this manner”.

The results of the dissertation come as no surprise to Lise Egholm, now retired, but who for 18 years, until 2013, was the head of Copenhagen’s Rådmandsgade school, which has many Arab students.

“I am not saying that all the Arab children did ugly things,” says Egholm, “but we witnessed on a regular basis exactly the phenomenon of using derogatory Arabic language towards Somalis and girls… Back then the biggest group of children in the school was Arabic speaking, and the words which in Arabic mean ‘whore’ and ‘f— your mother’ they all knew.”

In a written statement to Berlingske Tidende, Minister of Education, Ellen Trane Nørby, wrote,

“It is never all right to bully, whether this happens in Danish, Arabic, or in a third language. That is why I have initiated a large initiative, which has as its purpose to prevent and combat bullying. The teachers have to signal very strongly that there has to be room for all children and that you have to treat other pupils with respect. If some pupils do not understand this and speak in ‘code language’ or use a language that excludes and bullies other pupils, the schools must intervene. Danish is the language used for teaching in Denmark, and pupils should not be excluded or bullied because of parallel languages in school”.

However, what the minister of education fails to mention is that the problems with this kind of behavior are not likely to remain inside the school, but will inevitably spill into the streets. Then what? No amount of lists of radical religious preachers and laws is going to change that fact.

Whether Danish parliamentarians wish to acknowledge this problem or not, they are up against far wider issues than that of religious incitement in mosques by radical preachers. Notably, El Derbas’s findings have not caused any debate remotely resembling that, which was caused by the “Sharia in Denmark” documentary. They should.

• Copenhagen
• Newspaper
• Transparency

end

RUSSIAN AND MIDDLE EASTERN AFFAIRS

Goldman Sachs assists Malaysian embezzlers and are caught.  The USA seizes 1 billion dollars worth of ill gotten assets

(courtesy zero hedge)

US To Seize $1 Billion In Embezzled Malaysian Assets Which Goldman Sachs Helped Buy

 

The last time we wrote about the long-running saga of the scandalous collapse and constant corruption at the Malaysian state wealth fund, 1MDB, which also happened to be an unconfirmed slush fund for president Najib, was a month ago when we learned that the NY bank regulator was looking into fundraising by the fund’s favorite bank, Goldman Sachs. Then overnight, the story which already seemed like it has every possible angle of crime and corruption covered for a series of Hollywood action-adventure blockbusters, got a new twist when the DOJ announced it would seek to seize some $1 billion in assets from individuals affiliated with the fun as part of one of the largest seizures in US history.

The expected asset seizures would be the U.S. government’s first action tied to the 1MDB investigation. Among the properties the US is looking to confiscate, are Van Gogh paintings, Beverly Hills properties, a private jet, ultra high end real estate in NYC and LA, and the rights to profits from the hit movie The Wolf of Wall Street.

The move by U.S. authorities to seize assets tied to an investment fund run by a foreign government would be a major escalation in Washington’s global efforts to fight corruption and block allegedly illegally obtained funds, facilitated by Goldman Sachs, from moving through the world’s financial system the WSJ adds.

The case represents the most detailed and sweeping allegations to be brought in the multinational probe into a global scheme to siphon more than $3.5bn from the Malaysian government fund.  As the FT adds, it is also the first time Malay prime minister, Najib Razak, has been officially tied to the scandal, and while he has not been by name in court documents the description of “Malaysian Official 1” matches his biography and job responsibilities. In what may develop into a major diplomatic row, the DOJ states that that “official” received funds misappropriated from 1MDB, prosecutors say. Najib has repeatedly denied any wrongdoing.

The actions by U.S. authorities also threaten to upend the country’s relationship with Malaysia, a moderate Muslim nation that has long been an important U.S. ally in Southeast Asia, and may force Malaysia to enter China’s sphere of influence in exchange for protection from US retaliation. Malaysia has deep ties to the Middle East and has been seen as a bulwark against China, which has increasingly asserted its power across Asia. President Barack Obama cultivated a relationship with Mr. Najib, including playing golf together in Hawaii over the Christmas holidays in 2014, something we reported at the time.

Amid the controversy, the Malaysian leader now was likely to focus on his domestic political survival rather than retaliate against the Obama administration, said James Keith, US ambassador to Malaysia from 2007 to 2010. Malaysia is a key regional partner for the US, backing a proposed trans-Pacific trade deal and hosting a digital centre to counter Islamic State propaganda. “I don’t think this is unexpected from Najib’s perspective,” said Mr Keith. “His approach is: batten down the hatches; we’re going to survive this, no matter what. He’ll do everything he can just to pretend this didn’t happen.”

* * *

Political fallout notwithstanding, the case reveals just how extensive money-laundering by the fund, the Malay prime minister, and a handful of affiliated individuals, often with US bank assistance, has been ever since 1MDB was created in 2009 as a government-owned vehicle to promote economic development through global partnerships and foreign investment.

Ironically, it ended up anything but as funds intended to benefit the Malaysian people were instead diverted to buy real estate, works of art and jewellery, pay casino bills and hire musicians and celebrities for the conspirators’ “lavish lifestyles”,  the complaint says. More than $200m was spent on art alone, prosecutors allege.

As part of the complaint, US authorities accuse Malaysian officials and business executives with receiving laundered 1MDB funds through banks in Singapore, Switzerland, Luxembourg and New York.The Malaysian officials “treated this public trust as a personal bank account”, said Loretta Lynch, US attorney-general. The misappropriation occurred over four years beginning shortly after Mr Najib set up the fund, according to the complaint. According to the suit, in March 2013, $681m in proceeds from a 1MDB bond offering were transferred into an account belonging to the official matching Mr Najib’s description. Five months later, $620m of that amount was shifted to a different account to which a 1MDB official was an authorised signatory.

Officials at 1MDB and others began diverting money shortly after the fund was created in September 2009 under the guise of investing in a joint venture with a private Saudi oil extraction company, PetroSaudi International. More than $1bn was transferred to a Swiss bank account held by Good Star Ltd, which was owned by Mr Low, prosecutors allege. Andrew McCabe, deputy director of the FBI, told reporters in Washington: “The Malaysian people were defrauded on an enormous scale.”

There is more in the full complaint, and it revolves around the three main players who, aside from the prime minister,  were instrumental in the perpetuation of this grand fraud, including, Riza Aziz, stepson of Malaysian Prime Minister Najib Razak; Jho Low, a Malaysian financier; and Khadem Al Qubaisi, a former Abu Dhabi managing director of a sovereign-wealth fund.

Details about their involvement can be found in the WSJ.

* * *

Much of the above was already known, or implied, however this is the first official confirmation of just how vast the money-laundering scheme was and that it stretched to the very top. What is now also confirmed, is that at the heart of the fundraising operation was none other than Goldman Sachs.

According to the complaint, in 2012, 1MDB officials and others fraudulently diverted $1.4bn in proceeds from two bond offerings arranged by Goldman Sachs, according to the complaint. Representing almost 40 per cent of the total raised, the funds were transferred to a Swiss account controlled by a British Virgin Islands entity called Aabar Investments PJS Limited. Aabar had been named to suggest a relationship with an Abu Dhabi company, Aabar Investments PJS, an investment arm of the Abu Dhabi government. But funds diverted to the Swiss account ultimately ended up in a Singapore bank account.

In 2013, several officials including those from 1MDB diverted nearly $1.3bn from another $3bn Goldman bond offering. The money was supposed to be used to finance a joint venture known as the Abu Dhabi Malaysia Investment Co but was instead funnelled into a Singapore account controlled by Mr Low’s associate, the complaint says.

Where it becomes clear that Goldman had a special arrangement with the complicit issuer and the prime minister, is that Goldman earned $192.5m or nearly 11 per cent of the principal amount on one of the 2012 bond deals, a $1.75bn offering, according to court documents, which also said that the offering circular “contained misleading statements and omitted materials facts”. Considering that a typical fee for an emerging market sovereign or quasi-sovereign bond offering between $1bn-$5bn would be between 0.1 per cent and 0.3 per cent, according to Dealogic, this is nothing short of kickback to Goldman, and raises questions about why Goldman wilfully accepted such an overblown fee for a deal which any of its competitor banks would have done for a fraction of the cost.

This being Goldman, of course, the bank was not accused of any wrongdoing in today’s action. It may be in the future as per the DOJ’s parallel prove whether Goldman violated the Bank Secrecy Act in its handling of the proceeds of the securities offerings, but somehow the FBI was unable to link the bank to any crime conducted by the same people who were paying it exorbitant fees to keep the money flowing.

* * *

So once Goldman’s fundraising skills allowed corrupt Malaysian politicians and selected shady middlemen to have access to billion which they would then embezzle, what did they spend the money on? Perhaps a better question is what did they not spend on: among the purchases were Van Gogh paintings, a private jet, the rights to profits from the hit movie The Wolf of Wall Street, and real estate. Lots and lots of ultra high end real estate.

Here are some of the details from WSJ:

The properties allegedly bought with funds misappropriated from a Malaysian investment fund would make for a stunning house tour of high-end real estate in New York and Los Angeles. Besides flashy real estate, the U.S. government alleges that money from the fund, known as 1Malaysia Development Bhd. or 1MDB, was used to buy a $35 million private jet and a stake in EMI Music Publishing.

The assets that the government is trying to seize were purchased by three men who had close ties to 1MDB: Jho Low, a Malaysian deal maker; Riza Aziz, the stepson of Malaysian Prime Minister Najib Razak, and Khadem Al Qubaisi, a former Abu Dhabi managing director of a sovereign-wealth fund, and occasionally the men sold or gave assets to one another.

The properties range from a Beverly Hills mansion with a 120-foot-long pool to a string of Manhattan condos, including a seven-bedroom, five-bathroom duplex overlooking Central Park that cost $35 million.

 The complaints paint a picture of lavish spending on casinos and private jets and a taste for high-end real estate—an asset that has been an increasingly popular place for the world’s wealthy to stash their cash outside the banking system and inside stable countries. Mr. Low declined to comment. A representative for Mr. Al Qubaisi didn’t reply to requests for comment. Red Granite Pictures, a company owned by Mr. Aziz, said it and Mr. Aziz “did nothing wrong.”

Mr. Aziz’s New York duplex is by far the most expensive property in the Park Laurel building, a prominent luxury address near Lincoln Center and overlooking Central Park. Mr. Aziz has stayed in the apartment when he visits New York, according to a doorman there.

A home bought by Mr. Low is located in the so-called Bird Streets in Los Angeles’s Hollywood Hills—a quiet enclave of narrow, twisting roads named after different types of birds. The property on Oriole Drive is a 6-bedroom, 5-bathroom home with a swimming pool, spa and wine cellar, which Mr. Low bought in 2012 for $39 million, according to records. A tall, white wall surrounds the house.

The Los Angeles home owned by Mr. Aziz on North Hillcrest Road— a winding street just off Sunset Boulevard—was purchased in 2010 for $17.5 million. Security guards on the site Wednesday said that they had no idea who owned the property and that no federal agents had visited.

The Viceroy L’Ermitage Beverly Hills, the hotel Mr. Low purchased in 2009 through his family’s trust, sits discreetly on a tree-lined, residential street and features a rooftop pool and 116 newly renovated suites. Hotel staff said they hadn’t noticed any unusual activity Wednesday morning.

Mr. Low owns a majority stake in the Park Lane Hotel, a trophy property overlooking New York’s Central Park. He put up about $240 million of the $400 million of equity provided by the investors who bought the 46-story property in 2013 in a deal that valued it at about $850 million.

The investor group, led by New York developer Steve Witkoff, planned at the time to continue running the Park Lane as a hotel while studying the possibility of redeveloping the hotel into condominiums or a mixed-use property. But when news broke that Mr. Low was under investigation, those plans were stymied. Such a plan would require approval from the New York state attorney general’s office, an unlikely event when the property’s majority owner was being investigated.

* * *

And that kind of magnificent organized crime, dear New Yorkers, is why real estate in Manhattan has never been more expensive.

END

GLOBAL ISSUES

Brandon Smith illustrates 6 possible black swan events that may surface:

(courtesy Brandon Smith/AltMarket.com)

Submitted by Brandon Smith via Alt-Market.com,

We are a little over half way through 2016 and, at the current rate, it will be a miracle if the year finishes without outright catastrophe in half the nations of the world. Some might call these events “Black Swans,” some might call them completely engineered threats, others might call it all a simple “coincidence” or a tragedy of errors. I stand strictly by the position that most of the dangers we see today have been deliberately escalated, if not strategically implemented.

Here is the problem; international financiers and globalist nut-jobs are clearly operating on a timeline with the end goal of creating enough general chaos to convince the masses that complete centralized authority over every aspect of our lives is preferable to constant fear.

For a more in-depth analysis on the schemes of the elites, see my articles Are Globalists Evil Or Just Misunderstood and Globalists Are Now Openly Demanding New World Order Centralization.

In order to elicit this kind of thinking from the public, crisis events are required that will cause many human beings to act, for the most part, like rabid animals. How would this be accomplished? Well, what does history tell us about that which inspires people to sometimes sacrifice their moral code or to bow down to tyrants? Usually a loss of necessities is required — including a lack of employment, lack of production, lack of serviceable shelter, lack of ample food and clean water, lack of medical care, lack of overall security and a sense of safety, etc.

The question often arises: “Why would the elites need to create crisis at all; don’t they already have control of the world?”

The answer is no, not yet they don’t, and if you read my recent article The Reasons Why The Globalists Are Destined To Lose, you can see why they never will have total control. That said, just because the globalist plan for complete centralization is doomed to fail does not mean they will not do everything in their power to make the attempt.

Changes in mass psychology that might take decades to achieve can be accomplished in only a few short years if the public is placed under the right amount of duress. I find that younger people (and isolated people who spend all their time on the web) in particular just don’t understand how this works. Look at it this way; you may not think crisis would be all that useful in pushing the globalist agenda forward until you find your family threatened, your children at risk or your parents in dire need. Fear of losing those we love can open the door to great collective evils, even more so than the fear of harm to ourselves.

Those who have no concept of self defense or the will to prepare and fight are the easiest to manipulate in this way. Pacifists are an effortless meal for dedicated despots.  Hell, for some folks the simple threat of losing day-to-day comforts can cause them to make terrible choices and support destructive leaders and policies.

Chaos is NOT the end game, it is only a tool by which the elites gain psychological leverage over the masses so that people willingly give up their rights to self determination and hand more power to the establishment.

A perfect example would be the recent Brexit referendum, the effects of which have not even begun to rise to the economic surface yet. In light of this event, numerous political puppets and banking moguls have declared an outright need for financial centralization of all nations in order to avoid a calamity.

Investors have been lured into a false sense of safety as equities do not yet reflect the fiscal downturn taking place in every other sector of the global economy, but time grows short nonetheless. The political can negatively affect the financial and vice versa.  Here are just a few of the latest trigger events that are piling up atop an already precarious year…

Italian Banking Crisis

Globalists continue to warn that the effects of the Brexit are coming soon, and that they will bring frightening instability. The latest warning comes again from the IMF, which argues that in the wake of the Brexit a banking crisis in Italy is now imminent and will initiate a “global contagion” in markets. The IMF is not wrong – probably because it had a hand in creating the crisis in the first place.

Italy is the third largest economy in the EU. Current estimates project at least $400 billion in toxic debts tied to Italy’s insolvent banks (this obviously does not include the bulk of derivatives). The stock of Banca Monte dei Paschi di Siena (MPS), the world’s oldest bank and Italy’s most vulnerable lender, has dropped by a staggering 43 percent. Most of the EU is inexorably chained to Italian finance through various debt obligations, bond holdings, long term investments, etc. A breakdown in Italy would indeed be a “Lehman moment” for Europe.

In response, the Italian government and the Italian banking sector is seeking taxpayer bailouts from the EU under extraneous circumstances, but EU officials are questioning whether or not this is even legal under EU charter.

They are also hoping that international banks like JP Morgan will successfully form a bailout response for distressed Italian assets and save Italian banks from a hard landing.

It is doubtful that any bailout plan will be enough to stall the shock wave from an Italian bank crisis. I do not believe the elites even intend to defuse such a crisis. With Italy’s own constitutional referendum coming this fall, a political shakeup may result. If a banking disaster is mixed into this shift, the potential for Italy to exit the EU becomes more plausible. A refusal by the EU to save Italian banks would seal the deal.

In my pre-Brexit articles outlining why I believed the Brexit vote would pass, I predicted that numerous instabilities in the global economy would be allowed to turn volatile and that the Brexit would be blamed for nearly all of them. Not surprisingly, the Italian finance minister is already placing the blame for Italy’s impending bank implosion on the Brexit vote.

This is the economic event that no one in the mainstream is paying much attention to. Again, as long as stocks remain in the green, the mainstream is oblivious to the underlying dangers. By the time equities begin to plummet, it will be too late for most people to do much to hedge their bets or prepare.

“Failed” Coup In Turkey

Maybe you thought 2016 was already getting weird, but this ugly party is just beginning. In what amounted to a half-day coup against Turkish president Recep Erdogen, Turkey went from corrupt cronyism to outright fascism overnight.

I am not so sure that this short lived coup actually “failed”; in fact, I think it achieved exactly what it was supposed to achieve.  I am not surprised in the slightest that some believe that Erdogen fabricated the entire conflict in order to provide an excuse to root out his political opponents. The Turkish government has targeted at least 50,000 people so far, including judges, teachers, and political opposition, all in the name of combating “treason”. Erdogen has been sliding into ruin for years with failed policies and an increasing penchant for human rights and free speech violations and now he has free reign to go full totalitarian.

That said, I think the claims of an Erdogen false flag are missing the bigger picture.

First, the coup was clearly staged. Anyone who knows anything about successful coups in history knows that you either imprison or kill the existing leadership of a government before you try to take it over militarily. Reports indicate that military insurgents had Erdogen’s plane in their sights and could have easily turned him into a cloud of flaming vapor, but for some reason did not fire.

My instincts told me upon first hearing of the fleeting momentum of the coup that the whole event was not really about Erdogen. Rather, the event was about NATO, or a rationale for dividing NATO and weakening the West. Rather predictably, Erdogen’s government is now blaming the U.S. in particular for the coup attempt, as the Obama administration and the U.N. warn of civil rights violations by Erdogen.  John Kerry has openly suggested removing Turkey from NATO membership.

At this time, Erdogen has allowed U.S. military operations at Incirlik Air Base to continue, but the prospect remains that this is a temporary condition.

It is interesting that as the situation develops it is becoming obvious that whether the coup succeeded or failed the end result would be a rationalization for Turkey to break ranks with NATO and, in particular, America.  Turkey is a vital pivot point for NATO in dealing with the Middle East and Russia. To lose Turkish aid would mean a considerable weakening of NATO operations and open a path to more volatile confrontation between Eastern and Western powers.  Take note that no matter the ultimate outcome of the coup fiasco, the most probable result will be a Turkish break from the West.  If the latest coup is exposed as an Erdogen “false flag”, this process will progress very quickly.

I will be watching this situation carefully over the next few weeks, but I suspect that tensions between Erdogen and the U.S. are slated to expand and that Erdogen is about to go full-despot with human rights violations of the worst kind. I also suspect that Erdogen will begin drafting proposals for greater cooperation with Russia in the near term.

The instability in Turkey is an advantage for the globalists. They can use it to undermine NATO operations if they wish. They can flood the EU with even MORE refugees and blame Turkey in the process. They can even help their Frankenstein monster, ISIS, by allowing Turkey to shut down U.S. operations out of Incirlik (as if the U.S. government had any intention of actually stopping ISIS anyway). This could be used as an impetus for a resurgence of ISIS activities.

To summarize, a crisis in Turkey is not only good for Erdogen, it is also good for the globalists. Watch for this trigger event to continue mutating.

Race War In The U.S.

I have covered extensively the efforts by globalists, and George Soros specifically, to create open wounds in the American social structure and divide the public along racial lines. This has been done by promoting, and in some cases funding, operations of social justice groups (cultural Marxists) and black racist organizations. Black Lives Matter has so far been the vehicle Soros has used to lure useful idiots into championing a race war that has no basis in reality.

While there is in fact a legitimate cause for concern over the militarization of state police, police abuses are in no way limited to any single race. I wrote about the best possible solution to constitutional violations by police organizations in my article The ‘Thin Blue Line’ Serves No Purpose. In it, I outlined why state police, funded by federal cash, should not exist all and that their duties should be by taken over by elected sheriff’s offices and neighborhood watches. This removes the gasoline from the fire and undermines attempts by cultural Marxists to incite race violence.

Of course, this will never happen. Both Republicans and Democrats are calling for even MORE federalization of police in response to the continued shootings of random LEO’s by black activists. The Democrats want more federalization because they think it will reign in violent cops. The Republicans want more federalization because they think it will reign in violent BLM activists. Notice that no other solution is being offered other than more federal presence on American streets.

Keep in mind that the shooting of random police officers is becoming an active trend and it is only going to get worse as we close in on the November elections. Watch for officers to be killed not only while on duty, but also while off duty, perhaps even in their homes.

The goal here is to create an excuse for martial law without necessarily declaring martial law outright. That is to say, the government will enact the conditions of martial law incrementally. This will likely include anonymity of LEO identities — meaning ski masks, hidden badge numbers and zero public accountability, all in the name of “protecting police lives.” Groups like BLM and the social justice cultists that exploit them as a weapon are not a real threat to the public overall and could be crushed in an instant by an angry white majority and militarized police unrestrained by the constitution. But this is not the point.

The militarization and federalization of the police will end in totalitarianism in the U.S. if it receives wide support by conservatives, or widespread civil war if it does not. Police need to refuse to act in an unconstitutional manner even in the face of violence directed against them, otherwise, they risk starting a fight with liberty groups as well. Black Lives Matter would be the least of their worries at that point.

Quick Mention – 28 Page 9/11 Report Release: If you want my in-depth look at the growing rift between Saudi Arabia and the U.S., read my article ‘One More Casualty Of The 9/11 Farce – The Petrodollar’.  I am giving this a quick mention because we have yet to hear the full Saudi response to the release of this report.  The original threat was that they would dump their U.S. treasury holdings and depeg their currency from the dollar.  This would officially end the petro-status of the dollar and eventually end the dollar’s world reserve status as well.  I believe that if the Saudi’s do take this action, they will do it quietly before bond markets and oil markets realize what is happening.  It is likely that a Saudi break from the U.S. will occur quickly in the event of a Trump presidency.

Quick Mention – South China Sea Build Up: A prelude to WWIII?  Maybe, maybe not.  China and the U.S. have been sparring politically over the South China Sea for some time.   An international ruling has argued that China has no legitimate claims to the waters nor any territorial history.  This has led to greater tensions.  The latest build up of naval units in the region is concerning, but there has not yet been a true catalyst to instigate a war.  This is another scenario which may not materialize until next year, if it materializes at all.

The overall purpose of these events, I believe, is first to conjure mass confusion. The globalists are turning up the heat on the citizenry much faster than ever before, and it is time to take stock of our position and response. The best defense, as I have always stated, is personal preparedness and self sufficiency, organization with friends and family, then organization of the like-minded within your neighborhood and if possible your town. Most people are self-isolated and thus weak in their defensive position. Anyone effectively organized will have far reaching advantages in the midst of social breakdown. Anyone who is organized with solid planning will become the point to which everyone else gravitates. You can either be a pillar of strength or a victim, it is your choice.

Rest assured, there is more shock and awe to come in 2016. Now is the time to prepare if you have not done so already.

END

 

Why oil was fall

(courtesy Nick Cunningham/Oil Price.com)

 

Why Another Oil Price Downturn Is A Distinct Possibility

Submitted by Nick Cunningham via OilPrice.com,

In June 2015, oil prices surged to $60 per barrel, raising hopes that the oil price downturn would have been brief and the recovery swift. But by July, oil prices were heading back down, the beginning of a deeper slump that would continue for months.

A year later, a similar pattern could be playing out, or at least, that is what oil producers are fearing. After hitting a low point in February of this year, oil prices began a four-month rally, rising from $26 to $51 per barrel by June, the third year in a row in which the month of June saw a relative peak for oil prices. Now, July could once again mark a renewed nose-dive.

This time around, an array of oil producers are not taking any chances. According to Bloomberg, more and more E&Ps are hedging their production, protecting themselves against a crash in prices. Earlier this month, Laredo Petroleum Inc., for instance, hedged more than 2 million barrels of its 2017 production. “The producers have sold the hell out of this rally,” Stephen Schork, president of Schork Group Inc., told Bloomberg. “The companies that did survive, they’ve been hedging into this rally. And they’re counting their blessings.”

Hedging even began before prices rallied. Reuters surveyed shale firms earlier this month, finding that 17 out of 30 had increased their hedging in the first quarter when oil prices were at a low point. Even though they locked in at low prices, doing so offered some stability and certainty in their revenue projections.

But it was also an indication of the level of anxiety with which E&Ps were approaching 2016. The rally since February has buoyed spirits, but with oil prices back to $45 per barrel, negative sentiment once again pervades the market. For the week ending on July 12, oil traders increased their short bets by 1.6 percent, the third week in a row that shorts climbed.

The logic is straightforward. Production is falling but global supplies are still elevated. Worse, inventories are only coming down slowly from record highs. Then there is the possibility of new drilling – the rig count rose again last week, with the industry adding 6 oil rigs and 1 natural gas rig, according to Baker Hughes. On the other hand, although drillers could get back to work, the markets are likely overestimating the impact of a few dozen rigs coming back into operation.

Meanwhile, the botched coup attempt in Turkey barely registered in oil. Supply disruptions through the Bosporus, where 3 percent of global crude travels, were certainly plausible, but the straits were reopened only hours after the overthrow failed. “The market is looking past the coup,” Ric Spooner, chief market analyst at Sydney’s CMC Markets, told Reuters.

At this point, the very large overhang of refined products weighing on the market is one of the most important indicators to watch, a glut that will take time to work through. The rapid buildup in storage levels of gasoline and diesel this year have taken the markets by surprise, and could ultimately delay what everyone thought would be a rebalance in the next few months.

“The rising inventories of gasoline have got the markets’ attention,” John Kilduff, partner at Again Capital LLC, said in an interview with Bloomberg. “The oil market is getting ready to break.”

The one bullish factor for oil prices is India, which has taken over from China as the main driver of demand growth. India just grew at its fastest three-month period in the past decade, the most recent data shows. “We think India is roaring right now and will be a key driver of demand,” Helima Croft, managing director and Global Head of Commodity Strategy at RBC Capital Markets, told CNBC’s “Futures Now” in a recent interview. Despite all the negative factors pointing to ongoing oversupply, RBC still thinks that crude prices could close out the year in the mid$50s per barrel, largely because of India.

But another downturn in prices is also a distinct possibility, and one that looks a bit more likely than it did a month ago. At the very least, it will take quite a bit of time before a serious price rally arrives. “Fundamental headwinds are growing, supply-demand rebalancing is likely still a mid-2017 event, but tail risks are admittedly large in both directions, as geopolitics add to uncertainty,” Morgan Stanley concluded in a recent report.

 

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Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/THURSDAY morning 7:00 am

Euro/USA   1.1017 UP .0002 (STILL  REACTING TO BREXIT/

USA/JAPAN YEN 106.36  DOWN 0.812(Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER/KURODA:  HELICOPTER MONEY NOT ON THE TABLE

GBP/USA 1.3194 DOWN .0050(MORE STIMULUS PLANNED)

USA/CAN 1.3066 DOWN .0003

Early THIS THURSDAY morning in Europe, the Euro ROSE by 2 basis points, trading now JUST above the important 1.08 level RISING to 1.1012; Europe is still reacting to Gr Britain BREXIT,deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Shanghai composite  CLOSED UP 11.11 POINTS OR 0.37%   / Hang SanG CLOSED UP 118.01 OR 54% /AUSTRALIA IS HIGHER BY .41%/ EUROPEAN BOURSES ARE ALL IN THE RED   as they start their morning

We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this THURSDAY morning: closed UP 128.23 OR 0.77% 

Trading from Europe and Asia:
1. Europe stocks ALL IN THE RED AS THEY START THE DAY

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 118.01 OR 0.54%  ,Shanghai CLOSED UP 11.11 OR 0.37%   / Australia BOURSE IN THE GREEN: /Nikkei (Japan) CLOSED UP 128.33 OR 0.77%/India’s Sensex IN THE RED  

Gold very early morning trading: $1318.90.00

silver:$19.37 

Early THURSDAY morning USA 10 year bond yield: 1.588% !!! UP 1 in basis points from WEDNESDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield RISES to 2.308 UP 1 in basis points from WEDNESDAY night. (SPREAD GOES AGAINST THE BANKS)

USA dollar index early THURSDAY morning: 97.02 DOWN 13 CENTS from WEDNESDAY’s close.

This ends early morning numbers THURSDAY MORNING

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And now your closing THURSDAY NUMBERS

Portuguese 10 year bond yield:  3.05% DOWN 2 in basis points from WEDNESDAY  (does not buy the rally)

JAPANESE BOND YIELD: -0.216% DOWN 2  in   basis points from WEDNESDAY

SPANISH 10 YR BOND YIELD: 1.12%  DOWN 4 IN basis points from WEDNESDAY( this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 1.25 par IN basis points from WEDNESDAY (again totally nuts/)

the Italian 10 yr bond yield is trading 13 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: -.017% DOWN 1 IN  BASIS POINTS ON THE DAY

END

 

IMPORTANT CURRENCY CLOSES FOR THURSDAY

Closing currency crosses for THURSDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/3:30 PM

 

Euro/USA 1.1020 UP .0004 (Euro =UP 4 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 105.71 DOWN 1.405(Yen UP 141 basis points/HELICOPTER MONEY OFF THE TABLE )

Great Britain/USA 1.3201 DOWN 0.0041 ( Pound DOWN 41 basis points/BREXIT DECISION AFFIRMATIVE/QE TO START AGAIN/UK DOWNGRADED/NEW PRIME MINISTER T. MAY/

USA/Canada 1.3092-UP 0.00231 (Canadian dollar DOWN 23 basis points AS OIL FELL (WTI AT $44.67). Canada keeps rate at 0.5% and does not cut!

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This afternoon, the Euro was UP by 4 basis points to trade at 1.1020

The Yen ROSE to 105.71 for a GAIN of 141 basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY NOW OFF THE TABLE

The POUND was DOWN 41 basis points, trading at 1.3201 AS PRIME MINISTER THERESA MAY TAKES OFFICE/CONCERNS ON BREXIT

The Canadian dollar FELL by 23 basis points to 1.3092, WITH WTI OIL AT:  $44.67

CANADIAN RATES WERE NOT CUT

The USA/Yuan closed at 6.6745

the 10 yr Japanese bond yield closed at -.216% DOWN 2  IN BASIS  points in yield/

Your closing 10 yr USA bond yield: DOWN 2 IN basis points from WEDNESDAY at 1.557% //trading well below the resistance level of 2.27-2.32%)

USA 30 yr bond yield: 2.294 PAR  in basis points on the day 

BANKS NEED THE LONGER BOND HIGHER IN YIELD: INSTEAD THE SPREAD LESSENS.

Your closing USA dollar index, 96.98 DOWN 21 CENTS  ON THE DAY/4 PM 

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for THURSDAY

 

London:  CLOSED DOWN 29.10 OR 0.43%
German Dax :CLOSED UP  14.20 OR  0.14%
Paris Cac  CLOSED DOWN 3.51  OR 0.09%
Spain IBEX CLOSED UP 8.10 OR 0.09%
Italian MIB: CLOSED UP 41.58 OR 0.254%

The Dow was DOWN 77.80 points or 0.42%

NASDAQ  DOWN 16.03 points or 0.31%
WTI Oil price; 44.62 at 4:30 pm;

Brent Oil: 46.10

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  64.37 (ROUBLE DOWN  54/100 ROUBLES PER DOLLAR FROM TUESDAY) 

TODAY THE GERMAN YIELD FALLS TO -.017%  FOR THE 10 YR BOND

END

This ends the stock indices, oil price, currency crosses and interest rate closes for today

Closing Price for Oil, 5 pm/and 10 year USA interest rate:

WTI CRUDE OIL PRICE 5 PM:44.57

BRENT: 46.06

USA 10 YR BOND YIELD: 1.554% 

USA DOLLAR INDEX: 96.90 down 26 cents

The British pound at 5 pm: Great Britain Pound/USA: 1.32338 down .0019 or 19 basis pts.

German 10 yr bond yield at 5 pm: -.017%

END

And now your more important USA stories which will influence the price of gold/silver

Trading Today in Graph form;  VERY IMPORTANT FOR YOU TO VIEW ALL THE CHARTS TODAY

 

Americans Stunned As Stocks… Fall

 

Seemed appropriate…

As Ryan Detrick (@RyanDetrick) noted, The Dow is up nine straight days. Going back 20 years this has happened only twice. Both times it was up day 10… So today is a historic #fail… Leaving Dow Futs at crucial support… with VIX surging back to a shocking 13 level before it was quickly squelched into the close… “off the lows”

 

Stocks had their worst day since Brexit today… Trannies were clubbed like a baby-seal out of the gate and no bounce (SouthWest)…and when Europe closed things got worse…

 

Leaving The Dow, S&P, and Small Caps unchanged-ish for the day…

 

Of course this is merely “the pause that refreshes” or the “healthy correction” that leads to the next leg higher. Although we note that the S&P is at record richness to The Fed balance sheet…

 

But global central banks saved the world (for US stock investors) – but note the last 2 weeks have seen central bank balance sheets shrink in USD terms…

And S&P valuations are at 14 year highs… “it’s probably nothing”

 

Elon Musk is losing his touch…

 

Bank stocks have recovered mightily off the Brexit lows BUT…Citi and JPM are unch from Brexit

 

But financials remain full of exuberance relative to the yield curve…

 

Energy stocks began to catch down to crude..

 

Post-Brexit, Gold remains the biggest winner and bonds overtook stocks again today…

 

And off the Brexit bounce..

 

The decoupling continues in credit land as HY spreads are nowhere near record lows as stocks push ever higher…(note the break began when The Fed started to taper QE3)…

 

Treasury yields tumbled from the US open… 4th day in a row of Treasury selling into the US open, but notable bond buying after Draghi disappointed… the belly of the curve is at Turkey coup low yields…

 

FX markets were volatile with the USD index drifting lower amid Kuroda and Draghi comments…

 

As USDJPY dropped 1% –  the most in a month… (after Kuroda spoiled the helicopter money party)

 

Commodities were mixed today with PMs rallying after Draghi and Kuroda disappointed, crude weaker and copper flat to modestly higher…

 

Slamming WTI to 3-month lows…

 

As 2015 analogs move to top of mind…

 

And finally, yesterday’s PM plunge was entirely reversed today…

 

Charts: Bloomberg

Bonus Chart: Fool me once, shame on you; Fool me twice, shame on me, Fool me a third time, I must be a bloody idiot…

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The Philly mfg index slumped to a 6th month low totally negated last month’s rise.  The Chicago national manufacturing activity remains in negative territory for the 17th straight month:

(courtesy zero hedge)

Philly Fed Slumps To 6-Month Lows As National Activity Index Jumps To 6-Month Highs

In the first wave of macro data today, initial claims beat expectations, dropping to 253k near record lows (but remains wildly divergent from tumbling consumer confidence). Following June’s rebound in Philly Fed, July missed expectations tumbling to six-month lows, back to a contractionary -2.9 (against expectations of a flat print of +4.5). Finally, Chicago Fed’s National Activity Index surged unexpectedly to six-month highs (+0.16 vs -0.20 exp) but the smoother 3-month avg remains in contraction for its 17th straight month.

If the jobs market is so awesome, judging by initial claims near historic lows, then why is US consumer’s economic confidence collapsing?

Philly Fed’s bounce into the green in June is over with July printing back to its lowest since Jan 2016…

Which is odd given that almost all the subindices improved…

And finally The Chicago Fed’s National Activity Index surged back into positive territory (the highest since January) but the 3-month average remains in negative territory for 17 months…

So take your pick – bias confirming data abounds.

Charts: Bloomberg

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This may turn out to be very interesting as Johnson is HSBC’s key FX trader and commodity trader.  Even though he was “cleared” of its own internal probe, the USA has an iron clad case against HSBC for front running and causing damage to its client.  This is a criminal action:

(courtesy zero hedge)

Arrested HSBC FX Trader Had Been Cleared In Bank’s Own Internal Probe

While Wall Street was shocked yesterday after the announcement that HSBC’s global head of cash FX trading, Mark Johnson, was arrested at JFK on charges of frontrunning a Cairn Energy trade of $3.5 billion pounds, perhaps nobody was more surprised than his employer, HSBC. According to Bloomberg, the Johnson was about to move to the U.S. to take
up a broader position in the firm’s trading division. His arrest therefore, came as a shock to HSBC which wanted to promote the arrested trader to head of the bank’s foreign exchange and
commodities business for the Americas.

The reason for HSBC’s surprised was revealed by the FT earlier, which reported that according to HSBC’s own internal “investigation” three years ago into a $3.5bn currency trade that US prosecutors now believe was criminally fraudulent, it found nothing wrong with the transaction.

Mark Johnson, HSBC global head of forex cash trading

The HSBC review, conducted in the wake of a sweeping foreign exchange rigging scandal that erupted in 2013, was led by an external lawyer and found no breach of its code of conduct. HSBC declined to comment. The bank was on Thursday reviewing its own investigation of the $3.5bn forex trade to decide whether to support Mark Johnson, its global head of forex cash trading, who was arrested on Tuesday evening at New York’s John F Kennedy airport.

As the FT adds, a solicitor for Mr Scott in London strongly denied the allegations on behalf of her client, who is UK-based. While a warrant for Mr Scott has been issued, US authorities are yet to apply formally for his extradition.

HSBC reviewed its $3.5bn purchase of sterling for Cairn Energy in 2011 along with many other forex trades as part of an internal remediation exercise that it carried out at the request of regulators when the wider forex rigging scandal erupted in 2013.

People briefed on the matter said the bank’s internal investigation found no breach of its code of conduct when it reviewed the trade carried out for Cairn by Mr Johnson and Mr Scott.

How unexpected: a bank looked at its own trades, and found nothing strange despite clear evidence, as revealed by US authorities, showing that Johnson had an explicit intention of frontrunning the client order. It took a DOJ review three years later to stubmel on the smoking gun. As a reminder, the DOJ alleged the traders used a technique known as “ramping” that caused the price of pounds to spike. That spike benefited the bank’s trading book at the expense of the client, who then paid a higher price for the sterling.

When Cairn challenged HSBC about spikes in sterling ahead of the trade, an unnamed supervisor, working with the bankers, then allegedly misled the client by blaming the price increase on a “Russian” bank in the market. The complaint adds that Mr Johnson was surprised Cairn went ahead with the transaction. When told of the company’s commitment, he responded “Ohhh, f***ing Christmas,” using an expletive as an adjective.

Meanwhile, HSBC thought the storm had passed. After banks paid $10bn in fines to US and UK authorities, they complained that spot forex was not included at the time within the UK’s criminal market-abuse regime. A decision by the UK’s Serious Fraud Office earlier this year to drop its criminal investigation into forex-rigging seemed to bolster that argument. However, the Justice Department is accusing the pair of breaching a far more sweeping law: that of wire fraud. The authorities basically accuse them of deceiving their clients for gain. The evidence appears to confirm this allegation.

Roger Burlingame, a former chief prosecutor at the New York office that is bringing the case, and who is now based at law firm Kobre & Kim, explained: “The defendants are charged with wire fraud. This simply means the government has alleged that they’ve used an electronic communication in the US to commit a fraud. “The statute uses the broad, standard definition of fraud; it’s not a technical scheme targeting market abuse in particular. The same statute is used to prosecute any kind of fraud that involves email, phone calls or texts.”

The allegedly criminal trade also slipped through the fingers of the UK’s SFO: “a person familiar with the SFO’s thinking told the FT that the agency had not looked at the $3.5bn trade for Cairn and instead was focused on more generalised collusion and rigging within the $5tn-a-day forex market.”

Legal experts said that even under UK law, if a bank acting as an agent for its clients can be proven to have defrauded them through deceit then this would be illegal in the UK too. That is important as in order to extradite Mr Scott, the US must persuade a UK court that the alleged wrongdoing was illegal both in the UK and the US at the time.

What are the implications of this arrest for HSBC? The FT concludes that there is a chance it could “cause reputational damage to the global bank’s forex trading business and fuel more calls for HSBC to face full criminal charges. The DoJ has already been criticised for failing to prosecute HSBC after it paid $2bn in 2012 over laundering billions of dollars for Mexican and Colombian drug gangs.”

On the other hand considering current HSBC’s reputation, this doesn’t seem like much of a risk. More importantly, since the alleged wrongdoing happened before it signed a deferred prosecution agreement in 2012 bank insiders think it is unlikely to put it in breach of the deal to avoid prosecution that is due to expire next year.

In other words, while a trial of Johnson may or may not happen, and he may ultimately be found guilty – of wire fraud – the real message here is that perhaps it is time to stop the farce that is internal bank “self reviews” of alleged fraud, which as this incident confirms are merely a waste of time and shareholder funds.

• KIM
• Serious Fraud Office

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Well that is all for today

I will see you on Saturday to deliver the Friday night commentary.

all the best

h