Blink, and you missed the “sell off” from Italy’s failed referendum vote.

In the initial hours after yesterday’s vote which has cost Italy’s PM his job and ushered in a period of political limbo and potential chaos, markets were jolted by the scale of Renzi’s defeat which, as Reuters put it, “pointed to further turbulence and political crisis in the euro zone’s heavily indebted third-largest economy and particular uncertainty was focused on the country’s fragile banks.”  The euro fell to a 20 month low, as low as $1.0508 and the Milan bourse shed as much as 2% while Italian bond yields spiked sharply higher.

As confirmed by the following headlines, there was a palpable sense of panic about how markets would react:

• Renzi Quits as Italy Referendum Defeat Deepens Europe’s Turmoil
• Shares of Monte Paschi, UniCredit don’t immediately set opening price, limit down
• Pop. Milano drops as much as 6%, Banco Popolare as much as 5.9%
• While ‘No’ outcome shouldn’t be major surprise, “margin of rejection and news of Renzi’s resignation will spook the markets”
• Spread on Italian government debt seen widening further when markets open, stock market down
• Italy ‘No’ a Lost Opportunity; Won’t Impact Utilities: Bernstein
• Markets to Correct on Italy Vote, EU Survival in Spotlight: Citi

And then, just before the European open, everything changed on a dime, or rather in “three minutes” as Guillermo Hernandez Sampere, head of trading at MPPM EK put it: “After Brexit, it took three days for markets to shake it off, with Trump it took three hours, with Italy it took three minutes.The fast money, who expected markets to fall further with this outcome, are now covering their positions.”

Well, maybe not exactly three minutes but, well see for yourselves: the rebound was enough to prompt questions if the ECB now has its own plunge protection team.

What happened was the following: after global stock futures slid on Sunday night, European equities shrugged off the outcome of the Italian referendum to rally the most since the U.S. election, with the Stoxx Europe 600 rising as much as 1.4% in early London. In fact, European shares soared the most since the Trump presidential victory, even as Italian banks sustained losses and the cost of insuring their bonds against default jumped. Gold erased earlier gains to head for the lowest close since February, while equity volatility indices slid in Europe and the US.

Italian financials rose 0.5 percent having fallen more than 4 percentand shares in the world’s oldest bank, Monte dei Paschi were flat on the day after being suspended at the opening.

Political risk from Italy hasn’t spread beyond its borders as markets were correctly positioned for the anti-establishment mood sweeping around the world. This was a departure from the Brexit referendum and Donald Trump’s surprise election, when traders were caught out by populist votes.

The Euro, likewise, after falling to 20 month lows, rebounded strongly, and was trading virtually unchanged from its Friday levels, as the dollar and gold sold off, while 10y Treasury futures dropped to session lows, with the March contract touching lows of 124-09+ after block trade.

To be sure, not everyone was a winner on the news associated with Italy’s political limbo, and Italian namls Banca Popolare di Milano Scarl and UniCredit SpA both slid at least 2% as the outcome of the referendum raised questions about the nation’s plans to plug holes in the banking sector. Renzi’s reforms were aimed at simplifying the legislative process in a nation that’s seen 63 governments since the end of World War II. However, even Italy’s banks seemed ready to forget anything ever happened on Sunday night and were poised to move into the green at the first possible opportunity.

Bonds remained under pressure though. Italy’s benchmark 10-year bond yield jumped 11 basis points (bps) to 2.01%, widening the premium investors demand for holding Italian bonds over safer German bonds to 175 bps, before easing slightly.

“What the market is watching for is not so much the vote itself,” but the potential fallout from a Renzi resignation, said Ric Spooner, chief market analyst in Sydney at CMC Markets Asia Pacific Ltd. Payrolls “showed an improvement in the U.S. labor market and it’s all moving in the right direction for the Fed to continue raising rates.”

This is where we stand as US traders walk in: The Stoxx Europe 600 Index climbed 1.3 percent at 10:05 a.m. in London. Italy’s FTSE MIB Index, one of the worst-performing stock indexes in the world this year, rose 0.3 percent.  Futures on the S&P 500 Index were up 0.4 percent, after the underlying benchmark ended Friday up less than 0.1 percent.

Credit-default swaps on Italy jumped 14 basis points to 186 basis points, the highest since June. The cost of insuring Banca Monte dei Paschi SpA’s senior bonds against losses for five years jumped 27 basis points to 482 basis points, the highest since July, according to data compiled by CMA. Credit-default swap contracts insuring UniCredit’s senior bonds against losses rose 13 basis points to 224 basis points.

However, while there was some Italy-focused risk, 10Y Treasury yields rose two basis points to 2.40% after shedding seven basis points on Friday, as concerns about a short covering squeeze in US Treasuries quickly faded.

As a result of the price action, a favorable narrative was quickly spun: “Our base scenario is a caretaker government which could be in place before Christmas, and no new elections before 2018,” Indosuez Wealth Management chief economist Marie Owens Thomsen said. “If indeed things pan out according to our base scenario, there would be little reason for any broad-based turmoil. It is still utterly unlikely that Italy would leave the EU or the euro.”

Others jumped on the bullish bandwagon: “Rather than fretting about political risk, companies appear to be gearing up for further expansion. Employment is rising at one of the fastest rates seen over the past five years,” said Chris Williamson, chief economist at Markit.

In short, it is as if Italy’s referendum not only never happened, but was a good thing all along, and with that S&P is set to rise back to new all time highs.

Market Snapshot

• S&P 500 futures up 0.6% to 2205
• Stoxx 600 up 1.3% to 344
• FTSE 100 up 0.8% to 6788
• DAX up 1.8% to 10704
• German 10Yr yield up 3bps to 0.31%
• Italian 10Yr yield up 8bps to 1.99%
• Spanish 10Yr yield up 2bps to 1.57%
• S&P GSCI Index up 0.6% to 388.8
• MSCI Asia Pacific down 0.6% to 135
• Nikkei 225 down 0.8% to 18275
• Hang Seng down 0.3% to 22506
• Shanghai Composite down 1.2% to 3205
• S&P/ASX 200 down 0.8% to 5400
• US 10-yr yield up 2bps to 2.4%
• Dollar Index up 0.18% to 100.95
• WTI Crude futures up 0.6% to $52.00
• Brent Futures up 0.6% to $54.79
• Gold spot down 1.1% to $1,165
• Silver spot down 1% to $16.57

Bulletin Headline Summary from RanSquawk:

• European equities enter the North American crossover in positive territory despite the victory for the ‘No’ camp in the Italian referendum
• FX price action this morning has been all risk based, with the sharp comeback in equities after Italy’s referendum vote mirroring that seen in the wake of the US election result
• Looking ahead, highlights include UK and US Services PMI, ISM non-Manufacturing PMI, Fed’s Dudley, Evans, Bullard, Draghi

Top Global Headlines:

• Italy Sinks Into Political Limbo as Defeat Sweeps Renzi Away: Prime Minister Matteo Renzi announced his resignation, Finance minister cancels trip to Brussels as cabinet meets
• Trump Takes On China in Tweets on Currency, South China Sea: President-elect had been criticized after call with Taiwan, offshore yuan drops amid concern China to be named manipulator
• Trump Warns U.S. Companies Against ‘Very Expensive Mistake’
• Norwegian Surges After U.S. Approves Trans-Atlantic Expansion: Carrier’s Irish unit receives approval for U.S.- Europe routes
• Dakota Access Oil Pipeline in New Setback as U.S. Permit Denied: Analysis, exploration of alternative sites needed, Army says
• Citi Makes a Clarion Call for Commodity Bulls With 2017 View: Bank bullish on oil, copper, zinc on 6 to 12-month horizon
• Novartis CAR-T Has 82% Remission Rate in Pediatric Study
• Burberry Gains After FT Says Retailer Rejected Coach Approach

* * *

Asian stock markets, many of which were not open long enough to take advantage of Europe’s miraculous ramp, traded lower amid European political uncertainty after the Italian referendum in which PM Renzi lost and announced that he is to resign. This pressured Nikkei 225 (-0.8%) and ASX (-0.7%), alongside weakness in US equity futures. Chinese markets conformed to the negative tone with Shanghai Comp. (-1.3%) further weighed by a disappointing liquidity injection by the PBoC, while the launch of the Shenzhen-Hong Kong stock connect only briefly helped stem downside for the Hang Seng (-0.4%) and Shenzhen Comp. (-0.8%). 10yr JGBs traded higher as risk averse sentiment resulted in a flight to safety, although upside was limited after the BoJ’s buying operations were for a relatively paltry JPY 370bn of JGBs.

Top Asian News

• Billionaire Li Ka-Shing Offers $5.4 Billion for Australia’s Duet: Cheung Kong Infrastructure offers A$3 per share in cash
• Modi’s Cash Clampdown Set to Shrink India’s Key Services Sector: Nikkei Services PMI plunges to lowest since December 2013
• China Regulator Slams Leveraged Stock Acquirers as ‘Robbers’: CSRC chairman questions funding sources of some acquisitions
• New Zealand’s John Key to Step Down as Prime Minister: Key says he couldn’t commit to serving another full term
• Trump Takes On China in Tweets on Currency, South China Sea: President-elect had been criticized after call with Taiwan
• Man GLG Asia Hedge Fund Managers Walsh and Vidale Said to Leave: Departure came after April closure of a GLG Asian equity fund
• Shenzhen Opens Stock Market Up to the World, Is Little Noticed

In Europe, as noted above, it was a story of a major rebound, even as the Italian referendum has stolen the headlines so far this morning, with the week kicking off in a busy fashion. The price action seen across asset classes has been remarkably similar to that seen in the wake of the Brexit and Trump victories, with initial risk off sentiment dictating play, before a sense of calm returns to markets to see the entirety of the risk-off price action reversed. This sees equities trade firmly in the green by mid-morning, including the FTSE MIB (+0.4%). However it is worth noting that Italian banks remain the underperformers, with Unicredit lower by 4.7%. In terms of reasons behind the reversal, views vary across major banks with Nomura highlighting that the No vote was already priced in, however with the likes of Citi and MS suggesting that a correction could be seen due to political volatility in the form of the likelihood of elections and the possibility of an ‘Italexit’. Also of note BNP Paribas suggest that the ECB are less likely to announce a scaling back of QE at their meeting. Bunds opened higher this morning, before paring their opening gains and falling to see a total move of over a point, while the GE/IT spread widened this morning by approximately 6bps.

Top European News

• Aixtron Sees Slim Path to Save China Sale After Obama Order: Decision leaves door open for sale if U.S. unit is split off
• RBS Will Pay Up to $1 Billion Over 2008 Rights Issue Claims: The bank says the settlement covered by existing provisions
• $38 Billion Finnish Fund Moves Assets to U.S. as Europe Founders: Ilmarinen used to be underweight U.S. assets
• U.K. Supreme Court Brexit Hearing Moves EU Exit Decision Closer: All 11 judges to hear government case on triggering Brexit
• VW’s German Ranks Gird to Face Questions as U.S. Pursues Execs: Dozens hire lawyers as Justice Department seeks cooperators

In currencies, the euro was unchanged from Friday’s close 1.0674, paring a slump of as much as 1.5% earlier in the session. Polls show an early election in Italy would see the anti-euro Five Star Movement sweep into power. The offshore yuan lost 0.1 percent as Chinese shares declined. U.S. President-elect Trump rejected criticism of his decision to take a phone call from Taiwan’s president and reiterated concerns over China’s currency and trade policies to his 16.6 million Twitter followers. The kiwi weakened 0.6 percent as New Zealand Prime Minister John Key said he’ll stand down and backed Finance Minister Bill English to succeed him. The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, jumped 0.3 percent following its first weekly retreat since Trump’s victory.

In commodities, gold swung fell 1 percent, extending a 0.5 percent decline last week that was its fourth straight weekly loss. Oil prices are also continuing higher, in line with risk sentiment, but driven by the coordinated intentions on production levels emanating from the OPEC meeting next week. Another OPEC meeting scheduled for the weekend ahead in Vienna. Base metals are also showing some modest gains in the early part of the week, with the risk on mood benefitting from growth/infrastructure spending prospects. Copper for three-month delivery rallied 1.6 percent, while zinc gained 1.8 percent and Nickel rallied 1.4 percent.

DB’s Jim Reid concludes the overnight wrap

Only one place to start this morning and that’s with the Italian referendum vote. With almost all votes accounted for, PM Renzi has formally announced defeat after a relatively wide margin of 60% versus 40% voted in favour of rejecting the reforms. Renzi has said that he will submit his resignation to Italy’s president, Sergio Mattarella, this afternoon and also said that he will not be available to lead a caretaker government. The reaction in markets has been fairly orderly so far although we may have to wait for the European open to see the full impact. The Euro is down a little over 1%, dragging a number of other European currencies with it. Equity markets in Asia are down anywhere from -0.50% to -1.50% while equity index futures are down -0.30% in the US. In rates 10y Treasury yields are just over 3bps lower.

The obvious question now is what next? Well clearly the immediate risk is political instability. We’ll refer back to DB’s Marco Stringa’s report from last week where he highlighted that the short term tail risk is an immediate election (not his base case but perhaps a higher risk with the large no vote yesterday). The trigger would be failure to form a new government due to unbridgeable divisions among traditional parties. A failure to find a compromise on a new electoral law could also have a similar impact but with a longer time horizon. All eyes would be on the banking sector in such a scenario and if a solution wasn’t found then stress could eclipse July 2016 levels. Marco’s central case is that a new government supported by a similar parliamentary majority to the current one, with a narrow objective – writing a new electoral law – and limited duration will be formed. This muddle through scenario means that Italy’s economy will continue to perform poorly in both absolute and relative terms and over the medium term there will have to been a convergence to either pro-reform government or a euro-sceptic government. So this is only the beginning of a long path ahead for Italy but expect swift political manoeuvrings this week as the country will need to try to find a solution quickly.

The other populist test this weekend was the Austria presidential election where the Green party backed independent candidate, Alexander Van der Bellen, came out on top versus the far right Freedom party candidate, Nobert Hofer, by a score of 53.3% to 46.7%. Hofer has since conceded defeat. As our economists highlight, despite this result, Austria still faces a complex political outlook. First, the populist FPO party is leading in the opinion polls by about 8pp and it will be interesting to see whether Hofer’s defeat narrows this lead. They note that at the moment, the FPO is heading towards the late 2018 parliamentary election in a position of strength. Secondly, Chancellor Kern, sitting atop a mainstream coalition of SPO/OVP, is struggling with his reforms. He rules out early elections, but there is nevertheless a non-negligible risk that his government collapses already in 2017, giving a second opportunity to test support for populism in Austria. For example, the longer the muddling-through of the grand coalition last and the stronger their underperformance in the polls, the more likely there will be an early election.

Continuing with the politics theme, the remaining weekend newsflow is focused on the latest round of comments from President-elect Trump. In a social media posting, Trump warned of heavy import tax tariffs for US companies moving production overseas and selling back into the US, suggesting a possible 35% tariff for those companies that do. Clearly the statement is pretty ambiguous for now and throws open a whole wide range of questions particularly for businesses with multiple entities and so forth. A wider question also might be how other countries respond to such possible tariffs. One to keep an eye on.

Switching over to this week’s main event, that being the ECB meeting this Thursday. As a base case our European economists expect the ECB to announce a 6-month extension of the current €80bn QE programme (an extension from March 2017 to September 2017). This is likely to be complemented by a move to improve the supply of eligible bonds, perhaps by the removal or softening of the yield floor. This would facilitate a steeper yield curve and incentive transmission. In an alternative scenario our economists believe that the market would react negatively to say a slowing in the pace of purchases to €60bn. Indeed our economists have derived three rules that need to be satisfied by spot and forward core inflation in order for the ECB to taper. The soonest these are likely to be satisfied is mid-2017. They go on to highlight that if the ECB’s above-consensus view on growth is correct, the euro exchange rate depreciates in line with DB’s house view and systematic financial crisis is avoided, tapering could be announced in June 2017. On the other hand if their below-consensus view on growth is correct and the growth/inflation relationship is weak, tapering could wait until end-2017. The last thing to note is today’s market reaction to the referendum result which also has the potential to influence Thursday’s meeting actions.

Wrapping up the rest of the markets in Asia this morning where the other focus in FX has been on the New Zealand Dollar which is down close to 1% following the unexpected resignation of the country’s Prime Minister, John Key. The PM has since backed his deputy for the role and said that he is stepping down for personal reasons. There’s also been a bit of data out of China this morning. The Caixin services PMI was reported as rising 0.7pts to 53.1 in November which is the highest level since July 2015. Combined with a weaker manufacturing reading however, the composite has held steady at 52.9.

A quick recap now of how we closed out Friday. For those that missed it, the focus in what was an otherwise fairly quiet session ahead of the weekend events, was on the US November employment report. In a nutshell it was a fairly mixed batch of data. The headline nonfarm payrolls gain of 178k pretty much matched expectations (180k) while cumulative net revisions amounted to a modest -2k drop. Most noteworthy was the unexpected drop in the unemployment rate from 4.9% to 4.6% (vs. 4.9% expected) and to the lowest level since August 2007. The broader U-6 measure also dipped two-tenths to 9.3% and to the lowest since April 2008. The interesting take on this came with the fact that the unemployment rate dipped as the labour force participation rate dropped one-tenth to 62.7%. Meanwhile the other interesting take away was the softness in average hourly earnings (-0.1% mom vs. +0.2% expected). It was actually the first monthly decline in earnings since December 2014 and had the effect of lowering the YoY rate to +2.5% from +2.8%.

Onto this week’s calendar now. This morning in Europe we’re kicking off the week with the remainder of the November PMI’s which includes the final services and composite revisions for the Euro area, Germany and France, as well as a first look at the data for the UK and non-core. Euro area retail sales data for the month of October is also out today. In the US this afternoon we’ll also get the remaining PMI’s as well as the ISM non-manufacturing print for November and labour market conditions index. Tuesday kicks off in Germany with the latest factory orders data before we then get the final Q3 GDP reading for the Euro area. In the US tomorrow we’ll get the October trade balance reading, Q3 unit labour costs and nonfarm productivity, October factory orders, December IBD/TIPP economic optimism reading and the final durable and capital goods orders revisions. Germany gets things going again on Wednesday when we’ll get the latest industrial production report. French trade data and UK industrial and manufacturing production will also be released. The only data due out in the US on Wednesday is JOLTS job openings and consumer credit for October. China will also release November foreign reserves data at some stage. The early data to get things going on Thursday comes from Japan where the final Q3 GDP reading will be released. China will then be following with important November trade data. There’s no data in Europe on Thursday but all eyes will be on the main event of the week, the ECB policy meeting outcome just after midday. The only data out of the US on Thursday will be initial jobless claims. We close out the week in Asia on Friday with the November CPI and PPI prints in China. In Europe we’ll get trade data in Germany, industrial production data in France and trade data in the UK. Over in the US we’ll get the final October wholesale inventories report along with a first look at the University of Michigan consumer sentiment report. Away from the data the Fedspeak this week all comes today with Dudley, Evans and Bullard scheduled.

Forget the “impossible trinity” – Turkey is facing a just as impossible dilemma where it is trying to juggle two things at the same time: attempts to lower interest rates while supporting its currency, and predictably it is failing.

On Friday, the Turkish Lira crashed to record lows, plunging as much as 3.60 against the dollar when Turkish president Erdogan urged banks to lower interest rates because in order to stimulate investment in the economy “there is no other remedy”.

He referred to the United States, Japan and Europe as examples of where rates are low and questioned why Turkey still had such high rates. The Lira, which has soundly ignored the recent rate hike by the Turkish Central bank, plunged on the news, which in turn prompted Erdogan to tell his countrymen to convert their dollars into Lira and gold.

“For those who have foreign currencies under the pillow, come change this to gold, come change this to Turkish lira. Let the lira win greater value. Let gold win greater value,” he said during a televised speech in Ankara.

Then overnight, Turkey continued its crusade against high rates, so critical to keep the currency from foundering, when it announced it would prevent companies from borrowing at high rates. The measure will be part of a broader package of economic steps due to be announced Thursday, according to state-run Anadolu Agency which cited Deputy PM Veysi Kaynak as saying in an interview on CNNTurk.

“The rise in the dollar is certainly important, but the rise in interest is affecting our companies very quickly.” He added that the “prime minister will explain a package of measures that will touch the daily lives of our people,” and “relieve our companies financially,” including our banks.”

It was not exactly clear how government pressure to lower rates would help the plunging currency, however, in a surprising twist, one which likely seeks to isolate the Turkish Lira from its dependency on the US dollar, Erdogan said on Sunday that Turkey is taking steps to allow commerce with China, Russia and Iran to be conducted in local currencies, in what Reuters dubbed “the government’s latest effort to shore up the tumbling lira.”

Speaking at the opening ceremony of a shopping mall in Istanbul, Erdo?an said that he had proposed Russian President Vladimir Putin to conduct trade between the two countries with local currencies.

“I proposed Putin the following: Let’s do our trade in local currencies. Whatever I buy [from you] I shall pay you in Russian ruble, and whatever you buy from me make the payment in Turkish Liras,” said Erdogan on December 3, quoted by Hurriyet.

He added that he had made the same offer to China and Iran and his offer was found reasonable.  “We have given the necessary instructions to our central banks and we will try to conduct such [trade] relationships between us through this way,” Erdogan said.

Erdogan again reiterated his call to Turkish citizens to convert their foreign exchange into gold or the Turkish Lira. “Those who keep foreign currency under their mattress should come and turn them into lira or gold,” he said.

Stating that one should convert their foreign currencies to liras or gold against the ones who want to “destroy us,” Erdogan also answered the question of ‘what if we lose money,’ with this currency conversion.

“Look, this is national, there is fruitfulness in this, you will not make a loss from this, do not worry,” said Erdogan, adding that it was actually the “other,” a reference to foreign currencies, that would make the Turkish people lose because “the other is a representative of the imperial logic.” “You look after your money that is local and national; the money will stay here,” he said.

We expect another sharp move lower in the TRY following these overtures by what increasingly sounds like a desperate regime, one in which Erdogan is likely set to soon take over the central bank next,in his quest to both lower rates and boost the currency.

Following  yesterday’s unexpected phone call between Taiwan president Tsai Ing-wen and President-elect Trump, which broke with decades of foreign policy norms resulting from Washington’s official “One China” stance….

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… and which spooked numerous foreign policy pundits, concerned that China would see the call as a hostile act by the Trump team and lead to a material deterioration in US-China relations, which also prompted Trump to take to twitter on Friday night to explain that he did not initiate the call but was merely responding to good wishes from the president of Taiwan…

….and further poked the hypocrisy of the US establishment by saying “Interesting how the U.S. sells Taiwan billions of dollars of military equipment but I should not accept a congratulatory call” in a follow up tweet…

… China responded on Saturday morning in two ways.

First, as Xinhua writes in its English edition, it “lodged solemn representations with the United States, urging the latter to honor its commitment to the one-China policy, Foreign Ministry spokesperson Geng Shuang said on Saturday.”

“It must be stated that, there is only one China and Taiwan is an inalienable part of China’s territory, and the government of the People’s Republic of China is the sole legitimate government that represents China. Those are all facts recognized by the international community,” Geng said. The one-China principle is the political foundation for the China-U.S. relations, Geng said.

The White House on Friday reaffirmed backing for its long-standing support of the one-China policy and the three China-U.S. joint communiques. “We remain firmly committed to our one-China policy based on the three joint communiques,” White House National Security Council spokesperson Ned Price told local media. “Our fundamental interest is in peaceful and stable cross-strait relations.”

Geng also urged “relevant parties in the US to honor the commitment to the one-China policy as well as the three Sino-U.S. joint communiques, and to handle Taiwan-related issues with caution and care to avoid unnecessarily interfering with the overall situation of Sino-US relations.” That was interpreted as a direct warning to Trump to be careful while observing international diplomatic protocol, especially when China is involved.

According to AFP, it was not immediately clear whether Trump’s telephone call with Tsai Ing-wen marked a deliberate pivot away from Washington’s official “One China” stance, but it fuelled fears he is improvising on international affairs. China added that the one-China principle is a cornerstone for healthy development of Sino-U.S. relations, and China does not want this political foundation to be interfered with or damaged, Wang added.

That said, to avoid being seen as too critical on the president-elect, Xinhua also reported that overnight, Foreign Minister Wang Yi called Tsai’s call with Trump “a little trick”, or loosely translated in English as “gimmick”, by Taiwan which would not change the one-China consensus in international community. He added that the “One-China” policy is the foundation for the healthy development of China’s relationship with the U.S.

Further de-escalating tensions, Wang also said on the sidelines of a foreign policy seminar on Saturday that “I don’t think it will change the one-China policy of the U.S. government either.”

* * *

Prior to Beijing’s response, in China, analysts painted the call as something originating from Taiwan, claiming it was a deliberate Taiwanese attempt to upend America’s China policy. Jin Canrong, from China’s Renmin University, told AFP Tsai had been “very cunning” in her call to Trump.

“Tsai Ing-wen would like to draw the United States against the mainland,”he said.

During his presidential campaign, Trump repeatedly accused China of manipulating its currency to harm US manufacturing and threatened to impose tariffs on some of its exports. “One can see at once that Trump is very reckless, not familiar at all with the whole context,” Jin said.

Chinese citizens were quick to react to the call on social networking platforms, noting Trump’s reference to Tsai as “president” whereas on the mainland she is only referred to as Taiwan’s “leader”.

“The US dares to recognise Taiwan independence,” one user said on Weibo, China’s version of Twitter.

Another posted: “He calls Tsai as +president+ on Twitter!!! Is Trump thinking of using Taiwan as a bargaining chip in his negotiations with China?”

However Zhang Wensheng, of Xiamen University, was more circumspect, dismissing Trump’s use of the term “president” as “personal greetings” that “do not reflect a political position whatsoever”.

While the motive behind Trump’s conversation with the Taiwan president remains unclear – and perhaps there was no motive to begin with – Friday’s incident is a reminder that under the President-elect, everything is about to change and what was formally considered “mere protocol” is now officially out of the door, for better or worse.

Earlier today the Kersten Institute for Governance and Public Policyhighlighted an updated pension study, released by the Stanford Institute for Economic Policy Research, which revealed some fairly startling realities about California’s public pension underfunding levels.  After averaging $77,700 per household in 2014, the amount of public pension underfunding for the state of California jumped to a staggering $92,748 per household in 2015.  But don’t worry, we’re sure pension managers can grow their way out of the problem…hedge fund returns have been stellar recently, right?

Stanford University’s pension tracker database pegs the market value of California’s total pension debt at $1 trillion or $93,000 per California household in 2015. 

In 2014, California’s total pension debt was calculated at $77,700 per household, but has increased dramatically in response to abysmal investment returns at California’s public pension funds that hover at or below zero percent annual returns.

The Pension Tracker database (www.pensiontracker.org) is maintained by the Stanford Institute for Economic Policy Research (SIEPR) and is intended to help localize pension data by providing the ability to look up the market value of pension debt in any locality in California.

Looking back to 2008, the underfunding levels of California’s public pension have skyrocketed 157% on abysmal asset returns and growing liabilities resulting from lower discount rates.

Perhaps this helps shed some light on why CalPERS is having such a difficult time with what should have been an easy decision to lower their long-term return expectations to 6% from 7.5% (see “CalPERS Weighs Pros/Cons Of Setting Reasonable Return Targets Vs. Maintaining Ponzi Scheme“)…$93k per household just seems so much more “manageable” than $150k.

Oddly enough, California isn’t even the worst off when it comes to pension debt as Alaska leads the pack with just over $110,000 per household.

Of course, at this point the question isn’t “if” these ponzi schemes will blow up but rather which one will go first?  We have our money on Dallas Police and Fire…