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America Needs A Major Enemy To Justify It’s Defense Budget

A contrary view to most of Western media and governments propaganda machine. A must read for any red blooded and chest beating American.  With American “defense” budget pushing closer $1 Trillion mark (higher than the next 10 countries combined), the US Industrial Military complex needs another enemy to justify the expenditure. The bigger the enemy the better. Of course, China and Russia become our primary targets. 

Which begs the question, were the miscalculations in Ukraine intentional or unintentional?  

Of course they were intentional. If you don’t think that CIA or Pentagon analyst knew how Russia would react, I have some Notell and Pets.com stock to sell you. Unfortunately, there is only one way forward for the US Politicians and the Military Industrial complex. To escalate things for the benefit of profit. What the idiots don’t understand is what this will lead to. I have already outlined the timing and exactly what will happen in my comprehensive report Nuclear World War 3 Is Coming Soon.When, How & Why 

It is downright scary how things are beginning to line up.  

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RT Writes: ‘US looking for a major enemy to justify its defense spending’

As US spending on defense reaches $1 trillion a year and defense giants such as Boeing gain increased lobbying power, the US must justify this money by creating tangible enemies around the world, political analyst Patrick Hennigsen told RT.

RT: Why do some people in America say they were surprised at the speed Russia moved on Crimea?

Patrick Hennigsen: Personally I tend to be skeptical about press briefings or PR balloons coming out of Washington, especially around a crisis like this. Unless of course they were completely asleep at the wheel, or were totally incompetent, I find it hard to believe that they couldn’t have predicted at least a Crimea referendum result because of the crisis in Kiev.

So, even I in February said that Ukraine may be partitioned into two or three parts as a result of this crisis. But experienced intelligence analysts in the State Department or the CIA would have war-gamed five or six different possibilities, or any reaction as a result of an action taken with regime change in Kiev.

So it’s quite unbelievable that this would have quote, unquote, taken them by surprise. But this suits the priorities of the Pentagon in Washington, being able to talk up military confrontation in order to increase spending on defense organizations, to increase contracts which are going to be reviewed this year with the Pentagon and other defense organizations.

So it doesn’t surprise me. Even though they’ve made this statement, it’s quite disingenuous in my opinion.

RT: Has the US administration miscalculated? What and who are influencing America’s foreign policy with regard to Russia?

PH: I think throughout recent history, at least if not the whole of the last 30 to 40 years, the United States will never admit that it’s made a mistake or that any of the policies that it instituted have had a negative effect on the world. So that doesn’t surprise me, but certainly there are a lot of opportunists who stand to gain incredibly financially as a result of the crisis, a confrontation, a reigniting of the Cold War with Russia.

Currently the new United States is looking for an enemy, a major enemy, which they need to justify upwards of $1 trillion a year in total if you look at it in defense spending. And these are contracts that belong to corporations that are very powerful, as lobbies in Washington DC they hold incredible influence over political leadership, that is the system right now in the United States and Washington DC and so it shouldn’t surprise anybody that the opportunists are now jumping on board in the media and the corporate lobbies that really determine the agendas, the foreign policy agendas that are laid out by our political leadership in Washington DC.

 

People attend celebrations on the main square of the Crimean city of Simferopol March 21, 2014. (Reuters)

People attend celebrations on the main square of the Crimean city of Simferopol March 21, 2014. (Reuters)

 

‘Decision to join Russia was a no-brainer for Crimea’

RT: Why do you think Crimean people voted in such large numbers to become part of Russia?

PH: Well, if you put aside general anti-Russian propaganda that is running rife right now regarding Russia being a “corrupt country,” a “dictatorship,” you look at the international organizations that have been monitoring elections in Russia and have commented on how transparent they are, how well organized they are. From a Crimean population’s stand point it’s a no-brainer. If you put yourself in their position you’re looking north and you’re seeing the total destabilization and the collapse of rule, the collapse of government. A complete economic collapse in Ukraine as a result of what happened in Kiev. So hence you have a huge voter turnout, an incredible landside of a majority.

And any person in the world would make a similar decision. If Northern Ireland had to make a decision because the government in London collapsed, neo-fascists took over at gunpoint in London, and people of Northern Ireland could have a referendum, of course they would join the south; they would join the Republic of Ireland for their own personal stability, for their own safety. So it’s not that big of a stretch when you look at it from a larger perspective.

RT: How can the fact be explained that the transition of the military in Crimea went so smooth? As you know, just a few Crimean soldiers decided to return to Kiev, while others joined the Russian army.

PH: The transition militarily in Crimea shouldn’t surprise anybody, because between the Ukraine and Russia you have over two decades of cooperation, military cooperation from the top brass, down to the soldiers who were doing drills together and maneuvers together for 20 years and even further back when you count the time of the Soviet Union. So Russia’s military presence goes back centuries in the Crimea. So when you look at it from that perspective, it shouldn’t surprise anybody that there would be a relatively smooth transition. I can’t believe any Ukrainian soldiers have any desire, nor do any Russian soldiers, to be firing at each other. Especially as they’ve had such a close and friendly and cooperative relationship in recent decades.

 

People celebrate the ceremonial change of time on the railway square in the Crimean city of Simferopol March 30, 2014. (Reuters)

People celebrate the ceremonial change of time on the railway square in the Crimean city of Simferopol March 30, 2014. (Reuters)

 

‘US leadership has little respect for Iraq’

RT: Why did Obama compare Iraq to Crimea? Could those two cases actually be compared?

PH: Those comments by President Obama are very sad comments in respect to the Iraqi people. I think comments like that really demonstrate how little respect to the US leadership really has for the country of Iraq and for its people and they seem to forget the huge price that the Iraqi people paid in blood, paid in culture, paid economically for the designs of a handful of US transnational corporations and the Pentagon.

So to make such a statement, such an unequivocal statement, that has no basis really in reality. You can’t compare Iraq and the Crimea. How many Iraqis died since the first Gulf War? Two million, by some people’s estimations. To make that sort of comparison to me is intellectually sloppy and also very disrespectful to all the people who have paid the ultimate price for US foreign policy objectives in the Middle East.

RT: What do you think were Moscow’s aims in Crimea?

PH: I think in terms of Russian diplomacy regarding the Crimea, what you’re really talking about is the government in Moscow’s diplomacy and communication and relationship with the people of the Crimea. I don’t think it should surprise anybody if you look at the history of that part of the world, even Mikhail Gorbachev, who is considered by many in the West as a globalist, as an internationalist, said that the referendum in the Crimea corrected an old mistake, which was made under Nikita Khrushchev in the Soviet Union era. And that has been corrected that Crimea really should be a part of Russia and the people cast their ballots and they spoke quite loudly in fact and the result is in.

You have many other international commentators that would agree. The fact that the UN has not voted to recognize the result in terms of other opinion of UN countries is really disappointing. What the people themselves in that country have said and the argument in the West is that it’s in breach of the Ukrainian constitution. Frankly, the Ukrainian constitution ceases to exist the minute the government in Kiev was taken over at gunpoint, so all bets are off at that point. So it’s quite a disingenuous argument by the West to say that the referendum in the Crimea is in breach of the Ukrainian constitution, considering what happened in Kiev only weeks before.

More Proof That Most Economists Are A Waste Of Space

I have long argued that most economists can’t predict future market or economic developments even if the future walks up to them and hits them in face. How dumb are they? (see full article below)

The combination of an improving job market, pent-up consumer demand, less drag from U.S. government policies and a brighter global outlook is boosting optimism for the rest of 2014.

 “We think that once temperatures return to more normal levels, we will see a lot of pent-up demand released,” said Gus Faucher, senior economist at PNC Financial Services. “People will be buying cars and homes and making other purchases that they put off during the winter.”

Yep, it’s the weather everyone. As soon as that snow melts everyone will run out to buy homes and cars, propelling the US Economic growth much higher. Give me a break. Of course, the brilliant economists above don’t take massive credit, overvaluation, speculation, equity markets, etc… bubbles into consideration. For them, it is irrelevant. Yet, the first thing they should learn is as follows. It is not the economy that drives markets forward, it is the financial markets that dictate future economic developments.

That is the reason why recessions “officially” start 6-9 months after stock market tops. As per our mathematical and timing work we anticipate the markets to break down shortly, bringing the US Economy into a severe “official” recession by the end of the year. So, you have a choice. You can listen to such economists and go out to buy tech stocks OR you can start getting ready for the bear market of 2014-2017. If you would be interested in learning when the bear market will start (to the day) and it’s upcoming internal composition, please Click Here.  

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More Proof That Most Economists Are Waste Of Space Google

 

AP Writes: Why economists say 2014 could prove breakout year

WASHINGTON (AP) — Once this year’s harsh weather has faded, the U.S. economy could be poised for a breakout year — its strongest annual growth in nearly a decade.

The combination of an improving job market, pent-up consumer demand, less drag from U.S. government policies and a brighter global outlook is boosting optimism for the rest of 2014.

Many analysts foresee the economy growing 3 percent for the year, after a weak first quarter that followed a stronger end of 2013. It would be the most robust expansion for any year since 2005, two years before the Great Recession began.

One reason for the optimism: The government estimated Thursday that the economy grew at a 2.6 percent annual rate in the October-December quarter, up from its previous estimate of 2.4 percent. Fueling the gain was the fastest consumer spending for any quarter in the past three years.

The numbers pointed to momentum entering 2014 from consumers, whose spending drives about 70 percent of the economy.

Analysts cautioned that the brutal winter weather has depressed spending in the January-March. And they think economic growth has likely slowed to an annual rate of 2 percent or less this quarter. Yet that slowdown could pave the way for a solid bounce-back in the April-June quarter. Many think growth will be fast enough the rest of the year for the economy to grow at least 3 percent for all of 2014.

“We think that once temperatures return to more normal levels, we will see a lot of pent-up demand released,” said Gus Faucher, senior economist at PNC Financial Services. “People will be buying cars and homes and making other purchases that they put off during the winter.”

Economists have suggested before that the recovery appeared on the verge of acceleration, only to have their expectations derailed by subpar growth that left unemployment at painfully high levels.

This time, there’s a growing feeling that the improvements can endure.

“We are looking for progressively faster growth as the year goes on,” said Doug Handler, chief U.S. economist at IHS Global Insight.

The National Association for Business Economics predicts that the economy will grow 3.1 percent this year, far higher than the lackluster 1.9 percent gain in 2013.

If that forecast proves accurate, it would make 2014 the strongest year since the economy, as measured by the gross domestic product, expanded 3.4 percent in 2005. Since the Great Recession ended in June 2009, annual growth over the past four years has averaged a weak 2.2 percent.

The U.S. economy has been hit by a series of blows since then — from a Japanese tsunami and European debt crisis, which hurt U.S. exports, to Washington budget fights, which fueled uncertainty about the government’s spending and tax policies.

Tax increases and deep spending cuts that took effect in 2013 subtracted an estimated 1.5 percentage points from growth last year.

With Congress having reached a budget agreement and a deal to raise the government’s borrowing limit, companies now have more certainty about federal fiscal policies.

“We now seem to have a truce on budget issues, which means uncertainties have faded.” Faucher said. “That is a big reason growth will be stronger.”

Also helping will be an improving outlook overseas. Economies in Europe are strengthening, which should boost U.S. exports. In addition, the U.S. job market is improving.

The Labor Department said Thursday that the number of people seeking unemployment benefits last week reached its lowest level since November — an encouraging sign that hiring should be picking up.

In February, U.S. employers added 175,000 jobs, far more than in the two previous months. Though the unemployment rate rose to 6.7 percent from a five-year low of 6.6 percent, it did so for an encouraging reason: More people grew optimistic about their job prospects and began seeking work. The unemployment rate rose because some didn’t immediately find jobs.

With more people working, more consumers will have money to spend to boost the economy.

“The last missing link to a stronger recovery was income growth, and now we are seeing that,” said Joel Naroff, chief economist at Naroff Economics.

Unexpected events might yet prove that analysts are overly optimistic. But at the moment, economists don’t expect the standoff with Russia over Ukraine or the Federal Reserve’s paring of its economic stimulus to destabilize global markets or derail the U.S. recovery.

Naroff said the consensus view might even prove too pessimistic. He said he thought economic growth could achieve a vigorous 4.4 percent annual rate in the April-June quarter if pent-up consumer demand tops estimates. And he said growth could exceed 3.5 percent in the second half of this year.

Real Estate Mirage Breaks Down

AKA, dead cat bounce in the real estate market is over. According to the National Association of Realtors, pending home sales index “unexpectedly” fell 0.8% in February and 10.5% from a year ago level. This should not be unexpected to the readers of this blog. In fact, I have predicted that the housing market is topping out and rolling over as far back as September of 2013. If you would like to get a complete real estate report and learn exactly what will happen over the next few years, please read my comprehensive report. Real Estate Collapse 2.0 Why, How & When 

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Real Estate Mirage Breaks Down  Google

WSJ Reports: Vital Signs: Housing’s Recovery Is Losing Momentum

The National Association of Realtor’s pending home sales index unexpectedly slipped 0.8% in February, pushing the index 10.5% below its year-ago level. And with the January index revised down, pending home sales have fallen for eight consecutive months.

The downtrend foreshadows weakness in future existing home sales. (The pending sales index is based on contract signings, while sales are counted after closings.) While weather may have caused some buyers to hold off from housing hunting, affordability is becoming more of a challenge. Price increases and higher mortgage rates are pricing some potential buyers out of the market.

The NAR forecasts existing-home sales will total 5.0 million this year, down slightly from nearly 5.1 million in 2013.

BlackRock Rings The Proverbial Market Bell

BlackRock Inc. Chief Executive Laurence Fink’s letter highlights yet another aspect of short term thinking and speculative spirits in today’s market. Investor activism or forcing companies to either increase dividends, institute buybacks or otherwise increase short-term value through mergers, acquisitions, spin offs, etc…While it might seem like a good idea at the time, leading to a short-term bounce in an underlying issue, over the long-term it’s a big negative. In fact, I already wrote about Share Buyback and its repercussions earlier today. 

Mr. Fink is right on the money. For the most part, corporations should be left alone to manage their businesses over the long term by making necessary investments into capital expenditures, technology, new products and intellectual property. Not squeezing every cent out of their today’s stock market valuation. Yet, such short-term thinking in prevalent in today’s market environment.  Just another sign of a market top? You bet. 

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BlackRock Rings The Proverbial Market Bell Google

WSJ Reports: BlackRock’s Fink Sounds the Alert

In a shot across the bow of activist investors, BlackRock Inc. Chief Executive Laurence Fink has privately warned big companies that dividends and buybacks that activists favor may create quick returns at the expense of long-term investment.

In so doing, the head of the world’s largest money manager by assets lent his voice to a popular criticism of activist investors, even as his firm sometimes aligns with and may benefit from their efforts.

“Many commentators lament the short-term demands of the capital markets,” Mr. Fink wrote in the letter reviewed by The Wall Street Journal, sent to the CEO of every S&P 500 company in recent days, according to BlackRock. “We share those concerns, and believe it is part of our collective role as actors in the global capital markets to challenge that trend.”

Mr. Fink doesn’t specifically mention in his letter activist hedge funds, which typically take stakes and push for corporate or financial changes, from management ousters to buybacks, dividends and spinoffs. Instead, he addresses a broader concern that markets and companies generally have become too vulnerable to short-term thinking.

But the increasing clout of activists contributed to Mr. Fink’s decision to write the letter, people familiar with the matter said. New York-based BlackRock itself votes about a third of the time with dissident shareholders seeking corporate board representation, according to data from D.F. King & Co., a proxy-solicitation firm.

Activists are attracting more assets and enjoying greater acceptance, even as the debate continues over whether they are good for all shareholders and, more broadly, economic growth.

Critics of activists contend that when companies use cash or new debt to buy back shares or pay cash dividends to shareholders they are forgoing the opportunities to invest in labor, production or other potential avenues of future growth.

This month, Leo E. Strine Jr., chief justice of the Delaware Supreme Court, argued that constant pressure from shareholders may distract company executives and hurt returns. “Giving managers some breathing space to do their primary job of developing and implementing profitable business plans would seem to be of great value to most ordinary investors,” he wrote in the Columbia Law Review.

Activists, who move in and out of stocks more quickly than long-term managers like BlackRock, have said their actions do more than cause short-term pops.

By better focusing management, shedding low-performing businesses and returning unused cash to investors, companies are on stronger footing for the future, they said.

“The critique that activists are short-termed focus is a red herring that typically comes from underperforming companies that have no choice but to promise bluer skies in days to come,” Jared L. Landaw, chief operating officer of Barington Capital Group LP, said in an email. His activist investing firm holds stakes three years, on average, he said.

Unlike activists, BlackRock can’t just sell out of most stocks, as about 85% of its $2.3 trillion in equity assets are held in index funds, which mirror collections of stocks. That long-term view drives the firm’s thinking, even when it supports activists, said Michelle Edkins, BlackRock’s head of corporate governance.

Activists themselves say a big driver of their success in recent years has been the willingness of institutional investors to side with them. Management has to pay more attention when its biggest shareholders echo complaints that others raise.

Dissident shareholders who challenge management scored outright or partial victories in about 60% of board fights in 2013, the highest on record, according to FactSet, whose data go back to 2001.

Of the 30 fights that went all the way to a vote last year, activists won 17.

“Institutional investors are looking at these situations much more on a case-by-case basis” than in the past, said Richard Grossman, a Skadden, Arps, Slate, Meagher & Flom LLP lawyer who represents companies in activist fights. “That pendulum has swung, but it’s swung more to the middle.”

In 50 board fights from July 2009 through June 2013 that activist-nominated directors were up for election, BlackRock voted for dissident nominees 34% of the time, according to D.F. King.

That compares with 11% for Vanguard Group, one of its largest peers. But it is less than some other big investors, including T. Rowe Price Group Inc. and Fidelity Investments, which backed activists 52% and 44% of the time, respectively.

These types of situations can arise over different views on a number of issues, from buybacks to dividends to corporate breakups.

BlackRock voted for some dissident nominees of Jana Partners LLC in that hedge-fund firm’s fight to replace the board of Agrium Inc. last year, according to regulatory filings, a fight that Jana lost. It also supported some of TPG-Axon Capital Management LP’s nominees against SandRidge Energy Inc., in which TPG-Axon gained board seats.

BlackRock voted against Carl Icahn in campaigns against Forest Laboratories Inc. in 2011 and Oshkosh Corp. in 2012, filings show. Mr. Icahn lost both those votes, though in later years he gained board seats at Forest.

Ms. Edkins, BlackRock’s head of corporate governance, said votes are based on the quality of the nominees proposed by activists, which she said have generally improved. She said activist campaigns still represent a small minority of all situations in which BlackRock votes.

Buybacks. Another Nail In The Stock Market Coffin?

Just as human beings, Corporations are irrational when it comes to buying their own shares. Just as individual investors, they tend to accelerate buybacks at the top of the economic/market cycle and slow it down at the bottom. Case and point, corporate buybacks were at $160 Billion at 2007 top and only $20 Billion at 2009 bottom.

Today, in another sign that there won’t be a Cap-Ex boom, corporations are accelerating their buybacks and dividends to the pace unseen since the 2007 top. While most investors will see this as a positive, for me, it is yet another indicator that the market top is in. Or nearly in. When corporations don’t know what to do with their FED induced “funny money” the top is not that far behind. 

It has been our view since about December 31st, 2013 that the market top is in. Our mathematical and timing work continues to confirm that stand. If you would be interested in learning when the next bear market leg will start (to the day) and its internal composition, please Click Here. 

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Buybacks. Another Nail In The Stock Market Coffin?  Google

 

 

WSJ Reports: The Great Buyback Binge of 2013 Will Continue: S&P

U.S. companies bought back stock and paid dividends at a blistering pace last year, a trend that helped propel the stock market’s record-breaking rally. The heavy buying is expected to continue in 2014.

Stock buybacks among S&P 500 companies jumped to $475.6 billion in 2013, up 19% from a year earlier and the highest annual amount since 2007, when companies spent $589.1 billion on buybacks, according to S&P Dow Jones Indices.

In the fourth quarter, buybacks totaled $129.4 billion, up 1% from a quarter earlier.

Combined stock buybacks and cash dividends totaled $214.4 billion in the three months ended Dec. 31, the highest level since a record $233.2 billion were paid out in the fourth quarter of 2007. By comparison, the latest figure is almost three times the $71.8 billion total in the second quarter of 2009, when the economy was in the early stages of rebounding from the financial crisis.

S&P Dow Jones Indices

In returning money to shareholders, companies are tapping into cash piles they have reached record levels in the past few years as companies cut costs and took advantage of low interest rates to borrow funds.

Some 401 companies within the S&P 500 reported buybacks last year, according to Howard Silverblatt, senior earnings analyst at S&P Dow Jones Indices, with 339 of them also paying a dividend. He said 196 of those companies spent more cash on dividends than buybacks.

“I expect this trend of greater shareholder return to continue throughout 2014,” Mr. Silverblatt said.

At least at the onset of 2014, however, the pace of buyback authorizations has slowed. U.S. companies authorized $80 billion in stock buybacks last month, a 32% drop from last year’s record-setting amount but also the third-strongest February on record, according to preliminary data compiled recently by Birinyi Associates Inc.

IBMIBM -0.93%AppleAAPL +0.28% and PfizerPFE +1.54% paid out the biggest buybacks in the fourth quarter of last year. All purchased more than $4 billion of stock in the final three months of 2013. Five of the top 10 companies that implemented the biggest buybacks hailed from the tech sector. In addition to IBM and Apple, the other tech companies included Cisco SystemsCSCO +1.01%OracleORCL +2.21% andMicrosoftMSFT -1.02%.

The large payouts played a direct role in boosting investor confidence in a stock-market rally that pushed the S&P 500 up 30% last year. The stock index is slightly higher in 2014.

“Although there are headlines of record setting buybacks programs, the 19.2% increase in buyback expenditures for 2013 only matched the 19.2% average daily stock price increase,” Mr. Silverblatt said. “The average stock price for Q1 2014 is running 21.0% higher than Q1 2013, meaning that a 21% increase in current expenditures is necessary to purchase the same number of shares as last year.”

Buybacks can boost earnings-per-share — a closely watched measure of profitability — by reducing shares outstanding, although some companies use the stock they buy to deliver shares to executives who exercise stock options.

But skeptics deride buybacks. They say the cash could be deployed in a more efficient manner, such as investing in research and development, boosting hiring or buying an existing company. BlackRock Inc. Chief Executive Laurence Fink has been warning lately that buybacks can create quick returns at the expense of long-term investment.

Companies also have a history of buying back shares at the wrong time. At the end of 2007, buyback activity was near record levels just as stocks were in the early stages of a precipitous drop.

Still, investors have rewarded companies that execute buybacks. Firms that heavily repurchase their own shares have seen their stock prices outperform the overall market over both short and long time frames.  The S&P 500 Buyback Index, which measures the 100 stocks with the highest buyback ratios, has outperformed the broad S&P 500 over the past 12 months.

On a total-return basis, the Buyback Index is up 31% over the past year, while the S&P 500 is up 23%. The buyback ratio accounts for the amount of cash paid for common shares over the past four quarters, divided by the market capitalization of the common stock.

But worries have surfaced recently that buybacks may be losing their luster with investors, especially as the market has rallied to new highs. Since Jan. 1, the S&P 500 Buyback Index is up 1.3% on a total-return basis, compared to the S&P 500′s 1.4% gain.

Will China’s Economic Collapse Force A Revolutionary Change?

There is no question that China is in a heap of economic trouble. From massive credit bubble to empty cities, from shadow banking to slowing growth. We have covered it in great detail on this blog over the last couple of months. Plus, there are signs the Chinese bubble economy is starting to unwind with Hang Seng index plunging into an official bear market territory just a few days ago. My question is….

Will the Chinese crisis/collapse be severe enough to force a revolutionary change in China? 

Perhaps some of my Chinese readers can comment on the subject matter. What will happen when the Chinese economy slows down significantly, real estate collapses and tens of millions of Chinese families lose everything? I, for one, believe China might experience a violent (revolutionary) type of a governmental change. While today’s China illuminates the strength of its government, should the financial crisis be severe enough, the change might come faster/sooner than most people believe.  

What do you guys think? 

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Will China’s Economic Collapse Force A Revolutionary Change? Google

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The Daily Ticker: China heading toward a debt crisis with global ramifications: Banking vet

China’s economic engine appears to be contracting, or at least slowing. Chinese PMI fell to 48.1 in March, an eight-month low, and the index has been below 50 since January. A PMI below 50 indiates a contraction in the manufacturing sector.

Last year Suntech Power, a Chinese solar energy company, defaulted on a $541 million bond followed by Shanghai Chaori Solar failing to make a $14.7 million interest payment on March 7. On March 18, Zhejiang Xingrun Real Estate Company defaulted on a $400 million loan. China is also taking large (and potentially unsustainable) debts in emerging markets prompting investor concern. China’s hard currency debt exposure was $223 billion at the end of 2013, according to Nomura Securities

“China has significantly over-billed and created a significant amount of bad debt,” says Richard Vague, managing partner of Gabriel Investments. “They’ve grown private debt 56% in five years and their private debt levels are 180% or perhaps more.”

So is China looking at a 2008-style crisis with global ramifications?

“It looks to us like at least $2 trillion to 3 trillion in bad loans or suboptimal loans have been created so it’s not a small problem relative to their GDP, or the capital of the banks,” says Vague. But they have the capacity to rein in the problem, “both in terms of the reserves they have and they have capacity in terms of additional borrowing at the central government level.”

Still, says Vague, “It’s going to take no less than a concurrent effort to go in and recapitalize institutions and extend the safety net.”

The best case for China going forward? Significantly lower growth levels, says Vague. And worst case? A banking crisis where things contract and hit the global economy.

Russia Moves To The East

Russia, fed up with the West’s intentional destabilization of Ukraine and subsequent sanctions is moving fast to aggressively diversify it’s oil and natural gas business by going after China and India. Just as predicted earlier on this blog. This does not bode well for the EU, who might soon find itself competing for Russia’s natural resources with close to 3 Billiion people in Asia. 

Rosneft, one of the world top oil producers is looking to join forces with India’s Natural Gas Corp to supply India over the next few decades. At least. That is on top of partnerships and new deals Russia has with China. With geopolitical picture the way it is today, the future battle lines are being drawn today. With the USA/NATO on one side and China/Russia on the other.  Just as this report indicated.  

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Reuters Reports: Russia’s Rosneft, India’s ONGC may join forces on oil flows

(Reuters) – Rosneft (ROSN.MM), the world’s top listed oil producer by output, may join forces with Indian state-run Oil and Natural Gas Corp (ONGC.NS) to supply oil to India over the long term, the Russian state-controlled company said on Tuesday.

Rosneft CEO Igor Sechin, an ally of President Vladimir Putin, travelled to India on Sunday, part of a wider Asian trip to shore up ties with eastern allies at a time when Moscow is being shunned by the West over its annexation of Crimea.

With EU nations threatening to cut their reliance on Russian oil and gas, Russian officials have started to look East.

Rosneft said it had also agreed with ONGC they may join forces in Rosneft’s yet-to-be built liquefied natural gas plant in the far east of Russia to the benefit of Indian consumers.

Rosneft did not provide any additional details on its planned cooperation with ONGC.

The company said Sechin and the head of Indian conglomerateReliance Industries (RELI.NS) also met and discussed potential cooperation in developing Russia’s offshore resources, viewed by Moscow as a source of future oil production growth.

India was the last country in Sechin’s Asian trip, where he also visited Japan, South Korea and Vietnam.

Russia is the world’s top oil producer, pumping over 10 million barrels per day but mostly from west Siberian deposits, which are running out. Moscow is betting on offshore and unconventional oil to maintain the level.

At the same time, Russia is trying to diversify its energy flows away from its core European markets, with Rosneft leading the race with plans to triple oil flows to China to over 1 million barrels per day in coming years.

Rosneft said Sechin also discussed potential shipments of Russia’s East Siberia-Pacific Ocean (ESPO) oil blend to India’s biggest refiner Indian Oil Corporation (IOC.NS) but did not provide details.

Real Estate Collapse Update

In slew of real estate news, sales of new U.S. single-family homes fell more than expected 3.3% and hit a five-month low in February, pointing to continued weakness in the housing market. Further, Case Shiller index continues to decline for the 3rd month in a row. Down 0.08% in January. This should not come as a surprise to the readers of this blog. In fact, I have outlined exactly what will happen to the housing market here. Real Estate Collapse 2.0  Why, How & When – Read Here Take another look. 

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Real Estate Collapse Update  Google

Reuters: New home sales fall to five-month low

WASHINGTON (Reuters) – Sales of new U.S. single-family homes fell more than expected and hit a five-month low in February, pointing to continued weakness in the housing market.

The Commerce Department said on Tuesday that sales fell 3.3 percent to a seasonally adjusted annual rate of 440,000 units, the lowest level since last September.

January’s sales were revised down to a 455,000-unit pace from the previously reported 468,000-unit rate.

Economists polled by Reuters had forecast new home sales at a 445,000-unit pace in February. New home sales fell 1.1 percent compared with February 2013.

Last month’s drop brought new home sales in line with other data such as home resales and building activity that have offered a downbeat picture of the housing market.

Some of the housing slowdown has been blamed on an unusually cold and snowy winter. But the sector, the main channel through which the Federal Reserve has sought to stimulate the economy via monthly bond purchases, lost momentum last summer following a run-up in mortgage rates.

A dwindling supply of homes for sale and soaring house prices have also weighed. But a recovery is expected later this year as household formation accelerates after abruptly slowing in 2013.

Last month, sales in the Northeast tumbled 32.4 percent, the biggest decline since October 2012, indicating severe weather continued to hurt activity. Sales fell 1.5 percent in the South, which experienced harsh weather. They surged 36.7 percent in the Midwest, but fell 15.9 percent in the West.

Though the supply of new houses on the market hit the highest level since December 2010, inventory remains low. At February’s sales pace it would take 5.2 months to clear the supply of houses on the market.

That was up from 5.0 months in January and the most since last September. A supply of 6.0 months is normally considered a healthy balance between supply and demand.

The median price of a new home last month fell 1.2 percent from February 2013. It was the biggest drop since June 2012.