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Ukraine’s Navy Dolphins Defect To Join Russia & Other Insanity

The insanity that surrounds Russia, the US/EU and Ukraine continue unabated. I present you with the best of it….just in today’s news.   

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Ukraine’s Navy Dolphins Defect To Join Russia & Other Insanity Google

Is Gold About To Surge?

There is very little love for the yellow stuff at the moment. Since topping out less than two weeks ago, gold is down 6%. Today,many people and money managers are falling all over each other, suggesting that the gold has topped out and the time to short is NOW. Not so fast. Not according to our mathematical and timing work.

Here is what most people miss. Most people anticipate strong economy, tightening, stronger dollar and somewhat higher interest rates going forward. That is not what our mathematical and timing work shows. Not at all. Quite the opposite.  Our work shows that a severe bear market of 2014-2017 is about to start, ushering in a deep recession where the FED will be forced to flood the market with liquidity once again. Not tighten by any measure. In such an environment (liquidity pump while equity markets decline) gold tends to perform very well. 

That is on top of a favorable technical setup. While I wouldn’t buy just yet, Gold should be on your BUY watch list. If you would be interested in learning when the bear market will start (to the day) and it’s internal composition, please Click Here.  

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Is Gold About To Surge?  Google

Talking Numbers Writes: Why the top could be in for gold

The world is just as unstable now as it was a month ago. Yet,gold is now close to breaking below the $1,300 per ounce level.

Now, before gold bugs start panicking, let’s put this all in perspective: Gold is still up about 7% since the start of 2014. That’s seven times the return of the benchmark S&P 500 index for stocks. In 2014, gold is beating Google (up 3%),Apple (down 3%), Netflix (flat), Twitter (down 27%), and theUS Dollar index (flat) among countless others.

In other words, gold hasn’t been such a bad buy this year. But will that continue going forward?

Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson, says gold may take a hit in the short-term but the technicals are showing the yellow metal to be near a critical support level that could make for a buying opportunity.

“It looks to me as if gold has taken its position as the currency of fear once again,” says Ross. “That’s all well and good when Russia is annexing Crimea. But, when those emerging markets start to bottom and you get a strong rally and the macro unrest subsides, obviously, that going to hurt gold prices. That’s what the catalyst behind this big pullback we’ve seen recently.”

Ross sees notes gold has been trading in a range between $1,180 per ounce and $1,420 per ounce since June 201,3 with bullion testing and holding the $1,180 per ounce level in June and a couple of times in December. But, the level Ross is watching is $1,300 – or, to be more specific, $1,292 per ounce. That’s where gold’s 50-day moving average crossed above its 150-day moving average.

“That should be bullish,” says Ross. “It should provide support for this pullback around current levels. A break below that level could send gold down to the low end of that range [$1,180 per ounce]. I think support holds and I think we get another test of the high end of that trading range [$1,420 per ounce]. I would be a trading buyer here of gold.”

Portfolio manager Chad Morganlander of Stifel’s Washington Crossing Advisors is taking the other side of Ross’ trade. After owning gold for six years, his firm sold out its gold position because it sees improvements ahead in the US and European economies as well as improved capital and credit markets.

“Let’s bottom line it: I would be short gold,” says Morganlander. “I would not own gold in my portfolio. We think that the safe haven asset class is not necessary at this point in time.”

Morganlander doesn’t believe the current crisis in Ukraine will have a long-term effect on gold. 
“We think the Russia/Crimea issue is a storm that’s going to pass,” says Morganlander. “Geopolitical premia are going to be compressed.”

That and his expectations of better economic data ahead are leading Morganlander to see gold prices falling. “We would stay away from gold,” he says.

Warning: Fed Rejects Citigroup. Does Fed Expect Another Credit Event?

I thought that I would never say this, but I actually agree with the FED’s decision. In a “shocking” move Federal Reserve rejects Citigroup and 4 other big banks from raising dividends and boosting buybacks. According to the Fed, Citigroup fell short in some areas of it’s “stress test”, including it’s ability to forecast revenue and losses IF they come under economic or market stress.  

Now, change the IF above into WHEN. The situation we have today is not that dissimilar to the situation in 2007. Before the 2008 collapse. The Fed flooded the market with cheap credit and there was all sort of speculation (primarily in real estate, equities and credit). Based on our mathematical and timing work, the Dow will go through a significant bear market between 2014-2017. While the impact will not be as severe as what had occurred between 2007-2009, the banks will, once again, be stressed to the max. Perhaps the FED realizes this and that’s the real reason behind Citi’s rejection.

OR….perhaps I am giving the FED way too much credit here. 

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Warning: Fed Rejects Citigroup. Does Fed Expect Another Credit Event?  Google

AP Writes: Fed blocks Citigroup from raising dividends

Federal Reserve bars Citigroup, 4 other big banks from raising dividends, boosting buybacks

WASHINGTON (AP) — The Federal Reserve on Wednesday barred Citigroup from raising its dividend or boosting its stock buybacks, saying it’s too hard to predict how some parts of the bank’s global operation would fare in a sharp economic downturn.

It was a setback for Citigroup Inc., one of the nation’s biggest banks, which has been cutting jobs and trimming some businesses in an effort to improve its finances.

Citi was the biggest of five banks whose plans the Fed rejected as part of its so-called “stress tests,” an annual check-up of the nation’s biggest financial institutions. This year 30 banks underwent the tests to determine if they have large enough capital buffers to keep lending through another financial crisis.

Citi had asked the Fed’s permission to buy back $6.4 billion in shares through the first quarter of next year, and to raise its dividend to 5 cents each quarter, up from a penny per quarter now.

New York-based Citigroup was blocked from raising its dividend in 2012, too, after failing its stress test. Later that year it brought in a new CEO, Mike Corbat, with a mandate to speed up its turnaround. .

Corbat said Wednesday that the company is “deeply disappointed” by the Fed decision. The dividend and buyback would have been a “modest level of capital” for shareholders, and Citi still would have exceeded requirements for its financial health, he said in a written statement.

The Fed announcement caused investors to re-assess bank stocks across the board. Citigroup’s stock was down more than 5 percent in after-hours trading.

CLSA analyst Mike Mayo called Citi’s rejection “a shocker.”

“Citi needs to make this defeat into victory by improving the pace of restructuring,” Mayo wrote in a note. That would include selling off businesses and holding managers more accountable, especially after executives had offered reassurances about how the bank is monitoring its finances, Mayo said.

The Fed said that the capital plans of Citigroup fell short in some areas, including its ability to forecast revenues and losses in parts of its global operations, should they come under economic stress.

As with Citigroup, the Fed said it found deficiencies in the capital plans of HSBC North America Holdings, RBS Citizens Financial Group, Santander Holdings USA and Zions Bancorp. The central bank, however, approved requests outright from the other 25 tested banks, which included JPMorgan Chase, Wells Fargo and Morgan Stanley, in addition to Bank of America and Goldman Sachs

Before the financial crisis, Citigroup’s dividend peaked at $5.40 per quarter in 2007. After eliminating its dividend altogether in 2009, it reinstated a payout in June 2011 at a token penny per quarter, where it remains.

The dividends and share buybacks that the Fed weighed are important to ordinary investors, and banks. The banks know that their investors suffered big losses in the financial crisis, and they are eager to reward them. Some shareholders, especially retirees, rely on dividends for a portion of their income.

But raising dividends costs money. The regulators don’t want banks to deplete their capital reserves, making them vulnerable in another recession. Buybacks also are aimed at helping shareholders. By reducing the number of a company’s outstanding shares, earnings per share can increase.

A handful of banks that won approval from the Fed to raise dividends quickly announced plans to reward investors.

Wells Fargo said it would raise its dividend a nickel to 35 cents per share starting in the second quarter. It also boosted its planned share buybacks. Morgan Stanley announced it would double its dividend for the second quarter to 10 cents a share from the current 5 cents. It will also buy back as much as $1 billion of its shares through March 2015. Capital One Financial Corp. expects to buy back $2.5 billion of its shares but maintain its dividend at 30 cents a share.

The announcement Wednesday follows last week’s results of the Fed’s annual “stress tests.” The central bank determined that the U.S. banking industry is better able to withstand a major economic downturn than at any time since the financial crisis struck in 2008. The Fed said that only one of the 30 biggest banks in the country needed to take more steps to shore up its capital base. That bank was Zions.

The companies raising dividends and boosting share buybacks should have an advantage in winning investors, said Michael Scanlon, managing director at John Hancock Asset Management.

“From a total return perspective, all this is good,” he said. “The Fed is recognizing that there is continuing healing that’s taking place at the banks,” he said. “From a capital standpoint, these institutions are in a far better position than they were a few years ago.”

Citigroup and the other big Wall Street banks, as well as hundreds of others, were bailed out by the government during the crisis. The banking industry has been recovering steadily since then, with overall profits rising and banks starting to lend more freely. The banks have mostly repaid the taxpayer bailouts.

The Fed has conducted stress tests of the largest U.S. banks annually since 2009, the year after the financial crisis plunged the country into the worst economic downturn since the Great Depression of the 1930s.

Under the stress tests’ “severely adverse” scenario this year, the U.S. would undergo a recession in which unemployment — now at 6.7 percent — would reach 11.25 percent, stocks would lose nearly half their value and home prices would plunge 25 percent.

Russian Invasion Of Ukraine Is Highly Probable. Stocks To Sell Off?

Western intelligence continues to maintain that Russia’s invasion of Southern and Eastern Ukraine is now “highly probable”. I am starting to get the same type of a feeling after following Russian media. Nothing concrete, just “read between the lines” type of an analysis. In fact, Canada expects the invasion to happen as soon as next week. Here is what we know thus far. 

  • Russian troops on the border of eastern Ukraine — now more than 30,000 — number “significantly more” than what is needed for what Russia is calling a training exercise.
  • These troops include a large number of motorized units, which have the ability to deploy quickly. There also appears to be a higher level of activity among special forces, airborne, and air transport troops inside Russia.
  • Additional intelligence shows more Russian forces “reinforcing” the border region. 

If invasion does happen, the West will not respond militarily. Instead, an all out economic warfare, sanctions and escalation of the cold war are expected. Either way, if invasion occurs, particularly next week, expect the US equity markets to sell off. Big time. 
 

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Russian Invasion Of Ukraine Is Highly Probable. Stocks To Sell Off?  Google

Canada worried about ‘serious possibility’ of Russian invasion in Ukraine within week

OTTAWA – Canada is preparing for a Russian invasion of Eastern Ukraine – and soon, sources say.

“We’re worried about their intentions. I think it’s the view all the G7 leaders that we are very concerned that they haven’t necessarily stopped here,” Prime Minister Stephen Harper said at a press conference in The Hague on Tuesday.

Though the Russian defense ministry says it’s complying with limits, the presence is large, and sources say there’s a “serious possibility” Russia could invade within a week.

“The fact that they explicitly said they have stopped here gives us no confidence. They assured us they wouldn’t do this kind of thing in the first place,” Harper said.

Russia’s next moves are part of the discussion G7 leaders are having, but the government won’t speculate on Canada’s response in the event of an invasion.

Conservative MP James Bezan says for now, sanctions are working.

“I think if we hit them where it hurts – which is in their own personal pocket books – they’ll take a step back,” Bezan said.

And if they don’t – there’s a lot at stake for Canada.

WATCH: Harper says Putin’s mentality on Canadian sanctions has no basis

Russia has made claims to parts of the Arctic – claims Canada doesn’t recognize.

What do its actions in the Ukraine say about the Kremlin’s willingness to pursue those claims?

“If Russia has these ideas of increasing territory, we are a neighbouring state. I think we have to continue to be in lockstep with our partners,” Bezan said.

But Ivan Katchanovski, political studies professor at the University of Ottawa, says any action taken by Putin is less about the West and more about Russia’s interest in Ukraine.

The Ukrainian-born professor says an invasion is likely, but a military response from Canada is not, as long as the battle is contained to Ukraine.

“Western military involvement in Ukraine to prevent such intervention by Russia is not very likely. …It’s not realistic,” he said.

United States President Barack Obama was also asked Tuesday what the U.S. would do if Russia made other land grabs.

He replied that if the country is a NATO member nation – which Canada is – then the U.S. would defend it with force.

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.

Investment Grin Of The Day

10 signs you think about your portfolio too much

  1. You gave your broker a gift on the fifth anniversary of the day you opened your brokerage account, but forgot to give your wife anything on your wedding anniversary.
  2. You tell your children they can’t go to college because you are convinced you can make another 15% on their education accounts when the market turns around.
  3. You go camping, a bear attacks you, and your insurance has run out. You have a choice between selling your Microsoft stock or paying for an operation to save your leg. You choose the stock.
  4. When asked to speak at your graduation, you recited line-for-line Gordon Gekko’s “Greed is Good” speech.
  5. You miss your business partner’s funeral because Cisco is releasing its earnings report… after all, if they were still alive, they would want you to carry on with business as usual.
  6. You make your sixteen year old daughter get a job at a little-known manufacturing company in the hopes she will hear something and give you valuable insider trading tips.
  7. After a company has a disappointing quarter, you throw all of their products out of your house in anger and call your extended family, demanding they do the same.
  8. The Dow Jones drops 10% or more, you demand your family skip one meal a day so you can quickly raise cash to buy stock at the new, cheap levels.
  9. You wander the house on Saturday and Sunday because you have nothing to do. Every hour, on the hour, you loudly announce to the house the time remaining until the Japanese markets open.
  10. Your broker has issued a restraining order.

Stock Market Update. March 26th, 2014. InvestWithAlex.com

z32

A volatile day with the Dow Jones ending the day down 99 points (-0.60%) and the Nasdaq down 61 points (-1.43%)

In short, the market continues to perform as per our forecast (available in our subscriber section). While the Nasdaq continues to underperform, the DOW remains only 300 points away from it’s all time high. Looking at various indicators, the Nasdaq and the Biotech sector remain oversold and due for a bounce. In fact, the Nasdaq left a gap around 4260 that it is likely to close soon. 

I believe such bounce will occur over the next few days. Please note, a slew of negative opinions coming out over the last few days. It is expected from this blog, but not from the mainstream media. I believe the overall psychological perception is changing as well. While it bodes well over the short-term, indicating a bounce, it’s a big problem going forward. 

With that said, as we have been preaching on this site for some time, the bear market of 2014-2017 is just around the corner. If you would be interested in learning exactly when this bear market will start (to the day) and it’s internal composition, please Click Here. 

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Stock Market Update. March 26th, 2014. InvestWithAlex.com Google

Do Foreign Owned Assets Play An Important Role?

Foreign-owned assets in the US hit an all time high of $26.54 Trillion at the end of 2013. Most of the gains came in the form of asset appreciation as opposed to direct capital inflows.  To be honest with you, this is an irrelevant measure. It is simply indicative of what the US Stock market reflects. Overvaluation, speculation, massive credit expansion and credit mechanism dilution by the FED. At the end of the day it will move up or down in conjunction with the US stock market and the US Economy. 

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Do Foreign Owned Assets Play An Important Role?  Google

WSJ Reports: Foreign Investment in U.S. Hits New Record

Foreign investment in the U.S. hit a fresh record in the final quarter of 2013 as rising stock prices boosted the value of American assets, according to figures released Wednesday.

The value of foreign investment in the U.S. hit $26.54 trillion the fourth quarter, up $777.8 billion from the previous quarter and far surpassing a $372.1 billion increase in U.S. investments abroad, the Commerce Department’s Bureau of Economic Analysis said. Adjusting for inflation, the value of foreign investment surpassed the previous record in 2011 and is at the highest level since the data were first collected in 1976.

Reuters

The quarterly report showed foreign investors and companies playing an expanding role in U.S. markets. The development has worried some economists, because it makes the U.S. more vulnerable to major shifts in the global economy. But it also could show strengthening confidence in the American economy.

The BEA said most of the quarterly increases were based on rising asset prices, rather than investors plowing more cash into markets. In that period, the Dow Jones Industrial Average rose by around 8% to new highs, buoyed by growing optimism about the U.S. economic outlook.

U.S. investments overseas were tempered by lingering concerns about Europe’s economic recovery and worries over tapering growth in large emerging markets.

China To The USA Military: Get The F*#& Out Of Asia

According to Pentagon-sponsored study, China is waging a “Three Way” political warfare against the United States as part of a strategy to drive the U.S. military out of Asia and control seas near its coasts. (read full article below). This should not come as surprise to the readers of this blog. Developments outlined in This Report are playing out just as predicted. China views itself as a superpower. It’s recent and massive military expenditure are designed specifically to drive the US out of the region.

With China and Russia forming a military alliance over the next decade, this will be hard nut to crack. But not to worry, as President Obama stated yesterday “Russia is just a regional power”. Never underestimate your enemies Mr. President.  Lesson most often learned the hard way throughout history. 

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China To The USA Military: Get The F*#& Out Of Asia  Google

 

Warfare Three Ways

China is waging political warfare against the United States as part of a strategy to drive the U.S. military out of Asia and control seas near its coasts, according to a Pentagon-sponsored study.

A defense contractor report produced for the Office of Net Assessment, the Pentagon’s think tank on future warfare, describes in detail China’s “Three Warfares” as psychological, media, and legal operations. They represent an asymmetric “military technology” that is a surrogate for conflict involving nuclear and conventional weapons.

The unclassified 566-page report warns that the U.S. government and the military lack effective tools for countering the non-kinetic warfare methods, and notes that U.S. military academies do not teach future military leaders about the Chinese use of unconventional warfare. It urges greater efforts to understand the threat and adopt steps to counter it.

The report highlights China’s use of the Three Warfares in various disputes, including dangerous encounters between U.S. and Chinese warships; the crisis over the 2001 mid-air collision between a U.S. EP-3E surveillance plane and a Chinese jet; and China’s growing aggressiveness in various maritime disputes in the South China and East China Seas.

“The Three Warfares is a dynamic three dimensional war-fighting process that constitutes war by other means,” said Cambridge University professor Stefan Halper, who directed the study. “It is China’s weapon of choice in the South China Sea.”

Seven other China specialists, including former Reagan Pentagon policymaker Michael Pillsbury, contributed to the study. A copy of the assessment was obtained by the Washington Free Beacon. Disclosure of the report is unusual as most studies produced for the Office of Net Assessment are withheld from public release.

The May 2013 report was written before the dangerous near collision in the South China Sea last December between the guided missile cruiser USS Cowpens and a Chinese naval vessel. Senior defense officials said the incident could have led to a larger military “miscalculation” between the two nations.

Chinese state media falsely blamed the United States for the incident and falsely asserted that it had declared a no-sail zone prior to the Dec. 5 encounter. The zone was imposed after that date.

According to the final Pentagon report, China’s use of Three Warfares is based on the notion that the modern information age has rendered nuclear weapons unusable and conventional conflict too problematic for achieving political goals. China’s goals are to acquire resources, influence, and territory and to project national will.

“China’s Three Warfares [are] designed to counter U.S. power projection,” the report says. “The United States is one of four key audiences targeted by the campaign, as part of China’s broader military strategy of ‘anti-access/area denial’ in the South China Sea.”

The Pentagon regards China’s high-technology arms, such as anti-satellite missiles and cyber warfare capabilities, as arms designed to prevent the U.S. military from entering the region or operating freely there.

The study concludes that in the decade ahead China will employ unconventional warfare techniques on issues ranging from the Senkaku Islands dispute in northeast Asia to the disputed Paracels in the South China Sea.

For the United States, the Three Warfares seek to curtail U.S. power projection in Asia that is needed to support allies, such as Japan and South Korea, and to assure freedom of navigation by attempting to set terms for allowing U.S. access to the region.

The use of psychological, media, and legal attacks by China is part of an effort to raise “doubts about the legitimacy of the U.S. presence.”

The use of the techniques threatens to limit U.S. power projection in the region through influence operations that “diminish or rupture U.S. ties with the South China Sea littoral states and deter governments from providing forward basing facilities or other support,” the report says.

Another goal of the Chinese is to limit U.S. surveillance operations through harassment of aircraft and ships and to try and restrict routine U.S. Navy deployments.

China is also using the Three Warfares to facilitate its military expansion and global reach, and to secure sea-lanes needed to transport vitally needed oil from the Middle East.

The Pentagon study urged the development of effective countermeasures to Beijing’s psychological, legal, and media warfare efforts.

They include forceful legal action to challenge China’s so-called “lawfare” initiatives, high profile statements of U.S. security support for states in the region, and expanded support for regional political forums.

Militarily, the United States should continue reconnaissance missions by U.S. ships and aircraft and protect them with force protection weapons to deter harassment or attack. Clear rules of engagement should be developed to prevent a recurrence of the 2001 EP-3E incident.

Increased naval exercises and more “freedom of navigation” exercises also should be held within China’s exclusive economic zones in the region to counter Beijing’s claims in disputed waters.

The report also calls for bolstering “public diplomacy” campaigns in Asia, using targeted investment and development in the region, and expanding military talks and exchanges.

The Pentagon defines psychological warfare as efforts to influence or disrupt an enemy’s decision-making capabilities, to create doubts, foment anti-leadership sentiments, and deceive opponents.

Psychological warfare includes diplomatic pressure, rumors, false narratives, and harassment to “express displeasure, assert hegemony, and convey threats,” the report said.

For example, China’s economy has been used to threaten the United States with the sale of its large U.S. debt holdings, and state-controlled Chinese businesses have pressured U.S. businesses in China. Boycotts, restrictions on critical exports, such as rare earth minerals, and threats to use predatory trade practices are other Chinese soft warfare means.

For media warfare, also known as public opinion warfare, the Chinese use constant activities to influence perceptions and attitudes.

“It leverages all instruments that inform and influence public opinion including films, television programs, books, the internet, and the global media network (particularly Xinhua and CCTV) and is undertaken nationally by the [People’s Liberation Army], locally by the People’s Armed Police, and is directed against domestic populations in target countries,” the report said.

Hollywood has also been influenced by threats from the Chinese government, which threatens to block market access in an effort to pressure movie studios to avoid themes Beijing opposes.

Also, China’s state-controlled television network CCTV maintains a full time White House reporter who regularly joins the rotating media pool, a position that could permit influencing U.S. media on China through pool reports.

The goal of media warfare is to weaken an enemy’s will to fight, alter its awareness, and assist psychological and legal warfare goals.

Legal warfare exploits laws to achieve political or commercial objectives.

China has used lawfare to bolster its territorial claims. An example was the designation of the South China Sea village of Sansha, on the disputed Paracel Islands, as part of Hainan Prefecture. The legal measure sought to extend China’s control far into the South China Sea. Vietnam, Philippines, and other states have claimed the islands.

Tools used in lawfare include domestic laws, international legislation, judicial law, legal pronouncements, and law enforcement. They are often used in combination.

The report warns that the three types of unconventional warfare addressed individually are “manageable” problems, but taken together they challenge traditional U.S. concepts of war.

“Our war colleges and military research traditions emphasize kinetic exchange, the positioning and destruction of assets, and metrics that measure success by kill ratios and infrastructure destruction,” the report said. “By adopting the Three Warfares as an offensive weapon, the Chinese have side-stepped the coda of American military science.”

The use of these warfare techniques allows China to achieve strategic objectives using a new military technology that has not been considered in the past by the West.

To solve the problem, the report recommends setting up a White House office to coordinate countermeasures to the Three Warfares.

“If the Three Warfares is not a ‘game changer,’ it certainly has the capacity to modify the game in substantial ways,” the report said.

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.