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Chinese Companies Skidding Towards Default. What’s Next?

On March 4th, 2014 China experienced it’s first ever onshore default when Shanghai Chaori Solar Energy Science & Technology Co. failed to pay full interest on its bonds. Signaling two things. 1. Chinese government is no longer interested in bailing out (most) Chinese companies and 2. A lot more defaults to come. Here is where China is today. 

  • $21 Trillion Debt Mountain. Roughly the same size as the entire US Banking Sector. It took the US 220 years to get to that number, it took China just 5 years of explosive credit growth. 
  • $6 Trillion In Shadow Banking. Actually, no one knows how large this number is. I have read good data/reports putting this number at $10-15 Trillion range.  
  • Empty cities, shopping centers, massive speculative bubble in real estate, built out infrastructure, rising cost of labor and export driven economy. 

With massive debt burden, increasing borrowing costs and an upcoming bear market/recession in the US/Worldwide (2014-2017), shit is about to get real.  

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Chinese Companies Skidding Towards Default. What’s Next?  Google

skidding

China Heralding $1.5 Trillion Emerging Debt Wall: Credit Markets

A surge in interest rates and the worst currency rout since 2008 in developing nations from Russia to Brazil are inflating corporate borrowing costs as $1.5 trillion of obligations come due by the end of 2015.

Companies in the MSCI Emerging-Market Index (EEM) are facing the highest debt loads since 2009 as profit marginsnarrow to the least in four years, according to data compiled by Bloomberg. More than 36 percent of bonds and loans by Turkish companies will mature by 2015, while Chinese firms need to pay off $630 billion, or 29 percent, of their borrowings just as the country experiences its first-ever onshore corporate-bond default.

Even as higher rates help shrink trade deficits and stabilize currencies, they are damping emerging-market economic growth, eroding corporate profits and curbing bank lending. That’s increasing the cost to refinance debt for companies from Yasar Holding AS, the Turkish maker of Pinar dairy products and DYO paints, to Brazilian sugar and ethanol producer Grupo Virgolino de Oliveira SA.

“Tightening interest rates in a bad economic cycle exacerbates the stress,” Michael Shaoul, New York-based chairman and chief executive officer of Marketfield Asset Management LLC, which oversees $21 billion, said in a March 5 telephone interview. “If economic and credit conditions start to fall apart, then how can you refinance your existing bonds?”

Junk Bonds

That stress is already being reflected by a jump in bond yields. Investors demanded 166 basis points, or 1.66 percentage points, more to hold non-investment grade debt of developing-country companies than their global peers, Bloomberg data show. The premium jumped from 34 basis points a year earlier and reached a 16-month high of 172 basis points on Jan. 31.

In China, Shanghai Chaori Solar Energy Science & Technology Co. failed to pay full interest on its bonds, leading to the first default in the nation’s onshore bond market and signaling the government will back off its practice of bailing out companies with bad debt.

The maker of energy cells to convert sunlight into power is trying to sell some of its overseas solar plants to raise money to repay the debt, Vice President Liu Tielong said in an interview today at the company’s Shanghai headquarters.

Policy makers have reined in credit expansion, helping boost the yields on three-year AAA-rated corporate bonds to 6.26 percent in January, the highest since at least 2010, according data compiled by ChinaBond, the nation’s biggest debt clearing house.

Rate Increases

Russia’s central bank unexpectedly raised its benchmark interest rate 150 basis points to 7 percent on March 3, joining central banks in Brazil, Turkey, India and South Africa in raising borrowing costs to stem their currency declines this year. Brazil’s real has retreated 24 percent over the past two years, increasing their foreign debt payments in local currencies. Turkey’s lira, India’s rupee and Russia’s ruble each tumbled 18 percent.

Interest-rate increases may slow emerging-market economic growth to the weakest expansion since 2008, increasing the financial risks for banks and corporates, economists led by Dominic Wilson at Goldman Sachs Group Inc. wrote in a note on Feb. 19. Emerging-market economies grew 4.5 percent in 2013, the slowest since the 4.45 percent expansion during the 2008-2009 credit crisis, according to the International Monetary Fund.

‘Less Room’

Gross debt in companies in the MSCI emerging-market index amounted to 2.93 times earnings before interest, taxes, depreciation and amortization in February, up from 1.46 times in June 2009, Bloomberg data show. Profit margins declined to 7.81 percent from 8.34 percent in December and 10.35 in March 2011.

“We’ve moved into this environment where weaker growth in emerging markets, slower credit growth and compressed corporate margins give them less room to absorb higher costs,” Vanessa Barrett, a credit strategist at Morgan Stanley in London said in a phone interview on Feb. 6. “That certainly will challenge the debt servicing capabilities of emerging-market corporates.”

Morgan Stanley recommends its clients sell emerging-market bonds and currencies, predicting non-performing loans for Brazilian banks may increase to 5 percent from 3 percent.

Fitch Ratings Ltd. warned in January that almost 1 trillion rupees ($16.2 billion) of Indian bank loans are at risk of souring as companies’ ability to generate cash and service debt deteriorates.

Yasar Maturity

Turkish companies including Yasar, which owns everything from meat and dairy producers to fisheries businesses, and Dogan Yayin Holding AS, a media conglomerate, may have their credit outlook cut to “negative” after the lira weakened, Fitch said Feb. 14.

Yasar has $250 million of speculative-grade notes maturing in October 2015. More than 70 percent of Yasar’s debt is denominated in foreign currencies, while most of its revenue is generated in the lira, according to Fitch. Should the local currency decline further, Yasar’s net debt will rise beyond 4.5 times Ebitda, the upper limit for the B rating assigned by Fitch, the ratings firm said in a report on March 3. The company’s leverage was 4.4 times earnings in 2012.

The company’s 9.625 percent, dollar-denominated notes due next year were yielding 11.9 percent last month in trading on Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Virgolino de Oliveira

A telephone call to Yasar’s finance department wasn’t returned and Murat Dogu, vice president at Dogan responsible for finance and capital markets, didn’t respond to calls and e-mails seeking comment.

Bonds sold by Brazil’s Virgolino de Oliveira tumbled this year as Standard & Poor’s said lower sugar prices and higher interest rates may it more difficult to refinance its “sizable” short-term debt. The $300 million of debt due in 2018 fell to 56 cents on the dollar from 80 cents in November.

Virgolino is seeking financing in the international market and is getting “a very good response,” Chief Financial Officer Carlos Otto Laure said in a telephone interview on Feb. 28.

Companies in emerging markets went on a borrowing binge following the crisis five years ago as central banks cut rates to spur economic growth.

Private credit growth in each of China, Brazil and Hong Kong was more than 60 percent of their GDP since 2008. That’s second only to Ireland, at about 90 percent, among major countries tracked by Deutsche Bank AG.

Maturity Wall

Companies in the 20 largest developing countries have $808 billion debt maturing this year and another $645 billion coming due in 2015, Bloomberg data show.

Turkey has about $36 billion in debt and loans coming due. About 86 percent of the borrowings are denominated in foreign-currencies, making them more expensive as the lira’s value declines.

Russia’s companies need to pay off $142 billion in debt within two years, accounting for 25 percent of the total, Bloomberg data show.

Borrowing costs are still low compared with three years ago. Yields on dollar-denominated corporate bonds traded at 5.21 percent, down from a peak of 7.35 percent in October 2011, according to Bloomberg Emerging Market Corporate Bond Index.

Boom-to-Bust

“Higher refinancing cost alone is usually not sufficient to cause a ‘meltdown’,” Zsolt Papp, a money manager who helps oversee $2.6 billion of emerging-market debt at Union Bancaire Privee in Zurich, said in an e-mail on Feb. 21. “It would have to be coupled with a collapse in the economy and no access to credit, basically a 2008-2009 scenario. And that looks not likely.”

Capital is becoming less available, making it more difficult for companies to roll over their maturing debt. Global investors pulled $11 billion out of emerging-market bond funds this year through Feb. 26, already approaching the full year outflow of $14 billion in 2013, according Barclays Plc.

A “multi-year elongated EM cycle of underperformance” is likely as the credit and economic growth slows, according to Alan Ruskin, the global head of Group of 10 foreign exchange at Deutsche Bank in New York.

“A rapid increase of credit tends to associate with boom turning into bust,” Ruskin said in a phone interview on Feb. 21. “In an environment where there’s excess of credit, a slowing economy feeds on itself as assets go down and the banking system starts to decline. When financial markets seize on a theme, then things can accelerate.”

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Shocking Truth Revealed: Why Both Bulls & Bears Are Idiots

bull and bears investwithalex

Last night I had an unfortunate privilege of having dinner with both a Perma Bull and Perma Bear.  To say these two guys almost forked each other to death would be an understatement. Foaming at the mouth, they both tried to prove why their point of view on the market is the correct one. At the end of the meeting, only one thing was clear. 

They were both fools and bound to lose money in the market. Why?  

As investors we should never be too vested in any particular outcome. Having a cemented point of view leads only to losses. Instead, one should be able to see the forest through the trees and be able to allocate capital based on analysis, not a fixed point of view. Better yet, it is a lot better if you know exactly what the stock market is going to do. That way you can make money in both bull and bear markets.

That is exactly what we do here. If you would be interested in knowing the exact structure of the upcoming bear market (2014-2017), please Click Here.

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Shocking Truth Revealed: Why Both Bulls & Bears Are Idiots  Google

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Margin Debt. Just Another Scary Bear Market Confirmation.

margin debt

In an incredibly important story that no one is talking about, Margin Debt is at an all time high. In fact, it is at dizzying levels of $451 Billion as investors continue to speculate in the stock market on margin. By comparison,this same margin debt was at $275 Billion at 2000 and $390 Billion at 2007 tops. By using this simple measure one can easily figure out what the stock market is going to do over the next few years. 

 If you can’t, you don’t belong in the stock market. 

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Margin Debt. Just Another Scary Bear Market Confirmation.  Google

NYSE Margin Debt Hits Record $451 Billion; Watch Out If Rate Drops

Margin debt hit a record $451 billion on the New York Stock Exchange in January, as investors borrowed more money than ever to buy into the post-financial-crisis bull market.

And that’s a good thing, for now. But rapidly rising margin debt can also signal a market top, especially if the rate of borrowing starts to drop below its 12-month average. That was a strong signal to get out of the stock market in late 1999 and 2007 — if 0nly investors had been able to see the data in real time. The NYSE margin statistics are released after a six-week delay.

“You can’t use this for timing, but you can use it to be prepared for trouble,” says Ricardo Ronco, head of technical analysis at Aviate Global in London who shared the charts here with me. The net level of margin debt “gives you an important color on the mentality of the market,” he told me.

The chart below shows the level of the Standard & Poor’s 500 Index, with the trend in NYSE margin debt below it. The important line in the middle panel is the 12-month moving average. As long as margin debt remains above its 12-month moving average, Ronco says, the market is probably “safe.” When it dips below the 12-month average, investors are using less of the rocket fuel needed to keep stocks aloft.

The bottom panel shows the trend in net margin debt, or credit minus debt. History doesn’t always repeat itself, but the parallels to 1999 and 2007 are obvious.

 

The chart below adds detail to Ronco’s analysis. The bottom panel shows the ratio between the Wilshire 5000 Index and NYSE margin debt to strip out the inflationary effect of rising stock prices. “This ratio tells us how much equities are running away from borrowing levels,” Ronco says.  “Spikes in this ratio are associated with euphoria peaks driven by speculative excesses.”

ronco margin 1

Another indicator is the 12-month rate of change of the Wilshire and margin debt. When the margin debt ROC exceeds 40% (the red line in the middle panel), the market is in the territory of a top. More important is the combination of the two indicators. When the rates of change of equities (the blue line in the middle panel) and margin debt (the red line) diverge, watch out. Investors are still borrowing money to buy stocks that are no longer going up in value. They get the picture eventually and give up.

Margin Debt is still rising and well above its 12-month m.a. confirming the uptrend in prices; it is rising at 20%+ rate in line with stocks and there are some signal of important divergences developing between the rate of increase in stocks vs debt.

Investors are still partying like it’s 1999 — or maybe 2007 — but if you believe in technical indicators the charts might be showing signs of vulnerability. And remember, when the trend really turns, you won’t see it until 6 weeks later.

Ronco’s advice:Prepare your strategy for a market reversal, including stop-loss protection. And this: “If you want to jump on a bull market and see the margin debt is below the 12-month average, you should hold your horses.”

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Philippine Stock Market Is Surging. Should You Invest?

philippines-stock-market

With the Philippine stock index surging higher over the last few months and with large funds increasing capital allocation, the question is……should you invest in this fast growing emerging market?

The answer might surprise you. 

NO. The Philippine stock market is more or less reliant/follows the US Market. As soon as the US bear market takes control (2014-2017) and breaks down, I would expect the Philippine stock index to do the same. With one major difference. Since this is an emerging market with a highly speculative banking sector I would expect it’s decline to be much, much worse. How bad? If the PSEI Index breaks below 5,500 there is nothing stopping it (technically) until it gets to about 1,000. As such, if the PSEI breaks as anticipated, it turns into a wonderful shorting opportunity.

Please do your own research and make your own investment decisions.  

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Philippine Stock Market Is Surging. Should You Invest?  Google

Top Philippine Fund Doubles Consumer Stocks With Record Bet

The top-performing Philippine stock fund in the past five years has doubled holdings of consumer companies as record remittances boost the spending power of shoppers in Southeast Asia’s fastest-growing economy.

The UBP Large Cap Philippine Equity Portfolio (IFDLCPE)increased positions in the consumer industry to a record 60 percent of assets from about 30 percent in mid-2013, said Robert Ramos, who oversees about $897 million as the chief investment officer at Union Bank of the Philippines. Holdings include Emperador Inc. (EMP), the nation’s largest liquor company, and Puregold Price Club Inc., the biggest grocery-store operator. Both stocks have jumped at least 12 percent this year.

Overseas remittances to the Philippines increased a bigger-than-estimated 9.1 percent in December, while slower inflation last month eased pressure on the central bank to raise interest rates that have stayed at a record low since October 2012. Consumer spending accounts for almost three quarters of the $250 billion economy, which grew at a 6.5 percent pace last quarter.

“Everywhere you go, people say the economy is better and that global Filipinos are richer and have higher disposable income,” Ramos, 38, whose UBP Large Cap fund returned an annualized 46 percent in the past five years, the most among 28 Philippine stock funds tracked by Bloomberg, said in an interview in Manila on March 4. “I expect more gains from the sector.”

Earnings Jump

Overseas Filipinos sent home a record $2.16 billion in December, bringing the 2013 tally to an all-time high of $22.8 billion, data from Bangko Sentral ng Pilipinas show. The central bank forecast remittance growth of 5 percent this year.

The cash inflows, which make up about 10 percent of the economy, have helped companies such as Emperador and Puregold (PGOLD) post record earnings. Profit at Emperador, the UBP Large Cap fund’s biggest holding, rose to an all-time high of 5.8 billion pesos ($130 million) in 2013.

Ramos shifted the $67 million UBP Large Cap fund’s strategy in the middle of 2013 to shield it from volatility after the U.S. Federal Reserve signaled stimulus cuts. He sold financial, energy and property shares, deterred by regulatory headwinds and rising valuations.

“We wanted stocks that will outperform but at the same time won’t be very erratic,” Ramos said.

Valuation Risk

Consumer companies also stand to benefit as the Philippine currency’s slide against the dollar boosts the value of remittances, Ramos said. The peso has weakened more than 8 percent since May 22, when the Fed signaled it would trim its monthly bond purchases as the economy improves.

“Families of overseas Filipinos feel richer because the peso has devalued,” Ramos said. “They are probably spending a little more than before.”

The Philippine Stock Exchange Index (PCOMP) fell 0.1 percent to 6,508.58 as of 12:32 p.m. in Manila.

Consumer stocks are growing more expensive and the companies are unlikely to match the growth they enjoyed last year, when campaign spending in congressional and local elections boosted demand, according to COL Financial Group Inc.

Puregold is valued at about 25 times estimated 12-month earnings, while Emperador trades at 24 times, according to data compiled by Bloomberg. That compares with a multiple of 17.5 for the Philippine Stock Exchange Index, which has climbed 11 percent this year.

Growth Outlook

“I am less certain that growth will be as fast,” said Jed Pilarca, an analyst at COL Financial. “Consumer stocks aren’t cheap. It might be time for a correction.”

Emperador’s net income will probably increase 24 percent this year, while Puregold’s profit may climb 28 percent, according to analysts’ estimates compiled by Bloomberg. The nation’s economicgrowth is set to exceed 6.5 percent in the first quarter, boosted by rebuilding after Typhoon Haiyan, stronger exports and tourism, Economic Planning Secretary Arsenio Balisacan said on Feb. 4.

The government estimates growth of between 6.5 percent and 7.5 percent this year. The economy expanded 7.2 percent in 2013 and 6.8 percent in 2012, the fastest two-year pace since the 1950s, data compiled by Bloomberg show.

“A big chunk of the economy is driven by consumption,” Ramos said. “When GDP is growing, you know that a lot of people will be consuming more.”

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Job Creation Surges Higher. Now What?

Despite the bad weather, the US Economy added 175,000 jobs in February Vs. estimated 149,000.  Damn, I am impressed. Let me run out and buy some shares of Facebook, Netflix, Tesla, Google, etc… Even though I can puncture the “validity of data” hole (as I have done before) wide enough for a semi to drive through, that is not the angle I am going to take today.  

Listen, jobs is a lagging indicator. It’s a trend measure and is not indicative of future market developments. Let me give you an example. The US Companies were hiring hand over fist at 2000 and 2007 tops. In fact, they continued to do so 6 months after said tops. With the stock market surging higher over the last 6 months, I would hope that the February jobs report come in above expectations. Yet, it is all in vein.  As the 2014-2017 bear market accelerates speed over the next few months, any job gain will quickly turn into mass layoffs. 

What Bear Market? Read the  bear market report here.  

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Job Creation Surges Higher. Now What?  Google

jobs-feb-14-2

The U.S. economy added 175,000 jobs in February, more than anticipated despite brutal weather conditions across much of the U.S., with the unemployment rate ticking slightly higher.

Economists had predicted 149,000 new jobs. The headline unemployment rate was 6.7% last month, up from 6.6% in January, actually a positive sign because it means more people entered the workforce.

The December and January figures, both well-below expectations, were revised higher by a combined 25,000.

Weather had been widely predicted to put a dent in the numbers ahead of the release of Friday’s data by the U.S. Labor Department. That was the case but it didn’t impact overall hiring as much as analysts had anticipated.

“The weather was unseasonably cold in February, especially during the period leading up to and including the (Labor Department’s) survey week. In addition, snowfall has been unseasonably high over the same period,” analysts with Nomura’s Global Markets Research unit wrote in a note prior to the release.

Instead of chilling overall hiring, the Labor Department said the weather resulted in 7 million people working part-time last month rather than full-time, 10 times the number in January and the largest figure since January 1996, when a blizzard paralyzed the Northeast.

Todd Schoenberger, managing partner at LandColt Capital in New York, said the February numbers bode well for the spring.

“Despite headwinds, such as the continuation of a brutally cold winter, the labor market persevered, which leads to added optimism for a spring thaw in discretionary spending as we close out the first quarter of 2014,” he said. “Wall Street will cheer this report because strict attention is now given to economic and fundamental analysis as the (Federal Reserve) continues its tapering strategy.”

Despite a weak January jobs report, Fed policy makers voted unanimously earlier this  year to continue scaling back the central bank’s monthly bond purchases by $10 billion. The amount has been whittled down to $65 billion a month.

In public comments, Fed members have said the economic data would have to shift dramatically for the Fed to alter its stated objective of reducing bond purchases at $10 billion intervals until the program, known as quantitative easing, expires later this year.

After gaining an average of 194,000 jobs each month in 2013, the numbers have fallen off significantly in early 2014. The economy added a meager 113,000 jobs in January, which followed the  addition of just 75,000 new positions in December.

But members of the policy-setting Federal Open Market Committee, including newly installed  Fed Chair Janet Yellen, have taken pains to explain that labor data, especially the headline unemployment rate, is one of several economic indicators the Fed is using to determine future policy.

The unemployment rate has fallen to its lowest level since the onset of the 2008 financial crisis  but often for the wrong reasons, namely because thousands of people have been leaving the workforce each month which reduces the number of people the government counts as unemployed.

In addition to labor numbers, gross domestic product, which slowed to 2.4% in the fourth  quarter compared to the 4.1% growth in previous quarter, and consistently low inflation have been cited by policy makers as key barometers for the health of the U.S. economy.

In any event, central bankers have vowed to take a cautious approach to tapering, seeking to  find a balance between dialing back bond purchases too quickly, which could backfire if the economy shows signs of stalling again, and not scaling back fast enough, which could lead to runaway inflation.

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The FED Continues To Impress With Stupidity

In another point of reference that, once again, proves without a shadow of a doubt that the FED doesn’t know what is happening within our economy and our financial markets, the FED is talking about accelerating tightening.  Of course, exactly at the wrong time.

You see, most of the damage from their loose monetary policy since 2008-09 has already been done. They have already distorted most of the markets to the 10th degree and with speculation running rampant, the worst thing they can do now is to stop or tighten. Doing so will collapse all markets.

Believe it or not, even though markets are surging higher and the economy seems to be doing better, we are on a verge of a vicious bear market and a deep recession within our economy. That is based on my mathematical and timing work. In fact, it would be wise to be liquidating all of your long positions as we speak.  You can read an in depth report on this matter HERE. If you would like to know the exact structure of the upcoming bear market, please CLICK HERE. 

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The FED Continues To Impress With Stupidity Google

stupid fed

(Reuters) – The Federal Reserve may find its monetary policies quickly becoming overly easy if it sticks to the current pace of reductions to its bond-buying program in the face of a growing U.S. economy, a top Fed official said on Thursday.

“If the economy continues to improve, we could find ourselves still trying to increase accommodation in an environment in which history suggests that policy should perhaps be moving in the opposite direction,” Philadelphia Federal Reserve Bank President Charles Plosser said in remarks prepared for delivery to the Official Monetary and Financial Institutions Forum in London.

“Reducing the pace of asset purchases in measured steps is moving in the right direction, but the pace may leave us well behind the curve if the economy continues to play out according to the (Fed’s) forecasts.”

Since the onset of the Great Recession and throughout the more than four years since its end, Fed has kept interest rates near zero and has bought trillions of dollars of long-term assets in order to suppress borrowing costs and boost investment and hiring.

Late last year, in a nod to the improving economic and labor market outlook, the U.S. central bank took its first step toward easing up on the monetary gas pedal by trimming its current round of bond buying and signaling it could end purchases altogether later this year.

But the hawkish head of the Philadelphia Fed worries the wind-down will take too long, if, as he expects, the economy grows about 3 percent in 2014, pushing down the jobless rate to at least 6.2 percent by the end of this year and “plausibly” even below 6 percent.

Plosser’s forecast for growth falls squarely inside the 2.8 percent to 3.2 percent forecast range from the majority of Fed officials.

“As the expansion gains traction, the challenge will be to reduce accommodation and to normalize policy in a way that ensures that inflation remains close to our target, that the economy continues to grow, and that we avoid sowing the seeds of another financial crisis,” Plosser said.

“While there continues to be some downside risk to growth, for the first time in years, I see the potential for more upside risk to the economic outlook. We need to consider this possibility as we calibrate monetary policy.”

The economy grew at a 2.4 percent pace last quarter, and recent soft economic data suggests growth may have since slowed. But Plosser cautioned against reading too much into recent weakness, chalking most of it up to severe winter weather.

That’s a view shared by many at the Fed.

Most investors expect the central bank to look past the soft data and continue to reduce its bond-buying program by $10 billion per month at each meeting, setting it on course to end the program before the year is out. The Fed next meets to discuss policy in less than two weeks.

But Plosser, who votes this year on the Fed’s policy-setting meeting and is among the most hawkish of the nation’s central bankers, wants to ratchet back super-easy policies more rapidly than most of his colleagues.

Unlike many of his colleagues, who predict it could take years for inflation to return to normal levels, Plosser said Thursday he sees upside risks to inflation, now languishing at just above half of the Fed’s 2-percent target.

Plosser also called for the Fed to remake its guidance to markets for how long it will keep rates low, because the current promise, to keep them low until well beyond the time the unemployment rate falls to 6.5 percent, has lost any usefulness.

The U.S. unemployment rate stands at 6.6 percent.

He reiterated his view that the Fed should strive to follow monetary policy rules, reduce its reliance on discretionary decisions, and pull back from the aggressive intervention that has marked its actions since the financial crisis.

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Russia To Everyone: Take Your Sanctions And Shove Them

Russia’s parliament gave its defiant support to Putin and Crimea on Friday, indicating that no sanctions imposed by the US or EU will change its mind. 

With all the BS floating around here is what most people don’t understand. This is not about Ukraine, Crimea and Russia. This is about NATO taking over Ukraine and being closer to Russia than it has ever been. Since the collapse of the Soviet Union, NATO has been pushing its forces east, closer and closer to Russia. To the point where NATO is now right on Russia’s doorstep. Imagine if Russian forces where positioned right on the Canadian border and you begin to understand that the West has pushed the Russian bear between a rock and a hard place.  

As I have said many times before, under such circumstances, Russia has no choice but to go all in. Sanctions or not. It will fight the war if pushed too far. Thus far, the only agitation I see is coming from the West. The real question here is as follows. Since the wars in Iraq and Afghanistan are now over, does our industrial military complex need another war? I will leave you with these wise words. 

In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. – Dwight D. Eisenhower

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Russia To Everyone: Take Your Sanctions And Shove Them Google

blinking putin

Moscow (CNN) — Russia’s parliament gave its defiant support Friday to Crimean lawmakers who want to see their region split from Ukraine and join Russia, saying no sanctions imposed by the United States or Europe will change its mind.

A delegation from the Crimean parliament, in Moscow a day after its lawmakers voted unanimously to split from Ukraine, said it would put the decision to a public vote on March 16.

But Ukrainian interim Prime Minister Arseniy Yatsenyuk has condemned those backing a split.

Crimea, an autonomous region in southern Ukraine with an ethnic Russian majority and strong cultural ties to Russia, has become the epicenter of a battle for influence between Moscow, Kiev and the West.

Valentina Matvienko, the speaker of Russia’s upper house of parliament, told the Crimean delegation it would “support and welcome” any decision made by the Crimean people to become a part of Russia.

“We have no rights to leave our people when there’s a threat to them. None of the sanctions will be able to change our attitude,” Matvienko said.

The delegation was greeted with applause in the lower house, where the speaker described the decision to hold the referendum as “dictated by the willingness to protect human rights and lives.”

The Crimean government, which was installed a little more than a week ago after armed, pro-Russian men took over the parliament building in Simferopol, does not recognize the interim government in Kiev.

The authorities in Kiev, in turn, say the Crimean government is illegitimate.

Yatsenyuk, speaking Friday in Kiev, said: “I want to warn separatists and other traitors of the Ukrainian state who are trying to work against Ukraine, any of your decisions taken is unlawful, unconstitutional, and nobody in the civilized world is going to recognize the results of the so-called referendum of the so-called Crimean authorities.”

He said he’d requested a second telephone conversation with Russian Prime Minister Dmitry Medvedev.

Yatsenyuk, who was in Brussels, Belgium, on Thursday as European Union talks on sanctions against Russia took place, insisted then that “Crimea was, is and will be an integral part of Ukraine.”

Monitors suggested

U.S. President Barack Obama set out a potential solution to the crisis in Ukraine when he spoke to his Russian counterpart, Vladimir Putin, on Thursday, the White House said.

The proposal would include direct talks between Kiev and Moscow, the withdrawal of Russian forces to their bases, international support for elections due May 25, and the presence of international monitors to “ensure that the rights of all Ukrainians are protected, including ethnic Russians.”

Obama also rejected the Crimean lawmakers’ decision to call a referendum, saying: “In 2014, we are well beyond the days when borders can be redrawn over the heads of democratic leaders.”

International observers are welcome to witness Crimea’s upcoming referendum on joining the Russian Federation, the delegation of the newly installed Crimean parliament said in Moscow

Meanwhile, international monitors called in by Kiev will try again Friday to gain access to Crimea, which has been under effective Russian control for several days.

On Thursday, armed men at checkpoints turned back the 35-strong team from the Organization for Security and Co-operation in Europe, a regional security bloc.

But members of the OSCE team told CNN’s Matthew Chance, who is traveling with them from Kherson in southern Ukraine toward the Crimean peninsula, that they intend to be more assertive Friday as they seek to get in and assess the situation.

Asset freezes, visa bans

As they seek to put the diplomatic squeeze on Russia to pull back its forces from Crimea and negotiate with Kiev, EU nations announced Thursday they will suspend bilateral talks with Russia on visa matters and have threatened travel bans, asset freezes and cancellation of a planned EU-Russia summit.

French Foreign Minister Laurent Fabius told French public radio Friday that tougher measures are planned if Moscow doesn’t act to de-escalate the situation.

“Without very prompt results, there will be further measures against Russian officials and companies. Those could be asset freezes, cancellations, visa denials,” he told France Info.

“And if another attempt is made, then we would enter into something completely different — that is to say serious consequences for the relations between Europe and Russia.”

The United States also has taken action. The State Department has imposed a visa ban on Russian and Ukrainian officials and others that it said are responsible for, or complicit in, threatening Ukraine’s sovereignty and territorial integrity. Obama has signed an executive order laying the groundwork for sanctions against individuals and entities responsible for the crisis.

Paralympic plea

The Paralympic Games get under way Friday in the Russian city of Sochi, and Putin is expected to attend the opening ceremony.

Ukrainian Paralympic Committee chief Valeriy Suskevich appealed for peace in his country and said he’d made the same request of Putin at a meeting Thursday night.

“We are staying in order to be remembered, for Ukraine to be remembered as the state which sent a unified team,” he said at a news conference. “We’ve taken the decision to raise the flag of the independent sovereign state of Ukraine here at the Paralympic Games.”

Ukraine’s sports minister will not be attending.

Britain, the Netherlands, Canada and Poland are among those who also have said they will stay away. Earlier this week, the White House canceled a presidential delegation to the Paralympic Games.

Crimean threat?

Moscow has denounced the events that led to Ukrainian President Viktor Yanukovych’s ouster in late February as an illegitimate coup and has refused to recognize the new Ukrainian authorities, putting Russia and Ukraine on a collision course over control of Crimea.

Putin has insisted he has the right to use military force in Ukraine if necessary to protect ethnic Russians in Crimea. But Ukrainian officials say no threat exists and that Putin is using it as a pretext to control the region.

The peninsula was part of Russia until Soviet leader Nikita Khrushchev gave it to Ukraine in 1954. Ukraine was then part of the Soviet Union. Russia has a major naval base in the port city of Sevastopol, and thousands of troops are stationed there.

Russian speakers make up about 60% of the population, but around a quarter are Ukrainian and 12% are Crimean Tatar, a predominately Muslim minority. Neither of the latter two groups would welcome a switch to Russian control.

Meanwhile, a second Russian naval vessel was scuttled Friday morning at the entrance to Lake Donuzlav, an inlet on the western coast of Crimea home to a Ukrainian naval base.

Viktor Shmihanovsky, vice commander of the base, told CNN that the inlet is now sealed off and that several Ukrainian naval ships are trapped inside. Russian vessels remain in the waters beyond the blockade, he said.

Interpol asked to arrest Yanukovych

The EU and the United States also announced plans to freeze the assets of ousted leader Yanukovych, who turned his back on a trade deal with the EU in favor of one with Russia.

The rejected trade deal prompted months of protests that culminated in February with bloody street clashes that left dozens dead and Yanukovych out of office.

Back in Kiev on Friday, Yatsenyuk, the interim prime minister, said an agreement to sign an EU trade deal reached Thursday, and the offer of an EU financial aid package worth $15 billion, were the result of historic unity with EU members.

“We are leading Ukraine into the European Union,” he said.

Interpol said it is reviewing a request by Ukrainian authorities that would allow for the arrest of Yanukovych on charges of abuse of power and murder, an allegation tied to the deaths of protesters.

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Stock Market Update, March 6th, 2014. InvestWithAlex.com

daily chart Feb 28, 2014

A typical day with the Dow Jones up +62 points (0.38%) and the Nasdaq down -6 points (0.13%). 

With the market pushing all time highs, most market pundits agree that this bull market is likely to continue for the foreseeable future. Yet, that is not the case based on my mathematical and timing work. In fact, in one of my earlier posts today I have outlined why bull markets very rarely last over 5 years, particularly during the cyclical bear market we have been experiencing since 2000. As such, it would pay to be very careful here. 

XXXX

The bottom line is this. Maintain your positioning as described below. It won’t be long now before our previously forecasted price and time targets are hit. When that happens the market will shift gears by surprising both bulls and bears. One thing is certain. It will be an exciting period of time for those who have positioned themselves properly. 

As a quick reminder …..our existing forecast and positioning: 

Turn Date: XXXX.  
Turn Price: XXXX

XXXX

Hence, I suggest the following positioning over the next few days/weeks to minimize the risk while positioning yourself for a forecasted market action.

If You Are A Trader:  XXXX 

If No Position: XXXX 

If Long: XXXX

If Short: XXXX

Please Note: XXXX is available to our premium subscribers in our + Subscriber Section. It’s FREE to start. If you would like to learn exactly what the stock market is going to do over the long term as well as over the short term (including exact dates and prices), this would be a great place to start. 

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Stock Market Update, March 6th, 2014. InvestWithAlex.com Google

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Carl Icahn Is Going After Ebay. Should You Buy

ebay chart

Carl Icahn is at it again. His latest fight is against E-Bay and it’s getting dirty fast. In a nutshell, Icahn claims that E-Bay has been mismanaged by current management/board. Further, he is demanding the spin off of PayPal as a separate publicly traded company. Doing so would release substantial value or so the thinking goes. 

Should you follow in Carl Icahn’s footsteps and invest in E-bay in anticipation of a spin off?

Maybe. Icahn has a very good track record when it comes to such fights, shareholder activism and releasing value. While this process can be highly volatile, unpredictable and lengthy the chances are good some sort of a value will be released. If there is a PayPal spin off, I would expect that value to be significant. Just recently Ebay’s stock price broke an important level indicating further upside and consideration for possible investment. 

Either way, you should always do your own research and make your own investment decisions.  

Please see the letter from Carl Icahn on merits of the fight below. 

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Carl Icahn Is Going After Ebay. Should You Buy  Google

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Carl Icahn is a prominent activist investor and the chairman of Icahn Enterprises L.P. This letter originally appeared on his website Shareholders Squaretable. You can follow Mr. Icahn on Twitter here > @Carl_C_Icahn

New York, New York, March 6, 2014 – Today Carl C. Icahn released the following open letter to stockholders of eBay Inc.:

We are strongly encouraged by the results published yesterday of an investor survey conducted by Bernstein Research regarding our campaign to prove to eBay’s board of directors that stockholders are in favor of separating PayPal from the company. A majority of eBay owners responding to the survey said they believe that the composition of the board should change. 55% of the survey respondents said that the composition of eBay’s board should change, while 43% said that splitting PayPal from eBay is the right move to make. We are therefore naturally skeptical of recent articles reporting eBay CEO John Donahoe’s claims of widespread stockholder support for keeping the companies together.

While I find the Bernstein data points astounding in light of the fact that we have not yet even begun to formally reach out to our fellow eBay stockholders to make our case, I cannot say that I am particularly surprised at the level of apparent stockholder dissatisfaction with this board – especially in light of (among other things) –

  • what we believe was an epic blunder in which the board allowed an investor group which included director Marc Andreessen’s venture capital firm to capture the lion’s share of the enormous upside from Microsoft’s acquisition of Skype at the expense of eBay’s stockholders;
  • the fact that during Mr. Andreessen’s time on the eBay Board he has made investments in and actively advised, no less than five direct competitors of eBay (four of which are competitors of PayPal), including Boku (mobile payments platform), Coinbase (Bitcoin wallet), Dwolla (secure online money management), Jumio (online and mobile credit card payments) and Fab (design e-commerce); and
  • the fact that Board member Scott Cook, the founder of Intuit (which competes with PayPal) allegedly asked eBay not to recruit any Intuit employees, according to an ongoing Department of Justice investigation.

I am also not surprised that our spinoff proposal already seems from this survey to have so much support despite the fact that we have not yet even made public our full business rationale for the separation. What I see as some of the obvious potential benefits of a spinoff –

  • a spinoff of PayPal could eliminate the conglomerate discount that we believe the market has afforded eBay;
  • a spinoff could allow two separate management teams to focus more closely on the core businesses and make better strategic decisions regarding the long-term health of their respective companies;
  • an independent PayPal could provide an even more valuable currency for bolt-on acquisitions as PayPal strives to remain the market leader in mobile payments;
  • a spinoff of PayPal could provide a more compelling currency to attract top talent to the respective companies; and
  • separately, PayPal may be more able to facilitate strategic partnerships with companies that may now be reluctant to do so due to competitive concerns with eBay –

seem already to be apparent to many, many other eBay stockholders. Again, we are encouraged.

We are looking forward to the upcoming annual meeting, where stockholders will have an opportunity to vote on our precatory proposal and send a message to the board that PayPal should be separated from eBay NOW. Stockholders will also at that time have the power to vote out of office two members of eBay’s board of directors and replace them with our nominees, who we believe will be focused more on enhancing value for ALL eBay stockholders than on leveraging their relationships with eBay to benefit their outside personal investments.

Stockholders, please stay tuned. There is more to come – much more. Thank you for your continued support.

Sincerely,

Carl C. Icahn