Oh, No! Not That!;)) Not Sinking.

Western "economists" and "analysts" are a very interesting breed--they carry worthless pieces of paper called degrees in "economics" from universities where people who never worked a day in life on real job teach them how real economy works, and they love hyperbole. Like this:

The ruble sank early Monday as Russia allowed so-called "friendly" countries to re-enter Moscow's bond market. Moscow's fiat currency fell as much as 1.5% to 61 against the US dollar, while also pulling back roughly 0.2% against the euro. The Kremlin announced plans last week for investors haling from countries that haven't taken part in sanctions against Russia to trade in debt securities. Russia will also convert global depository receipts, or GDR's, into shares to be traded on the Moscow Exchange. Russia's central bank said on Monday that it planned to write off the GDR's from account holders and then credit the shares. Moscow closed off its markets in February to keep a tighter seal on outflows of capital, after President Vladimir Putin launched the invasion of Ukraine. And the ruble's latest fall adds to the wild swings the currency has seen after notching all-time highs and record lows this year.

As you all know I don't deal with this voodoo which Western economics is because I don't deal in magic, occult and magic spells, aka Wall Street. But as always, for anyone who wants to glimpse at economic reality of the world it is worth noting that Ruble was revolving around 60-61 (Hey, Joe, where is those promised 200 for a dollar) for a duration of the last week or so and today it closed at:

Of course, the piece above reports in a proforma manner this piece of news:

NEW YORK, Aug 15 (Reuters) - Several major Wall Street banks have begun offering to facilitate trades in Russian debt in recent days, according to bank documents seen by Reuters, giving investors another chance to dispose of assets widely seen in the West as toxic. Most U.S. and European banks had pulled back from the market in June after the Treasury Department banned U.S. investors from purchasing any Russian security as part of economic sanctions to punish Moscow for invading Ukraine, according to an investor who holds Russian securities and two banking sources.

Allegedly it is all about divestment and ridding off the "toxic" Russian assets. Sure. But something tells me that there is a lot more to this story than Reuters puts on, and the issue here is very simple: in the long run real economy on which the financial system rests, not the stock market, wins. And while I am no specialist in securities--I am simply not that interested in speculation in general--I give you one example to illustrate the issue. 

Japan has revealed it will keep hold of its stake in the Sakhalin-1 oil and gas project in Russia, despite Western energy giants abandoning projects in the country. Industry minister Koichi Hagiuda argued the project was key to diversifying Japan’s energy supply. He said: “Sakhalin-1 is a valuable non-Middle East source for Japan, which depends on the Middle East for 90 per cent of its crude oil imports. There is no change in maintaining the interests of Japanese companies in it.” Sakhalin Oil and Gas Development, a Japanese consortium, owns 30 per cent of Sakhalin-1. Russia has banned investors from so-called unfriendly countries from selling shares in banks and key energy projects, including Sakhalin-1, until the end of the year. This is despite firms such as Shell and BP unilaterally ditching stakes in projects situated in the country following the invasion of Ukraine. 

You try to kick them out, but no--they just don't want to. You see, when one's life is dependent on real, tangible things, not some funny papers--sanctions or not--try to kick them out. And mind you, Russia is imposing her own sanctions on the "unfriendly" countries. But, getting back to Ruble, it is absolutely not a secret that Russia since June went public stressing that:

Russia Doesn’t Want Stronger Ruble, Seeks to Avoid ‘Sharp’ Gains

And that Russia is now in the process of "weakening" the Ruble and tries to find a "golden middle" which will be both good for revenues and budget. The discussion is on now about what is this rate comfortable for Russian economy. Some say it is 65, others go as high as 70. But under no condition all those changes are "sinking" as some try to portray a normal work of the government, which is in a full control of national economy and works with it as a unified organism, unlike it is the case in Western world where suicidal economic and ideological concepts got a stronghold on the West's future which is bleak. But then again, what do you expect from people who cannot find the definition of recession. I am on record, most of those people cannot find their own ass with their own two hands in a brightly lit room, so it is all good. Somebody, tell me where can I buy Tesla or Apple stock, I need to make a good investment before electricity rationing and food shortages start, wink, wink... 

P.S. Something tells me that there are many people in D.C. who would love to lift many more additional sanctions from Russia while making sure that EU imposes new ones. Just a wild thought. But what do I know.

Nothing To Celebrate.

ADP National Research Institute report on unemployment is out and it is devastating:

As a result, which is strange (it should be really high because the worse off is the country, the better are earnings  /s) Dow Jones even dipped couple of points into the negative territory. By far more important is a new normal--a chaotic behavior of oil prices which grow, then fall, then grow again, and which is, I guess, a "normal" behavior for the so called "free" (free from any responsibility) market. As it stood in the morning: Urals was up, the WTI was down--a mixed bag. 

It is obvious that the devastation--and we still do not know the full extent of it--at the labor market is a decisive factor in erratic behavior of everything and of nearly everybody, especially against the background of some Green Berets obviously losing their bearings and trying to... 

Kidnapping Venezuelan President Nicolas Maduro and bringing him to the US was the objective of a failed incursion into the country, one of the two captured US mercenaries said in an interrogation tape released by state TV.Two employees of Florida-based security firm, Silvercorp, have been detained by Venezuelan forces in connection with the failed invasion.The only instructions he received before Sunday's botched operation was to take control of the airport in order to facilitate the transfer of Maduro to the US, Luke Denman, one of the detained Americans, said in the footage.

I think watching too much Hollywood and fighting Arab and Afghan peasants in sandals armed with AK-47s, under the umbrella of own Close Air Support, may have created a false sense of own invincibility among perpetrators, but judging by this "operation", one has to seriously question not only professional but mental merits of people who planned it. I merely scratch my head in disbelief--what the fvck were those people thinking? Venezuelan Armed Forces may not have intercontinental ballistic missiles and satellite constellations, but they sure as hell have radars, night and IR vision, patrols, even aviation and modern communications and know how to use them precisely for the purpose of tracking all kinds of strange people from the the US and its "allies" (Columbia, anyone) around itself. Russians may have helped also, but that is just me speculating. Even more astonishing is the reward which whoever planned this BS offered to them--between $50 and 100K for taking airport and facilitating Maduro's transfer to the US? Dude, they framed you for the price of the fvcking new 2020 Ford 150 Limited Truck. That's it? Boy, the going rate for "regime change" mercenaries, certainly, went down as of lately. 

 

Where are those wonderful times when Arnie, totally out of fatherly duties and love, would go out completely alone and kick the ass of a battalion or two of all kinds of international (and domestically grown) commandos. 

I miss those times, including the times when Alicia Milano was merely a charming child, not four-wheel drive feminist bitch supporting Hillary and advocating for vegan lifestyle, yes, by endorsing America's main vegetable Joe Biden. You see, everything is falling apart, but who cares, right? As long as stocks go higher, the ADP report will be forgotten in a couple of days, until next report. At least we know couple of unemployed Green Berets are now off the US government balance and are provided three hot square meals in whatever high security Venezuelan facility they are being held on charges of being complete morons. At least they can thank God for being in Venezuela, not in some Taliban underground prison. In other news, Pompeo called Lavrov, again, and "discussed" issues of Arms Control (in Russian). Obviously, "the forms must be obeyed" before the United States kills START. And it will kill it and then... and then what? Judging by the "quality" of operational planning demonstrated in Venezuela, one should seriously ask the question if the United States will kill itself first before killing everybody else.

That Is Everything You Need To Know.

And it is in the announcement of Russia's Central Bank: 

Russia’s sovereign wealth fund has enough reserves to cover budget deficit for years, even if oil prices stay between $25 and $30 per barrel, the Finance Ministry announced amid a dramatic oil market crash.Despite Monday being a public holiday in Russia, both the Ministry of Finance and the Central Bank were quick to react to the overnight drop in oil prices of nearly 30 percent. The former said that the Russian National Wealth Fund has $150 billion (more than 10 trillion rubles) worth of liquid assets from additional oil and gas revenues, which is enough to offset a possible shortfall from falling crude prices for 6-10 years.

So, if anyone thinks that this whole FUBAR with "markets" (quotation marks are deliberate) is about Saudi Arabia and Russia feuding, they better check the reality. It is way more than that. KSA in this situation is just one of the players and not the biggest ones at that. But most important are these conclusions which must be made and which, most likely, will not be made in the West but we will try:

1. This crisis shows what a house of cards this whole "global economy" is, because markets, as a place where REAL price on commodity is fixed, are a figment of imagination of all kinds of white board "analysts" who still believe in a false gospel of laissez-faire. Modern "markets" are speculation and political pressure machines which have zero in common with actual economic reality on the ground and as such cannot exist anymore in present form. In other words: system of trade imposed by the United States is pretty much done and we see it disintegrating in a front of our eyes;

2. It also shows what a Potemkin Village whole modern US economy is, when economic development is assessed in terms of the stock price and capitalization most of which are driven by stock buybacks and credit infusion. So much for Trump's "achievements" in economy. 

3. We are yet to establish the algorithm of Coronavirus panic being spread globally--it will take some time to figure out the REAL drivers behind this, most likely, grossly exaggerated danger--but it is already clear that the so called US economic sputtering was ongoing long time before any Coronavirus was ever discovered. 

In other words, the crisis is systemic and it cannot be fixed by monetary or any other present so called "market" means precisely because those markets as imagined by theorists do not exist. In general, we are at the precipice of a gigantic geopolitical shift which, indeed, will remove Petrodollar as a viable financial instrument through, first, completely defanging OPEC and then, or, rather, simultaneously deflating the bubble of the US speculative economy. This is my off the calf take on all that. Enjoy the spectacle. Expect more violence.

All That Jazz.

You may ask: why am I not writing about stock market. Well, now I am. The "market" got slaughtered in the last 2 days by losing 1,800, or whatever the number, points. So what? We have to accept two major truths about stock market:

1. US stock market is not just "overvalued", no, this is not the term--it is grossly and criminally overvalued;

2. US stock market has a very remote, if any, relation to actual real economy of the United States--it long ago became a place where financial speculations and fraud became Modus Operandi; 

Yet, there is a degree a practical purpose in this, allegedly Corona virus-inspired,  spiraling down because one can trade all kinds of shitty financial derivatives for only so long before the actual house of cards comes down. 

It really doesn't matter how the stock market behaves itself--in the economy where General Electric, granted financialized into the ground, is replaced by Walgreens at Dow, anything can happen. Economics based ONLY on bottom line or profit-only ideology is fragile by definition. Is coronavirus as dangerous as it is claimed to be? One cannot fail to notice that majority of people who died from it are of Chinese ethnic (genetic) origin. Some people go as far as state that it was a some kind biological weapon unleashed on China, well, I don't know about that. Now, what are the real chances that this thing becomes a pandemic? Let's relive those wonderful times of SARS panic. Origin--China again and, yet again, bat-related. Anyhow, this was expected by many and as one observer puts it:

"The Fed should not be cutting interest rates but that's what they are going to do because it's the only thing they can do." That is not going to cure coronavirus or the economy, it's simply going to make US economy sicker, Schiff notes. "The US economy is in gigantic bubble and maybe the coronavirus is going to be the pin." However, there are much deeper problems than the coronavirus, as the markets are generally very overvalued, according to Schiff. "If we had a healthier economy we could better withstand... But the bigger problem is that the Fed's cure is actually worse than this disease," he says.

One doesn't have to be a stock-broker to understand this.  

Some Truly Gigantic News.

No, not about stock market which behaves like a loony--that is totally expected in the "economy" where median house price of $320,000 is considered "affordable", yes, for very few, actually. And even rent is not affordable for 66% of renters. Now, the news about real economy, of Russia. These news mark a major new point of bifurcation for Russia. Today, Russia's hi-tech colossus State Corporation Rostec acquired 92% of interest in another Russia's giant--United Aircraft Corporation (UAC).   

Implications of this monstrous transaction are truly proportional to the size and capabilities of this variant of Russian State Keiretsu (sort of) which emerges. In the same time today, Vladimir Putin introduced legislation to State Duma, for passing--many in Duma after that soiled their pants, the legislation is about the right of Russia's Prosecutor General to literally hunt for the foreign accounts of Russia's bureaucrats (in Russian) who are not supposed to have any foreign assets while being employed by state structures. Like Duma legislators, among others, maybe? What does this remind you of? Oh, that, sure as hell, reminds me of what overwhelming majority of Russians were begging for decades since criminal so called liberal oligarchy came to power in 1991--to reformat economy. You see, those damn Bolsheviks, Communists, whatever "Ists", they, for some obviously nefarious reasons, took backward Russia and turned her into the industrial superpower and most educated nation in the world. Majority of Russian population still remembers this, despite all massive efforts of all kinds of "dissidents", "liberal" (in reality totalitarian laissez-faire and Russophobic) brainwashing machines known today as media, or direct efforts of hostile propaganda, to pour buckets of sewage on Russian people historical experiences and memory.

As it turned out--this is why Western "intelligence" can not grasp it--that, unlike Americans, who are fiercely anti-government and anti-state in metaphysical sense, Russians throughout all their history were, actually, building a state. They had to--otherwise how can one survive more than 800 years of brutal warfare out of 1200 years of history without the state. It matters that, quoting George F. Kennan:

Not all that went by the name of communism in Russia was bad; nor were all those who believed in it. 

No, don't worry, Russia is not about to become communist or is about to become new Soviet Union--not even close. Russia will continue to remain capitalist, free enterprise (in fact new programs in support of small and mid-size business are being readied as I type this) and broadly free socially and culturally. But here is the issue--Russians, unlike Westerners, have a very different concept of national treasure. As I spoke about this for a while on this blog, using American examples--is Boeing a national treasure of the United States? Absolutely it is, it is a part of America itself. Is Boeing a private company? Well, yeah. But can you imagine a group of Boeing's shareholders getting together in some secret place and deciding (well, just imagine for the sake of the argument) to dissolve Boeing, sell its assets and go on living on their acquired immense wealth? This is impossible--because this would be considered, and rightly so, the act of national treason in America and, I am sure, those who will come to this decision to sell Boeing will be hunted down and revenge will be exacted because Boeing, while being a private company, in reality IS NOT. One can earn or lose money on Boeing's shares but Boeing is in effect a (American) state company. And, of course, US government actively supports Boeing not just out of altruistic intentions or because it is greedy, no. It supports Boeing because it is a national, state strategic asset. Remember air refueling  aircraft B KC-767scandal?  

The same principle applies to many American companies because there IS NO market forces and "honest" competition (all figments of imagination of Western "economists") when the fate of a nation is on the table. Fate of modern nations which have no massive and advanced real hi-tech machine-building complex is sad--they stop being players. This is exactly what US-inspired 1990s "reforms" pursued in Russia--to deindustrialize the nation which won WW II in Europe, restored itself after the war, led the way into space and even today remains among most educated nations of the world. For overwhelming majority of Russians their national treasure is not just oil, gas and minerals, albeit this too--crown jewels of Russia also are her spacecraft, weapons, fundamental sciences, many machines, in general, even still largely Soviet public education, all those things which separate just any nation from superpower. Bolsheviks "poisoned" Russians making them wanting to work in real economy, and merging UAC with Rostec is one of those ways to guarantee that never again sleazy and bloody hands of "oligarchs" will ever again touch what is Russia's main national treasure, the one which allows Russia to exist as a nation, as a civilization--a powerful advanced Russian State. I already can hear squealing from Russia's "liberal" (completely marginal) quarters--it is music to my ears and I am a consummate capitalist. But I can only follow Kennan's dictum that many things which Soviet system provided for Russians were, indeed, not only good but had a major historic positive impact. Putin and his people are trying to preserve them.  But as I always say, until "West" learns REAL Russian 20th century history it will continue to remain in a complete delusion.      
Remember this picture Putin presented as a gift to PM Medvedev on his birthday in 2016?

As you can see, the hint was obvious--get busy with re-industrialization of the nation. Today we may say that it is in a full swing. Enough to look, among myriad other things, at the portfolio of still in construction gigantic shipyard Zvezda near Vladivostok--it has orders for 23 gigantic ships, especially Aframax-class. Even Soviet Union didn't build those. Stock Market, you say? I believed since 2013 that he and his people were preparing some breakthrough for Russia. There were signs, then Crimea happened, today signs are everywhere and only blind and deaf can not see and hear them.