Guest Post: Drone Club


 

Submitted by John Aziz of Azizonomics

Drone Club

The first rule of Fight Club?

You don’t talk about Fight Club.

Obama isn’t a member of Fight Club; he’s a member of Drone Club — which targets individuals in foreign lands, including American citizens and their families, for extrajudicial assassination by drone. And the first rule of Drone Club?

You don’t talk about it.

Via Reprieve:

Apple has for the third time this month rejected an iPhone app which alerts the user to a drone attack and to the number of people killed.  Drones+ enables those concerned to track the strikes to their handset.

 

This is no doubt an uncomfortable prospect for the US authorities, whose use of drones extends to Pakistan, Yemen and Somalia, where no war has been declared.  Such drone strikes have killed more than 3,300 people in Pakistan alone since 2004, according to reports by the Bureau of Investigative Journalism.  

Now we don’t know who made this decision, whether Apple thinks that citizens knowing of drone strikes is a national security risk, or whether Apple were leaned on by the CIA, NSA or Pentagon — though given that Obama has prosecuted more whistleblowers than all other Presidents combined, the latter wouldn’t be entirely unsurprising. Nonetheless, whatever the truth this is a very disturbing development — after all, how can we rightly judge the administration’s foreign and national security policy without having up to date facts?

Obama claims that the drone strikes are conducted on a very rigorous basis:

1 “It has to be a target that is authorised by our laws.”

 

2 “It has to be a threat that is serious and not speculative.”

 

3 “It has to be a situation in which we can’t capture the individual before they move forward on some sort of operational plot against the United States.”

 

4 “We’ve got to make sure that in whatever operations we conduct, we are very careful about avoiding civilian casualties.”

 

5 “That while there is a legal justification for us to try and stop [American citizens] from carrying out plots … they are subject to the protections of the Constitution and due process.”

Yet as Wired notes:

At least two of those five points appear to be half-truths at best. In both Yemen and Pakistan, the CIA is allowed to launch a strike based on the target’s “signature” — that is, whether he appears to look and act like a terrorist. As senior U.S. officials have repeatedly confirmed, intelligence analysts don’t even have to know the target’s name, let alone whether he’s planning to attack the U.S. In some cases, merely being a military-aged male at the wrong place at the wrong time is enough to justify your death.

Micah Zenko adds:

What I found most striking was his claim that legitimate targets are a ‘threat that is serious and not speculative,’ and engaged in ‘some operational plot against the United States. The claim that the 3,000+ people killed in roughly 375 nonbattlefield targeted killings were all engaged in actual operational plots against the U.S. defies any understanding of the scope of what America has been doing for the past ten years.

Of course, just as worrying as the actual policy is the fact that the public widely approves of it.

The Washington Post notes:

The sharpest edges of President Obama’s counterterrorism policy, including the use of drone aircraft to kill suspected terrorists abroad and keeping open the military prison at Guantanamo Bay, have broad public support, including from the left wing of the Democratic Party.

A new Washington Post-ABC News poll shows that Obama, who campaigned on a pledge to close the brig in Cuba and to change national security policies he criticized as inconsistent with U.S. law and values, has little to fear politically for failing to live up to all of those promises.

 

The survey shows that 70 percent of respondents approve of Obama’s decision to keep open the prison at Guantanamo Bay. He pledged during his first week in office to close the prison within a year, but he has not done so.

 

Obama has also relied on armed drones far more than Bush did, and he has expanded their use beyond America’s defined war zones. The Post-ABC News poll found that 83 percent of Americans approve of Obama’s drone policy, which administration officials refuse to discuss, citing security concerns.

83%? It was George Lucas’ Princess Amidala who noted that freedom usually dies to thunderous applause.

Wikipedia:

Extrajudicial punishments are by their nature unlawful, since they bypass the due process of the legal jurisdiction in which they occur. Extrajudicial killings often target leading political, trade union, dissident, religious, and social figures and may be carried out by the state government or other state authorities like the armed forces and police.

I’d like to see Obama answering as to whether his sanctioning of extrajudicial killing resides within the rule of law.

Ben Swann wanted to know the same thing, but Obama wasn’t answering:

 

You don’t talk about Drone Club.

The Next (Lack Of) Trading Casualty: Nomura's Brand New $270 Million Trading Floor


Over the past several months (and years) we have been warning that the ongoing collapse in trading volumes, in part due to the lack of faith in capital markets that now have all the integrity of a rigged Vegas casino from the 1960s, in part due to investors’ need to monetize assets in a world in which wages simply refuse to keep up with prices, will have not only irreversible implications on the shape of market structure, but also substantial consequences when it comes to the layout of modern banks, and associated up and downstream variables, such a jobs, real estate, support professions, municipal taxes and much more. Nowhere is this more evident (for now at least) than in the massive corporate reorganization taking place at Nomura’s American division, which among many other things is about to lose its brand new $270 million trading floor even before a single trader set foot in it.

Reuters explains what we have been predicting for years:

Nomura Holdings’ decision to scale back its equity trading business halts its ambitious U.S. growth plans and creates a Manhattan real-estate conundrum for Japan’s biggest brokerage.

 

Nomura said Thursday it will move its equities execution business in the Americas, Asia and Europe to its New York-based Instinet arm as part of a broader cost-cutting plan. It will no longer buy and sell stocks using its own capital, but instead match clients’ buy and sell trading orders through Instinet.

 

The shift reflects a broader effort by brokerage firms to reshape equities operations that have been battered by years of low trading volume and falling commissions. Companies ranging from Bank of America and Goldman Sachs to much smaller firms have been hit, and many have been trimming large, capital-intensive operations.

And while jawboning (so prevalent lately) and threatening of layoffs is one thing, it is something totally different to see what it means in practice:

The firm recently signed a 20-year lease to accommodate the growth it expected in New York. It is moving next July from lower Manhattan into 820,000 square feet spread over 16 floors to a Midtown building called Worldwide Plaza. Nomura has already spent $270 million preparing the space for trading and other operations.

 

As recently as May, a senior Nomura executive in the United States said the new space would allow the firm to increase staffing by another 50 percent.

 

That’s unlikely to occur. Nomura said Thursday the Americas will bear 21 percent of its cost cuts. Personnel cuts will account for about 45 percent of the global savings, Nomura said. Specific decisions about layoffs have not yet been made, according to a spokesman.

In other words kiss the principal equity trading group goodbye, in process reducing market volumes even futher. So who will survive? The ultra low, flow margin business Instinet which Nomura bought for $1.2 billion in 2007.

For more than a year, equities traders and salespeople had expected Instinet to be folded into Nomura’s broader securities operation, which includes research from 17 analysts. The Japanese firm bought Instinet in 2007 for about $1.2 billion, and in the past year has cut about 200 employees to cope with shrinking profits as trading volume and commissions fell industrywide.

 

Now, though, Nomura’s business is being folded into Instinet, which itself recently moved into almost 100,000 square feet on three floors in another Midtown building, which it had leased until August 2020.

 

Nomura will continue to offer “non-execution” services such as lending to hedge funds, selling convertible securities and offering futures and options through its equities unit, but the majority of its employees are involved in trade execution.

 

Instinet executes about 5 percent of equities traded in the United States, and expects its market share to grow after the Nomura integration. However, the overall pie is shrinking.

“Agency brokers” such as Instinet, which do not trade with their own capital when buying or selling from clients, generate very thin profit margins that have been squeezed further by three years of declining trading volume and a decade-long plunge in commission costs.

 

Trading commissions paid by mutual funds, hedge funds and other institutional traders have slipped from about 15 cents a share in the 1970s to less than a penny a share over electronic systems such as Instinet.

 

Global fees paid by clients for trade executions dropped from $300 billion in 2007 to $220 billion in 2011, according to consulting firm Oliver Wyman.

Considering that Knight’s near death experience in the beginning of August resulted in stock volumes dropping to decade lows in the month, all that remains is for Instinet to go dark next, which it most certainly will once the group no longer generates any profits as the race to the margin bottom among agency brokers begins in earnest, which in turn will make the already broken equity market completely uninhabitable and a trading venue merely for Bernanke and his ilk, whereby the Princeton professor does all in his power to push the mark to myth value of America’s very much insolvent pensions and retirement accounts into the stratosphere to perpetuate for at least a few more year the illusion that America’s welfare state is not totally and utterly broke.

As for Nomura’s traders about to start receiving unemployment benefits, we have good news: consider this a first adopter advantage – you will have some extra time to learn valuable skills which none of your competitors currently sitting behind Bloomberg terminals but who too will soon be seeing pink slips, have, and will thus be at least modestly more marketable in a new normal in which nothing is what it used to be.

The Post Globalized World Part 2: Why The PIGS Are (Still) Out Of Luck


A world of ongoing global integration leads to rising global trade and to rising competition between companies from different countries and to some degree also between the countries themselves. Some countries have benefited from rising global trade and strengthened their positions, expressed by rising trade surplus; other countries have come under pressure, expressed by rising trade deficit. These global trade imbalances are a consequence of competitive differences. Deutsche Bank note that investors invest in companies and the countries are the platform of the companies. Therefore, an understanding of global competiveness of countries is key for investors. It is most helpful to look at the combination of competiveness and hourly wages. The more competitive a country is, the higher its wages can be justified. There is a clear relation between the two variables. Countries below the regression curve have a strong competiveness rank relative to their labour costs while countries above the curve have a lower competiveness rank relative to their labour costs. Greece is one of the most extreme outliers, but Italy, Spain, and Argentina are also above the curve. They have a long way to go to get close to competitive.

Competitiveness vs hourly compensation costs…

 

and in detail – just why the PIGS are (still) out of luck:

 

See The Post Globalized World 1 here

Source: Deutsche Bank

Merkel and Clinton Go To China: One Makes Deals, The Other Gets Snubbed


Wolf Richter   www.testosteronepit.com

Bring home the bacon, or the speck, as it were, was the guiding principle for German Chancellor Angela Merkel when she frolicked in China last week. But her pleas to get the Chinese to buy the crappy bonds of debt-sinner countries in the Eurozone fell on deaf ears. This week, US Secretary of State Hillary Clinton was hobnobbing with the Chinese elite. It turned into a clash fest, and instead of bringing home the bacon, she argued with the Chinese over everything and the South China Sea.

Merkel was accompanied by seven ministers and a delegation of executives from EADS, subsidiaries Airbus and Eurocopter, Volkswagen (which sells nearly a third of its cars in China), Siemens, Thyssen-Krupp, SAP…. Three planes stuffed with Germany’s political and corporate elite. It wasn’t about human rights or Syria or the South China Sea, but about trade.

Days before her visit, it seeped out that Airbus was hoping for a mega contract of 100 planes. The official occasion was Airbus’s joint venture in Tianjin where they celebrated with Premier Wen Jiabao the assembly of the 100th plane—of the 114 planes Airbus sold in China in 2011, 36 had been assembled there. During the ten years Wen has been Premier, German exports to China have quintupled, and Chinese exports to Germany have quadrupled.

Hopes of mega contracts can turn into disappointments. In early 2011, before the Chinese delegation came to Berlin, Airbus was hoping for an order of 150 planes. Then an advance agreement called for 100 planes. But in June that year, when the Chinese arrived in Berlin, they only ordered 88 planes. Punishment: the EU had included aviation in the EU Emissions Trading Scheme (ETS) to deal with “climate change,” a policy China, along with the US and other countries, considered a harebrained idea.

This time, Merkel “secured” an order for only 50 planes. Tough times, even in China. Contracts were signed in the presence of Merkel and Wen. According to “informed circles,” numerous other deals were signed as well.

Smiles and friendly gestures abounded. Merkel and Wen strolled through the Imperial Palace together. There was talk on the German side of a “special relationship,” and on the Chinese side of “friendship.” Wen hinted that China would continue to “invest in the European Union”—but rather than buying bonds of Eurozone debt-sinner countries, which Merkel had been begging him to do, China has gone on a corporate shopping spree in Germany … where it’s least needed. As an aside, the discussions also touched upon Syria and “questions of human rights.”

Germany’s interest is of mercantile nature. China’s focus is on strategy, part of which is to realign the world away from the hegemony of the US. It sees Germany as the leader of the Eurozone in a multi-polar world. And China needs friends. Its relationship with the US is thorny, with Japan on knife’s edge, and with countries around the South China See, which China claims as its own, it’s outright confrontational. Even in Africa, where China is investing heavily in resources, such as oil, tensions are growing [read…. The New Cold War, by Marin Katusa].

No such problems exist with Germany. But Germans have valuable technologies that China is appropriating bit by bit. It’s all about trade, and its murky give and take. A language both countries speak well. Not that there aren’t a host of tricky issues. But Merkel is flexible; she’d try to intervene, she said, with the EU Commission to scale down a trade war in solar panels which the Chinese are accused of dumping on European soil.

By contrast, Clinton’s visit to China, after a barrage of hostile articles in the Chinese press, turned into a fiasco. She argued with the Chinese over a laundry list of intractable issues. No compromise appeared possible; China simply refused to go along with US positions and initiatives. There was Syria: China supports the regime of President Bashar al-Assad, has vetoed three UN Security Council resolutions to stop the violence, and isn’t about to change its mind. There were other flashpoints, such as Iran, North Korea, and the territorial disputes in the South China Sea.

And instead of selling Boeings, software, and nuclear power plants, Clinton argued with hardened Chinese positions. They didn’t even try to put lipstick on their differences. It was so pointless that Vice President Xi Jinping, possibly the next leader of China, cancelled his meeting with her.

The visits by Merkel and Clinton are symptomatic of two different approaches. American concerns are valid, and should be high on the priority list, but so should be the economy, and it certainly could benefit from more exports to China. With the election coming up, millions of people will be asking, “what can the next administration do to help me get a job?” So, Mrs. Clinton, where is the bacon?

And here’s Argentina, whose government goes through great lengths to use self-destructive policies to keep the country glued together a while longer. Read…. Argentina: When Life Gives You Lemons, Cry To The WTO, by stilettos-on-the-ground economist Bianca Fernet.

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