In Memory of Spock: Live Long and Prosper; Is He or Isn't He? Fish Tomatoes, Hand Transplants, Sci-Fi vs. Reality

One of my favorite characters in TV history was Star Trek's "Spock". Yesterday, Leonard Nimoy, Spock of ‘Star Trek,’ Died at 83.

Leonard Nimoy, the sonorous, gaunt-faced actor who won a worshipful global following as Mr. Spock, the resolutely logical human-alien first officer of the Starship Enterprise in the television and movie juggernaut “Star Trek,” died on Friday morning at his home in the Bel Air section of Los Angeles. He was 83.

His wife, Susan Bay Nimoy, confirmed his death, saying the cause was end-stage chronic obstructive pulmonary disease.

Mr. Nimoy announced last year that he had the disease, attributing it to years of smoking, a habit he had given up three decades earlier. He had been hospitalized earlier in the week.

His artistic pursuits — poetry, photography and music in addition to acting — ranged far beyond the United Federation of Planets, but it was as Mr. Spock that Mr. Nimoy became a folk hero, bringing to life one of the most indelible characters of the last half century: a cerebral, unflappable, pointy-eared Vulcan with a signature salute and blessing: “Live long and prosper” (from the Vulcan “Dif-tor heh smusma”).

There's much more in the article. Inquiring minds may wish to take a look.

Is He or Isn't He?

Nimoy is author of two contradictory autobiographies:

• “I Am Not Spock,” published in 1977
 
• “I Am Spock,” published in 1995.

Vulcan Greeting



Nimoy Explains Origin of Vulcan Greeting



Link if video does not play: Leonard Nimoy Explains Origin of Vulcan Greeting.

In Memory of Leonard Nimoy

Science Friday has an interesting article Memory of Leonard Nimoy.

In an enclosed video in the above link, Nimoy talks with Ira Flatow, physics professor John Kramer, and science fiction writer Robert Sawyer about the relationship between science and science fiction.

Sci-Fi vs. Reality

The Science Friday video was from 1998.  The video mentioned among other things, artificial hands and transplanting fish genes into tomatoes to make them more resistible to frost.

Artificial hands are here. Fish genes in tomatoes?

Let's investigate hand transplants and "fish tomatoes" in more detail.

Hand Transplants

Hand transplants are a success. The March 27 issue of BBC Future has the story of Rose Eveleth who says "I had a double hand transplant".

Rose considers the operation a success although it required much intensive therapy.

Genetically modified tomatoes were not a success to say the least. A couple of stories will explain.

Does Your Tomato Have Sole?

UC Santa Barbara asks Does Your Tomato Have Sole? If So, Is It Still a Veggie?

“Fish tomatoes,” are transgenic tomatoes that have been genetically engineered with a gene from winter flounder, which are also known as lemon sole. Fish tomatoes have become an icon in the debate over Genetically Modified Foods, especially in relation to the perceived ethical dilemma of combining genes from different species.

Killer Tomatoes

The above article explains the intent. The following article will explain the success or failure of the experiment.

Please consider Throwing Biotech Lies at Tomatoes

Remember the pictures of the fish tomatoes? For years they were an unofficial emblem of the anti-GMO movement. They depicted how anti-freeze genes from an Arctic fish were forced into tomato DNA, allowing the plants to survive frost. Scientists really did create those Frankentomatoes, but they were never put on the market. (Breyers low-fat ice cream, however, does contain anti-freeze proteins from Arctic fish genes, but that's another story.)

The tomato that did make it to market was called the Flavr Savr, engineered for longer shelf life. Fortunately, it was removed from the shelves soon after it was introduced.

Although there are no longer any genetically modified (GM) tomatoes being sold today, the FDA's shady approval process of the Flavr Savr provides a lesson in food safety—or rather, the lack of it—as far as gene-spliced foods are concerned. We know what really went on during the FDA's voluntary review process of the Flavr Savr in 1993, because a lawsuit forced the release of 44,000 agency memos.

Bleeding stomachs

Calgene, the tomatoes' creator-in-chief (now a part of Monsanto), voluntarily conducted three 28-day rat feeding studies.

The rats that ate one of these Flavr Savr varieties probably wished they were in a different test group. Out of 20 female rats, 7 developed stomach lesions—bleeding stomachs. The rats eating the other Flavr Savr, or the natural tomatoes, or no tomatoes at all, had no lesions.

If we humans had such effects in our stomachs, according to Dr. Arpad Pusztai, a top GMO safety and animal feeding expert, it "could lead to life-endangering hemorrhage, particularly in the elderly who use aspirin to prevent thrombosis."

Oh yeah, some rats died

The team that had obtained the formerly secret FDA documents sent the full Flavr Savr studies to Dr. Pusztai for review and comment. While reading them, he happened across an endnote that apparently the FDA scientists either did not see or chose to ignore. The text nonchalantly indicated that 7 of the 40 rats fed the Flavr Savr tomato died within two weeks.

But the endnote summarily dismissed the cause of death as husbandry error, and no additional data or explanation was provided. The dead rats were simply replaced with new ones.

When I discussed this finding with Dr. Pusztai over the phone, he was beside himself. He told me emphatically that in proper studies, you never just dismiss the cause of death with an unsupported footnote. He said that the details of the post mortem analysis must be included in order to rule out possible causes or to raise questions for additional research. Furthermore, you simply never replace test animals once the research begins.

Questionable follow-up study

Calgene repeated the rat study. This time, one male rat from the non-GM group of 20, and two females from the GM-fed group of 15, showed stomach lesions. Calgene claimed success. They said that the necrosis (dead tissue) and erosions (inflammation and bleeding) were "incidental" and not tomato-related.

In reality, the new study was not actually a "repeat." They used tomatoes from a different batch and used a freeze-dried concentrate rather then the frozen concentrate used in the previous trial. Dr. Martineau explained to me that by freeze-drying, it allowed them to put more of the concentrated tomato into each rat.

In spite of the outstanding issues, the political appointees at the FDA concluded that the lesions were not related to the GM tomatoes. To be on the safe side, however, Calgene on its own chose not to commercialize the tomato line that was associated with the high rate of stomach lesions and deaths. The other line went onto supermarket shelves in 1994.

Faulty science rules the day

This was the very first GM food crop to be consumed in the US. It was arguably the most radical change in our food in all of human history. It was the product of an infant science that was prone to side-effects. Yet it was placed on the market without required labels, warnings, or post-marketing surveillance. One hopes that the FDA would have been exhaustive in their approval process, holding back approvals until all doubts were extinguished. But the agency was officially mandated with promoting biotechnology and bent over backwards to push GMOs onto the market. As a result, their evaluation was woefully inadequate.

Federal Death Agency

I was at a Casey conference last September and Doug Casey commented the FDA (Food and Drug Administration) ought to be reclassified as the Federal Death Agency.

Those articles help explain why.

I conclude "Live long and prosper" ... and don't eat "fish tomatoes".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Greece Negotiations Resume Again; "Constructive Ambiguity"; Schäuble Outmaneuvered!

On Friday, the German Bundestag Backed the Greek Bailout Extension. Ahead of the vote, many commented that Greece collapsed.

It's not all that simple as I have explained.

The likely explanation for the alleged collapse of Syriza is Greece did not have a primary account surplus. Had it left now, it would have been forced off the euro, violating a campaign promise of Syriza.

Caving in required temporary caving in of other campaign promises.

Both Sides Got Something

The four-month extension gave Greece a better chance to prepare for default while allowing Greece to stay on the euro. The extension also gave the ECB four more months to prepare for Grexit or default.

Properly analyzed, both sides got something. Isn't that what usually happens in complex negotiations?

Third Bailout Needed

Meanwhile, it's pretty clear that Greece needs yet another bailout.

I wrote about the bailout issues and the primary surplus issues on February 11 in Third Greek Bailout? Another €53.8 Billion Needed? Primary Account Surplus Revisited.

"Real" Negotiations Begin

Given that Greece does indeed need a third bailout, today's headline story should not be at all surprising: Greece Seeks Negotiations on ECB Bond Repayment.

Greece called into question on Saturday a major debt repayment it must make to the European Central Bank this summer, after acknowledging it faces problems in meeting its obligations to international creditors.

Finance Minister Yanis Varoufakis said Athens should negotiate with the ECB on 6.7 billion euros ($7.5 billion) in Greek government bonds held by the Frankfurt-based bank that mature in July and August.

Varoufakis did not say what he hoped to achieve in any talks, but he accused the ECB of making a mistake in buying the bonds around the time Greece had to take an EU/IMF bailout in 2010.

"Shouldn't we negotiate this? We will fight it," he said in an interview with Skai television. "If we had the money we would pay ... They know we don't have it."

With tax revenue falling far short of target last month and an economic recovery faltering, the state must repay an IMF loan of around 1.6 billion euros in March and find 800 million in interest payments in April. It then needs about 7.5 billion in July and August to repay the bonds held by the ECB and make other interest payments.

Varoufakis, who has staged a media blitz in recent days to sell the euro zone deal to the Greek people, singled out former ECB President Jean-Claude Trichet for criticism.

"One part of the negotiations will be on what will happen to these bonds which unfortunately and wrongly Mr Trichet bought," he said. "I see it as a mistake - but the ECB did this with the aim of keeping us in the markets in 2010. They failed."

Varoufakis argued that if the bonds had remained in investors' hands, their value would have been cut by 90 percent under a restructuring of Greece's privately held debt in 2012, reducing the burden on the state.

The ECB bought the bonds at a deep discount and made large profits because their value rose as the euro zone debt crisis eased. Under Greece's second bailout deal, these profits were due to be returned to Athens to help it repay debt.

Athens received a partial payment in 2013 but euro zone countries are withholding a further 1.9 billion euros pending the review of Greece's economic plans. Varoufakis wants this money sent directly to the IMF to meet the March payment.

Curious Timing

Although the above headline and details are not surprising, the timing may appear somewhat curious. Even though the Bundestag signed off, the eurogroup as a whole has not ratified the extension.

Today's call for further negotiations ahead of that vote are sure to raise more than a few eyebrows.

Why now?

I have two possible game theory explanations

1. Varoufakis wants to quell Greek parliament sentiment that Syriza collapsed, and he feels the need to do that right away
2. Syriza really does not care if it is forced out of the eurozone as long as Greece can 100% without a doubt place the blame elsewhere

Advocates of position number two may argue that by caving into the demands and getting Germany to go along, it will not appear to anyone as if Syriza was responsible for Grexit, should the eurogroup parliament reject the extension.

Which is more reasonable?

As a fan of Occam's Razor (the rationale that requires the fewest assumptions is most often the correct explanation), I vote for number one.

Option 1 is self-explanatory. Option 2 requires a lie by Syriza (that it does not really want to stay on the euro), and a complex way to make that happen, absolving themselves of blame because the Greek population as a whole does want to keep the euro.

Constructive Ambiguity

As a result of the timing, I expect still more bickering accompanied by still more warnings. Nonetheless, the extension will be approved.

Also in support of theory number one is Intentional Vagueness.

Greece's finance minister says the country's agreement with its European creditors to extend its international loan agreement by four months was intentionally vague to ensure the European countries that need to have it ratified by their parliaments would be able to do so.

Greece was granted the extension by its European creditors last week in exchange for a commitment to budget reforms Varoufakis laid out in a document sent to Brussels. The list is a policy plan but does not contain specific measures or figures.

Varoufakis said that "we are very proud of the degree of ambiguity. And I use a term, constructive ambiguity."

Using Time Wisely

In the next four months, the real negotiations begin. Expect Syriza to announce it really did not cave in at all, because the document is purposely vague.

Let's revisit a couple of statements from my February 22 article Tspiras Claims to have "Won a Battle, Not the War"; Greece to Combat Tax Evasion; Illusion Shattered; Another Bailout?

1. "Once you get them into the safe space for the next four months, there'll be another set of discussions which will effectively involve the negotiation of a third program for Greece," said Irish Finance Minister Michael Noonan.
 
2. German finance minister Wolfgang Schäuble rubbed Greek capitulation in Tsipras' face with his comment "The Greeks certainly will have a difficult time to explain the deal to their voters. As long as the programme isn’t successfully completed, there will be no payout."

Schäuble Outmaneuvered 

In retrospect, number two is rather amusing. How will Syriza explain this to the Greeks?

Like this: We got a four-month extension in return for vague promises at our discretion. Essentially we got the extension for free. Now we can negotiate payments to the ECB and IMF! 

I suggest Schäuble was outmaneuvered by game theory book author Varoufakis. (See Mish's Game Theory Math)

If Syriza uses that time wisely, it can get back to a state of primary account surplus. And if it does, Greece will be in a far better position to tell the much hated Troika where to go.

I still have odds of default (with or without Grexit), well over 50% by June. Which one depends on the state of primary account surplus in June when this extension ends.

All that happened in February was approval of a four month extension giving both sides time to prepare for the inevitable.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Panic in Ukraine Over Food, Empty Stores and Protests; Strategic Food Reserve Empty

Here's a brief update from "Ellen" who lives in Lviv, a city in Western Ukraine.

Hello Mish

We have quite a panic over the collapse of currency. People buy any food product that can be stored. Everyone wants to rid of Hryvnia. We haven't seen anything like this since 1991 when the Soviet Union collapsed. Stores are empty.

It is hard to say what exchange rate this days, somewhere between 34 and 42

There were riots in downtown today. A group of protesters was beaten up by police. They marched through downtown and gave a last warning to government officials. Next time they said they will shoot some officials.

Ukraine is on a brink, but the West is not in a hurry to give us money. Perhaps they want something.  Maybe they know the money will end up with corrupt officials who will steal it.

Either way, the few billion dollars they promised in March won't save our economy, not after this panic started.

Best wishes
Ellen

Strategic Food Reserve Empty

A curious thing happened today. To quiet protests over food, president Petro Poroshenko ordered the minister of the food reserve to fill the shelves of stores with flour, sugar, canned meat, and buckwheat from the reserve.

Well guess what? There was no food in the reserve. It has either been looted (like the vanishing gold), or it was fed to the army.

Here is a nice translation from Russian by J. Hawk: Ukraine's Strategic Food Reserve...Runs Out Of Food.

Ukrainian food prices are rising at a rate faster than in the ‘90s. But the Yatsenyuk government is still blaming the situation on the ignorance of the population and speculation by supermarket chains.

They used to blame currency exchangers, now they are blaming supermarket directors. However, you can’t feed the people with such tales.

The government’s “economy block” hastily summoned the director of the Ukrainian State Reserve Vladimir Zhukov. They demanded that he open the storehouses and fill the shelves with flour, sugar, canned meat, and buckwheat from its stores. In response the keeper of Motherland’s strategic stores revealed a terrible military secret to Yatsenyuk and Poroshenko: the storehouses are empty.

It would seem Ukraine’s Black Hour is here.

J.Hawk's Comment: There indeed were earlier reports that the strategic reserve was being "unsealed" to support military operations on the Donbass. The army has to eat, after all, and maintaining several tens of thousands of soldiers for nearly a year is likely to make a dent. The second factor was the junta's desperate need to earn hard currency to somehow plug up the many budget holes opened up by its adoption of "European Choice" neoliberal economic policies. Therefore anything that could be sold, was sold, including Mariupol's huge grain reserves. Finally, there's the small matter of corruption. One gets the impression Ukraine is a giant organized style "bust-out" operation, whose objective is to stash as much loot in foreign accounts and then leave the mess for someone else to clean up. To say that the Kiev junta has some kind of a strategy would be giving them entirely too much credit. It's a collection of loosely coordinated individuals pursuing their own venal agendas and living hand-to-mouth, without any thought given to Ukraine's long-term prospects.

Here is a link to the original article that J. Hawk translated: Ukraine State Reserve Doesn’t Even Have Buckwheat. Everything was Stolen.

Buckwheat is a Russian staple. I believe, "out of buckwheat" would be the equivalent of Japan being out of rice.

Mish note: One person accused me of bias over the word "junta". I did not choose the word. I quoted someone, just as I quote Colonel Cassad.

In context, it certainly appears J. Hawk went out of his way to not just translate, but to mention the possibility reserves were unsealed to feed the army.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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"NowCast" - The Evolution of GDP Forecasting

In the wake of existing home sales reports on Monday, and new home sales yesterday, GDP and residential investment forecasts came tumbling down.

Check out the latest "GDP Nowcast" from the Atlanta Fed.



"The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2015 was 1.7 percent on February 26, down from 1.9 percent on February 18. The first-quarter nowcast for real residential investment growth fell from 11.1 percent to 2.3 percent following Monday's existing-home sales release from the National Association of Realtors and yesterday morning's releases on sales and construction costs of single-family homes by the U.S. Census Bureau."

Please note that the "NowCast" does not factor in this: Chicago PMI Crashes to 5 1/2 Year Low: Production, New Orders, Backlogs Suffer Double Digit Declines.

Expect another revision soon.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Chicago PMI Crashes to 5 1/2 Year Low: Production, New Orders, Backlogs Suffer Double Digit Declines

Fourth quarter GDP was revised lower today to 2.2 percent from 2.6 percent previously estimated.

Looking ahead, I think we are going to see some shocking downward estimates in the months to come. Meanwhile, a shocking PMI report came out today.

Chicago PMI Crashes to 5 1/2 Year Low

ISM Chicago reports Chicago Business Barometer At 5½-Year Low

The Chicago Business Barometer plunged 13.6 points to 45.8 in February, the lowest level since July 2009 and the first time in contraction since April 2013. The sharp fall in business activity in February came as Production, New Orders, Order Backlogs and Employment all suffered double digit losses, leaving them below the 50 level which separates contraction from expansion.

New Orders suffered the largest monthly decline on record, leaving them at the lowest since June 2009. Lower order intake and output levels led to a double digit decline in Employment which last month increased markedly to a 14-month high.

Disinflationary pressures were still in evidence in February, although the slight bounceback in energy costs pushed Prices Paid to the highest since December – although still below the breakeven 50 level. Some purchasers cited weakness in some metals prices including copper and brass, but others said suppliers were slow to pass along lower prices to customers.

Commenting on the Chicago Report, Philip Uglow, Chief Economist of MNI Indicators said, “It’s difficult to reconcile the very sharp drop in the Barometer with the recent firm tone of the survey. There’s some evidence to point to special factors such as the port strike and the weather, although we’ll need to see the March data to get a better picture of underlying growth.“

Blame it on the Ports

Everyone was quick to blame this on the ports and bad weather.

But the LA port issue has been festering for months. Weren't economists aware of the ports? Of bad weather?

The reason I ask is the Bloomberg Consensus Estimate was 58.7. The range was 55.5 to 59.6. Who predicted 59.6?

Regardless, the actual number came in nearly 10 points lower than any forecast!

Surprise! Surprise! Surprise!



Link if video does not play: Gomer Pyle on Surprises.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Recession is On the Way: Questioning One's Sanity; Beat the Crowd, Panic Now!

In 2006-2007 I called for a recession. We got a big one. I called for another one in 2011, as did the ECRI. That recession never happened.

50% is not a very good recession predicting track record except in comparison to consensus economic opinions that have never once in history predicted a recession. Consensus opinion is batting a perfect 0.00%

Investigating the Record

By the way, the ECRI was late in calling the recession of 2007. They still deny it. And questions regarding the 2001 recession and ECRI have still not been answered.

I have talked about all of this before, and it's worth a recap, if for no other reason than to note the difficulty of calling recessions in real time.

February 24, 2012: ECRI Sticks with Recession Call on CNBC; More than a Bit of an Exaggeration by Achuthan to Make His Call?

November 29, 2012: ECRI Sticks With Recession Call

October 13, 2009: A Look at ECRI's Recession Predicting Track Record

That third link above seriously calls into question the ECRI's recession calling capabilities.

I am not calling out just the ECRI. Open up the middle link and you will find this statement by me:

"The ECRI is sticking with its 'US is already in recession' call based on four coincident indicators. Very few agree, but for what it's worth (perhaps nothing) I am one of those in agreement."

I have already admitted my error. It's been silence from the ECRI, which has been my biggest objection to them over the years.

The moral of this story is: "If you cannot admit your mistakes, someone else is sure to admit them for you."

Word About Predictions

Yogi Berra said it best: "It's tough to make predictions, especially about the future."

Nonetheless, and throwing caution to the wind, on January 31, I stated Canada in Recession, US Will Follow in 2015.

Also on January 31, I went Diving Into the GDP Report and noticed "Some Ominous Trends" on imports and exports.

This was my call...

US Recession

The US won't decouple, just as China did not decouple from the global economy in 2008-2009 (a widely-held thesis I also knocked at the time).

Indeed, now that virtually no economist expects a US recession, I believe we are finally on the cusp of one, just as the Fed seems committed to hike.

Contemplating My Own Insanity - Again

With the above backdrop, Albert Edwards at Society General had me laughing at his own personal assessment in his Global Strategy Weekly Email Update (no link available).

He titled his research "Contemplating My Own Insanity - Again". Here are a few snips.

With equity markets galore hitting record high s clearly I must be missing something big! We are at that stage in the cycle where I begin to doubt my own sanity. I’ve been here before though and know full well how this story ends and it doesn’t involve me being detained in a mental health establishment (usually). The downturn in US profits is accelerating and it is not just an energy or US dollar phenomenon – a broad swathe of US economic data has disappointed in February. One of the positive surprises, payrolls, is a lagging indicator. The $64,000 question is not if, but rather when will investors realize what is going on?

My colleague Kit Juke summed it up nicely in his morning note "Whatever the Fed does, they will not risk the economic recovery. That bias is why rates won't get anywhere near ‘neutral' before they peak. The economic cycle will be brought down by asset bubbles bursting long before ‘tight' policy has any effect. Lessons were learned from the Global Financial Crisis, but not that one.”

Investors are transfixed instead by the Fed and when it will tighten rates and can't see the wood for the trees. The Fed's focus on payrolls, a lagging indicator, is most perplexing but not unusual at this stage in the cycle. The reality is that the vast bulk of economic, as well as earnings, data (even outside the energy sector), has been simply dreadful.

Current Rate of Profit Deterioration



click on any chart for sharper image

February US Data Above and Below Expectations

If you believe profit deterioration is a solely or even mostly related to the collapse in oil prices you are mistaken.



Fed Study Shows "Persistent Fed Overoptimism" 

The Society General report is all the more amusing because nearly every Fed economic forecast has been on the optimistic side since 2007.

I commented on this phenomenon  on February 2 in Fed Study Shows "Persistent Fed Overoptimism about Economic Growth"; What Will They Do About It?


US GDP Slow-Down

File this one in the "If I am wrong, I am at least in good company category".

Via email on Thursday, Steen Jakobsen pinged me with his thoughts.

US Q4 GDP revisions are out tomorrow and will most likely show a slow-down from 2.6% to 2.0%: (Source: Bloomberg – WECO US)

This makes Q3(2014) the peak in this cycle and I expect QoQ growth in the US will hit ZERO by Q3 or Q4 – there are several factors for this including rising real rates, malinvestment into energy but most importantly is the falling earnings in the US.

[Also referring to the society general chart] ... The point however is US data been worsening for a long time – I personally think we are in period where we yet again hand-over the growth engine from the US to emerging market but via a significant new low in growth which will make Europe looks good.

The expected path for me is: Slow down confirmation in the US over the next two months – that will kill the improvement in Europe by end of Q2 and leave it stable - not growing for the year.

Meanwhile emerging market will come back as market realize the FOMC is years away from ‘talking up’ rates. The June or September initial hike (if it comes) still leaves the FOMC 100 bps above Wall Street on its projected long-term path for growth – a Wall Street who on their own is also too optimistic about future growth. The Fed sees 3.0-3.5% growth while Wall Street sees 2.5-3.0% on average. In other words there is room for a +100 bps correction to the sustainable long-term growth which will render 10-year rates a 1.0-1.5% before we over with this part of the cycle. I label this: Restarting the business cycle.

QE and targeted “help” for banks is running out of time, if not already out of time. The inequality and low salary to GDP base simply can’t produce enough domestic consumption anywhere for the middle class to be able to afford the products the stock market listed companies produce.

Macro Conclusion

We are in an “in between period” where the US will slow down and ultimately hand over the growth engine to emerging market by the earliest Q4-2015 but firmly in 2016.

The problem is emerging market are not ready due to high US dollar debt, waning commodity prices, and Europe is still too weak to contribute net to world growth leaving a growth vacuum for new growth.

Europe will show one more month of improving data, then global slowdown of EM and US will drag down the data to flat performance.

Fixed Income

I still only have one very strong view and that’s 10 YR fixed income will trade at 1.5%, possibly even potentially 1.0% this year. Everything else will lag this move by 9 month or so. In other words, if the low in yields comes in Q3 (as I expect) then the summer of 2016 will be the lift-off we all have talked about.

The US Dollar will peak this quarter and probably has peaked for this cycle. The weaker US Dollar will stabilize commodities and emerging markets, creating the conditions for a hand-over at the end of this year. The US dollar should be very sensitive to this relative slow-down in the US, especially as Europe is anachronistically improving.

Gold remains top of my list for new investment. I’m long and adding. I have also re-sold Brent/Crude as the marginal cost of producing oil is still rising, meaning global impact still is negative net-net.

Jeremy Grantham excellently argues that for world to benefit from falling energy prices, it has to come with falling marginal cost. The opposite is the case now: lower prices and higher production/extraction costs.

Stock Market

It's not time yet to call the top, but preparing special report on valuations and models, or the lack of it. Conclusion will be: There is potential for a 5-10% gain this year but also for a 25% correction.

The problem of course being that the market is very expensive by traditional standards, but these are hardly normal times.



The expected return for reference over 1, 3 and 10 years can be seen above – the upside is the first year still can carry market higher. The downside is a possible drop for the next 9-10 years!

CAPE Notes

CAPE stands for "cyclically adjusted price earnings ratio".

CAPE started the year over 25.

Business Insider writer Sam Ro commented on CAPE yesterday in Robert Shiller's Revered Stock Market Valuation Ratio is Crappy at Predicting 12-Month Returns.

I laughed at that headline because CAPE was never meant to be a timing signal. Rather it's a medium-to-long term warning signal.

"In other words, don't dump stocks and hide in cash because the CAPE is at 26. Rather, just be prepared [for] lower average returns for years to come," said Ro.

Lower or Negative?

Ro totally misses the boat. The warning is not about "lower" returns; it's about likely "negative" returns.

A Word About "Panic"

It's fitting to see such articles at this time, especially with earnings plummeting and everyone latching on to lagging indicators like jobs.

Yes, I have said this for a couple years. But CAPE has been stretched for a couple years.

CAPE was stretched in 1998 too. Yet, one could have had big gains through March 2000, if one held on, then cashed out at the top.

With that in mind, I have three questions for those who think like Ro.

1. How many held on, then cashed out at the right time? 
2. How many panicked and cashed out at or near the bottom?
3. How many held stocks that never recovered at all?

Here's a bonus question: Did anyone buy a basket of stock in 1999, ride them up and down for 15 years, only to find themselves once again at the break even point?

I ask that bonus question because the Nasdaq 100 Index is just below the March 24, 2000 peak.

In spite of the above, we see the same perennial advice today that we saw in January of 2000 "don't dump stocks".

If one has a dedicated, no-panic investment commitment with a time horizon of 15 years or longer, such advice, coupled with dollar cost averaging, may make sense.

Four Evaluation Metrics

Doug Short at Advisors perspectives has an even more interesting chart of valuations in his post Equity Valuations, Recessions and Stock Market Declines.




click on any chart for sharper image

Using an average of four popular valuations metrics, the only higher blowoff tops in history were 1929 and the dotcom bust in 2000.

However, ahead of and during the dotcom bust, many market segments were very attractively priced. The same cannot be said now.

Panic Now!

If one doesn't have a dedicated, no-panic investment commitment (that they will realistically stick with), "Don't dump stocks and hide in cash because the CAPE is at 26", is not a good philosophy.

"Panic before everyone else does" is far more appropriate.

Given massive baby boomer retirements, coupled with strong doubts that people can and will have a dedicated time horizon long enough to matter, I offer simple advice: Beat the Crowd, Panic Now!

Outside the Box

For those willing to think outside the box, I echo this sentiment of Steen Jakobsen "Gold remains top of my list for new investment. I’m long and adding."

I also like "perennially despised" US treasuries along with Steen, and I am a big proponent of yen-hedged Japanese equities (a position I believe different than his).

Finally, and also of a contrarian nature, Russia looks quite attractive to me at this time. It's beaten up, off everyone's investment radar, and will do well if the ruble or oil rallies. Typically stocks turn before currencies.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Ukraine Rations Food; Interbank Rate New Record Low; Monetization of Bonds; "Devaluation Kerosene"; Electronics a Store of Value

A chart of Ukraine's currency is nonsensical once again today.



Supposedly the hryvnia rallied again today, if only by a miniscule amount 0.15%. Yet, once again the chart is complete nonsense.

Black Market Rate

The Black Market Rate today is a bit improved, with a bid/ask spread of 29.45 to 34.55. How long that rally lasts is questionable. I presume not long.



If one could exchange at the official rate, one would immediately have an arbitrage on the black market.

Translation: The alleged official rate is "for show". No one can get it, except perhaps favored politicians and bankers taking advantage of their position of authority.

Reader John, whose father was a key figure in the Ukrainian Resistance in WWII, and whose sister currently lives in Lviv in Western Ukraine sent the following link that shows what's really happening.

Interbank Rate Fell Sharply to New Record Low

Dateline February 26, ZN-UA reports Interbank Hryvnia Fell Sharply to New Low.

Interbank Hryvnia, despite yesterday's statement heads the National Bank and the Finance Ministry to take measures to stabilize the currency as of February 26, the hryvnia plunged to a new record low, reaching a figure of 34.5 per US dollar.

Thursday morning the interbank rate opened at 22-27 UAH per US dollar.

The collapse of the hryvnia this afternoon was associated with the cancellation of the February 25 ban on bank's ability to buy foreign currency on behalf of customers.

Central Bank Reversals

In the past week, the Ukrainian National Bank (UNB) suspended foreign currency trading, cancelled the suspension, then resumed the suspension, then cancelled the suspension.

Wording and back-references are so confusing, I am not precisely sure of the current state of affairs. Do they know either?

Today's Wall Street Journal reports Ukraine Dials Back on Latest Attempt to Halt Currency Free Fall.

Yesterday, the Journal reported, Ukraine’s Central Bank Limits Access to Foreign Currency.

I believe the Journal missed one intraday flip-flop that I caught, or perhaps I caught an announced reversal that never happened.

It's all meaningless anyway. The black market is where it's at.

Monetization of Ukraine Bonds Fueling Currency Crash

Let's get to the heart of the matter. Ukraine is bankrupt. Please consider National Bank Adds Fuel to the Devaluation Fire.

The NBU continues to give the banks billions of dollars of loans, increasing devaluation of the hryvnia with one hand while imposing administrative restrictions on the other, adding fuel to the devaluation fire.

The refinancing is one of the catalysts of the present fall of the hryvnia:

• Direct (speculation by banks, including fictitious imports)
• Indirect (in which bank customers can use deposits in hryvnia to buy foreign currency)

It should be noted there are other factors:

1. There is also unsecured NBU monetization of government bonds to cover the state budget deficit. (The NBU dare not cutoff the government - editor) [Mish comment - if that editor lives in Ukraine, he will soon be charged with treason]

2. Quasi-fiscal payments of the Central Bank in the state Treasury (article an excess of income over expenditure in the previous year)

3. The decline of the economy on the background of the war in the Donbass

4. Reduction of inflow of foreign currency earnings of exporters; previously generated demand importers for currency; a withdrawal of currency abroad by using fictitious import contracts

5. Panic in the market and so on

Thus, with one hand imposing administrative restrictions on the market, another national Bank adds fuel to the fire devaluation.

It is also worth noting that since the beginning of the year up to February 24, the portfolio of internal government bonds (t-bills) in the NBU increased by 20.2 billion UAH for the period 2014 - 14.5 billion USD). In January, the figure was 9.6 billion UAH.

For more, see Devaluation Kerosene

Devaluation Kerosene

I have to say "Devaluation Kerosene" is an interesting title so I looked it up. The above article is a synopsis with a few more details, so there is no need to dive in further.

Ukraine Rations Cooking Oil, Flour, Sugar, Buckwheat

Let's conclude our Ukraine roundup of the day with this report in English: Kiev Introduces Rationing, as Falling Hryvnia Causes Shopping Binge.

Ukrainian supermarkets have imposed rationing of basic products after the drastic fall in the value of the hryvnia. The currency has lost 70 percent of its value causing people to stockpile food and buy electronics as a hedge.

Restrictions apply for goods such as cooking oil, flour and sugar, Ukraine’s news agency UNN reports Wednesday. Retailers may sell no more than two bottles of sunflower oil, and two packs of buckwheat per customer and, depending on the store, from 3 to 5 kilograms of flour and sugar.

Bread, rice, potatoes, meat and milk are not yet rationed, but are not so plentiful on supermarket shelves.

Stores have also see higher demand for household appliances, as people consider consumer electronics an investment as prices increase on a daily basis, RIA reports. Inflation in Ukraine is expected to reach 27 percent by the end of 2015.

27% Percent? How about 50 Percent, Already

This article is a couple days behind my report from "Ellen" who said "People buy anything just to get rid of hryvnias" (See Emails From Kiev: Free Speech Vanishes, Total Media Thought Control; US Radar System Falls Into Rebel Hands?).

Inflation is easily up 50% this year. And it's rather telling that people consider consumer electronics as a store of value.

We are not talking about inflation here, we are talking about hyperinflation as noted yesterday in
Ukraine Hyperinflation; Currency Plunges 44% in One Week! Actual Black Market Rates; Poroshenko Gives "Ultimatum" to Central Bank to Fix Exchange Rate.

Panic is in the air. And rightfully so.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Right-to-Work Sweeps Midwest, Heads for Passage in Wisconsin

Right-to-Work legislation is sweeping the Midwest. It's one of many reforms needed to makes states more competitive, reduce cost pressures on infrastructure projects, and hold down the necessity of tax hikes.

Today the Wisconsin Senate Passed 'Right to Work' Legislation.

The proposal would let workers opt out of paying mandatory dues. Many would do just that, preferring to keep money for themselves rather than for the priorities of union officials, including corruption, graft, and various political goals that workers may not at all agree with.

The Wisconsin House of representatives is expected to approve the legislation making passage all but certain.

His staff issued this statement "Governor Walker continues to focus on budget priorities to grow our economy and to streamline state government. Governor Walker co-sponsored right-to-work legislation as a lawmaker and supports the policy. If this bill makes it to his desk, Governor Walker will sign it into law."

Illinois Again Lags Neighboring States

Unfortunately, and as typical, Illinois lags other Midwest states in passing much-needed legislation.

I wrote about that on Febuary 11, in my first article for the Illinois Policy Institute. Let's recap Missing the Boat on Right-to-Work.

Illinois Chamber Misses the Boat on Right-to-Work

The Illinois Chamber of Commerce recently took interesting, as well as contradictory, positions regarding the minimum wage and Right-to-Work legislation.

On one hand, the chamber is not in favor of minimum-wage hikes for Illinois. On the other, the chamber says “Illinois doesn’t need right to work (laws) to compete with its neighbors.”

At the root of both of these policy issues is the state’s ability to compete and attract job creators. If the chamber acknowledges that a minimum-wage increase is a jobs killer, how can it oppose Right to Work, which is proven to attract new businesses?

Contradictory Positions

Illinois Chamber of Commerce Chief Executive Todd Maisch says that minimum-wage increases put employers at a competitive disadvantage. Maisch also contended “Illinois doesn’t need right to work (laws) to compete with its neighbors.”

Those positions are contradictory. To understand why, one must investigate the tie between “prevailing wage” laws, Right-to-Work laws and collective bargaining.

Prevailing Wage

Illinois’ Prevailing Wage Act governs the wages a contractor or subcontractor is required to pay to all “laborers, workers and mechanics” who perform work on public projects. This wage is to be “no less than the general prevailing hourly rate as paid for work of a similar character in the locality in which the work is performed.”

As the Illinois Policy Institute noted in Unions take advantage of Illinois’ prevailing wage law, “This almost always is taken to mean the union rate, even though union workers make up less than 40 percent of the construction workforce and union wages are often 50 percent higher than those of nonunion workers.”

Want to repair roads? Add another wing onto a public school? Fund a bond for any public project? Cities have to pay the “prevailing rate.” Those prevailing rates apply to every imaginable public project, spilling over into many private projects as well.

Prevailing rates are in direct opposition to the idea behind Right-to-Work laws. Under properly formed Right-to-Work legislation, any contractor should be able to bid on any project, regardless of a government-mandated prevailing wage.

Preferably, the needed legislation on these two issues should be accomplished in one fell swoop. If it takes two acts, one for Right to Work and another to repeal prevailing wages, so be it.

The third piece of the puzzle is collective bargaining.

Wisconsin Offers Example on Collective Bargaining

Wisconsin Gov. Scott Walker passed legislation in 2011 to eliminate collective bargaining for most public workers in the Badger State.

Then a curious thing happened, as reported by the Washington Examiner:

“The Kaukauna School District, in the Fox River Valley of Wisconsin near Appleton, has about 4,200 students and about 400 employees. It has struggled in recent times and this year faced a deficit of $400,000. But after the law went into effect, at 12:01 a.m. Wednesday, school officials put in place new policies they estimate will turn that $400,000 deficit into a $1.5 million surplus. And it’s all because of the very provisions that union leaders predicted would be disastrous.

Some of the most important improvements in Kaukauna’s outlook are because of the new limits on collective bargaining.

Overnight, the Kaukauna, Wisconsin, school district turned a $400,000 deficit into a $1.5 million surplus. In essence, Illinois needs to do the same.

Specifically, Illinois desperately needs to do three things, all of them related:

1. Eliminate collective bargaining of public unions
2. Pass Right-to-Work legislation
3. Scrap prevailing-wage legislation

Whether this is done in one fell swoop or in three separate acts does not matter except in terms of time, and Illinoisans have little time to spare.

Businesses and private citizens are fleeing the state at record rates in search of a healthier business climate and to avoid enormous property taxes. Illinois cannot afford for these losses to continue much longer, especially if another national recession should occur. Illinois fared poorly in the last recovery, and another recession may very well do in the state – especially state pension plans – unless appropriate measures are enacted soon.

See The Light

The Illinois Chamber of Commerce, and others coming out against Right to Work in the Land of Lincoln, would be wise to reconsider their position.

One by one, neighboring states have seen the light. Illinois needs to join the right-to-work party or be left behind, lagging in job growth, while paying more in taxes for infrastructure improvements.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Mariupol Exchange Rates vs. Laughable "Official" Rate: Foreign Exchange Intervention; IMF Calling the Shots?

Colonel Cassad reports It Takes 44 Hryvnia to Buy a Dollar in Mariupol.



Let's do some quick math.

On Monday (perhaps reflective of Sunday) Ellen, who lives in Kiev wrote "Today $1 is worth 36 hryvnias on the black market. A Week ago it was 20 hryvnais. No one knows where the bottom is. People buy anything just to get rid of hryvnias."

To be safe, let's call it 10 days ago. In those 10 days, the hryvnia plunged from 20 to the dollar to 44 to the dollar.

That is a decline of 54.54% in about 10 days. Here is the key "People buy anything just to get rid of hryvnias".

Laughable "Official" Rate

Here is an amusing chart from Investing.Com for February 25.



I explain that chart below. Meanwhile, rest assured that not a damn thing transacts at that rate other than perhaps graft and illegal transactions by bankers and Ukrainian officials selling 25 hryvnias for a dollar.

Poroshenko Ultimatum

Earlier today I wrote ...

Poroshenko Gives "Ultimatum" to Central Bank to Fix Exchange Rate

At a live press conference on the currency market, Poroshenko ordered the Chairman of the National Bank and the Finance Minister to Stabilize the Hryvnia at the "Budget" Rate of 21.5 hryvnia per dollar.

During an online broadcast, Poroshenko issued an ultimatum demanding the head of the National Bank of Ukraine, Valerie Gontareva, stabilize the hryvnia at a level which was guided by Cabinet in approving changes to the 2015 budget.

Amazing Reversal

Yesterday, February 24, the central bank put on currency restriction. Today we see National Bank has Overturned Yesterday's Foreign Currency Ban.

National Bank of Ukraine (NBU) eased restrictions on foreign exchange market and abolished the prohibition of authorized banks to buy foreign currency on behalf of customers of the 26th and 27th of February.

The National Bank had introduced a temporary ban prohibiting banks to buy foreign currency on behalf of clients on February 25.

Consequential amendments to NBU resolution number 130 made ​​on February 24, and NBU Resolution 131 on February 25, published on the website of National Bank, were abolished.

On February 25, the NBU bought on the interbank foreign exchange market $80 million currency at the official rate, with further intent of foreign exchange intervention.

The head of the NBU Valery Gontareva explained that the NBU bought currency on Wednesday on the interbank market and that "generated an additional supply of foreign currency".

After the move by the NBU, the hryvnia exchange rate on the interbank market rose to 22-27 per US dollar and 24.96-30.6 per euro.

IMF Calling the Shots?

The only thing that makes any sense in this mess is the IMF demanded Ukraine stabilize the hryvnia.

The National Bank of Ukraine attempted stabilization with a farce of a move that no one on the street believes.

And if the central bank supplies all demands at 22-27 per US dollar while the black market bid/ask is 32:44 (equating to an instant arbitrage profit in spite of the massive spread), all Ukraine's foreign reserves will be wiped out in a week.

Alas, it appears there is a $50,000 restriction on such moves, reserved for imports, limited to special accounts, with the waiting period increasing from three to four days.

Fake Receipts

The street laughs at the official rates, and so do I. Meanwhile, I wonder how many fake import receipts have been generated recently.

Prime Minister Accuses Central Bank of Negligence

Yesterday Ukraine's Prime Minister Accused the National Bank of Negligence.

The Prime Minister of Ukraine complains that the NBU did not take control of output currency abroad for import contracts. According to him, during the last 9 months, the financial market has sold $51.5 billion.

He said that the total daily buying and selling foreign currency, carried out and controlled banks NBU on average from 100 million to 170 million.

"This means that some currencies bought and sold for the purpose of speculation, with the intention to buy the currency at a lower rate and then sell for a higher" - said the Prime Minister of Ukraine.

Currency Speculation? Incompetence?

Shocking! Say it ain't so Joe.

Incompetence? Negligence? You bet.

It would be difficult to find a central banker on the planet that is truly competent. By definition, no one competent could even take the job because they would not believe in central bank planning in the first place.

That said, some are more incompetent than others.

Appraisal of Ukraine's Prime Minister

First, I have a couple of choice comments regarding Ukraine's prime minister.

1. Ukraine did not have $51.5 billion in foreign currency reserves to bleed and I highly doubt $51.5 billion in other forex transaction.
2. I congratulate anyone smart enough to sell or trade every hryvnia they had for any hard currency or gold.

Abandon Ship!

I don't have a competence rating for Valery Gontareva, but I do have advice: Get the hell out of Ukraine immediately.

When you are dealing with hyperinflation and the prime minister accuses you of negligence, arrest is likely coming unless you stabilize the currency, and that is impossible by decree.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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In Search of the Magic Wand: Career Change at Age 45 Possible?

Reader Mark has a career question. Mark writes ...

Hi Mish: I am 45 years old. I have worked in the grocery business for 20 years. I am starting to have back problems. I would like to move on. Do you have any suggestions as to a suitable career for someone my age. I do read your blog, and I can relate to the money business. Thanks, Mark

Formal Education is No Magic Wand

Hi Mark

Unfortunately, and in spite of what the education industry would like you to believe, I present a  sobering reality: A career change at age 45 or even 55 is possible, but extremely difficult.

Traditional education is highly unlikely to give you the skills you need. Occasionally someone hits the jackpot, but most likely you would waste money, and lots of it trying. Don't believe hype from places like the University of Phoenix.

From information technology (IT), to banking, to writing, to market analysis, to dog catching, corporations will want experience. Even college interns have difficulty finding jobs.

In IT, there are hundreds of thousands of skilled workers out of a job and competing with programmers in India or Russia.

In banking or finance (if not everything), my honest assessment is that someone would look at your age and experience and pass you over for someone younger, someone with more experience, or both.

Your safest plan is to make an effort without spending much, if any money. I suggest some free courses at the Khan Academy, Coursera or elsewhere. That would put something on your resume of relevance, and more importantly would show prudent motivation.

Instead, if you drain your savings on training, the most likely thing is you will be exactly where you are, but without your savings.

Please don't pick a career for the money. Selecting a career based on pay is not the road to happiness. Find something you really want to do. That has to come from within.

In the meantime, if you have physical issues, you should strongly consider mentioning them to your current employer, perhaps asking for a different type of position that is less physically demanding.

Finally, please be realistic about your expectations. Consider anything that gets your foot in the door at a company you would like to work for.

Good luck to you.
And please keep reading. I have more below.

How to Find an Authentic Career

A Gallup Study that reviewed 25 million responses in 189 different countries shows 30% are happy with their job, 20% are miserable, and the rest are going through the motions, at best.

Finding a new career is very difficult but not impossible. I have written about this before.

Please consider Majority Hate Their Job but Only 25% Looking; How to Find Your Way to an Authentic Career

In the above link, I describe my own career change thrust upon me, and a career change by Adam Taggart, co-founder of Peak Prosperity with Chris Martenson.

A career change at 45 is possible, I managed to do it at age 50. Adam tells me he was a reader of this blog and he decided that if I could make a career change, he could too.

Others can make a career change as well, but it takes lots of dedication and motivation, and likely a good dose of luck as well.

Many helped me along the way as noted in Financial Blogger Profile of "Mish" on Equities.Com.

By the way, I failed to mention one extremely helpful person in the above link. His name is Neil, a hedge fund manager in the UK.

At the time I made my career change, I knew nothing about the stock market, nothing about investing, and nothing about the economy.

Fifteen years ago, if someone told me I would have an income from writing and being an investment advisor I would have thought they belonged in the loonie bin. Yet here I am, and hopefully it's obvious that I really enjoy what I'm doing.

Education was important for me, and I had many good teachers along the way, all online, all free. It can be done, but it is not easy.

Good luck!

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Ukraine Hyperinflation; Currency Plunges 44% in One Week! Actual Black Market Rates; Poroshenko Gives "Ultimatum" to Central Bank to Fix Exchange Rate

I hear various reports of what the hryvnia actually trades for on the black market in Ukraine. I believe the reports, but they come in piecemeal.

Today, I have an actual black market link to share thanks to reader Oleg from Crimea.

In response to Ukrainian Currency Comparison: Budget Rate vs. Official Rate vs. Interbank Rate vs. Street Rate reader Oleg Writes ...

Hello Mish!

There's more to the black exchange rate than meets the eye in Ukraine.

First of all if you use the "legal" currency exchange places you can only exchange up to 3000 hryvnias per day. Then there is an extra tax on the exchange.

None of that applies at the black market of course. Often black market outfits operate from the same official currency exchange kiosks, you just need how an what to ask for.

A number of "online exchanges for people" sprang up where people say how much of what they have and what they ask for it. Of course, such sites are subject to manipulation.

I am from the Crimea originally, and I am grateful it's no longer at the top of the news.

Oleg

Currency Limits

The official foreign exchange limit is 3000 hryvnias per day, down from 15,000 a year ago. That's less than $100 a day. That limit is posted in Changes in Currency Control Rules (in English).

The Exchange Tax, not in English, is up from 0.5% to 2.0%.

In a second email Oleg comments "It's a pretty widespread practice to ask around when you need to sell dollars/euros because there are tons of willing buyers at a very competitive price compared to official exchange places. Of course, going straight to the black market is risky in many respects. However, importers frequently turn to such exchanges because they need currency and cannot obtain it by official means."

Black Market

As I said previously, no one gets the "official" rate exchanging hryvnia for dollars other than corrupt banks officials taking advantage of the rigged system.

I am not sure who gets the interbank rate and in what quantities. But anyone who needs hard currency above and beyond what they can get at the interbank rate has little choice other than the black market sites that have sprung up.

Black Market Exchange Site

Please consider the appropriately named Black Market Exchange.

The site amusingly warns "Please note that the violation of the order and conditions of sale and purchase transactions of foreign currency, the perpetrators of such violations shall be liable in accordance with Art. 162 of the Code of Administrative Offenses, according to which the illegal purchase, sale, exchange, use of currency values ​​as a means of payment or collateral - entail a warning or a fine of thirty to forty-four times the income of citizens with confiscation of currency values."

The way it works is by phone. You see an exchange rate you like, make a call to the posted phone number, meet and do a deal.

The word "course" translates as "exchange rate". Some of the offers are nonsensical. Scroll down to offers that have a strike-through. Those allegedly represent completed transactions at the shown rate.

I do not believe some of the executed transactions. Others look reasonable.

Currency Converter

The Currency Converter, part of the same website, seems more reasonable.

Average Black Market Rates



Average Bank Rates



Rates Revisited

Yesterday, I noted The Dollar on the Interbank Market was Fixed at Around 33.5/USD.

Ukraine's international newspaper, The Mirror (available in English), reported on February 16, Ukrainian Government Changes Rate to UAH 21.7/USD in 2015 Budget.

The "official" rate yesterday was 28.29/USD.

I can now complete a table whose last line yesterday read like this "Street: Unknown but assuredly higher". We can now reasonably quantify "unknown".

Exchange Rates

• 2015 Budget: 21.1
• Official: 28.29
• Interbank: 33.5
• Street: 38.5

All of the above for Monday, 2015-02-24.

Hyperinflation?

At the beginning of 2014, the exchange rate was 8.21 per dollar. From 8.21 to 38.5 is a decline of 78.6% in just over a year.

This morning in Emails From Kiev: Free Speech Vanishes, Total Media Thought Control; US Radar System Falls Into Rebel Hands? I quoted "Ellen" who lives in Kiev.

Ellen, who lives in Kiev writes "Today $1 is worth 36 hryvnias on the black market. A Week ago it was 20 hryvnais. No one knows where the bottom is. People buy anything just to get rid of hryvnias."

That's a decline of 44.44% in one week! And if you use the 38.5 black market rate, the weekly decline is 48%.

In my book, that is hyperinflation, complete with that attitude that does with it: "People buy anything just to get rid of hryvnias."

And where will it stop?

Full Scale War

Ukraine's deputy foreign minister announced a "Full Scale War" on Saturday.

For details, please see "Prepare for Full-Scale War" says Ukraine Deputy Foreign Minister: "With What?" asks Mish; Ukraine Lie of the Day.

Ukraine is broke. It has no means to fight a war. Nonetheless, Ukraine is dedicated to fighting the impossible to win war, with foreign currency reserves dwindling.

Insistence on more fighting will produce more of the same results. Except now the US is involved in a not-so clandestine way (See Emails From Kiev: Free Speech Vanishes, Total Media Thought Control; US Radar System Falls Into Rebel Hands?)

Poroshenko Gives "Ultimatum" to Central Bank to Fix Exchange Rate

To put the finishing touches on the hyperinflation story, at a live press conference on the currency market, Poroshenko ordered the Chairman of the National Bank and the Finance Minister to Stabilize the Hryvnia at the "Budget" Rate of 21.5 hryvnia per dollar.

During an online broadcast, Poroshenko issued an ultimatum demanding the head of the National Bank of Ukraine, Valerie Gontareva, stabilize the hryvnia at a level which was guided by Cabinet in approving changes to the 2015 budget.

Poroshenko is not only a military fool, this rate change by mandate while fighting a stupid war proves he is an economic fool as well. Of course Mish readers knew that long ago.

I advise Hontaryevoyi to get out of Ukraine while she still can.

Addendum - Street Rates in Lviv

Reader John, who speaks Ukrainian, and whose father payed a key role in the Ukrainian resistance in WWII, has a sister who lives in Lviv, a beautiful town in Western Ukraine. He got "street" rates from his sister, just moments after I posted the above.

John writes ...

Hello Mish

My sister just returned from grocery shopping and advised that prices have further skyrocketed and are getting outrageous. The population will be subsisting on potatoes and beets and not much more.

Street Rates

• SELL 1 USD = 25.00 UAH
• SELL 1 EURO = 28.00 UAH
• BUY  1 USD = 39.00 UAH
• BUY  1 EURO = 45.00 UAH

Ukraine faces an IMF funding decision on March 11. Clearly it's not going well. I knew that was the purpose of the ultimatum. John provided the date.

Black market street rate in Lviv is now 39-to-1 if you want to buy dollars.

Addendum Two - Translations

In my previous post, I requested a better translation of "Накануне супруга журналиста сообщила, что он задержан СБУ по подозрению в госизмене".

The Google translation was "suspicion of SBU gosizmene".

Many readers confirmed my translation assumption that gosizmene meant treason.

Reader Andrei offers this translation and explanation  "Yesterday the journalist's wife informed that Ukraniane Secret Services detained her husband on suspicion of treason".

Andrei explains "gosizmena" is a shorter version of "gosudarstvennaya izmena" which means "treason against the government"

Reader "Silver" commented: "Try Yandex for translations. It tends to be much more accurate than Google or Bing."

I tried it.  Here is the Yandex Translation: "On the eve of the wife of the journalist reported, he SBU detained on suspicion of treason."

That's quite broken, yet understandable. Yandex did get the word treason correct. Google translated it as the non-word "gosizmene".

This is what I go through every day, in many languages. I am getting better at guessing words. Many have volunteered to help, but my hours are not normal to say the least. I frequently write at 3:00AM.

Thanks to all who responded.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Emails From Kiev: Free Speech Vanishes, Total Media Thought Control; US Radar System Falls Into Rebel Hands?

Free Speech Vanishes - Total Media Thought Control

I have a couple emails from Ukraine to share, one from two days ago, one from yesterday. Both are from "Ellen" who lives in Kiev (name changed).

Two Days Ago From Ellen

As you know, the Debaltsevo pocket situation is resolved. It's not as bad as it could have been in terms of casualties. However, this was a crashing defeat of Poroshenko's generals.

I don't know how many more losses our society can take, but people are very angry. Currency keep plunging every day. Today it takes 30 hryvnias to buy one US dollar. It seems we have default without official announcement of it.

There is a new problem: total media thought control. In Ukraine we used to have free speech, but not any longer. War propaganda is everywhere and if someone doubts official policy, the journalist will be cast out or put in prison.

It is worse now than under Yanukovych. There is an atmosphere of fear everywhere. Today, a new law was passed, and now the president can switch off any TV news channel, any paper.
 
Total mobilization is underway. Anyone who refuses to join the army will go to jail.

Putin opened the border for Ukrainians who don't want to join the army. Millions of men from Ukraine went to Russia. Not many want to go to war. One defeat after another discourages people.

Many think Debaltsevo was breaking point. Some say separatists will take new areas with less resistance from Ukrainian army. Hard to say. Many think Mariupol, a city of 400,000 people is next. If separatists storm Mariupol it will be a bloody mess world haven't seen for long time.

Ellen

UAE Sells Arms to Ukraine, Currency Plunges More

Yesterday From Ellen ....

News today is Ukraine will buy arms from UAE, perhaps arms that Americans previously sold to UAE. Poroshenko signed the contract, but we do not know what exactly Ukraine is buying.

It seems pretty much like Ukraine is in default. Today $1 is worth 36 hryvnias on the black market. A Week ago it was 20 hryvnas. No one knows where the bottom is. People buy anything just to get rid of hryvnias.

The only thing missing from a default is the announcement. I guess Poroshenko waits for bail out money from IMF and America. No one is in a hurry to bail us out because they know the money will be stolen by our corrupt officials.

We never seen prices rise so fast. Poroshenko came to power with 1 dollar around 9-10 hryvnias and now it's 36. Meanwhile his chocolate factory profit has gone up 8 times. His friends are also doing very well. People in Ukraine are very angry. Maybe this anger will be out on the streets soon.

Best regards

Ellen

No-So Clandestine US Weapons Shipments

Colonel Cassad describes UAE anti-tank offerings in Arms supplies to Ukraine.

Given that Obama, despite pressure from the Pentagon and the Senate, has not yet taken a decision, it seems that a "buffer" scheme has been activated, whereby a country dependent on the U.S. is prepared to ship arms to Ukraine, essentially becoming a sort of middleman through which American weapons systems are sent to Ukraine. These can come in the guise of "arms from the UAE", with the U.S. seemingly uninvolved.

Specifically, the UAE has the BGM-71 TOW US antitank system, long ago discussed in relation to the pumping up junta troops' defensive lethal weapons.

TOW Anti-Tank Missiles



BGM-71 TOW Description

Wikipedia describes the BGM-71 TOW as a "Tube-launched, Optically tracked, Wire-guided" anti-tank missile. First produced in 1970, the TOW is one of the most widely used anti-tank guided missiles."

An optical sensor on the sight continuously monitors the position of a light source on the missile relative to the line-of-sight, and then corrects the trajectory of the missile by generating electrical signals that are passed down two wires to command the control surface actuators.

Lethal Aid

On February 7, Stratfor wrote US Considering Lethal Aid to Ukraine.

A significant portion of the anti-tank weapons Ukraine owns are old and likely inoperable. Moreover, only a few effective weapons such as the 9K115-2 Metis-M, indigenous Skif missile and RPB-29 are in its stockpiles. If the United States or its NATO allies were to transfer Javelin anti-tank guided missiles or heavier crew-served TOW missiles to Kiev, it could give Ukrainian troops a credible capability against separatist and Russian heavy armor.

That just happened. Expect Russia to respond in kind. And expect more deaths.

Renewed Fighting Around Mariupol

Earlier today Yahoo! News reported Ukraine Rebels Fill Hospital as Clashes Flare Around Mariupol

US Radar System Falls Into Rebel Hands?

One of the problems in sending top-notch equipment to Ukraine is what happens to it. For example Colonel Cassad reports ...

"Among the trophies in the Debaltsevo area was a damaged American mortar counter-battery radar system.  The junta claims that during the flight of the 128th Brigade its soldiers were able to wreck it. But there is some doubt seeping through these claims. It is likely that the radar, in one condition or another, passed into the hands of the Novorossia Armed Forces, which means that it will get to Russia and be studied, as happened with American hardware captured during the Olympic (2008 Russia-Georgia) war."

I do not know the equipment, or the significance, but if Cassad thinks it happened, history suggests it probably did.

Say Something Against the Draft - Go to Jail

Ellen commented "Total mobilization is underway. Anyone who refuses to join the army will go to jail".

It's a bit worse than that. If you call for a boycott of mobilization, you will be arrested.

Please consider Prosecutor Calls for Arrest of Journalists who Protest Mobilization.

In mid-January, journalist Ruslan Kotsaba recorded a video in which called for the abandonment of the mobilization.

His wife reported that he had been arrested on suspicion of "SBU gosizmene". The adviser to the chairman of the SBU Markiyan Lubkivsky commented on the detention of journalist as follows: "Given that the actions R.Kotsaby there are signs of a crime under Part 1 of Article 111 and Part 1 of Article 114 of the Criminal Code, he announced that suspicion."

I need a better translation of "Накануне супруга журналиста сообщила, что он задержан СБУ по подозрению в госизмене" vs. Google translation of "suspicion of SBU gosizmene".

I suspect that phrase and/or Part 1 of Article 111 and Part 1 of Article 114 pertain to treason or subversion.

Anti-Draft Agitation - Eight Years in Prison

Here's a literal headline translation that's easy to understand: "For Agitation in Social Networks Against Mobilization Can Collect Up to 8 Years".

Conscription of Minivan

Here's a final post that shows who we are supporting.

The prosecutor's office in Kharkov starts Criminal Proceedings on a Corporation's Refusal to Turn Over Minivan for Military Use.

In Kharkov, prosecutors opened criminal proceedings on the failure of one of the companies within the mobilization region to transfer a minivan for the needs of the APU.

The prosecutor's office of the Frunze district of Kharkov started criminal proceedings under Part. 1, Art. 364-1 (abuse of authority by an official of the legal entity of private law) of the Criminal Code against the leadership of one of the machine-building enterprises of Kharkov.

According to the District Attorney Stanislav Pieve, officials Ltd. refused to give within the framework of the mobilization for the needs of the Armed Forces of Ukraine technique.

"At the request of the district military office to provide vehicles in the company announced its absence. However, as it turned out, the management of concealed information about the presence of a van," - said Pieve.

Hiding a Minivan

Sheesh. From the last paragraph above, it appears this company was charged because it concealed a minivan.

For now, I believe this type of thuggery is primarily happening in Eastern cities not under separatist control. I don't think they would dare do this in Kiev yet.

If they did, I would expect an uprising if not takedown of Poroshenko. Recall that Ellen said "Maybe this anger will be out on the streets soon."

The problem is, the asshats associated with Poroshenko are even worse than he is.

Addendum:

Regarding my request for a better translation of "Накануне супруга журналиста сообщила, что он задержан СБУ по подозрению в госизмене" vs. Google translation of "suspicion of SBU gosizmene" ...

Many readers confirmed my translation assumption of treason. The most offered context was along the lines of  "He was taken by the SBU (Ukrainian KGB) for suspicion of treason."

Reader "Silver" commented: "Try Yandex for translations. It tends to be much more accurate than Google or Bing."

I tried it.  Here is the Yandex Translation: "On the eve of the wife of the journalist reported, he SBU detained on suspicion of treason."

That's quite broken, yet understandable. Yandex did get the word treason correct. Google translated it as the non-word "gosizmene".

This is what I go through every day, in many languages. I am getting better at guessing words. Many have volunteered to help, but my hours are not normal to say the least. I frequently write at 3:00AM.

Thanks to all who responded.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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War of Terror: "Disappeared in Chicago"; Illegal Detention by Chicago Police Without Charges; Beatings and Death

Meet the "Nato Three"



Brian Jacob Church, Jared Chase and Brent Vincent Betterly, known as the ‘Nato Three’. Photograph: AP/Cook County sheriff's office.

All were arrested, put in an "off-the-books" interrogation compound in Chicago and denied access to lawyers. This goes on every day. People are beaten and threatened.

It's all part of the alleged war on terror. I prefer to call it "War of Terror".

War of Terror

Please consider the Guardian report "The Disappeared": Chicago Police Detain Americans at Abuse-Laden 'Black Site'

The Chicago police department operates an off-the-books interrogation compound, rendering Americans unable to be found by family or attorneys while locked inside what lawyers say is the domestic equivalent of a CIA black site.

The facility, a nondescript warehouse on Chicago’s west side known as Homan Square, has long been the scene of secretive work by special police units. Interviews with local attorneys and one protester who spent the better part of a day shackled in Homan Square describe operations that deny access to basic constitutional rights.

Alleged police practices at Homan Square, according to those familiar with the facility who spoke out to the Guardian after its investigation into Chicago police abuse, include:

Keeping arrestees out of official booking databases.
Beating by police, resulting in head wounds.
Shackling for prolonged periods.
Denying attorneys access to the “secure” facility.
Holding people without legal counsel for between 12 and 24 hours, including people as young as 15.

At least one man was found unresponsive in a Homan Square “interview room” and later pronounced dead.

Brian Jacob Church, a protester known as one of the “Nato Three”, was held and questioned at Homan Square in 2012 following a police raid. Officers restrained Church for the better part of a day, denying him access to an attorney, before sending him to a nearby police station to be booked and charged.

“Homan Square is definitely an unusual place,” Church told the Guardian on Friday. “It brings to mind the interrogation facilities they use in the Middle East. The CIA calls them black sites. It’s a domestic black site. When you go in, no one knows what’s happened to you.”

Unlike a precinct, no one taken to Homan Square is said to be booked. Witnesses, suspects or other Chicagoans who end up inside do not appear to have a public, searchable record entered into a database indicating where they are, as happens when someone is booked at a precinct. Lawyers and relatives insist there is no way of finding their whereabouts. Those lawyers who have attempted to gain access to Homan Square are most often turned away, even as their clients remain in custody inside.

“It’s sort of an open secret among attorneys that regularly make police station visits, this place – if you can’t find a client in the system, odds are they’re there,” said Chicago lawyer Julia Bartmes.

When a Guardian reporter arrived at the warehouse on Friday, a man at the gatehouse outside refused any entrance and would not answer questions. “This is a secure facility. You’re not even supposed to be standing here,” said the man, who refused to give his name.

“They just disappear,” said Anthony Hill, a criminal defense attorney, “until they show up at a district for charging or are just released back out on the street.”

Jacob Church learned about Homan Square the hard way. On May 16 2012, he and 11 others were taken there after police infiltrated their protest against the Nato summit. Church says officers cuffed him to a bench for an estimated 17 hours, intermittently interrogating him without reading his Miranda rights to remain silent. It would take another three hours – and an unusual lawyer visit through a wire cage – before he was finally charged with terrorism-related offenses at the nearby 11th district station, where he was made to sign papers, fingerprinted and photographed.

Church’s left wrist was cuffed to a bar behind a bench in windowless cinderblock cell, with his ankles cuffed together. He remained in those restraints for about 17 hours.

Though the raid attracted major media attention, a team of attorneys could not find Church through 12 hours of “active searching”, Sarah Gelsomino, Church’s lawyer, recalled. No booking record existed. Only after she and others made a “major stink” with contacts in the offices of the corporation counsel and Mayor Rahm Emanuel did they even learn about Homan Square.

After serving two and a half years in prison, Church is currently on parole after he and his co-defendants were found not guilty in 2014 of terrorism-related offenses but guilty of lesser charges of possessing an incendiary device and the misdemeanor of “mob action”.

Bartmes, another Chicago attorney, said that in September 2013 she got a call from a mother worried that her 15-year-old son had been picked up by police before dawn. A sympathetic sergeant followed up with the mother to say her son was being questioned at Homan Square in connection to a shooting and would be released soon. When hours passed, Bartmes traveled to Homan Square, only to be refused entry for nearly an hour.

An officer told her, “Well, you can’t just stand here taking notes, this is a secure facility, there are undercover officers, and you’re making people very nervous,” Bartmes recalled. Told to leave, she said she would return in an hour if the boy was not released. He was home, and not charged, after “12, maybe 13” hours in custody.

On February 2, 2013, John Hubbard was taken to Homan Square. Hubbard never walked out. The Chicago Tribune reported that the 44-year old was found “unresponsive inside an interview room”, and pronounced dead. After publication, the Cook County medical examiner told the Guardian that the cause of death was determined to be heroin intoxication.

“Back when I first started working on torture cases and started representing criminal defendants in the early 1970s, my clients often told me they’d been taken from one police station to another before ending up at Area 2 where they were tortured,” said Taylor, the civil-rights lawyer most associated with pursuing the notoriously abusive Area 2 police commander Jon Burge. “And in that way the police prevent their family and lawyers from seeing them until they could coerce, through torture or other means, confessions from them.”

Tracy Siska, a criminologist and civil-rights activist with the Chicago Justice Project, said that Homan Square, as well as the unrelated case of ex-Guantánamo interrogator and retired Chicago detective Richard Zuley, showed the lines blurring between domestic law enforcement and overseas military operations.

“The real danger in allowing practices like Guantánamo or Abu Ghraib is the fact that they always creep into other aspects,” Siska said.

“They creep into domestic law enforcement, either with weaponry like with the militarization of police, or interrogation practices. That’s how we ended up with a black site in Chicago.”

There's much more in the Guardian report. Read it. I am so infuriated by this I am at a loss for words.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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