Archive for June, 2014

The fog of war is already growing large in the Middle East.

At first there were news of the Iraq Army recapturing Tikrit (then denied) – the battle for Tikrit is still on.

ISIL declared a caliphate.

But the news that are worrying is actually not what happening in Iraq, but around it.

Iran is constantly shelling ISIL positions in Iraq.

Syria is using its fighter jets bombing ISIL in Iraq

Saudi went to max alert as American drone saw ISIL movements towards Ar Ar – to capture the border post Iraq – Saudi.

Jordan-Iraq border is in the hand of ISIL and there are rumors (unconfirmed) of light clashes and pro-ISIL demonstration. And Israel already offered its protection to Jordan.

The Kurds are actually pressing to be recognized as an independent state, with a support of Israel (the first independent (from Iraq) Kurd oil shipments went via Turkey to Israel).

What a mess!

A comment

In an old post I comment that the Arabic revolution of 2011 (Egypt, Tunisia, Lybia) where destined to fail as the European Revolution of 1848. But also that in the following 10 years we will see the real consequences of the revolution as in Europe (between 1848 and 1880, Italy and Germany became unified nations). Logically, as now we are in the Internet age all is happening much faster.


This is a very complex option position on the US SP500.

With the volatility so low and tight volatility conditions make it very cheap and easy for institutions to build a gamma trade (I will not bore you with details).

It works like a spring…..there is a lot of crowded trade on the upside and with a gamma trade you can unleash hell and make really a lot of money with tiny risk. It is a perfect trap.

It can be used up or down – but as the market and crowded trades are up – it will be most likely down.

In two words: a trap! You have to watch out Vix level 12.5 and 14. The worst case scenario is Vix 28 (I do not think so and hopefully I am right!)

funnily scary gold stories

Posted: June 27, 2014 in Uncategorized

Gold is another very manipulated trade.

yesterday in Bloomberg an article appeared with USD15 billion of loan backed by falsified gold transaction.

On 16 January 2013 German put out a great fanfare about bringing back their gold hold in the US FED (300 tonnes) and in the French vaults (374 tonnes).

Now, 18 months later, it says some gold came back (37 tons, of which 5 from the US).

And it announced that they have haled the request to repatriate the gold, as there is no mistrust between Governments (Bundestag announcement)

The repatriation started when the Federal Reserve refused to show the gold to German officials. And nobody seen the German gold thereafter (and maybe nobody will never see it).

These news promptly did not make any appearance on the mainstream media

Iraq update

Posted: June 27, 2014 in Uncategorized

The fight is going on. ISIL is starting disruptive tactics in Baghdad similar to the one used in Kabul ( car bombs, terrorist attacks).

It actually looks very organized as it is opening multiple fronts to stretch the Iraq Army response.

They reached the southern district of Baghdad in heavy numbers. This is important as it cut off reinforcement from the South, were the main army is and it cannot be attacked by airplanes without causing heavy civilian casualties.

it is spreading towards south. That is an extremely important piece of information as 70% of Iraq oil fields are in South Iraq. Saudi Arabia does not have enough spare capacity to calm down the oil prices at the moment.

ISILis likely to supplant Al Qaeda in your terrorist nightmares as it has a clear organization (funnily enough it even publishes an end of year report similar to what the listed companies do) and with this attack it also got hold of over US$420 million dollar in Mosul and probably more.

So practically ISIL is a terrorist organization acting with the sophistication of a well trained army – fast deploying unit and terrorist sleeper cell. And with Syria attacking with Baghdad blessing inside Iraq (and Iran shelling rebels positions inside Iraq) the Middle East situation can really spiral easily out of control – ISIL war is already spanning from Lebanon to Iran, with Jordan in high danger as there are not any more divisions between ISIL in Iraq and Jordan.

Very few of you that a new tax will be introduced in the US – with potential side effects.

FACTA stands Foreign Account Tax Compliance Act.

Essentially it has been legislated after UBS got caught red handed for holding a large quantity of US citizen money hidden abroad. Now institutions will have to report directly to the tax office (IRS). US ownership in a company is deemed when there is a US holder holding more than 10% of the assets. There are millions of companies that have this issue!

The legislation hits mainly American expats and wealthy American.

A side effect is that some normal non -US traders will cease to invest in the US as they will need to fill forms to show that they are non-US citizen.

The big issue is that also foreign entities can caught in the midst (it is a 30% tax!) – making it not viable to invest in the US!

The way to avoid it is to enter an IGA (Inter Government Agreement) for the foreign institution – but it is complicated.

FACTA fully enters in place the 1 July 2014. I do not know if it will have an effect or not…but it is a new element to consider (as if there were not enough).

A 2011 KPMG survey of entities with more than EUR 10 billion under management declared for 6% that it was possible they would consider a divestment of US investments due to FACTA. A whopping 25% said that it depended on FACTA implementation rules.


Iraq – continues

Posted: June 24, 2014 in Uncategorized

Apart the US war of words….the war is still going in favour of the insurgents.

While the media says that Iraq is fighting back, military news paint the Iraqi Army largely in disarray – there are some troops (Iranian backed) very forceful, but the common army is in disarray and the 1,000s of untrained volunteers are just cannon fodder.

ISIL now took over the main Iraqi’s refinery and now there is a rush towards Haditha – the major Iraq’s dam that control most of the country’s electricty and could flood the entire region.

After that, the battle for Baghdad will start


ISIS in Iraq and the markets

Posted: June 23, 2014 in Uncategorized
Tags: , ,

Well, the something is wrong is clearly ISIS in Iraq and the oil prices.

Notwithstanding talks of the Iraq government fight back the situation on the field is quite murky.

ISIS is not just ISIS “terrorist organisation”. It is also allied with numerous Sunni’s tribes and Sunni ex Army units as the fight is not ISIS vs Iraq, but Sunnis vs Shiites. 

– Isis control most of the North -West (aside the Kurdish North)

They actually dismantlement the borders with Syria and Jordan, allowing reinforcement to pour in. There are fonts that their forces in Syria have substantially decreased.

The Kurds (Sunni) are both courted by ISIS (and Saudi) not to get involved and by Iraq’ Maliki (logics would tend to favour ISIS and Saudis which are Sunni).

Syrian aviation is bombing positions of ISIS in Iraq to show Iran that they are doing their part (but now ISIS got hold of American land to air weaponry).

It is pretty clear that ISIS want to mount an attack to Baghdad from the West side.

As per Iraq, with the help of Iran, it is amassing a 50,000 army north of Baghdad for a counter-offensive – that could be successful or not. But it could be as the Iranian backing is very powerful.

– Saudis have warned Iran against interfering with Iraq

– The so called potential alliance Iran-US, seems not happening.

naturally all this influence oil Brent now is at $115 (it  was 100-108 before this) and, if it breaks $120, the two major resistances are $127 and the terrible $150. The target $127 seems pretty achievable.

Alert: something is wrong

Posted: June 20, 2014 in Uncategorized

The US Sp 500 made a new top.

Gold jumped USD 40 overnight

Oil Brent jumped and is trying to breach USD115 ($110, 10th June)

Do not have time to write…but it does not make much sense.

About Iraq

Posted: June 17, 2014 in Uncategorized

Well Iraq is in a mess again….and really it was in the card.

Why it happened is because, after the US left, the government fell under the Iranian influence – who are Shias.

And the north of Iraq is Sunni….and Shias forces are pretty much considered invaders.

ISIS just took advantage of this situation.

So where we are at now? Practically a balkanization of Iraq.

ISIS achieved its own target: raise awareness, get cash (from Mosul’s Central Bank coffers), newish weapon and decrease Iranian presence in Syria.

Iran is introducing some proxy forces to help Iraq at least to keep Baghdad and make it look like winners. Iran is very worried as it needs to call back some forces from Syria (ISIS idea from the start) to stabilize its satellite state Iraq.

The Kurdish separatist are one of the major winners, here. Unknown to the media at large, the Kurdish Peshmarga forces already cut out a part of Iraq for themselves (rightly so as it was theirs) and now they are entrenching themselves as a real force and state to be reckoned with.

The state that has the biggest stake here, apart Iran, it is actually China – as China is the biggest customer of Iraqi’s oil as China Petroleum scooped up almost all oil contract (they should send boot on the ground. It is with sadness that all the American soldiers died for a Iranian/Chinese advantage).

On that point I would agree with the first words of Obama…they should sort out their own mess (or better Irana and China).


Graphically oil could hit 116 a barrel. 


It is years that often I tell you that this market is rigged by the Central Banks. And you could always have dismissed my theory as another conspire theory.

The idea is that since the normal ways (increasing the money available to the banks so they lend it out) do not work, try to make the consumer feel better so it is the consumer that kick starts the economy.

Now, as the Financial Times reports, you can see that is all real:


The FT reports a cluster of central banking investors has become major players on world equity markets.” The report, to be published this week by the Official Monetary and Financial Institutions Forum (OMFIF), confirms $29.1tn in market investments, held by 400 public sector institutions in 162 countries, which “could potentially contribute to overheated asset prices.” China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, according to officials, and we suspect the Fed is close behind (courtesy of more levered positions at Citadel), as the world’s banks try to diversify themselves and “counters the monopoly power of the dollar.”


And by the way, always the Financial Times, says that the FED is thinking to impose exit fees on Corporate Bond Funds – they are fuelling this rally so much that they are scared there could be a mass exodus from Bond Funds. Also, your money will have to go into shares.