• "the influential Saudi journalist Abdel Rehman Rasheed of Al Arabiya wrote in an article published June 2 that Tehran will try to reach an understanding with the United States and Israel to undermine the interests of the Sunni Arab world."

• "Anne Applebaum is also wrong when she writes about anti-corruption protests and the recent protests against the horrific Delhi rape-murder as two different outbursts. She is correct in stating "Hazare's campaign has lost steam" but totally incorrect about the reasons. We have begun to think that neither protest was really about the visible cause. Meaning the protests for Anna Hazare were really not about corruption and the protests in Delhi were really not about rape or women's rights. But this anti-consensus discussion will also be left for another article on another day."

That day is today because that discussion is the same as the discussion about the protests in Turkey. How could that be? After all, the ostensible reasons for protests in Turkey are so completely different than the 2013 protests against rape and the 2011 protests against corruption in India. This brings us to the old cliche about what you see, what you hear is what deceives you.

But even the eyes can see many similarities. The protestors in Turkey and India, as well as the initial protestors in Tahrir Square in Cairo, were mainly educated professional secular middle class people. Both Turkey & India are democratic societies where Governments are elected by the people in reasonably fair elections. Both Turkey & India are celebrated as economic success stories within emerging markets. Both have seen sizable inflows of foreign capital that has led to the development of a professional middle class.

Yet, it is that professional middle class that is seething with rage, the rage that the world saw this week in Istanbul and in January 2013 & August 2011 in Delhi.

3. Same Rage in Africa

• "What shocked me in Lagos, Uganda and Nairobi was the fury of the young middle classes – the very people who are supposed to driving the new Africa into the 21st century. They were angry about the poor levels of education, about the lack of electricity, but above all about corruption at the very top. And they see the growing ranks of ill-educated, unemployable young people being churned out of badly-managed state education systems."

• "Frankly, we think Bernanke intended the confusion he caused. It is better for the market to worry about a yellow traffic light today then come to a rapid halt when the traffic light suddenly changes to red. And if the markets worry about the traffic light changing to yellow, then hopefully the markets won't charge to the intersection all reved up."
• "Every stronger than expected piece of data will make the stock market wait and wonder about the QE-taper coming early. And every weaker than expected piece of data will lead to a sigh of relief but with increased worry about the state of the economy. So, in either case, the stock market will worry more and perhaps pause more. Sort of a reverse Tepper corollary of 2010?"
• "If this is what happens, then Bernanke will have pulled off a tapering of market fervor without reducing his flexibility in any way."

• Frankly, we still worry but not so much. Because it is clear now that both Prime Minister Abe and BoJ boss Kuroda are panicking. They will throw whatever they need to throw at the JGB market to cool it down. Central Bankers are the sole exception to the certainty of Gambler's ruin, at least in the near term. 

• Keith McCullough ‏@KeithMcCullough3m - Long Bond $TLT acts like Bernanke is going to pussy foot next wk instead of signaling what he should

• Anyone who has been watching the Nikkei over the last month has noticed that the Japanese stock market has routinely been selling off throughout the trading day. ... In fact, over the last twenty trading days (a period going back three days before the index peaked), the Nikkei has closed more than 1% below its intraday high 13 times!  We haven't seen that type of intraday selling in the Nikkei since the Financial Crisis, and before that, December 2001.  In the 1990s, there were multiple occurrences where the Nikkei saw this kind of intraday selling, but keep in mind that the 1990s weren't exactly a good period for the Japanese stock market. 
  

• "I think Japan is out of control. I don't think they can put the genie back in the bottle there. ... "
  

• "the big money this week, U.S. wise, what they did was something very simple. They called shenanigans on this idea that the Fed's going to come out and tell us that they're doing some kind of taper or cessation of buying back assets.
  
• Look at what bounced and what went up - Defensives, Utilities. Treasuries had their first green week in the last seven. Look at the Reits, up 3.5% off the bottom, look at the utilities bouncing on the 50-day moving average. when you think about what big money is doing, they're saying, we got a shock to the system, but the truth is we still need yield. We're coming back to the old playbook. it was fascinating to see that in the context of every other sector red Monday through Friday.

• "what's is he gonna say? he already owns 20% of the MBS market, 90% of Treasury market..where does he go from here? At this point, it is Sell the Fed. ... I think they're totally out of bullets. I don't think it really matters what they say. we're at a point now in the markets, where bad news is bad ..."

• I think the June lows, kind of interesting to me; the summer rally season starts when the market makes a low in May or June. I think that June 6th could have been the low.
• I thought we were going to have a deeper correction, this could have been the 5-10% correction which honestly I would welcome. I was pleasantly surprised on Friday when we had the 2nd biggest up day of this year. And now we get hit with this foreign news, this central bank news and the market stabilizes. So, yes, it could be the end of the correction. I need to see new highs though.

• "In summary, $SPX is trading rapidly between 1600 and 1650. A breakout in either direction would be significant. Maybe "Sell in May and go away" really IS going to work this year, much to the chagrin of those who have already declared that it didn't."

• "big number 1600, we bounced 1,600, we bounced off it twice in the last couple of weeks here. that's the line in the sand. I think we'll hold that line probably before the Fed meeting. but again, what has been going on? What has been coming out of the Fed since May 22nd. It's been a lot of language that's causing volatility. So I don't expect a ton of clarity as far as the markets are concerned before Wednesday's press conference.that will be the line in the sand next week, but if we break that after the meeting, I think we see 1550 quickly."

• "given where treasury yields are today, that unless you think somebody is going to take you out at a profit in the future and that mostly that investor is thought to be the Federal Reserve, there is no real economic reason to purchase Treasury securities relative to other things that are available in the market,"
  

• "I tend to think that our trading range now on the ten-year note is probably between 1.8% and 2.5%",

• ... this massive backup in rates of 50 basis points which is about, you know, 25% given the level of interest rates we started at. we are starting to see housing activity stall out, mortgage applications dropping off and refinancing applications dropping off, and housing is in and of itself directly and indirectly contributing to about two-thirds of GDP so when you see the last GDP number at 2.4% and housing is at least 1.5% of that, if housing stalls out, and I'm not talking about it falling off a cliff, I'm talking about just the activity, flattening out where we don't have any home price appreciation or growth in construction, then what we're going to start to see is that the economy is going to stall and if the economy starts to stall rates are going to come down ...
  

• Gross tweet on Wednesday before the 10-year auction - #Fed’s not raising interest rates for years. That makes intermediate #Treasuries a buy at 2.0%+.
• Shilling on BTV Surveillance on Wednesday affirming his sub 2% target for the 10-year treasury yield. 
  

• June 1 - "The payroll number comes in much stronger than expected and bond yields shoot up on June 7. That would just about make everyone bearish, both fundamentally & technically. Just as bearishness becomes universal, Treasury prices could ironically bottom the following week, say on June 12, the date of the 10-year auction. ... This is not just wild speculation. Empirically speaking, when Treasuries have suffered steep sell-offs in May, the 10-year auction in June* has usually marked the bottom or near bottom in Treasury prices."
  

• June 8 - As we wrote last week, when Treasuries have suffered a steep sell-off in April-May, they have tended to bottom in June. This seems true whether stocks keep rallying in the 2nd half as in 2009 or not as in 2007.

• the big story of the last couple of weeks is that we have seen a massive exit from EM which has been benefiting G3 across and to the extent that the market was short the Euro, and particularly short the yen, these two actually benefited more than the dollar. So in my view, this has been a position liquidation  story that has driven the dollar weakness against the euro and the yen, and to the extent we think that tapering expectation is going to be very much alive going into next week and beyond, this is a great opportunity to sell the euro against the dollar.
• as I said the stronger Euro and the stronger Yen is position of liquidation, and now the position liquidation has basically run its course. this creates great opportunities, and great levels to actually establish the dollar long against these two currencies.
  

• on the multi-year basis, this [dollar rally] is the beginning of the long-term trend and anyway to upwards to 20% on the trade-weighted basis and a large appreciation, but it is slow. What you are seeing here is that the initial phase as the Fed retracts from the QE, you are starting to see initially people that are selling bonds and the initial instance and the dollar will appreciate slowly.

• ... emerging markets in some sense is facing a perfect storm. I mean the combination of China getting worse and the U.S. doing better actually is a bad combination for emerging markets. Think about it. most of them basically do, make a living selling to China, but at the same time with the current deficit by attracting the highly mobile capital and U.S. doing better with the higher U.S. rates weakening the opportunity for investment. Right now, to the extent with a big sell-off and not many people have managed to get out of the long EM position, it is no doubt that after next week if the tapering expectation does not come down, I suspect that the EM will remain vulnerable. 

• Commercial traders of gold futures are showing one of the most bullish conditions in years.  They are usually presumed to be the "smart money", and so when commercial traders move to a lopsided net position as a group, it usually means that prices are going to be moving in their chosen direction.
• In the chart above, the current reading is the commercials' lowest net short position (as a percentage of total open interest) since 2001, which was when gold prices were just starting a multi-year uptrend from below $300/oz.  The message here is that commercial traders as a group are convinced that gold prices are heading higher.  They usually get proven right, eventually, although sometimes we have to wait around longer than we might wish for "eventually" to get here.
• One insight that I recently shared with our Daily Edition subscribers is that when the 3-week rate of change of total open interest drops below around -12%, it is usually a pretty good indication of an important bottom for gold prices.
• But history says that it should be associated with a meaningful price bottom, which tells me that we should get some meaningful amount of a price rally from here.

• An exodus from EM assets: weekly redemptions from EM equity & debt funds of $9bn = 3rd largest ever (exceeded only in Mar'07 & Jan'08 ).  
• EM buy signal coming soon: $8-10bn of EM equity outflow next week triggers first "buy" signal in over 2 years (EEM bounced 10% in 6 weeks after Feb'11).

• $6.5 outflows from HY bond funds (2nd largest ever) (Table 2)

• $2.5 outflows from EM debt (2nd largest ever); but Chart 2 suggests pace of outflows still trailing market sell-off 

• $1.5bn outflows from govt/tsy funds  

• $1.7bn outflows from munis (largest in 2013)  

• 51 straight weeks into floating-rate debt ($1.5bn)  

1. Tom McClellan on CNBC SOTS on Wednesday, June 12
2. Larry McDonald on CNBC Fast Money on Thursday, June 13.

•  there's been a whole lot of discussion about what people are calling a huge divergence between the lumber prices going down so sharply but the HGX or  that the Philadelphia housing index is aloft for the most part, and they are saying it is warning of us big problems to come in housing, but the problems are not showing up, but it does not explain the true relationship between those two.

• if you look at the coincidence basis, there is some slight correlation but you will find the true relationship you have to do some more magic on the chart . I like to shift forward the lumber price plot by a year, and it reveals that whatever lumber does now, that is what the housing sector will do in a year from now.

• We have a correlation that works going back a couple of decades and at some point when you see enough correlation, you give up wondering why it is exactly a year. lumber sits at the intersection of demand from housing, but also supply from the mills, and lumber mills are terribly slow in being able to respond to changes in prices, because it takes a long time to bring back into operation a mothballed mill. so you got a lot of economic forces of transportation, labor, electricity costs all coming into play in lumber and housing demand and why it is a year, I don't know, but I celebrate that I get the answer a year ahead of time a lot more bull market in the housing sector left to do, and especially after a bottom for overall market that I'm expecting to come this fall probably in September.
  
• well, we know that the lumber future prices topped earlier this spring of 2013 and that means that we should expect the real top for the housing sector in the spring of 2014 because of that one-year lag. so while lumber prices are already signaling trouble ahead, it is not for another year ahead.
  

• Housing stocks should continue the rise into February or March of 2014, and then the effect or the echo of the big drop of the lumber prices can be felt in the housing sector, but it is a one-year lag. It is nice to have a one-year leading indication of what is ahead of us.

• ... the Hindenberg omen has correctly told us about every major stock market decline going back 30 years, and it has incorrectly told us about problems at other times. So you have to accept that it is going to cry wolf sometimes. i wouldn't call it a signal,I would call it an alert. it says to keep the ears up and watch for trouble. watch for conforming signs of a down trend. I think  we are seeing those now, now that the Hindenberg omen has triggered twice in just the last week. It comes from when you see new highs and new lows both coming to a high level at the same time with a few other conditions being met and a sign that there is rotation going on. it is a good message to listen to. It is not a message to take at full faith every time and can't be the only thing one ever watches,but it is nice to have a message to tell you that hey, something is different right now, and you need to pay attention.

• what we are seeing is the data from the commitment of traders report, ... we are seeing the levels of commitment by commercial traders that have paired their shorts down to such a low level that we have not seen this reading since 2001 and you remember gold bottoming at $260 in 2001 and starting a great rally, we are seeing the same sort of expression of commitment from the commercial traders that we saw in 2001 and that says that we have a multiple year trend for gold and silver at a time when people are roundly hating both of them, and saying that gold will never go up gap again and gold is for losers or suckers, and that is the kind of attitude and muttering that is a great marker for a historic bottom which we believe it to be, and gold has a lot more years to go up.

• Lee - ticking time bomb is pretty incendiary. would you agree with that?
• McDonald - we have a QE conundrum. The more QE they do, it is increasing currency volatility, and bond price volatility worldwide. This week we had the largest spiking currency vol  since Lehman on a percentage basis. If you think about the banks around the world, they're long a lot of currency risk in a lot of bonds. So it sets up a really strange dynamic. lastly, the last time we had this type of really sharp currency in bond price volatility was right before long term capital. it sets up those dynamics.

• McDonald - this isn't a joke but you think about the movie Frankenstein, there's a scene in the movie where when Frankenstein starts to get up and attacks the doctor. The side effects of QE manifests themselves around the world. Those side effects, the market is starting to play games with. That's really what I'm telling clients, with the emerging markets dead, QE has forced capital into weak places in the world. and it's really the opposite of capitalism. Capitalism should put money in strong hands. So we are very careful of some emerging markets debt and levered companies in the markets.

• Adami - I am a big believer that there is a derivative book out there somewhere whether it is in Asia or Europe that is on the verge of blowing up - its almost, if you think about it, by almost definition has to be out there somewhere. It just hasn't happened yet. Do you believe in what I believe that there is a book out there that is not positioned for the volatility?

• McDonald - Absolutely. When we have this type of a move, we have always seen this in our careers, its 2-3 2weeks later, a month later we'll see the news and it will be in the headlines. think about Bernanke coming to  year-round. He's exiting. Think what's going on in the last month is he really doesn't want to throw everything on Yellin's risk seat. Think about back to '87 you had Volcker leave and Greenspan coming in & that's where everything was really left to him..I think . Bernanke wants to put a little fire hose on the fire here before he leaves.

• Lee - we are out of time but I can't let this statement go, the notion about this book that's ready to explode out there. are we going to see the ripple effect of that? if this exists is this going to pose a risk to our system?
• McDonald - It would really create a risk-off in the markets. I would say enjoy these rallies; I trade the rallies by fear though. If it does creates a nice fear moment, at your greatest moment of fear do the opposite of what you want to do. Buy fear. The people that bought fear the last four years made the most money.

• U.S. Government Coming Apart or Under Attack? >>>>

• Arrogance or Racism of Good Intentions? >>>>

• Morality & Equality - Should India Ban Single "White" Women Tourists or Should These Women Not Travel to India? >>>>
  

• Interesting Videoclips of the Week (May 25 - May 31, 2013) >>>>
  

• Jim Yardley ‏@JimBYardley 4 Jun    Again, a woman attacked in India. At #IndiaInk, American Tourist Gang-Raped in Manali, Police Say http://nyti.ms/18QCqMb
  

Sadly, a women gets attacked every day in India, in America and in virtually every part of the world. Jim Yardley hasn't cared much about all these unfortunate women and he rarely tweets anyway. So the fact that she is America must have been the reason for the tweet. That's fair, though. Every American should be concerned first about well-beings of Americans.

This Yardley tweet was followed almost immediately by a tweet by Indian reporter Neha Thirani Bagri of the New York Times.

• Neha Thirani Bagri ‏@NehaNotes 4 Jun - Yet again --American Tourist Gang-Raped in Manali, Police Say: Vishnu Varma and I report for India Ink india.blogs.nytimes.com .
  

We were disturbed and upset at the news. No woman, man or child anywhere should be subjected to attack or rape. So we read the NYT-India Ink article. But having read the article, we felt more upset about how Indian reporters of NYT-IndiaInk again targeted India.

1. The facts

According to the article by Neha Thirani Bagri & Vishnu Varma in the NYT,

• "The woman arrived in the resort town of Manali on Monday with three other women and was staying in a guesthouse in the old part of the town, ..." 
• "On Monday evening, she headed to meet a friend at Vashisht, which is about 2 miles north of Manali and famous for its hot springs. At 1 a.m. on Tuesday, she was looking for an auto-rickshaw to return to the guesthouse when three men in a truck offered to drive her to Old Manali. Instead, they took her to a secluded spot and raped her, the official said."

While we feel deeply for the pain suffered by this woman, we simply cannot understand her adventurism. She was not in South Mumbai which is alive with people even at 1 a.m. in the morning. Manali is a relatively small resort town and Vashisht, about 2 miles north, is even smaller. Why did this woman find herself alone in such a small rural backwater area at 1 a.m.? And how utterly adventurous was she to jump into a truck driven by three men whom she didn't know?

Forgive us. We don't wish to hurt any sensibilities of any one. But frankly, very frankly, if you jump into a pack of hungry wolves alone, you are not going to fare well. This is a fact in every city in every country in the world.

2. Was this woman lucky? What could have happened to her in America?

Our first thought was that this woman was simply lucky to be alive. We thought so because we live in New York City and know Chicago well. If you get caught in certain areas of Chicago or New York at 1 a.m., chances are you might be killed. And you don't to have to look for such trouble as this woman did in Manali, India. Trouble comes looking for you past midnight in New York or Chicago, whether in a subway station, in parks or simply on the streets.

How random, violent and unbelievably tragic can life be in New York City? Let us share a story that we know personally. A few years ago, a young gifted Chinese graduate student in Columbia University was killed just outside the campus. This young man was crossing Broadway, a major avenue just outside the campus, at about 10:30 p.m. He was attacked by 3 American teenagers on the median. His death was mourned by his fellow students and by Columbia University.

We knew this young man and were deeply grieved at this wanton loss of life, a life of a young man in his prime, a life that might have meant a great deal to Mathematics & Statistics.

But no one in New York media, not even the New York Times, made a big deal about what happened to this young man. No one wrote about how dangerous America is and how American culture is so violent. If we recall correctly, the New York Times didn't even report this on the first page.

Because America is a simple straight country. America's message to visitors & tourists is simple - come to America and live here at your own risk. And above all, be smart, sensible and practice safety. If you get hurt by your stupidity, it is, frankly, your own problem. The police will do what they can to find and punish the people who attacked you but only as a part of their normal routine.

Getting back to the young Chinese student who was killed because of the assault, the three teenagers were found and put in jail. We recall a mother of one of these men claiming loudly that they were innocent and were railroaded because they were of a minority. No NY newspaper reported whether justice was served or whether the young teenagers escaped with a minor punishment. 

The Chinese student died in the simple act of crossing a major avenue just outside Columbia University. He was not being adventurous or foolhardy. He was simply going home. In contrast, the young American woman in Manali was foolhardy enough to go to a relatively isolated area 2 miles away from a small resort town and then utterly stupid to get into a truck with 3 unknown men inside.

Yet, the New York Times made it appear as if this is a shameful blot on India and on all Indians. The same New York Times that didn't bother to display any anguish about the death of a bright Chinese student in Columbia University, the pride of New York City. 

3. The Racist Behavior of Indian Police & of Indian Government

If you read NYT-India Ink or WSJ-IndiaRealTimes, you will notice that the police in Manali and the state went into high gear to find the men who raped the American woman. This is only because the woman was an American and because the Indian Government was under intense pressure to find & punish her rapists.

Unfortunately, this also means that Indian victims of other crimes in the area take a back seat. The Indian police force is notoriously understaffed and cares little for ordinary Indians anyway. And with the pressure to find the rapists of an American woman, we can imagine the police telling other victims in Manali that their complaints will ignored while the American woman's case is being handled.

If you doubt us, just read the NDTV story about a Delhi girl allegedly gang-raped in Ghaziabad, blackmailed with video. The police effort in this case is described as "a case has been registered and efforts are on to arrest them". Typical Indian police behavior with ordinary Indians.

By the way, no Indo-American blog reported this case. But wait, we might be too harsh. After all, NYT-IndiaInk, Reuters & WSJ-IndiaRealTime are all American entities and so they should be mainly concerned about Indo-US stories, right?

Fair enough. That leads us to ask whether these Indo-American Blogs have ever written a story about violence experienced by Indian tourists or visitors in America. We haven't seen even one such story in NYT-IndiaInk, Reuters or WSJ-IndiaInk. Not one Indian reporter, not Neha Thirani Bagri of NYT-IndiaInk, not Tripti Lahiri of WSJ-IndiaRealTime, not Anuja Jaiman of Reuters has cared to investigate or report on how Indian tourists can get into trouble in America.

Getting back to the Indian police, what happened to the intense efforts of the Indian police to find the men who raped the American woman? A Big Story in the Associated Press tells us India Court Jails 3 Suspects in Rape of US Woman:. 

• "A court in northern India has sent three men arrested on suspicion of gang-raping an American woman this week to prison while police investigate. ... Police arrested the men Thursday, but they haven't been charged. ... On Friday, a court in the resort town of Manali, where the alleged rape occurred, ordered that the men be held in prison for two weeks. When the two weeks are up, police will present their evidence to the court.. "
  

We sincerely hope we are wrong but this article does bring to mind various scenes of police investigations from Bollywood films. In these scenes, the police round up suspects and put them in jail to satisfy their senior officers and government officials who are clamoring for arrests in high profile cases. Then the police beat up these suspects in jail and try to coerce confessions which can then be used as evidence before a judge who is also under pressure to close the high profile cases with convictions.

We deeply and sincerely hope that this sort of stuff is only for Bollywood films and not for real cases like the rape case of the woman in Manali.

By the way, no progress has been reported in the case of the Delhi girl who was gang-raped and then blackmailed with a video.

4. Why a moral appeal to European-American women to not travel to India? 

The Indian police and the Indian Government care far more about "white" visitors than about Indians. So they will spend far more time and effort on handling your cases than they will on handling even more serious cases of ordinary Indians. And they are understaffed any way.

So if you get into trouble in India and approach the Indian police, you will in effect hurt and damage legitimate complaints of at least 3-7 Indian families in that area. Do you really want this on your conscience? Do you want to be responsible for hurting the citizens of the country you visit for your pleasure?

If you don't, then heed our appeal. Choose some other country for your tourist travel. Just avoid India.

5. Why Indian Government should ban tourism by European-American women?

This is very simple. You, the Indian Government, are a diffident cowardly bunch. You don't, for example, have the candor or guts of America which essentially tells all visitors that they visit America at their own risk, that they should practice safe & smart tourism in the interests of their own safety and that they will not get any favored treatment if they get in trouble.

And the American press is in an attack mode against you. No matter what you, the Indian Government, do, it will not be enough. Some "white" tourist will get into trouble by being stupidly adventurous and that will broadcast all around the world as the fault of Indian Government, its culture and its society.

In case, you haven't found out already, these attacks have registered and they are having an impact on your ratings. So it is time to cut your risks and simply ban all tourist visits by single European or American women to India. Simply not worth the hassle.

Of course, you don't need to ban all such tourists. Allow by all means rich Western women who will only stay in 5-start hotels and travel in escorted limousines. Frankly, one such tourist can bring you more revenue than 50 tourists who will live in guesthouses and get you into trouble by their adventurous behavior.

And by the way, by all means encourage travel by African and Middle Eastern women. Reporters of NYT-IndiaInk, WSJ-IndiaRealTime or Reuters don't care what happens to non-white women in India.

Send your feedback to editor@macroviewpoints.com or @MacroViewpoints on Twitter.

• "I think what we have to be aware of is our ability to forecast is far less than we understand and I'm most concerned about the fact that we have lots of time to decide when we're going to move. and I'm not sure the markets will allow."

• Kernen - do you at this point feel that the economy is strong enough to go to zero on QE right now?
• Greenspan - I don't even think that's the question. I think we've got to do it, even we don't think it is strong enough. I happen to think that the thing that is most important positive for us at the moment is the fact that equity premiums are so high, which means the down side on stock prices is quite limited. And I think if we could get stock prices to rise, which they will if this thing stabilizes, then you get a lot of asset growth effect on the economy. and one of the things that I think we underestimate is how important asset prices are in determining the levels of the overall economic activity. so the more asset price expansion we get, the more type of negative bond market reaction we can deal with.

• Rick Santelli - Leverage deleverages, not in a gentle pretty way but in a forceful wild way.. if you look at our 10-year about an hour ago we touched under 2% ..if you blinked, you missed it...so we lost 12 bps we have come back... Dollar-yen is what it is all about, euro-yen, anything yen...a breath-taking move, we are rattling the cages of the carry trade and it isn't just here... look at the 10-year 25bps higher in Spain, 25bps higher in Italy all those great MF-type invesments -  , leverege & buy the junk... now it is back to junk at least for a moment...

• Bill Gross on BTV Market Makers on Thursday, June 6 (see clip 4 below): what we are seeing now a disappearance of the enthusiasm for growth, not just in Euroland but in the US and we are certainly seeing a disappearance of liquidity based upon that growth.

• I went to 60% cash before we had that selloff; it was more luck than skill, but I did miss this 40 handle run from 1600. I am not ready to get long, I think we are gonna fade again.

• look at the 200-day moving average in these indices and I think that's where you're headed. I think from top to bottom you're talking about 10%. I recently looked at ... Dow theory about a week or so ago. That was starting to flash a secondary correction. I think today the transportation index itself closed below its 50-day moving average. So technically you're getting the sell-off. In fact, this decline is broadening out. I noticed the DAX broke down from a mini double top, emerging markets made new lows. So it's a global affair. I think it's long overdue and I'm very happy.

• well, we finally had Bernanke give a little whiff of what could be changing. since then, that marked the peak in the market. only off about 3% or 4%. but my guess is we'll still tuck down probably under 1600.  If I had to guess where we stop, at least for this initial decline, it's probably between 1,590 and 1,560. That's kind of where we have targeted as a downside area here where we suspect people who have been waiting for a pullback will start coming back.

Lawrence McMillan turned negative on Friday morning:

• The pressure on the stock market increased again this week, driving the Standard & Poors 500 Index ($SPX) down through some support levels, and generally turning almost all of our indicators to sell signals.
  
• In summary, we are bearish until proven otherwise. The $SPX chart has turned bearish by breaking support levels, and if the 1600 support is broken, things could get rather nasty.
  

• we've been establishing the evidence over a period of about a year, pieces of evidence that could argue that we are beginning a structural bull market with liftoff and the S&P 500 through the 2007 and the 2000 peak. We wanted to have a significant lift. It's about 8% through now.
• we're also seeing a little weakening under the surface of the indicators. so typically when you break out from something that major in terms of a multi-year breakout, you get some kind of a pullback possibly to the breakout level. from a shorter term perspective, we could see it come back to 1550, 1500 over the short-term.

• I think the most important thing is that this is representative of what the other bond charts look like tops. And bond cycles historically have run 22 to 37 years. We're in the 32nd year of our 1980 bull market for bonds. And I think that it's getting long in the tooth. And we may have a consolidation here that continues to be possibly the final bottoming process before we see a reversal in rates.

Do Treasuries keep selling off next week? What demand will the 10-year & 30-year auctions see next week?  As we wrote last week, when Treasuries have suffered a steep sell-off in April-May, they have tended to bottom in June. This seems true whether stocks keep rallying in the 2nd half as in 2009 or not as in 2007. This is simply an empirical observation as the TLT charts below demonstrate:

    
            (April-June 2007)                              (April-June 2009)                        (April-June 7, 2013)


The consensus argued in 2007 for a structural move up in interest rates due to inflation. The consensus in June 2009 was about new structural bull market in stocks accompanied by the end of the post 1982 bull market in bonds. The ensuing bond rallies in 2007 & 2009 went on till November 07 & October 09.

Will this pattern hold in 2013 to create a local bottom for Treasuries in June? Or will Treasury yields keep climbing through the summer & perhaps beyond? Bernanke and Time will tell. 

• actually we think there is more downside on gold. And really, it's the weight of positions and a correction. We still think the market is too long. supply and demand. look at cost production. it's well below where we are. and we think we should correct to 1200, maybe 1300, and then pause. but unless you get the dollar to really roll over, and that's the other thing, with rates kept low you might have the dollar turned down again too. If you have a massive sell-off in the dollar, then you could see gold, you know gain a little bit of its luster back.

1. Jeff Gundlach on CNBC Fast Money Half Time on Tuesday, June 4
2. Ralph Acampora on CNBC Closing Bell on
3. Renee Haugerud on CNBC Fast Money on Tuesday, June 4
4. Bill Gross on BTV Market Makers on Thursday, June 6
5. Steve Schwarzman on BTV Market Makers on Friday, June 7
   

• I think rates go a little higher but not much higher. They were too low, 1.6% on the ten-year and 1.38 on the 10-year 10 or 11 months ago. There's quite a bit of support at 2.40% on the 10-year, particularly against an environment where commodity prices are weak and look like they are going to break down. The inflation numbers aren't there. global growth is no robust. It's half of what it was several years ago.
• I think that interest rates moving higher from here are going to damage sectors other than the bond market frankly. I think the risk that a lot of investors have is they've been observing interest rates rising and lost a little money on government bonds. We're at the point where further interest rate rises start to take out the alternatives people have gone to to try to escape from what they think is unacceptable bond returns. For example, particularly mortgage related rates have super weak in recent time period. They have gotten crushed and the reason is their dividends are going to fall as they are going to have ongoing reinvestment problems. I think higher interest rates from here will start to cause problems. Maybe 20 basis points more on longer term treasury yields. I think you'll see action like happened last Friday. I know some people say that's rebalancing and it doesn't matter but i think it had a lot to do with how weak the bond market was early in the day and really start to make people understandably concerned about what was going on. plus,
• let's not forget, there's a lot of volatility that entered other markets, in particular, the Japanese stock market which was the killer of them all. obviously it's down a lot from a huge rally, but volatility showing up in markets like that is not exactly a positive. obviously it's the opposite. i think rates can rise a little bit more. We'll be a buyer in our bond funds if increases in treasury rates above where they are today

• I think we've seen the best from the middle of November into the peak near 60,000 or so. I don't think I've seen a stock market or any market go up so sharply in search a compressed time frame. I had a target on Japan in December of 13,000, 13,500, I thought that was aggressive, we might get there somewhere during 2013. It blew through that like a hot knife through butter. You should stay long with that momentum move but obviously that's a market that was crowded, really very, very sharp rally and it's not surprising that it's gone down. 
• I think it's a buying opportunity in the mid 12,000s in Japan. I don't think you go from a straight line up type of market behavior to a sudden collapse, a u-turn of that type of that type of shape doesn't really happen in markets. So this has been a big correction, understandably from a huge monster type of rally. you should have a pretty nice move back up. I don't know if we'll see the highs that we saw in the middle of may again, but from 12,000, I think you've got a pretty easy 10% you can make in the short term being long japan.

• we first bought at 405 and averaged higher. I think Apple seems to be forming a base to me. It certainly moved down in a way that was frustrating for investors that were long and seems to have a hard time rallying above 450 but I think it's going to. I think Apple goes to 500 bucks anyway. It seems to me to be too cheap versus a lot of other stocks given their cash flow engine that they have. I'm not so sure we're ever ever going to see 700 again in Apple, at least in the context of markets where they are today. It seems like 500 should be a fairly easy place for the stock to go to after collapsing from 705 in the high 300s. Also, it's basing out in a way that is fairly encouraging. I also think that Apple is a stock -- it's weird. it seems to be anti-stock market, seems to go up on days when the S&P goes down and down on days when the S&P 500 goes up. It's a pretty darn good diversifier and it seems to help to move in a way that isn't just all one market type of stock portfolio. it's a nice inclusion at the levels it is today given how low it is when they strip out the cash and the fact they are working on giving income to investors. which is a big deal.

•  yeah, I think though that people are going to perpetually given demographics and zero interest rate policy are going to return to a need for income. i really think that the movement down in income payers is a reasonably good buying opportunity. Now they are cheaper. it seems to me utilities and certain bonds, various income paying stocks, there's no reason to abandon the these. I think the reason for owning them remains intact for quite some time to come.

• I'm a huge believer in trade location, in particular when it comes to shorting. Trade location is a big deal

• Lee - you first of all, this is the question we posed to the traders, are the pillars of market breaking down and what would you consider to be the pillars at this point?
• Acampora - Not at all. Ridiculous. You're getting quality rotation and quality rotation is you leave one sector, you go to another sector. And the sectors that look spectacular are all the pillars for the next leg up or they've been part of it already are the financials, the industrials. no one's talking about technology. I don't hear anybody talking about semi conductors. They're on fire.
• Acampora - You know, Melissa, I was very worried about two weeks ago. The market was starting to profile a melt-up. The last thing a bull like me wants to see is buying panic. So I am enjoying this sell-off. I hope it continues and I think it will. And that's going to be a great opportunity to not only hold those groups but maybe in that decline we start taking a look at the Utilities and the Reits again. I think it's too early for that.
• Lee - even though you say there is a rotation at this point to the more cyclical names, semiconductors or financials, you say there's enough room to look back at the safety plays like the utilities?
• Acampora - yeah, I wouldn't do it today. But they're hitting them so hard at some point they're going to be very, very attractive. I'll give it a little bit of time.
• Seymour - the pillars for you as technical guy, what are you watching? what breakdown gets you concerned? what level on the s&p, first of all? you said you think we could go farther down. 
• Acampora - look at the 200-day moving average in these indices and I think that's where you're headed. I think from top to bottom you're talking about 10%. I recently looked at ... Dow theory about a week or so ago. That was starting to flash a secondary correction. I think today the transportation index itself closed below its 50-day moving average. So technically you're getting the sell-off. In fact, this decline is broadening out. I noticed the DAX broke down from a mini double top, emerging markets made new lows. So it's a global affair. I think it's long overdue and I'm very happy.
• Finerman - a question for you. there is a volume element to this as well that you need to see beyond levels of the S&P?
• Acampora - well, when we get towards the end of this correction I would like to see a volume dump. In other words, people panic and you get a spike in volume. That would be on the downside. That to me would be the cathartic phase. I haven't seen that just yet.
• Lee - I want to get your take on the gold. Louise Yamada said yesterday she saw Gold down to 1300 to 1,200 an ounce even with the sell-off. ... Where is it headed?
• Acampora - well, gold made a short-term low in April around 1321. We tested that in May. I'd say on a short-term basis, the trading range roughly 1320 to 1480, 1485, something like that. I agree with louise. the longer term is questionable. Until that 1321 breaks, I'd say the odds are that gold stabilizes. ... I'm just trying to put a little bit of a positive spin on gold. And I think it's going to be contra cyclical with the current market of equities go down, I think gold will stabilize and maybe try to rally in this corrective phase for equities.

• actually, we think it's going to be kind of slow going, and we think the correction on the bond market right now is probably going to pause for a while. And in fact tapering could take a little longer than people expect. ... again, at least through the end of this year. we don't look for anything until next year.

• no, actually we think there is more downside on gold. And really, it's the weight of positions and a correction. We still think the market is too long. supply and demand. look at cost production. it's well below where we are. and we think we should correct to 1200, maybe 1300, and then pause. but unless you get the dollar to really roll over, and that's the other thing, with rates kept low you might have the dollar turned down again too. If you have a massive sell-off in the dollar, then you could see gold, you know gain a little bit of its luster back.

• the industrial metals we think are going through a short covering rally. 1) the Chinese PMI was a little better than expected. We've had growth look like it's bottoming. And so, 2) it got a little oversold. We think we're going into a short covering rally, and we would use this to sell into. Overall for the next year on the industrial side, on the infrastructure build, we think there is going to be less demand, and we are overall in a better supply. First time in five years that we're in surplus in copper, not deficiency.

• you know, oil is a different animal than all the other commodities  and it is really a geopolitical index. so we think that the cushion of the geopolitical index has been too wide. much like the spread between wti that that cushion is going to fall away and a correct range for oil should be around 60 to 80.

• on the softs, on the's, except for the grains which have to go through more downside, And we're starting to see the on an valuation basis, cotton, sugar, coffee starting to approach some buy levels. And we think the softs in the eggs, depending on the specific market has bottomed and may be coming back a little bit. so it's a little too early to tell. But, again on a value basis, we like the prices right here. And think we're moving out of that churning from a lower price.

• I like food on the big picture three to five years. I think we're going through a major regime shift, major repricing. And this year could be down for the rest of the year. If we do get huge crops, if we get the weather, now we have the crops. in we think that new crop corn, there isn't nearly the acreage that people expect. on soy beans, wheat, crop corn, we think we have to go through a little more of a downside. If we do, this is an opportunity for next three years. We don't have water priced in to grains and eggs. We have a growing emerging market. 60% of global gdp should come from brick and mist over the next five to ten years. This is coming from a much lower base on the income chain when you move up, and foods, eggs, and softs are undervalued on a big picture that doesn't mean that short-term we can't fall and near term supply and demand kind of points towards a little bit more of a correction. Major opportunity over the long-term.

• bond bull market abruptly ended around April 29th - that was the exact date I tweeted. But Treasuries in the last few weeks have certainly been the place to be. We have seen unwinding of leverage on a global basis, perhaps because of the Bank of Japan, at the moment, markets are in a disarray, not just equity markets, but high yield markets, risk markets currency markets emerging markets - the bid ask spreads in these markets is wide to say the least ... the liquidity is low to say the least and to be able to exit markets today or yesterday or last week has been very difficult...so it is good for Pimco to have been high quality oriented and to have recognized the risk in terms of low risks & low future returns..

• we continue to say you never want to fight the central banks, they are the ones with the checks with trillions of dollars worth purchasing power.. what we think has happened in the past month or so is the Bank of Japan has set in motion perhaps an unanticipated increase in currency interest rate and spread volatility... they didn't want to do this but we suppose they expected their QE to act much like the Fed's QE and that was dampening volatility and keeping interest rates low. ... that hasn't happened perhaps because clearly their policy was directed at Yen weakness.
• As long as that weakness was gradual and the yields were low, the levered community, the levered speculators, hedge fund managers etc. that could bank on a cheap and attractive currency funding on the short side ... when the volatility and rates went higher, as opposed to lower, as they did in the experience in the US, levered speculators were forced to reduce positions and that's the story of the past few weeks....it is not that the vigilantes now have control it is that leveraged positions are running for the exits ..

• we are holding TIPS; it appears that in these delevering moments, anything but a pure treasury, nominal treasury, risk in terms of liquidation, as economic growth weakens and as markets stocks come down, the anticipation would be that inflation continues to be contained if that is the appropriate word that the Fed officials would use and so TIPS are not the most attractive Treasuries in this type of environment... we still feel that on  a longer term basis, that's why we own TIPs, over the next 3-5 years, our secular outlook is all of this spending power, all the $75 billion a month from the BoJ, the $85 billion from the Fed and all of this in combination with the trillions of dollars of checkwriting will ultimately produce not inflation in 1970s mode but in resembling a 2-3% level which gives some traction for inflation insurance on the TIPS side..

• When BOJ buys 75 billion a month, then somebody has to sell it; our original assumption would be that internal insurance companies and banks would sell JGBs and then start to look for alternatives in terms of treasury space or emerging space or some higher yielding space... certainly it appears that they haven't done that... perhaps they simply reduced their duration, raised cash... doesn't seem that much has come outside the country... perhaps in the retail space what we call Mrs. Watanabe & her preferences .. in the last few weeks, based on the inherent volatility of risk markets, they are staying put.. It is a conundrum  to know where this money goes because the BoJ is perhaps buying as much as the Treasury is issuing and so the fair question to know where the money flows to... we do know the Yen volatility and the volatility of JGB market on a nightly basis .. has upset levered holders of not just risk assets but Treasury assets because they are levered holders of Treasury assets.. so when the volatility increases and the uncertainty of the Yen & the positions going forward of yen rates & treasury rates explode then all markets are disturbed ...like a little butterfly disturbing the highly levered global markets which the fundamental condition and problem we experienced...

• we wouldn't have expected that the Japan & BoJ would have been the butterfly to have started this all out.. we knew there was a lot of leverage and that was a risk and that is why we owned Treasuries and that is why we suggested those markets were at risk...
• where does it go forward & what else could happen? listening to Mario Draghi this morning made me wonder if he was Italian or German  .. because it was a very dour, very tight very conservative central banker speaking which someone would say god bless but in terms of the peripheral markets, hasn't done them very good --- Draghi has told peripheral markets that ECB stands ready to act and they don't pre-commit .. but private market holders - just be patient and let the growth formula work its magic...
• I suspect at some point .. some of these investors are saying to periphery  - hey if there is no help from you or the EU then don't be looking to us to help you in terms of your markets... throw in the pot perhaps the Euorpean peripherals in terms of the risk markets, up to this point, they haven't been there but there is a highly levered global trade that is reaching for yield at perhaps a highly risky period of time .. and these trades are becoming unwound as various policy makers used to basically spend more..

• It all depends Eric on growth, the whole thing depends on growth... the US stock market, the global risk markets, Italy, Spain.  can they grow their way out of ? Draghi says yes, just give them time.. they are structural solutions, the labor market will reorient it... labor will become cheaper... Spanish & Italian exports will grow and German imports will absorb that particular growth.. it is all growth dependent...
  
• I would simply say these policies on the part of central bankers & on the part of fiscal agents have been ineffective in producing growth... we have been here for 3-4 years, waiting and the United States has 2% growth plus or minus, now a little minus, but this isn't something that 2-3-4 trillion dollars worth of funding and monetary check writing logically would have produced... you would have gotten much more .. so private markets are basically saying hey if that's all you got then this is all you have done..
  
• and so it is growth dependent and what we are seeing now a disappearance of the enthusiasm for growth, not just in Euroland but in the US and we are certainly seeing a disappearance of liquidity based upon that growth and it is not 2008; it is not Lehman; it is not a panic moment in terms of catastrophe but it is a delevering moment in which global markets have to consider how much growth is being generated by these policies and how long these policies can continue...

• "The economy is moving forward. There are some real pockets of strength. The housing business has been really good and we are the largest owner of houses right now in America. The auto complex -- you are producing around 15 billion plus autos and that is up from about 8 million at the bottom of the crisis. Then you have the energy complex which is almost like an energy revolution. You have three big drivers plus technology. That is all to the good and whether we are growing at 2% or 2 .5%, that is in the face of all the government increases in taxes and sequester, so you have to give us a relatively good grade in the economic arena in that sense."

• "We are sort of unusual in that our hiring in the United States over the last several years has been about double what regular companies have been doing in terms of hiring rate. We are hiring on a consistent basis. If the rest of the country did what we did, we basically would not have much in the way of unemployment."

• "If you are a business in the United States, that has been happening to you without you even knowing it, and the cyber security issues that not just the United States is facing, but the western world is facing, are very, very significant and what is happening is that almost every business is hardening its silos to deal with that issue. It is a major, major concern."

• "Depends on what you are buying and what you are selling. In the buying area there are some very interesting things in each of our businesses. In the real estate area, for example, there are a lot of interesting things all over the world. The U.S. still has a variety of troubled assets that have not been restructured yet…mostly commercial. The number of foreclosures has gone way down. Europe has all kinds of stuff. The banks have really not fully sold their troubled assets the way they have in the States and there are all kinds of other assets available in Europe."

• "Big opportunity, and also in Asia, where banks have cut back lending and developers are in trouble. In Asia, for example, you are cross-collateralized with your real estate assets, whereas in the U.S. each asset stands on its own. In other words, you can get in trouble with one, but your empire does not come down. In Asia, they are more linked. As you need more equity and as the prices of assets have come down, all of a sudden there are a lot of sellers and that creates great opportunities for us. In private equity, the whole explosion, if you will, of the energy complex in terms of investment opportunities, presents all kinds of unique things you can do. It is an area where there are way more needs for capital than there are capital to make those investments. There are also opportunities in the financial world because of regulation. There are certain things that traditional financial institutions can't do anymore whereas people like ourselves can do them and those present very interesting opportunities. In our credit area there is always the opportunity to recapitalize companies. We've sold out, if you will, of our long-term bonds with fixed yields, but there are opportunities for investment in the leveraged loan market."

• "You absolutely will be in an inflection point, but you just do not know exactly where it is. What i have found is when you are in a situation where rates cannot go that much lower, at some point, that will reverse and the issue is: how do you deal with that? What we do is we've refinanced all of our companies, and we refinanced with as much fixed rate debt at very low rates. It has been an unusual time since World War II that you can do that. You make sure you are a taker of capital and you do not get caught with rates going up and hurting your prospects."

• "I don't think so because we keep going different places in the world and building out our ability to make investments where there is a need for capital where things are underpenetrated. One of the wonderful things about our world is the volatility that is baked in from the internet and the fact that there is virtually no friction regarding information."

• "Absolutely."

• "I love what I do. It's one of the most fascinating jobs you could ever have. You meet with people all over the world. You're dealing with constantly changing circumstances, new initiatives and virtually everything from macroeconomic policy to politics to investments of all types to various asset classes. I have no desire to stop doing this."

• "Sure. I could always get hit by a bus apparently from watching the local news in New York -- or a taxi. I have a terrific partner, Tony James, who is president of the firm. Tony is great. If anything were to happen to Tony, we have some unbelievably experienced people on our management committee who could also step up -- who are themselves are running individual businesses that are the biggest in the world. It's our obligation to make sure that people are prepared, heaven forbid, if bad things happen to nice people."

1. The Good, meaning those who feel equally outraged or at least think they should feel outraged and,
2. The Ugly, the others who don't.

• "Terrifying anti-Muslim violence surged this week in Myanmar, exposing deep ethnic and religious tensions that are undermining efforts to stabilize the country and move forward with political and economic reforms. Myanmar’s democratic aspirations can never be fully realized if Muslims, who make up about 5 percent of the population, continue to be attacked and marginalized by Buddhists, the majority of the population. At least 44 people have died since March in sectarian mob violence. ..... Across Myanmar, hundreds of thousands of people, mostly Muslims, have been displaced."
• It will not be easy for President Thein Sein to achieve the multiethnic, multireligious vision for Myanmar that he outlined in a speech earlier this month, but that must be the goal. He has to make clear that extremism will not be tolerated and that those responsible for the violence, including security officials who refuse to protect minorities, will be brought to justice.
  

• "An enraged Muslim crowd attacked a Christian neighborhood in Lahore on Saturday, setting fire to more than 150 houses and 2 churches, in a new display of religious intolerance as Pakistan reels from violent persecution against other minorities."
• "“They vandalized Christians’ houses, desecrated churches and opened fire on the police,” according to a police spokesman, Multan Khan. Several policemen were hurt as they tried to intervene."
• "By evening, about 178 houses, 18 shops and 2 churches had been damaged by fire, said Ahmad Raza, who was leading the rescue operation."

• "Saraswati Rani Das ran for her life with her two young children when a Muslim mob rampaged through her village in the southern Noakhali district of Bangladesh. ... Mrs Das broke down repeatedly as she tried to explain how their tiny tin-roof house was destroyed and set on fire... . "We heard the mob was coming towards our house. So, we just ran away. Our house was completely burnt. They looted all our belongings, including our savings. We have lost everything," Mrs Das says."
• "Minority Hindu and Buddhist communities bore the brunt of the attacks as their houses and temples were vandalised and burnt down. ... The village of Aladin Nagar, about 120km (75 miles) south of the capital Dhaka, was strewn with torn tin sheets, broken glass, food grain, damaged books and burnt bicycles. ... Its residents have been living in fear since the attack and are afraid that they may be targeted again."
  
• "Hindu community leaders allege that the attacks were co-ordinated and widespread. So far, they say, more than 50 temples have been damaged and more than 1,500 houses destroyed in the attacks, which took place in nearly 20 districts over the last few weeks."
  
• "Buddhist villages in Cox's Bazar district also came under attack by Muslim mobs last year, when an image allegedly insulting the Koran was posted on Facebook by a Buddhist youth. Many Buddhist temples were vandalised in the subsequent violence.".
  

  
 (Aladin Nagarhave - 75 km from Bangladesh capital)              (Mrs. Das and her children - src BBC.com)

• "The United States and other countries supporting Myanmar’s transition, as well as international companies eager to do business there, must impress on Mr. Sein and his government that Myanmar’s promise could evaporate if they cannot control the deadly sectarianism gaining strength there."

But this same principle does not apply to Bangladesh and the attacks there on Buddhists & Hindus, not for the New York Times, Reuters, Washington Post or the Wall Street Journal. These newspapers, though totally silent about attacks against Buddhists & Hindus in Bangladesh, have been on a sustained campaign against the attacks on Muslim Rohingyas in neighboring Myanmar. 

If you want to see the contrast in coverage, simply search for Myanmar & Bangladesh in nytimes.com. Then search for Myanmar & Bangladesh on Reuters.com. Or just click on the four links we have provided. You will see what we mean.

This doesn't mean that NYT, Reuters and their American media colleagues are pro-Muslim in any serious way. Just hark back to the NYT article by Declan Walsh about attacks by Muslims on the Christian minority in what the NYT calls the land-of-the-spiritually-pure. Declan Walsh was so against that regime and its religious intolerance that he was literally banished by the Islamabad regime.

But wait. Declan Walsh, as far as we can recall, never wrote against persecution of Buddhists & Hindus under that regime in Islamabad. And the entire Af-Pak region has systematically attacked Buddhists and Hindus minorities. Stories about young Hindu girls have been kidnapped and forcibly converted to Muslims have surfaced and documented by Hindu organizations. But the New York Times has steadfastly deemed these attacks as "unfit to print".

So what is the pattern here?

5. A hierarchy of religions, perhaps?

What you see above and what we have felt & experienced for a long time, is a classic pattern of coverage in the New York Times, Reuters, Washington Post and other American newspapers. It is as if there is a defined and accepted hierarchy of religions in the American media:

1. Religions practiced by Europeans - Christians & Jews,
   
2. Religions practiced in the Middle East - Muslims,
   
3. Religions practiced in Asia - Buddhists, Hindus, Sikhs...

When a lower ranked religious community attacks a higher ranked religious community, that is very big news and American media covers it aggressively. But when a higher ranked religious community attacks a lower ranked religious community, that's just par for the sociological course and not worth the ink or web-space in an American newspaper.  

Notice something interesting in the above rankings? They also fit the European-American hierarchy of color. Europeans are fairer than Middle Eastern people who are also generally fairer than Asians. And religions ranked 1 & 2 are collectively people of the book, to quote that great religious thinker, Mahmoud Ahmadinejad of Iran. And religions ranked 3 are outside the collective people of the book.

Think about this and you will see that this hierarchical model is a great fit to the historical practices & conceptual framework of American media. This is important because it takes the morality of Declan Walsh, morality of New York Times, morality of Reuters out of the discussion.

So when Declan Walsh writes about attacks on Christians by Af-Pak Muslims and when he studiously ignores the attacks on Af-Pak Buddhists & Hindus by Af-Pak Muslims, he is not being morally decrepit. No, he is just following the religion-hierarchy model of the American media.

Similarly, when the NYT Editorial Board writes against attacks by Buddhists against Muslims in Myanmar, we should not expect them to write against attacks by Muslims against Buddhists & Hindus in neighboring Bangladesh. Because that would be against the above religion-hierarchy model of American media, which they lead.

But hierarchy of religions is too much of a mouthful. What is a simpler, more familiar word for this concept of hierarchy? A Religious Caste System, perhaps?

That would be our vote.

6. What about American NGOs, Human Rights NGO?

Perhaps we should use the singular because the only one we know of is New York based Human Rights Watch (HRW). We have tried to approach them via Ken Roth, their head honcho, and via a couple of their Directors. The response is deafening silence just like the response from our friendly editors at the venerable New York Times.

On April 22, 2013, HRW declared attacks by Buddhists against Muslims in Myanmar as "Ethnic Cleansing". According to Phil Robertson, deputy Asia director of HRW,

• “The Burmese government engaged in a campaign of ethnic cleansing against the Rohingya that continues today through the denial of aid and restrictions on movement,”.
  

We do not object to this characterization. But we do point out that HRW has never accused the NonPakistani regime or the Bangladeshi government of ethnic religious cleansing against Buddhists & Hindus. We don't have specific figures about how many Buddhists have been "cleansed" out of Bangladesh, a neighbor of Myanmar.

But thanks to the BBC article, we do have a figure of the number of Hindus "cleansed" out of Bangladesh, their ancestral home for 25 centuries:.

• "In 1947, Hindus constituted around 30% of the population," says Subroto Chowdhury, a Hindu community leader in Dhaka.
• "Now it is less than 10%. Hindus are being warned to leave so that locals can take over their land and houses.
• "This is our motherland and we have been living here for 25 generations. We cannot imagine of leaving this land. This is our country."

10% of today's roughly 150 million = 15 million and 30% of 1947 population of roughly 70 million = 21 million. So 21-15 = 6 million Hindus have been "cleansed" out of Bangladesh in the past 65 years.

Six million is the rough number used for Jewish victims of the Nazi Germany holocaust and six million is the rough number of Hindus attacked, beaten& driven out of Bangladesh. Yet, HRW refuses to call this a "religious cleansing"!

Look, HRW and their sister NGOs are honorable institutions. Their refusal to touch human rights crimes and "religious cleansing" of Buddhists & Hindus in Bangladesh & Af-Pak is not because they lack morals or basic human values.

It's just that they seem to follow the religious caste system model. And according to that model, Buddhists and Hindus are the lowest or the untouchable caste of that religious caste system. So who among the highest religious caste care about what happens to religious untouchables?

Certainly not HRW, New York Times, Reuters or any of their media, NGO cohorts. At least, not in our experience.

Editor's Note: The above opinions have been based on articles published by the various news organizations and on the tweets of NGO executives. We seek and welcome feedback or response from NYT, Reuters, HRW and any organization referenced above. We will publish all responses verbatim. 

Send your feedback to editor@macroviewpoints.com Or @MacroViewpoints on Twitter

• The cold war dynamic drew the United States into an alliance with Pakistan and into an adversarial relationship with India. The alliance with Pakistan, however, was deeply troubled by the divergent goals of the two parties. American wanted an alliance to contain Russia; Pakistan wanted an alliance to confront India. The resulting tension would bedevil the allies for decades.

• Nixon developed an extreme dislike of India over the course if his career.... Vice President Nixon, who became Pakistan's strongest advocate in the [Eisenhower] would say that Pakistan "is a country I would do anything for. They have less complexes than the Indians".It was the start of a long Nixon romance with Pakistan.
  
• Pakistan, unlike India, wanted to form cold war alliances, and it soon became America's "most allied ally".

Then came President John F. Kennedy and the 1962 defeat of India by China:

• But it was India that most preoccupied JFK in his relations with South Asia.... No president since has sent such a close friend and high-powered representative to New Delhi..... the United States was helping to build a new Indian army, including six mountain divisions to face China.
  
• India wanted more, at least two squadrons of F-104 jets. But Kennedy and his successor, Lyndon Johnson, did not agree to send India high-performance jet aircracft like the F-104 s that Pakistan was getting.
• The Americans also had come to realize that America and India needed the bomb if they were able to stop another major Chinese invasion.
• Approval ratings among Indians for America soared from 7% at the start of the [1962] war to 62% at the end.
  

Relations soured during the LBJ administration & its handling of the 1965 war in the subcontinent:

• The Johnson Administration distracted by Vietnam, ..... cut off military assistance to both parties... As a consequence of the war, the United States, which went from arming both sides in the India-Pakistan rivalry to arming neither, lost the trust of both.
• For both Indians and Pakistanis, the Johnson era was a bitter disappointment. India thought that American would be its new ally against China and that the two democracies would finally escape the estrangement of the Nehru era. Although India had been receiving U.S. Military aid, it was abruptly terminated, and Washington had sold the F-104s to Pakistan but not to India.
• Pakistanis were shocked that they, the "most allied ally", also were cut off from their major source of arms.
  
• The legacy of the Johnson arms cut-off remains alive today. Indians simply do not believe that America will be there when India needs military help.
  

The Nixon Presidency & the 1971 War

• Nixon fulfilled the expectations of both... Another Indo-Pakistani war would take America and India to the brink of conflict in 1971 and move India to test a nuclear bomb.
• It was an ugly meeting by all accounts. Nixon called the Indian prime minister a "bitch" and much worse behind her back; she thought he was a cold war fanatic who cared nothing about innocent lives.
  
• Indira Gandhi did not need America. She was convinced that Nixon was her enemy, and she harbored suspicions that the CIA was determined to assassinate her.
  
• She did conclude that India needed the bomb, and on May 18, 1974, India exploded a nuclear device and thereby joined the nuclear club.
  

Riedel's conclusion at the end of this Cold War chapter is poignant:

• For forty years America had sought to build strong ties to both India and Pakistan. The attempt had failed. ... It would get worse.
  

Chapter Four - The Carter & Reagan Years

These years were dominated by the Soviet invasion & occupation of Afghanistan. Bruce Riedel was a "junior player in that war effort", as he describes himself:

• .. in December 1979, the Soviets invaded Afghanistan. While America saw it as a sign of Soviet imperialism, India was less alarmed. For the Carter team, the moderate Indian reaction was like a "ton of bricks" shattering the goodwill that Carter had sought with Desai.
  
• The Soviet invasion cemented the change in Washington, and it would lead to a renewal of America's cold war with the Pakistani army and Inter-Services Intelligence. Carter's national security adviser, Zbigniew Brezinski, traveled to Pakistan after the invasion and offered more assistance to the mujahedin and for Pakistan.
  

Then came the Reagan-Casey team:

• Pakistan was an essentially ally against Russia; India was at best an afterthought, if not a Soviet ally. Reagan's primary wish was to avoid Indian interference in Pakistan.
• Reagan had decisively tilted the United States towards Zia and Pakistan during his tenure; together the two had won the war in Afghanistan and set the stage for the collapse of USSR and the end of the cold war.
  

There is no question that America's war against Soviet Union through NonPakistan was well extremely successful & enormously consequential. In fact, as Bruce Riedel writes:

• "it has to be judged one of the most cost-effective federal government programs in history."

But success itself sows the seeds of future failure. Especially in this case, because, in Riedel's own words, "The American-Pakistani alliance had been built on sand".

Chapter Five - From Crisis To Crisis - Bush and Clinton

The Indian Subcontinent was virtually ignored by the Bush (41) Administration which was guiding America through the collapse of the Soviet Union and the transformation of Europe. As Riedel notes:

• "Bush himself never went [to India]. In his memoirs, written with his brilliant national security adviser Brent Scowcroft, India is mentioned only once and Pakistan not at all."
  

The Clinton Administration was another story:

• he was fascinated by India, and he believed that India was certain to be a major player in the twenty-first century. ... Clinton was eager to build a new partnership with New Delhi and became more interested as he watched Singh open up and transform India. 
• Bill Clinton was determined to do better, and his second term should rightly be marked as the turning point in the American encounter with South Asia and with India in particular.  

Just think what the Clinton Administration dealt with - the nuclear tests by India & NonPakistan, the Kargil War and the emergence of Al Qaeda as America's foremost enemy. "It was Clinton's genius", as Riedel notes, " to recognize that in adversity, opportunity beckoned" And,

• For the next two years, South Asia, especially India but also Pakistan, went to the top of the American presidential agenda as never before or since. The effort failed to achieve its stated goals; ... But what it did was to transform American-Indian relations profoundly. 

Then came another transformation; the al Qaeda attacks on American embassies in Africa. As Riedel writes:

• In just one morning, al Qaeda went to the top of the American national security agenda. The trail led directly to Pakistan.
• ... America's priority with Pakistan changed profoundly in August 1998, from counterproliferation to counterterrorism.
  

Within a few months, came Pakistan's intrusion & occupation of about 500 square miles in the Kargil-Drass sectors. The Vajpayee government ordered a counteroffensive at the point of attack. Riedel was fully involved in this conflict:

• "For the first time ever in a Pakistani-Indian conflict, the United States was unequivocally and publicly siding with India. Islamabad was devastated, and New Delhi could hardly believe it. When the Indian Ambassador called on me in the White House to make sure, I told him that the United states was fully behind India."
  
• "Clinton recognized that the Kargil war allowed him to skip over the nonproliferation dispute at long last and so what he wanted to do: open a new chapter in America's relationship with India.
  

Chapter Six - Bush, Mush and Sonia

• Bush would also preside over a significant further improvement in America's relationship with India....he outdid his predecessor in looking for ways to build strong ties between the United States and India.

The NonPakistani policy towards Washington also changed in a big way. When given a choice to be with America against the Taleban or with the Taleban against America, Musharraf chose America. Riedel writes:

• Musharraf put it succinctly, Pakistani policy derived from Pakistan's concerns about India. There would be no role for India in the Afghan war,and Pakistan would temporarily sacrifice its territorial pawns if necessary to save its nuclear arsenal.

We recall the speech Musharraf made to his people in 2001. As we recall, he told them he was not siding with America to damage Taleban but he was siding with the Americans to protect and help is Taleban brothers. He proved true to his word. Riedel writes;

• Without Pakistan's help. the Taliban would never have recovered. ... A NATO study published in 2012 that was based on 27,000 interrogations ... concluded that ISI support as been critical to the survival and revival of the Taliban since 2001, ... Even today, "the ISI is thoroughly aware of Taliban activities and the whereabouts of all senior Taleban personnel."
  

Then came the nuclear deal:

• The U.S. - India Civil Nuclear Agreement was a landmark in American-Indian relations. The nuclear issue would no longer be a source of constant friction between Washington and New Delhi; India would be given a de facto waiver for testing nuclear weapons and for not signing the Nuclear Non-Proliferation Treaty, which it regards as unfair and unbalanced.
  
• Singh negotiated the deal with Bush, but the real decisionmaker in New Delhi was Sonia Gandhi, Rajiv's widow. Sonia is without question the power behind the throne.

Bush also took a major step against NonPakistan:

• George Bush could also rightly claim a major role in shutting down the worst excesses of Pakistan's nuclear bazzar. ... Bush did shut down Pakistan's proliferation of nuclear technology to a host of bad actors, from Libya to North Korea. 

Riedel's concluding comment about Bush is sort of negative and revealing, we think.

• His record in dealing with South Asia was very mixed.

What was mixed about Bush's record? Riedel describes it as below:

• His India policy had been a great success. Indians genuinely appreciated his efforts to defuse the 2001-02 Twin Peaks crisis, and the nuclear deal was well received in India once it was clearly explained and understood.
  
• Pakistanis have a different view. They believe Bush shortchanged democracy in their country. Although Pakistan received more aid from Bush than any previous president had provided, approval ratings for the United States were at an all-time low when he left office.
  

The only way this record is "mixed" is if one believes that America's relationship with India and NonPakistan should be roughly on par. In other words, American policy of the past 6 decades of constantly balancing India & NonPakistan is the right one. But isn't that the same policy that, as Riedel argues, has been a total failure?

Frankly, this "mixed record" comment of Riedel seems revealing to us. It leads us to wonder how he looks at the history of the Indian Subcontinent and how he thinks about the future. That we will discuss in our next article.

Regardless of his own "mixed" feelings, Bruce Riedel has written a book that is panoramic in its view of the past 6 decades and that is full of interesting details. It is a book that is a must for understanding how American policy looked at and continues to look at the Indian Subcontinent.

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1. Speed Kills!

This famous John Madden declaration is this week's story of the markets. Everyone wanted bond yields to go up, but no one was prepared for the speed of the rise. This speed led to fear and fear-induced selling in bonds and bond-proxies. The result was absolute carnage in high beta bonds, in spread products from Emerging Market Debt funds all the way to Municipal closed end funds. The decline was so fast that it finally shocked the US stock market which dropped 100 points in the last couple of hours on Friday to close down 208 points. 

 
                (MSD - MS Emerging Debt Fund)                         (MHN - BlackRock NY Quality Muni Fund)

Long duration treasuries had a wild day on Friday with TLT up 1/2 point in the morning on weak GDP,  income & spending data to above 115+ , a sell off of almost 2 points after the strong sentiment numbers & Chicago PMI to 113.20ish & a final 1 pt rally to close at 114.60 - only down 28bps on the day.

No asset class can withstand this level of panic in its Sovereign bond market. So the stock market finally had a down 200 day on Friday, with the past 100 points coming in the last couple of hours. The action was so ugly that it even scared Maria Bartiromo who has been openly praying for bond yields to shoot up.

The panic was in the JGB market for the past two weeks. We said last week that we weren't too worried about it because both Abe & Kuroda had begun to panic. This week, the panic has shifted to US Treasuries and we all should worry. Because Bernanke is unable to do what Kuroda did. Bernanke cannot simply step in to buy his sovereign bonds at random and in larger & larger amounts without a FOMC meeting.

So, in our humble opinion, nothing matters next week except the action in the Treasury market. It is once again the absolute determinant of all asset classes.

But not everybody is a worry-wart like us and like most market participants. We allude to CNBC's Bill Griffeth who actually said the following as his final comment in the segment titled Is the Bond Sell-Off For Real?:

• "This just proves we are not in Kansas anymore because we just spent 5 minutes in a compelling debate about Treasury Bonds of all things!"  

• "Buy TLT - I think yields are going back down."

•  "I think there's a chance we [10-yr yield] go back to the 1 1/2s [1.5%]"

• "In this week's chart, I compare that 4-month ROC of M2 to a monthly plot of T-Bond futures prices.  It is interesting how good the correlation is, and the conclusion from that is that surging money supply seems to end up causing bond prices to rise.  All of that extra money has to go somewhere."
• "Also interesting is that when this 4-month ROC dips below about 1%, that tends to be followed by a period of rising bond prices.  The last dip below 1% in 2012 did not work out so well, but others in the past have a reliable association with bond prices rising as the M2 growth starts coming back on again."
• "With T-Bond prices pulling back now to the top of the broken upper channel line, this information about M2 growth coming down now to a low level provides evidence to argue for higher bond prices in the months ahead."

• "Despite surging prices for homes and equities, consumer spending is contracting, registering its biggest monthly decline since September 2009. Quite simply, the wealth effect is rendered moot by languishing incomes."
• "No wonder yoy U.S. import growth has also plunged into negative territory. In recent decades, this has happened only during U.S. recessions. Notably, unlike data for GDP and jobs, imports data are not revised substantially, long after the fact."
• "The bottom line: for all the talk of the wealth effect, demand is falling and deflation is closer than at any time since 2009."

Below is the chart from the ECRI article:

• Charles Gasparino ‏@CGasparino2m - "Jeff Gundlach(via dkass)"I'd say the bullishness today looks remarkably similar to the bearishness of Mar 09" take that larry "dow 28K" fink"

With a little bit of search, we found this comment on stocktwits.com attributed to Gundlach:

• "Perhaps it started yesterday. I think that the complacency regarding stock market risk is very similar today to 1998, 1999 and 2006 and 2007. ...  I think we're at 92% bullishness right now in the world of advisors on stocks. ... The most extended sentiment I've ever seen is 98% bearishness in mid-March 2009. ... I'd say the bullishness today looks remarkably similar to the bearishness of Match 2009."

• "Is there any concern that the 10-year government bond yields in Japan move up ever so slightly?"

• "60-40 meaning 60 in stocks, 40 on bonds? ... that's a big bond exposure."

• "what! Are you one of those?"

1. Mohamed El-Erian on CNBC Fast Money Half Time on Thursday, May 30
   

• there's two distinct issues. there's what's happening to the bond market and there's the more bigger question, how is Japan impacting all this. I think in order to answer the bond market, you also have to have a view on Japan. Because let's remember that the last bit of the rally has been very much induced by Japan and more generally by indications that central banks are all in, they're all in. And what is happening in Japan is either a blip or, and this is important, could be an indication of something more fundamental. It's an indication of something more fundamental, we should be paying a lot of attention to it.
  

• so if you run it forward a few months as opposed to a few hours or few days, I think we are going to get growing indication that this hyperactive central bank policy in Japan is becoming increasingly ineffective. So they're going to have to do even more. Already today, there are rumors that the public pension fund may buy more equities to support what the central bank's trying to do.
  

• I think the message is going to come out of Japan over the next few months is careful guys, central bank policy is becoming increasingly ineffective. I think that's a really important issue.
  

• so critically it comes down to are we going to make this transition that the markets have priced in? And the transition that the markets have priced in is assisted growth where central bank liquidity is behind the wheel... that is wonderful for the equity market. it's wonderful for risk spreads. it's also okay for interest rate spreads. Will we make that transition to genuine growth? Will we go to fundamental growth? That is what we need.

• unfortunately today's data suggesting that transition is not happening quickly enough. That's the key issue, okay, because at some point, central banks are going to become ineffective.
  
• If it's after the transition is made, than no risk for investors,
  
• but if it's before, we're going to have a hell of a lot more volatility in front of us.
  

•  we think the time has come to bring that risk positioning to, "neutral or slightly underweight" and do so by walking away from risk, by selling, not running away but walking away from risk. The reason why, it's very simple. We're not seeing this handoff occur. Valuations and prices need to be validated by fundamentals. We don't see that happening as smoothly as we'd like. In addition, we started to see dislocations in markets. We look across a lot of markets and there's something going on the last few days. There's something going on. So, you know, all this is saying, you know what, let's book the profits, let's get more liquid. it provides us optionality as we go forward. and let's get more data.
  

• most corporations as strong as we've ever seen them. rock solid balance sheet. more cash than they know what to do with. so they are rock solid. but they need top-line revenue growth. so you need growth in general. okay. so far we've had borrowed growth. Central banks have brought growth forward from the future. We need genuine growth. look at Europe. sure, Europe is  relaxing in austerity, but  there is no growth model. There is no growth model in Europe. So you're not going to get much growth out of Europe.
  
• the saving rate is down to 2.5%. We better see either another source of demand or we better see export zoom. But China is also slowing. So I worry a little bit. The issue's not corporations. They are rock solid. Can you get the growth that validates the fundamentals that you need to validate the prices? And that's the big question mark.
  

•  in general, we think Treasuries are still range bound. and we have indicative levels, indicative of 2.25% on the 10-year, and we don't think that this is the beginning of the cyclical bear market. We think we may get a secular bear market. Interest rates have bottomed. ..so we're...entering a different phase for the bond market. but we don't think it's a cyclical bear market for interest rate risk as yet.
  

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Prime Minister ManMohan Singh is reputed to be a good economist. His only claim to real accomplishment depends on the economic reforms he led in 1990s under the directive of then Prime Minister Narasimha Rao. Today he is trying to improve India's economy by developing trade with NonPakistan & by deepening trade with China.

His vision is simple. He believes that if NonPakistan has deep trade relations with India, if NonPakistani economy benefits by trading with Indian economy, then the leaders & people of that unfortunate regime will drop their animosity and peace will follow. His thoughts with China are similar. That is why he was so willing to overlook the recent Chinese intrusion into Ladakh and focus on the larger trade & investment relationship with China.

ManMohan Singh is not necessarily wrong. He is trying to follow the American model. Germany and Japan used to be martial societies that went to war for conquests. America redirected their aggression towards the financial and economic sphere. America achieved this by offering its large economy, the large American market to Germany and Japan. So Germans & Japanese devoted their energies to building products for export to the vast American market. Their economies recovered from the destruction of WWII and flourished. America also won and became the most prosperous society on earth with the highest standard of living.

This is the economic model Prime Minister Singh dreams about for NonPakistan & India. He is not wrong. Unfortunately, his understanding is incomplete and partial. He misses the central foundation of the American model, the absolutely critical factor that leads to the success of the American model.

Today the world's financial system is based on the U.S. Dollar and American innovation is the envy of the world. But even the most liberal pacifist American voices understand, really understand that all this depends on American military might. Read what Tom Friedman, their doyen, wrote in the New York Times 14 years ago:

• "McDonald's cannot flourish without McDonnell Douglas, the designer of the F-15. And the hidden fist that keeps the world safe for Silicon Valley's technologies to flourish is called the US Army, Air Force, Navy and Marine Corps."

But ManMohan Singh doesn't understand this. The real tragedy is that he does not even understand Indian history.  He does not have to look far. Why doesn't he simply look at the Indian flag in his office?

                                 

At the center of the Indian flag is the Ashok Chakra, the symbol of Ashok, one of the greatest emperors in world history. Ashok converted to nonviolence and became the greatest advancer of Buddhism in the known world. Ashok is also famous for his establishment of universities, for building roads and for economic development of his vast empire. ManMohan Singh probably understands this and approves of it.

But ManMohan Singh doesn't understand the real foundation of Ashok's success. Ashok began doing his economic work AFTER he conquered his empire with military might. Ashok won every war he fought and some with brutal use of military power. That gave him unquestioned respect and authority which he put to use for peace and economic & civil development.

America did exactly what Ashok did. America won WWII with its military might. And America used this might in a brutal manner when needed. Look at the pictures of Dresden in Germany after carpet bombing by the American air force. America dropped two nuclear bombs on Japan to force their surrender. America's military victory was the singular factor in establishing Pax Americana. Then, like Ashok, America used this power wisely for the economic development of Europe and Asia.

"His military was integral to him; He had two means of achieving his goals,
intelligent discourse based on logic-science or with the string of the Bow [meaning his military]" - Raghu-Vamsha I.19

• "UPA is working to realize your dream of an economically resurgent, socially just India."

• Through the second term of the UPA government, Delhi has allowed ideological romanticism and political timidity to overwhelm common sense in dealing with China. Worse still is the relentless mystification of Chinese policies. Consider the recent psycho-babble in Delhi about the logic behind China's Depsang intrusion.

• "historians of international relations tell us that rising powers tend to demand a revision of territorial status quo. Confident of its expanding economic and military clout, Beijing is doing precisely that...The problem, then, is not about the opaqueness of Chinese intentions; it is entirely about Delhi's self-deceptions."

• "Delhi persuaded itself that a China currently preoccupied with territorial disputes in the east would make nice with India. This is rooted in a profound misreading of Beijing's sense of its own power, and a terrible underestimation of the new Chinese determination to make good on its long-standing territorial claims everywhere, including those against India. Delhi deluded itself that a boundary deal with Beijing was around the corner, even as the evidence pointed in the other direction. China had, in fact, walked back from the earlier understanding, arrived in April 2005, on a three-stage solution to the boundary dispute."

• "The UPA government also bet that by reinventing the rhetoric of non-alignment and slowing down its relations with the US, it could persuade Beijing to do the boundary deal. This, again, has been a massive misjudgement of Chinese attitudes...."

This is exactly the bet regional Indian Kings made 250-200 years ago when they bet on appeasement of the British East India Company as the way to deal with the increasing might of that British private company. And the appeasement of this Indian Government is even worse than that of their ancestors 250 years ago. As C. Raja Mohan writes:

• "In the last few years, Delhi has bent over backwards to assure Beijing that it will not join the US, Japan and Vietnam to contain China. Beijing has offered no such assurances to Delhi. It has persisted in deepening its long-standing strategic alliance with Pakistan. China has expanded nuclear and missile cooperation with Pakistan in defiance of international rules, and signalled that it will help Pakistan maintain strategic parity with India."

Such appeasement is in Indian blood. As we wrote last week, Indian leaders always react with panic during a military crisis with an invader and post-crisis gloss over their defeats with verbose rhetoric. Mr. Raja Mohan seems to share our views because he advised this week:

• "In dealing with these imbalances, Delhi must discard its current diplomatic style towards China, which involves pushing difficult issues under the carpet, masking major disputes in resounding rhetoric about anti-Western solidarity, and conflating enduring interests with empty slogans."

So what should the Indian Government do?. Mr. Raja Mohan opines:

• "Chinese leaders are steeped in the realist tradition and appreciate the logic of power politics. Li might respond more positively to a frank discourse from Singh than Delhi's self-deceptions that have so misled India's Chinese interlocutors."
  

• UPA is working to realize your dream of an economically resurgent, socially just India.

• "Finally, Afghanistan has decided that enough is enough. It has made clear in no uncertain terms what it wants from India. And what it wants and badly needs is a robust security partnership with India that includes supply of weapons and defence hardware. The pretence that India’s ‘soft power’ engagement in Afghanistan will be enough, is gone."

• “It is critically important that the two countries...deepen and talk about more substantive issues beyond than training and other soft issues,” Abdali suggested. He went on to underline that India and Afghanistan “are required to sit down and discuss the contours of our security and defence cooperation to ensure predictability, to ensure protection of common cause which is self defence against any perceived threats to our two nations.”

• "The key hardware Afghanistan wants include hand-me-down A2.A18 105-milimeter howitzer, a robust and rugged weapon India has used for years."
• "In addition, Afghanistan wants urgent assistance to get its mothballed fleet of Antonov An.32 medium transport aircraft back into the air."
• "Karzai wants to have the six An.32s given to his country by the Soviet Union refitted in the Ukraine, where the Indian Air Force is upgrading its own fleet of 105 aircraft."
• "The Afghan army may, in the future, also consider requesting service infrastructure for its helicopter fleet India."
  

• "Even as India has signed a strategic partnership agreement with Afghanistan promising to enhance its role in Afghan security sector, it has at the same time been reducing its economic footprint in Afghanistan. As a result, New Delhi has not only complicated its own future options but it has also lost allies who are having difficulty in viewing India as a credible partner in the emerging strategic realities in Afghanistan. As the western forces prepare to leave Afghanistan in the coming year, India stands at a crossroads where it remains keen to preserve its interests in Afghanistan but has refused to step up its role as a regional security provider."

• "India will either have to step up to the challenge or get ready to be forever marginalised in Afghanistan and beyond."

• "New Delhi, not for the first time, thus  has to make a hard choice. If the past is a guide, though, it will likely impale itself to the fence."

• "I don't agree this is so dependent on the Fed. I believe the Fed could do more improvement by curtailing QE. I think that would build confidence that even the Fed sees some improvement in the economy. I think what would help is if the Fed itself showed confidence by suggesting they need to start adjusting or normalizing. I think that would be more beneficial."

• " you are not going to hear that term taper out of the Fed. That is exactly the message they don't want to be sending to the market right now. Because when people say taper, the implication is that when they make one move, it is going to be followed by a succession of other moves..."
• what they are trying to say and they are having a very very hard time saying it is that they are going to make a move and then they are going to see how things go..they are taking things one step at a time..so if they take things back a little bit. it doesn't mean that the full exit has begun..
• what they're doing, I kinda liken it to tip towing away from a grizzly bear. you know, they don't want to move very quickly because they're afraid they'll get attacked by the grizzly bear. But unfortunately you always run the risk of upsetting the grizzly bear.
• they're having a very hard time communicating the when and how. Next few meetings - that was the "when". Then there's the "how". The how is, they take a step and then they look around and see what happens. And if things get worse they go back up again. If things get better they keep going.

• "I doubt very much that the Chairman intended to signal a taper... It would take extraordinary conditions for it to happen..the problem is the Fed has let the genie out of the bottle...unlimited liquidity that is what is driving the market. Look at the size of the adjustment we got from the Chairman saying the answer to a question that they could possibly begin to taper around labor day. that's it. and we got a massive worldwide sell-off. Imagine if they actually did taper how big the selloff would be. This is not something they can risk."
• "I think Fed had better hope that the market keeps going up. if we go side ways -- remember, the whole QE story is to drive a weight effect which boosts consumption, get GDP going, employment. that is the whole story. has been the whole story from the beginning. At the moment we have some progress. but just back out the math. If you stop the wealth effect at this point,  you will not get what the Fed wants. If the market were to stop, i think we will stall out pretty quickly. I think the Fed has no choice. It is committed it has to hope, pray, do everything it can to get the market higher."

• "Wall Street banks are expanding holdings of speculative-grade bonds as prices fall from record highs with investors retreating from exchange-traded funds that buy the debt."
• "The dealers are soaking up supply as firms from JPMorgan Chase & Co. (JPM) to Barclays Plc (BARC) predict demand will return. Even with banks facing new limits on risk-taking and higher capital requirements since the credit crisis, the pullback from investors is prodding them to act in their traditional roles of facilitating trading with their own money as they underwrite an unprecedented volume of new speculative-grade debt."

• “There’s just so much demand for high yield it’s outstripping supply,”..."People think it’s painful now when they can’t buy; wait until they can’t sell.”

•  If you remember '07, there was a period like this, markets are roaring, but the biggest risk in '07 was the wall street's balance sheets were at risk because of mortgages. Now here we are all these years later. The threat really is the little guy that's exposed to the yield thirst, the yield hunt. If you look at the amount of capital that's flown into not just utilities, leveraged loan funds, high-yield funds, it's up 500% from '06 levels. So it's the most crowded trade in the world.
• ... the portfolio managers that manage that capital don't have the liquidity we had back in '06. The Street balance sheets because of Dodd-Frank are much lower. At the end of the day, QE plus Dodd-Frank equals a big, big, big systemic risk at some point in the near future.
• I think the Fed when it does exit as Bernanke alluded to yesterday, I think it's going to be because of this dangerous cocktail of side effects they've created again.

• "I remember the same kind of comments about the auction rate securities in the mortgage space. same pitch. you can make the same point. the point, I think the danger is liquidity. In other words if the street balance sheet is 80% lower than it was in '06 and you have this huge, huge pile of capital that's flown into utilities, loans, that means that even if the loan is a high-quality, senior secured asset, if the fund manager has to exit because shareholders want out as we saw yesterday with that utility fund that dropped 7% in five minutes..."

• "I agree with you, but I don't think it's a '07, it's sort of  like a '05/'06."

Look at the picture tweeted by Larry McDonald on Friday and decide for yourselves whether today is 2005, 2006 or 2007? The red line is the market cap of the U.S. stock market and the blue line is assets in high-yield ETFs (corporate, mortgage bonds, high-yield stocks).

                                                        

The U.S. stock market is basically back to 2007 levels while the "yield appetite" assets have jumped by over 500% over 2006 levels, according to Larry McDonald. Who will step up to buy if & when investors decide to sell these high yielding assets?

Of course, one happy solution is to have the stock market rise to bridge this chasm.


5. U.S. Equities

The U.S. Indices went to new all-time highs on Tuesday, the day before Bernanke tossed in his wrench. What lies ahead?

Lawrence McMillan of Option Strategist on Friday:

• "The stock market finally took a hit this week, but it hasn't really changed the overall picture -- yet.
• Yesterday's low at 1635 has to be considered a support level as well as 1625-1630, and then the more important support at 1600. if THAT were violated, it would be bearish.
• In summary, despite the nervousness that Wednesday's action created, the picture remains rather bullish -- at least until actual sell signals materialize, which has not yet occurred."

• "well, I've been of the view that the market would touch 1700 this year, Becky, since year end. we basically have gotten to that level here. And I'm not inclined to raise at target for the rest of the year."
• "... confidence ...has been the driving force here for increasing the stock market. I think people are finally giving up the armageddon ghost and looking at a slow, slow but sustainable recovery, and that's allowing them to have higher multiples....evidence is in gold market junk bonds yields in recovery....that's all about confidence."
• "the problem I have for the second half for the stock market is I think it's going to digest its gains because the confidence that we have run through these other markets is going to run through the bond market. I think the hurdle is going to be rising bond yields in the U.S. Treasury in the second half. and then, you know, that's also going to bring up the debate we're already having about whether the Fed needs to pull back on QE. Although I think that's a positive, it will create some consternation. I think we're going to be a trendless side ways market from the 1700 level."
• "I just think this year we're going to have to digest a repricing of the bond market just like we have repriced these other markets. I think we're going to reprise bonds and I think that's going to take a bit of digesting the rest of this year. Maybe then once that happened we can sustain another run. if we keep inflation in control the next several years we have recovery ahead of us, another five years' worth. if we do that there's a lot more upside in the out years."
  

• "Goldman Sachs has upgraded its target for the S&P 500, forecasting that the U.S. benchmark index will climb a further 5 percent to 1750 by year-end, from an initial estimate of 1625,..."
• "...the U.S. investment bank also raised its targets....expecting the index to rise by 9 percent to 1900 in 2014, and advance by 10 percent to 2100 in 2015, compared to earlier forecasts of 1775 and 1900, respectively."
• "Strong earnings and dividend growth will be a key support for the market, according to the bank. It forecasts dividend growth of 30 percent for the S&P 500 between 2013 and 2015, with 11 percent growth in both 2013 and 2014 and 9 percent in 2014."

•  "for the past three weeks or so I've been bearish on the bond market.first time in a long time I've been aggressively bearish....in retrospect we can look back and see that bond futures made their high almost 14 months ago in autumn 2011, failed to meet a new high since, failed badly a couple of weeks ago. I think we're seeing a very important turn in the long end of the curve. This looks like the absolute inverse of what happened in 1982 to 1984 when bonds fail to make new lows and the beginning of a bull market began that lasted 30 some years. I think we're now seeing the end of that bull market, the beginning of a bear market, that could last for some long period of time. I'm short the long bond. I'm long the 10-year note. Short the nob-spread as we call it. I think I'm going to be that way for a long period of time. Today, the fact that it broke on what should have been decent news from Bernanke, I thought was the kiss of death."
  

• For all the bearish talk about interest rates, betting big against the Treasury market in the coming months may well prove another false step as investors wait for the Federal Reserve to start trimming its bond purchases in the coming months.
• Inflation, the prime enemy of fixed rate debt, is falling and that makes Treasury yields look a lot better when lumped together in a beauty contest with other big government bond markets. Meanwhile, the US budget deficit is improving rapidly, which means the Treasury will sell fewer bonds later in the year, potentially offsetting any modest cut in Fed purchases.
• Tempering the froth in mortgages, equities and other markets in the near term may well limit the selling pressure we have seen in Treasuries this month. It’s an outcome that could leave interest rate bears with a familiar feeling of frustration as the QE3 exit takes time to evolve and Treasuries benefit from their haven status.

The 30-year Treasury Bond is the purest contrary measure of inflation. This week we saw that PCE measure of inflation, Fed's favorite measure, is tracking about 1%. And thanks to the melting away of the Budget deficit, the supply of long maturity Treasuries will decrease in the 2nd half of 2013. Color us dumb, but this doesn't look so bad.

But none of it matters right now. The monthly employment report is what has mattered. The employment report in April was weaker than expected and Treasuries rallied virtually all through April to top out on May 2, the day before the employment report in May. That report was much stronger than expected and Treasuries have been selling off since May 3. On Friday, Treasuries closed just above the bottom in mid-March. Will they bounce off that level to create a double bottom? Or will they crash through it?





 .
7. Gold

Two weeks ago, Michael Novogratz of Fortress told us that Gold was in a bubble. But even the busted Nikkei & the Nasdaq mounted sharp rallies in their long term downtrend. Could Gold be ready for a rally? 

Francisco Blanch of BAC-Merrill Lynch on CNBC Fast Money:

• "look, I think in the short run you can argue if interest rates go up from here, there's no doubt gold is going to go down. But I think this market is very fickle. It's very QE dependent...I think obviously if the Fed goes and removes quantitative easing, gold's going to have a bad time ahead. Can they really do that? I think the Japanese market has sent a big warning. If you start to doubt QE, if the data comes back, you're going to have to keep printing or even put more money into a system, right? And that's kind of the support point for gold...we might realize that we need QE more than we realize."
  
• "remember, every end of QE has come on the back of a significant move down in equities, also a rally in bonds and gold has regained the footing....The bouncing of gold overnight shows that if we have a bad equity market movement, whether it's Japan or somewhere else, investors are going to get back to Gold. I think that's the main point we've learned over the last 24 hours."

• I don't know if this is a case of the smart gold coin dealers sensing that a rally is coming, and thus bumping up their prices to take advantage, or if some other market dynamic is at work.  I just know what I see in the data.
• Interestingly, this momentary pricing anomaly for gold coins arrives at the same time that the Commitment of Traders (COT) Report data are showing that gold and silver traders are at historic extremes of sentiment.  In other words, things looks like a bottom for gold prices which should matter not just for a few days to follow, but for weeks or months.

Then you have the chart below from the Bespoke article titled A Double Bottom for Gold?:


                                     (source - Bespoke Investment Group)



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• Election of Nawab Sharif - Real Story & Its Impact on the Really Big Issue >>>>

• China-India - Repeat of British EIC vs. Indian Rulers? - Part I >>>>
  

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• Interesting Videoclips of the Week (May 11 - May 17, 2013) >>>>
  

• "This is not the first time Afghan and Pakistani forces have clashed; they have fought limited battles over the years. Kabul's refusal to recognize the Durand Line, the de facto border between the two countries drawn by the British in the late 19th century, started the current conflict in the 1970s."
• "Each side accuses the other of turning a blind eye to their respective rebels and, worse, possibly aiding them, but the presence of NATO forces has limited the scale of fighting between Afghan and Pakistani forces. With Western forces scheduled soon to leave the region, these clashes are expected to intensify. Afghan forces are weaker than those of Pakistan, but it is this very weakness that has Pakistan worried about its own security in the post-NATO period."

• "We will therefore witness messy cross-border battles involving government and Taliban forces on both sides. It is not clear how the residual forces that the United States plans to leave behind will manage such a situation, but any action by American forces is sure to further stoke cross-border tensions."

How would the Pakhtun residents of Khyber-Pakhtunkhawa react to this coming conflict? Would they support their current Panjabi-dominated regime or would they support their Pakhtun brothers across the artificial Durand line? That might depend on the stability of the new Afghan regime that takes power after 2014 Afghan elections. That might also depend on how much autonomy they get from the newly elected Nawaz Sharif & Imran Khan led Parliament.

Nawaz Sharif is a veteran who knows his Panjab inside out. But Imran Khan is a newcomer who is thought of as more comfortable in London than in the countryside of Khyber-Pakhtunkhawa. The big question is whether Imran Khan is able to carry the Pakhtun countryside with him as he helps Nawab Sharif govern.


5. "We are one people, one culture, one country"

Based on the above, you might think that these words are from Imran Khan addressed to the Pakhtuns of Afghanistan. No they are not. These are words of Nawaz Sharif directed at India.

Amazing, isn't it? The Muslim Panjabis were the main force for the creation of NonPakistan and now you have Nawaz Sharif, Muslim Panjab's leader, openly reaching out to Indians with a "one culture, one people" message. Why? Is it because he wants trade with India? Is it because he cannot govern without India's economic support? But that doesn't need the "one culture, one people, one country" message. Just a message of peace with India will suffice.

Does Nawaz Sharif see a greater risk to his Panjab? Is that the reason he talks of "one culture, one people, one country"? The answer may lie in the wikipedia-sourced map below:

Notice the green area. It shows the partition of the Pakhtuns between Afghanistan & NonPakistan. Assume Nawaz Sharif sees what we see in the future, a battle for reunification of the Pakhtuns. How does he handle it? Look at the map again. You will notice that the Pakhtuns are not the only partitioned, divided people in the map below.

                                

Look at the dark grey area in the map above. You will notice that the Panjabis in grey are also partitioned, divided into NonPakistan & India.

It is easy to see that the Panjabis of NonPakistan may not able to handle the challenge of united Pakhtuns. Nawaz Sharif knows this and he also knows the history of Pakhtun control of Panjab from 1001 to 1853.  So is he calling out to his own ethnic brothers, the Panjabi Indians, for an alliance based on "one people, one culture" message? We don't know and no one does except Mr. Sharif.

Of course, what Nawaz Sharif thinks or says may not matter. Because the MIP, (the most-important player), in this game is the Panjabi-dominated Non-Pakistani Military. Peace with India is an existential danger for this MIP and its large enriched officer class. They are also arrogant to the core and oblivious to the danger from the deeply religious Pakhtun soldiers in their army, especially in the Frontier Corps, the British-created Pakhtun units that guard Khyber-Pakhtunkhawa.    

How should India handle the coming Afghan-NonPakistan conflict? Should India encourage & support the Afghan-Pakhtuns against the NonPakistani Military? Or should India support Nawaz Sharif in fighting Pakhtun incursions into NonPakistani Panjab? Or should they engage in Chanakya-style realpolitik and play both sides to improve India's sway in the Indian subcontinent?  

We are not optimistic because today's Indian leaders do not even remember Vishnu-Gupt Chanakya or his tradecraft. They remain content to fight each other and enrich themselves to the extent they can. 



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• the intense desire of Indian rulers to be left alone to run their own little kingdoms,
• their assumption that if they were peaceful, others would leave them in peace,
• the resultant tendency of not building up their military infrastructure, 
  
• their complete lack of strategic understanding & tactical planning,  
• their utter panic at being publicly embarrassed, and
  
• their resultant tendency to acquiesce to invader demands to buy peace. 
  

• Be pleasant, charming and offer British friendship to a local king,
• Lure the the Indian king into peaceful neglect of military preparedness,
• Quietly Build up British military strength & infrastructure against that kingdom,
• Use a convenient excuse to Create a military incursion to publicly embarrass the unprepared king,
• Threaten the panicked, embarrassed king using their greater military strength,
• Negotiate from their position of strength to get concessions they wanted while professing long term friendship with the panicked king,
• Instruct the king to NOT build up his military infrastructure thus maintaining British superiority,
• Publicly hold a congratulatory joint celebration praising the king for his wisdom and reproclaiming eternal British friendship with the Indian kingdom.

• "Without such [militarily strong] an Israel in the Middle East, Iran would become the sole enemy of the entire Sunni Arab world. In other words, a strong Israel could actually be an unarticulated but core strategic interest of Iran. Conversely, Sunni hostility towards Iran lessens the pressure on Israel. This is why the Shah of Iran & Israel were semi-allies in the 1960s & 1970s. Regimes come and go but fundamental geostrategic interests remain the same."

• "America will have to turn into 19th century Britain and play Middle Eastern players against each other the way that Britain played European powers against each other. That America will have to publicly display the charm of a James Garner while privately engaging in tactics of a Disraeli."

• "Don't defeat Iran. Shi'ism is not America's enemy. It is not in the long-term interest of the United States to side with the Sunni Arab states against Iran or vice versa."

• Remember that the United States had a bad, decades long experience with Sunni domination of the Middle East. It was Sunni dominance, in which the Shias were not sufficiently feared, that helped lead to a phalanx of Arab dictators -- in Egypt, Saudi Arabia and elsewhere -- who had little incentive to quell anti-Americanism in their midst.
• The last thing Washington should want is to build a new Middle East around Saudi Arabia, which itself has entered a period of great uncertainty and is resolved to weakening Iranian influence in the northern rim of the Middle East at all costs -- even if it means empowering jihadists.

• "The West should therefore be prepared in coming years for regionwide upheavals in which its alliances are rearranged."

• "The U.S. estrangement from Iran has already lasted over a third of a century -- a decade longer than the U.S. estrangement from "Red" China. This cannot go on forever."
• "... the United States should, nevertheless, attempt to create conditions favorable for a robust American-Iranian dialogue that will balance its warm relations with Saudi Arabia."

• "US will assure Iran that it will not attempt or support a regime change in Iran, privately remove sanctions, covertly assist Iranian  economy through allies and allow Iran a major anti-Taleban role in Afghanistan."
• "Iran in turn will give up its nuclear program, allow American monitoring of all nuclear facilities and support America's war against Al-Qaida type movements in Middle East and Africa."
• "Israel in turn will make nice to America's public but festina lente efforts for an Israeli-Palestinian accord and gets what it wants the most - removal of Iranian nuclear threat"

• "economy is getting better, autos are better, housing is better, it continues to improve, they can't find enough people in housing, that's the only thing holding it back right now...."
• "the private sector seems to be in pretty good shape. As soon as the sequester is over, it's going to be really interesting second half of the year. you see Goldman picking up forecasts, other people picking up economic forecasts.."
• "you're kind of an early stage economy, very similar to an early stage economy, probably have years to run in an early stage economy. we don't have inflation, capacity utilization is low, so you have room there. unemployment is high. you have room there. we have a little bit of room to run. we just had the early sector of the economy is moving. you had big rallies is housing. banks have recovered. ... eventually we will have renaissance in US manufacturing."

• "the moment the Fed starts moving, the stock market's going to go down,  a decent bit. The rally's going to end. you'll get a correction. 10%? 15%,  a lot of people will get squeezed in between now and then. it's been a wall of worry market. people haven't bought in yet. that's why the market doesn't go down. once everybody buys in and the Fed moves, everyone will sell."

• "it's finally going back up a little bit. everybody is excited. oh, my god, they are falling. Japanese markets are going to hell. 80 basis points. stop. stupidity is running wild."

We are not taking it personally. Heck, Tepper doesn't even know we exist. He is probably addressing the cognoscenti like Rick Santelli. And we wouldn't mind if he did and called us stupid to our face. So many have done so that it doesn't even register. But we stick to our stand. We cut our investment teeth on Q2 of 1994 when the bond market got destroyed and Cisco, our favorite stock then, was cut from 37 to 19. The experience has instilled in us a very healthy respect for a big break in the bond market.

Bill Gross said this week that leverage in today's bond market is 2-3 times what it was in 1994. And we bet that the leverage in the JGB market is a multiple of the leverage in the US bond market. We would be absolutely petrified if the JGB market broke down. It was a relief to see Rick Santelli share our concerns about the JGB action.

And it seems that Japanese authorities also shared our concern. Because they stepped in on Japan's as Michael Novogratz said:

• "look at what the Japanese did last night. Their rates which were stunningly low, their 5-year was at 12 bps; now they're nervous it's at 30. You know, they came in and did four times the amount of buying they normally do.

Their intervention worked. JGB yields not only stabilized but they fell a bit on Thursday & Friday. So now we can go back to the "Tepperian" view.

4. The U.S. Treasury Market

David Tepper was lukewarm about the long end of the Treasury market:

• "it [excess liquidity]either has to go in the economy, which, you know, it probably will go somewhat in the economy, it has to go to the short end of the curve trade better, make the long end of the curve trade better, there is not that much paper, we have this excess and it has to make stocks trade higher...the problem with the long end of the curve is you might be worried some of that might go into the economy and, you know, it might stimulate the economy with a little bit of surge right here."
  

Michael Novogratz had a different viewpoint:

• "I think we'll be in a range the entire year. I do not think ten years could take out 2.30% this year. It will be a 1.60%-2% range.....The Fed is buying and not just the Fed. The Chinese took in $250 billion of reserves in the first quarter, 75% of those goes into Treasuries. That's like QE-4, you know. Everybody's buying Treasuries."

• "it's one of those times where the indexes are really cheap, they really are low. Next year the S&P, we kind of have it in the low 13s in next year's numbers. 3%, 4%, run 20 times. crazy stuff."
• "I have this other chart. This is a blog by the Fed. you can't probably see this thing....  the high points are 75, 82 and now. those are the cheapness of the market or equity risk premium. It is basically saying that when the premium is high, historically you get better returns after that. One of the all time highest equity risk premiums in history."

Tepper's chart is below, courtesy of CNBC.com. Just a small point, the risk premium is as dependent on interest rates as it is on stock prices, earnings. So if interest rates change dramatically, the risk premium can change quickly, particularly if the interest rates used are 10-year or 30-year rates rather than short rates.



David Tepper's fear of a crazy overshoot like 1999 was described differently by UBS' Art Cashin on Friday morning:

• "...either they are going to say, Ok, we are pretty overbought, we are going to pause here, take a look and see if you can have a correction when everybody is going to buy the dip,
  
• or, if they don't pause here, you run the absolute risk of,  because you are at that kind of fulcrum point, of going parabolic...this could turn into a rocket shot because the stocks that have the heaviest shorts have raced ahead further than the S&P and the Dow, which means the pressure is there.. these guys are going to crumble if they keep moving up.... shorts are probably having their blood pressure checked  by the minute... they have begun to cover in a variety of other areas...if they do, we could get parabolic and it would be lovely to see..."

• "Stocks continue to rise almost daily. $SPX has gone on a tear since successfully testing support at 1540 about a month ago.(April 18th). This latest upside breakout now leaves the 1623 area as minor support."
• "In summary, the market is getting frothy now, as overbought conditions build up. But that doesn't mean it will collapse, or even turn bearish any time soon. Overbought does not mean "sell.".

• "I happen to think the market is going to correct between 3-5% pretty quick here..."

• "the 10-day Open Arms Index is at a fairly high level on this inverted scaling, and such readings are reliably associated with meaningful tops for stock prices."
• "When a high chart reading like the current one (i.e. a low raw reading) appears after a meaningful decline, it can sometimes be a signal of strong upward initiation for a new uptrend.  But when it appears late in an uptrend as it is doing now, it is more often a sign of conclusion for the advance."

• "if you look at S&P's rally, you can see a five-wave pattern to the upside....when that fifth wave is complete, the market always will reverse trend and correct at least that previous five-week advance. We think the correction will be a little bit bigger than that, but right now, we think we're at the end of the fifth wave and ready to reverse to the downside.
•  it could be a three-year down trend....well, the three years, a long-term forecast by bob protector, the president of our company, based on long-term cycles and time relationships between previous waves we've looked at. so 2016, give or take, is where we see the next major buying opportunity. there will be bottoms and rallies along the way, but i think the decline will be pretty persistent into that time period

• I personally think gold is toast. When you think about it, if you were a gold bull and you got quantitative easing and qe-7, nothing did it. we peaked out at 1900. that's why it was at 1900, the anticipation of all of this. if you run the Gold chart over the Nasdaq chart over the Nikkei chart in 1989, they are identical. Once bubbles pop, they go all the way down.
• gold bubble has burst... you have tried everything to get it to go back higher and it won't go higher...so it will go lower...
  
• Gold was a classic bubble, the story that you can fit all the gold in an olympic sized swimming pool, such a compelling story, all the gold ever mined in an olympic sized swimming pool or a 30 meter-cube...bubbles come around with spectacularly good stories that are believable...once everybody believes it, there was no one to buy...it would not shock me to see gold back at $500.

•  "Art is 100% a bubble. it has all the markings of a bubble....the new painting doubled in price. Prices have gone parabolic. you go to any of the art shows and stuff that was even the cheap art; it was $10,000 2 years ago, now it's now $80,000 and the expensive art has gotten crazy.
• "the Fed has this policy of trickle down. it's a trickle down monetary policy, helping the rich get richer and the rich are getting tremendously richer because asset prices are going up around the world. what the hope there is as the wealth effect kicks in and you spend more money and it generates growth of the economy. we haven't seen that part in a dramatic sense yet. so the middle class is still suffering, the working class is really suffering, but the wealthy are getting wealthy..apartments in New York are flying  and art has been the tip of that spear."
• "and all the wealth from China and Russia. you also have the illegal money or the dirty money, the laundering. and that's what's really giving this turbo charge to the art market. All bubbles pop, and they come down a lot further than people think. These $90 million paintings, they might be worth $8 million some day."
• "one thing you learn is that you don't try to pick the top of bubbles, it is a very dangerous game,  but once it cracks, when you see the real cracks in it, then you can sell. Sotheby's, Christie's will be the direct shorts at that point. I am not short now,..."

1. David Tepper on CNBC Squawk Box on Tuesday, May 14
2. Michael Novogratz on CNBC Squawk Box on Wednesday, May 15

• I'm definitely bullish.... it's so overwhelming... economy is getting better, autos are better, housing is better, it continues to improve. They can't find enough people in housing, that's the only thing holding it back right now...
• Australia just eased, ECB just eased, Korea just eased, Japan is in massive easing mode, These United States of America, we just are just amazed at the way these numbers work. as we go out further.
• the Fed is going to purchase $85 billion of Treasuries and mortgages a month. it is over a trillion. so over 500 in six months. What's happened and what's really amazing is that if you look at the numbers, over the next six months because of tax increases, budget cuts, growth in the economy and Fannie Mae and Freddie Mac paying back, the deficit over the next six months is shrinking massively; the next six months deficit will be well under 100, probably closer to 85.
•  we have over $500 billion we're going to buy over the next six months. Now we only have a deficit less than $100n the next six months. The net issuance versus refunding is a little over 100. That means we have 400 billion, 400 billion that has to be made up. So basically think about this. That's being taken out of the market, out of the bond market. $400 billion is now in your hands, my hands and other folks' hands. and there's a few choices. It either has to go in the economy, which, you know, it probably will go somewhat in the economy, it has to go to the short end of the curve trade better, make the long end of the curve trade better, there is not that much paper, we have this excess and it has to make stocks trade higher.
• the problem with the long end of the curve is you might be worried some of that might go into the economy and, you know, it might stimulate the economy with a little bit of surge right here. basically, afterwards, we also have to cut back because the deficits in the future will be less than this trillion dollars.
  
• so if we don't taper back we will get into this hyper drive market. So it's like backwards of arguments on TV. To keep the markets from going up in a steady pace, the Fed has to taper back. Because if you look at the numbers, it's so tremendous, These numbers are so tremendous that you can have the market sort of in a hyper mode potentially. I don't know where the money goes and you know who else doesn't know where the money goes, the Federal Reserve of the United States of America.
• in a way you like to have a smooth market not two up too fast. so this worrying about tape thorring, there is no worrying about tapering.
• if there is a true taper, there better be a true taperor. Else you are back, I think, in the last half of 1999. and so guys that are short, they better have a shovel to get themselves out of the grave. Because if you don't have that back to have a smooth market move. these numbers we're talking about are tremendous. i think the fed doesn't know the effects. what they do know is that they have to move the program down.
• . they should taper it down. June is not a bad time to taper it down.  If you don't taper it down, you could go crazy. I don't know that. They don't know that. It's just a possibility. You have to expect some of it. The question will be if the market does the numbers they should be fine. because they know how the flow of money is. they should be fine. the market should expect some. the question is you're not getting anything until June 19th. that's a long time. so you have this excess of money in the system.
• so i don't have any fear and then you go beyond that. you look at the budget numbers. we have six wall street firms budget numbers and stuff. next year the average is about $600. and the next two years after that, 600 million deficit. and the next year is $500. you can't run a trillion and have big gaps for the whole year.
• the first half of the year, you know, October to March, you basically have most of your spend something most of your tax receipts. and second half of the year, April to October or April to September 30th. So if you're the Fed, what should you be doing? Taper off in the first half of the year and be bigger in the second half of the year. So you have this balance of flows.

• I have this other chart. this is a blog by the Fed. you can't probably see this thing....  the high points are 75, 82 and now. those are the cheapness of the market or equity risk premium. It is basically saying that when the premium is high, historically you get better returns after that. One of the all time highest equity risk premiums in history.
• look, here's the joke. to me it's a joke. I don't know how fast the economy is going to grow. It feels like it's getting better. Besides the ECB is calling off austerity. If ECB is talking about banking union after the election, you will probably see more movement by the government.
• 2-year extension in Spain & France for austerity, ...next year you're still low 13 for estimated earnings. Say you are 3% treasuries, at some point they can go up in yield, if they don't change this, they will never go up in yield.

• I think every place is the place to be in the stock markets in the world. I think you have taken out the disaster case, Doesn't mean you wont have some potential riots in Europe because of high unemployment, pain in Europe is pretty bad.. But you have the ECB and powers that be a little more pro growth.. . you have the ECB and the powers being a little more pro growth. You do have it turns a little bits, which is good.
  

• we're long Japan. From pretty much the beginning of the year. It's pretty good for us....  there's massive restructuring of a lot of Japanese companies, whether Sony, some of the real estate companies over there....so many companies restructure and increase the value. Besides that, if you look at earnings estimates, you know, at 105yen,.... you're taking very low multiples with a very low interest rate, a few structural changes by those companies there,  even though that market has moved a lot, you still can have a lot in there.

• the private sector seems to be in pretty good shape, . as soon as the sequester is over, it's going to be really interesting second half of the year. you see Goldman picking up forecasts, other people picking up economic forecasts. really interesting stuff. so i actually think, you know, it's all worth it.

• let's look at this economy for what it is. You were in a depression state when we went through the Lehman collapse. You're kind of an early stage economy,...probably have years to run in an early stage economy. We don't have inflation, capacity utilization is low, so you have room there. Unemployment is high, you have room there. We just had the early sector of the economy is moving. You had big rallies is housing. Banks have recovered. probably more in the U.S. Eventually we will have renaissance in US manufacturing.

•  listen, we think, you know, it's one of those times where the indexes are really cheap. They really are low. Next year the s&p, we kind of have it in the low 13s in next year's numbers. 3%, 4%, run 20 times. crazy stuff. 

• yeah. my biggest position is Citibank....We have a certain amount of the U.S. banks which are good sectors. We don't own commodities because we think the Dollar is going to be strong for a little bit.
  
• However in the 2nd half of the year, if we continue to have a strong economy,  the way it usually works is later on we'll have as more growth picks up, we will have commodities pick up sometime in 2014. Little early for them right now and commodity like things..  I think general manufacturing, tech is very cheap, you have to be very careful because there is a lot of obsolescence..individual sort of game....

• for mortgages, without the Fed, the market has a net shrinkage of mortgage paper. Okay, so there's a little bit of shortage. There's no new issuance of non-agency paper.... the mortgage market is are getting better and better and better.
  

• I think that it's really a question of how good the economy gets and how fast the economy gets better. I hate to use this word because it will come back to haunt me in life. for all these bears out there, we may be, a little bit of goldilocks right now. We just may be there. Because of the stuff we talked about, interest rates won't go up as fast..Probably the Fed doesn't want rates to go up.. it's just a smoothing mechanism to go up at a slower rate.
• You are going to get historically fairly low interest rates. You have no inflation at all on the horizon. so  you're going to go up but the question is when are you going to go up? We are a bit nervous with bonds because of this cash here to be quite frankly short anything... I don't like bonds long term. but good luck shorting them.
  

• Just like the Japanese trade. It's finally going back up a little bit. Everybody is excited. Oh, my god, they are falling. Japanese markets are going to hell. 80 basis points. stop. stupidity is running wild.

• I told a story years ago, horse manure story. it was a story about the 1890s there was a big problem in the world about horse manure. There were so many horses in the world, basically pooping in the cities. Times of London wrote an article basically saying in 50 years the horse manure would be nine feet high on every street. They had a conference in 1898, first urban conference in new york city was supposed to last two weeks. disbanded after three days because they couldn't figure out the answer to this horse manure problem. the answer was, cars came along.
• these guys looking at this economy, they don't want to say the economy is better. They didn't get how much the taxreceipts are up, how much budget cuts happened. That's why we have this $400 billion thing in these six months....this is tapering, there's no hand wringing over tapering. There is no handwringing. There should be no handwringing, You should invite it. The market is going up. The question is how fast it goes up.

• we slowed down global warming a little bit although there's still a problem potentially depending how you believe it. The natural gas in the U.S. is still carbon, but it slows down.
  
• But, look,...the U.S. is going to have this great manufacturing renaissance. Everything that is energy related will be manufactured in the U.S....when the world has a need to it. at 3% world growth you won't see it. When the world picks up to 4%, you are going to start seeing it. So people who say I haven't seen the renaissance of the United States, give it a little time. That's just the way the numbers work.

•  We still own apple. We cut our stakes in the beginning of the year I guess around 500 sort of area. and then, we still have a position in Apple. Bought a little bit below 400. Just a little bit. it's okay right here. it's okay.
  
• I, along with everyone else is waiting to hear what they have to say as far as do they have something revolutionary in the horizon?  If they don't have something great and fantastic, make a bigger screen for goodness sake. By the way, while you have this great, you know, sort of itunes, ... eco system. make a cheaper phone. It can have a very high multiple.
•  if you don't have it that way, go that way. If you don't have the Steve Jobs around to do the revolutionary sort of thing, do the evolutionary thing....if you don't have the next greatest thing you can still be a very, very successful company. you have the best eco system
  
• Now, if they don't do either, we've got a problem. It's like, Houston, we've got a problem. So September, if they don't have either, I hope I can move fast.
•  you know, Apple is another position. Citycorp is more than twice the position of apple, for instance.

• They did do something; they did the sequester; that was a pretty big deal in a positive  way...If  you look at the numbers, in 2015 or 2016, it looks like we will be at a 3% deficit. With nominal growth, the debt to gdp will be coming down.
• but the thing is, when you look at the numbers you have a chance in the next couple years, the debt to gdp will come down. there's a problem with saying that because the numbers will pick up again. . you have to do something. hopefully Obama will do something with the entitlements now while the Democrats are in there. We have no problem in the next two, three, four, five years. There is no problem. The Debt to GDP will come down. It is down in 7, 8, 10 years when it really starts picking up again.

• things that need to get done, get done. People will say they have this, that in China. Yes they have 30 airports that they don't need. That's fantastic. That's not what we should do. When we need things we do things in this country. Should we do more infrastructure? yeah. If we can fix the entitlements, and what do I believe & it is not in any of these numbers, this mfg renaissance which may come in 2015, 2016 as we get the world's supply and demand a little better, you will pick up tax revenues.
• I was with another really great hedge fund guy, actually does more commodities sort of stuff. He was over in china. and he said the Chinese were complaining. He said the United States are so lucky,  they just have this energy thing. He said that's because God blesses America, you atheists.

• there's always things that can happen to make markets go down. Middle east is a little bit of concern. You can get a 5% drop because of the war,...I don't see that happening but it could happen. North Korea settled down a little bit. I guess if SARS like hybrid swine flu.
•  there may be some people in the summertime in Europe because of the high unemployment. hopefully after the German elections they make moot. But if they don't, if the economies don't pick up, it's going to be tougher to hold together. They are seeming to recognize that. More and more they are recognizing that. the Germans are giving in to some of that thought.

• I think the only thing holding it back is -- from what we hear, to get the people back in the labor force....people move on in life...housing will pick up. It's not going to back to where it was. Nor should it go back, it's not good for the economy. But hopefully, you have housing picking up. You read about the price increases and the demands there. Like I said, I do believe we're in the early stage. It feels like an early stage recovery. Bears can't stand that. They can't stand it.

• I think Dave's right. The central banks are flooding the markets with liquidity. Inflation continues to fall, which leaves the Fed feeling fat, dumb and happy. They are not nervous....All your inflation indicators are going down, growth going up. It's a perfect storm for them. And so, yeah, they'll talk about tapering and I think they'd like to, but it's not any rush. and so you've got lots of liquidity, decent growth and stock markets going up.

• the moment the Fed starts moving, the stock market's going to go down, a decent bit. The rally's going to end. You'll get a correction - 10%? 15%. A lot of people will get squeezed in between now and then. It's been a wall of worry market. People haven't bought in yet, that's why the market doesn't go down. Once everybody buys in and the Fed moves, everyone will sell. If you've been long the whole way and you're making lots of money, it's probably a good time to take your chips off the table. 
•  and if we get one piece of light data, we've got industrial production that comes out today, if that's light fixed income, people are going to say, hey, Nirvaan.
• As long as the inflation indicators keep pointing down, the Fed is sitting back with a cigar in one hand and bourbon in the other. the market could go a lot higher between now and then. If you look at the European stock markets, the charts are breaking out today. People are going to get squeezed into the markets. there's a lot of cash on the sidelines.

• listen, Europe's got a growth issue, the ECB is working on it. People think they're behind the curve. I'm not positive. Spanish bond yields come down every day. Last time I was on this show, I think they were 150 points higher than they were today. Italian bond yields come down. In a lot of ways, ECB is doing what they can do. Europe's got a strategy, which is time. Time healed the U.S. banks and time will in time heal Europe. And I think that's their strategy. So I don't think they're in a big rush to do anything different.

•  you know, revenue's continuing to go lower and earnings continue to stay okay. I think that's the story here. This is multiple story, not an earnings story and we are not expensive.  You look at the stock market today versus where it was in 2007, right? earnings are higher and there's no alternative investments.

• I think we'll be in a range the entire year. I do not think ten years could take out 2.30% this year. It will be a 1.60-2% range.

• look at what the Japanese did last night. Their rates which were stunningly low. Their 5-year was at 12 bps; now they're nervous it's at 30. They came in and did four times the amount of buying they normally do. There's financial market repression going on in every major government bond market. The Fed is buying and not just the Fed. The Chinese took in $250 billion of reserves in the first quarter, 75% of those goes into Treasuries. That's like qe-4, you know. Everybody's buying Treasuries and so you're holding government bond yields down to try to generate inflation and, you know, that's the plan.

• I think, listen, the Fed buying certainly has driven Treasury yields a lot lower than they would normally be. You're going to see some sell-off if they're tapering because we've got strong growth and inflation is coming back, Yields will be a lot higher. Are they 200 basis points higher? No, they're not because I don't see us shockingly coming from an era of deflation into inflation.

• the Fed is buying it [Treasuries],  the Foreign Central Banks are buying it. and, you know, different insurance companies will buy long and from an asset liability match.

• Japan....we have 13 years of malaise in Japan where no one believed in it, no one invested in it. You've got dollar/yen on the move, Nikkei on the move, people way underinvested. None of the Japanese believe in this yet. I was just in Japan two, three weeks ago, and the Japanese banks were selling equities not buying. They haven't been buying dollar/yen and rarely do the Japanese get it right, as a group of investors. 
• I think one of the interesting stories there is that part of the Obama Administration second term will be pushing trade; it's going to allow the Japanese to say, yes, we're going to open our markets. it's not our decision.

• Japan's the second largest market cap collective in the world, the third largest economy. They've got a demographic problem, no doubt. But lots of great companies. They've got companies that aren't expensive at this point. It was a wildly depressed market for a long period of time and they've got a central bank that is trying a quantitative easing program four times the size of ours. And if you look at the playbook of U.S. quantitative easing and move it to the Japanese story, dividend stocks are going to do well there, the exporters with dollar/yen moving from now 102, by the end of the year, 115, 120.

• ... it's a relative gain in Japan. Listen,... to me the biggest worries are the BRICS, which have been this wonderful story for years, They're going to be a crummy story for a while. And it might be a five-year developed markets over emerging markets.

• I hate Brazil. They've got stagflation, all kinds of problems. It's gotten way too expensive to do business in Brazil. They've got labor market inflation, tight labor market, not enough supply.
• India a little bit, okay. Just because it had done so poorly for so long and making some marginal progress as the price of gold goes down and the price of oil goes down. You know, helps their current account situation.
  

• English-Educated Indians & Stratfor's American "Imperial Class" >>>>

• "Gang-Rape" of Indian Culture - Who is Responsible? US Media or EE-Indians? >>>>

• Harassment of a Women Driver - Delhi vs. NYC - Entitlement or Racism of a NYT Journalist? >>>>
  

• 911 vs. 311; Does this Reuters Journalist Know the Difference or the Meaning of Democracy?>>>>

• Interesting Videoclips of the Week (May 4 - May 10, 2013) >>>>
  

• "An "educated" class is a large group of people who have a deeply evolved sense of "secular-progressive" mission, and whose professional interests are connected to that mission succeeding. They number of journalists and policy experts at think tanks who collectively define the debate among elites throughout the "Mumbai-to-Delhi" media corridor; and by defining that debate determine the opinions that bombard any administration on the "liberal" policy front. This class is financially well off and generally educated at the best schools. It is the product of "two" decades of prosperity going back to the post-"1990" era. Whereas "Delhi" in the mid-"1990s" decade had barely a handful of think tanks, the city is now packed with them. As for the media, it now constitutes a power center all its own that includes both liberal internationalists and "secular-progressives", both of whom have in the past supported using the "EE-Indian-Journalistic" corps to impose "secular-progressive" values."
• "I am implying that its influence on policy is permanent. It is permanent because prosperity breeds a class of global cosmopolitans, whose "Indian" branch is defined by harboring "secular-progressive"  tendencies masked as humanitarianism."
  

• "The United States is an imperial power and has been for more than a century....America's empire is without colonies, suitable for a post-modern information age in which capital is not necessarily tied up in permanent territorial holdings. But make no mistake, America's troops have been and still are in imperial-like situations the world over, from South Korea to Afghanistan to the Indian Ocean and the Western Pacific: grappling on the ground and on the blue waters with the need to maintain order over exotic swathes of the earth, like the Romans, Venetians, Portuguese, Dutch and British did before them."
• "Like empires of yore, the United States periodically sends its forces into harm's way in imperial-like interventions, seeking to oust this foreign tyrant or that for supposedly threatening the empire's interests. Of course, American officials, of whatever administration, always claim that they are acting in such a fashion for the sake of human rights and humanity, but that is similar to what the officials of previous empires usually said. Many empires have had strong philosophical organizing principles, in which they label their own values as universal ones. And often they are right. Rome, Venice and Great Britain were not only militarily dominant but were also the most enlightened powers of their ages -- with Venice and Britain by the standards of their eras being truly liberal imperiums. And so, democracy at home and military imperialism abroad can go hand in hand."

• Washington Post, January 4 - "a retrograde culture that’s hostile to women"
• Times of London - "India's "patriarchal culture," where Indian men are characterized,..., by a "murderous, hyena-like male contempt" towards women
• New York Times - January 1, 2013 - "a patriarchal and misogynistic culture"
• New York Times - March 8, 2013 - "old mindsets steeped in patriarchy still prevail"
• Wall Street Journal - April 2, 2013 - "But in India, socially conservative attitudes towards women dominate, and thousands of years of patriarchal traditions have been blamed for crimes against women.."
  

• "The foundational texts of Indian culture — the Ramayana and the Mahabharata, ancient Sanskrit epics — both revolve around the communal outrage that results from insults to a good woman’s modesty."
  

• The crimes are heinous and will reinforce the perception that although America is a free country, we are also a dangerous nation. The reality is that Kidnapping are very rare, but there are some very bad people walking the streets of the USA. The crime in Ohio just another cautionary tale. 

• "In February, I was driving my car through a busy street in Connaught Place when a taxi driver began honking his horn at me...The noise ended only after the taxi had pulled beside me at a red light. Then the driver angled his car to block mine."
• "The man was enraged. He rolled down his window and angrily gestured that I do the same. I worried that he might ram into my car if I didn’t comply. But when I did, he shouted the foulest, most sexist insults I’ve ever heard. “Why are you holding the steering wheel? Go hold a penis!” he yelled at one point."

• "Finally, the light turned green, and the man sped off. I drove slowly, but I quickly called the “100” number for the police to seek help. I was terrified.  The government recently passed a sweeping new law to protect women from harassment, but I can’t say I noticed any urgency when the police took up my complaint."
• "My initial phone call did lead to some action. A police van showed up, and an officer took a handwritten complaint, in which I gave him the taxi driver’s license plate number. The officer promised he would follow up. But a few days later, I learned that police had found my harasser but applied the weakest possible charges. Ultimately, he was forced to pay a 100-rupee ($1.80) fine for misbehavior."

• "That didn’t seem right to me. Could a man get away with harassing and intimidating a woman, just by paying 100 rupees?"
• "Ram Babu Singh, the station house officer who filed my complaint with the local court, said that “based on your complaint, only sections relating to misbehavior were invoked as no other legal provisions were applicable.”"

• "The driver that harassed me, for example, could have been charged under section 509 of the Indian Penal Code, which reprimands people who “insult the modesty of a woman” through “word, gesture or act,” said Rajiv K. Luthra, founder and managing partner of the Delhi law firm Luthra & Luthra, in an e-mail. According to this section, an offender can be imprisoned up to a year, or be fined an amount decided by the court, and in some case it could be both."
• "Subclause three and five of section 354A state that “making sexually colored remarks” and “any other unwelcome physical, verbal or nonverbal conduct of sexual nature” qualifies as sexual harassment, which could lead to imprisonment of up to one year, or a fine, or both. Section 354D makes stalking as an offense that can draw a prison term of up to three years, in addition to a fine." (emphasis ours).
  

• "watches or spies on a person in a manner that results in a fear of violence or serious alarm or distress in the mind of such person, or interferes with the mental peace of such person, commits the offence of stalking"

Again this seems utterly insane to the point of being a human rights violation of the entire male population of Delhi. You are a stalker if your accuser claims you caused "distress" in her mind? Or if she claims you "interfered" with her "mental peace"? Think of yourself as the accused. How could you defend yourself? How could you disprove what distress she felt in her mind? How could you disapprove that her mental peace was interfered with?

Think of the common American insult "your Mama". Well, if you said that to a woman in Delhi, her mother could claim that you caused "distress" in her mind and you "interfered" with her "mental peace". And then she could send you to jail for up to three years for being a "stalker", all because you said "your mama". At least that is what the law reads, as quoted by Ms. Raina.

This is so insane and the stalking claim is so tenuous that it makes us wonder why Ms. Raina went to such lengths to think of punishing the taxi driver with a three-year jail term.

• "My car had represented a small zone of personal freedom for me. Before I bought it last year, I spent long hours commuting by subway from my home in suburban Gurgaon to my office in Connaught Place. Having a car was a risk: the auto loan was a financial burden, and my parents were nervous about my driving alone on the crazy streets of Delhi. But the car gave me liberty, if I was working late or out meeting friends, and saved me from the unnerving hassles of traveling in overcrowded Metro trains or haggling with auto-rickshaw drivers. It instilled a sense of security and a renewed feeling of independence..Yet now I realize that a woman is as vulnerable to driving her own car as she is riding public transport." (emphasis ours).
  

Ms. Raina doesn't seem to understand that Delhi is a teeming city of 18 million people, people with as much right to the city as she does. And the vast majority of Delhites are far poorer than her and work harder to support themselves and their families. They do not owe Ms. Raina anything. And when Ms. Raina steps out into the streets of Delhi, either in her car or on foot, she is on her own.

But she is not alone in her sense of entitlement from Delhi. As we wrote about another professional woman in Delhi, Ms. Raina seems firmly in that ,

• class of English-educated women who feel a tremendous sense of entitlement, the entitlement of having a European/American life style in Delhi without the exasperation of dealing with that poor Hindi-speaking India that is meant to serve without getting in their way.
  

But the sheer intensity of Ms. Raina's reaction points us to a more serious issue, an issue that is the unspoken reality in India, especially in Delhi. That is racism, pure and simple.

Racism of Delhi's English-Educated Indian class against the ordinary, poor, non-English speaking, manual labor class. This EE-Indian class has actually become a caste in that children of this caste members  become EE-Indians and marry other EE-Indians. Their professions are virtually barred to people from the non-EE caste which is treated as a lower or servant race for EE-Indians. These non-EE people are not expected to be uppity towards the EE-Indian caste, forget being insulting.

This contempt, this deep sense of "how dare he insult me like that" is what we see in the intensity of Ms. Raina's anger against the taxi driver. We wonder whether Ms. Raina would have reacted with the same intense anger had a professional EE-Indian, a Doctor, a Lawyer, a Businessman driving a fancy car yelled the same obscenities to her. By the way, the really rich and powerful of Delhi use sexually derogatory phrases that are far worse than those used by ordinary Delhites. Faced with same obscenities from such EE-Indians, Ms. Raina would have been angry, hurt and upset. But would she have reacted with same fury, the same sense of "how dare he" anger that she felt against the poor uneducated taxi driver? We don't think so.

Frankly, her intensity reminds us of stories we have heard from deep American south where "white" women still react with same intense anger at "uppity" behavior of men of darker skin color. That feeling is now recognized as racism and that is exactly the same feeling Delhi's EE-Indians have against uppity behavior by non-EE, usually darker colored ordinary Indians.

The above is our sense, our opinion after reading the two articles written by Ms. Raina in NYT-India Ink. Until we speak with her in detail or interview her, all we can offer are our opinions which is what we have done above. We have tried on a few occasions, both directly to India Ink & via Corporate Communications of The New York Times Company, to speak with NYT reporters. But our requests have always gone unanswered.  

So we hereby publicly invite Ms. Raina or her colleagues at the New York Times to share their point of view with our readers. We will print their response verbatim. And if they show us the error of our opinions, we will publicly retract them.

5. What about NYT Editors?

Maureen Dowd and Helene Cooper are two well-known writers in the New York offices of the New York Times. Unless they are always driven around in Limousines, these two professional women come into contact with ordinary New Yorkers. They understand the loud, crass and direct nature of New York City, we think.

Would either of them react so intensely when a man screams obscenities at them in the streets of New York? Would they publicly air their anger in their articles in the New York Times? Would they publicly raise the specter of 1-year jail term for the man who screamed at them? We don't think so.

And even if they did, would the editors of the New York bureau authorize publication of such personal claims of "mental distress" in their paper? We seriously doubt it. Because they would be driven out of town if they did. You see, "how dare he" feelings are not tolerated in New York City.

This brings us to the editors of the India Ink blog of the New York Times. Their journalistic standards are so different from those of New York based editors, their prejudice against the ordinary people of India, their culture, their religion is so deep and intense that articles like Ms. Raina's seem perfectly acceptable to them. Because, in our opinion, they think the EE-Indians are the only Indians who deserve rights as individuals. That is what we have argued to them both in private communications and via our published opinions in this Blog.

And in our opinion, they know their own reality. That is why they will not sit down to talk with us.

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