Monday, January 4, 2016

Saudi Arabia Severs Ties With Iran, Tensions Are 'Exploding' Across Middle East, China Halts Stock Trading After Market Crashes

Saudi Arabia severs ties with Iran

Saudi Arabia severed ties with Iran and ordered diplomats and delegates to leave the kingdom within 48 hours.

Foreign Minister Adel al-Jubeir told a group of reporters in Riyadh that Saudi was not going to allow Iran to undermine its security, and referenced the storming of its embassy in Tehran, Reuters reported. Iranian protesters, angry at the execution of a Shiite Muslim cleric, rushed the Saudi embassy in Tehran over the weekend, while Ali Khamenei, the country’s ayatollah, vowed “divine vengeance,” Reuters reported.

“The kingdom, inlight of these realities, announces the cutting of diplomatic relations with Iran and requests the departure of delegates of diplomatic missions of the embassy and consulate and offices related to it within 48 hours,” Jubeir said, Reuters reported. “The ambassador has been summoned to notify them.”

Iran responded with an angry message on state television.
Deputy Foreign Minister Hossein Amir-Abdollahian said the severing of diplomatic ties doesn’t mean Riyady could gloss over its “major mistake of executing [cleric] Sheikh Nimr,” Reuters reported.

Either the rebel prince succeeds in convincing enough people who matter to remove the King, or the King counters and drives the prince out. The former situation is far and away the best option for stability in the Middle East, and would likely allow the Saudi royal lineage to hold on to power for longer. If the second scenario unfolds, current leadership will crack down even harder on dissent and run the state further into the ground. This behavior will ultimately lead to an unpredictable and likely violent revolution, and if you think the Middle East is volatile now, you ain’t seen nothing yet.

As John F. Kennedy accurately noted:
Those who make peaceful revolution impossible will make violent revolution inevitable.
This also applies to Saudi Arabia.

If you’re like me, you’ve probably been pretty checked out of global news over the past severals days. It’s time to get checked in.
The extremely dangerous developments currently unfolding throughout the Middle East cannot be overstated. Indeed, it appears we may be on the verge of all out regional conflict. In order to understand what’s happening and where things might go, let’s review the events of recent days.

On January 2nd, Saudi officials welcomed the New Year by holding its largest mass execution since 1980. 47 individuals were put to death across 12 cities, some by firing squad, others by beheading. While the vast majority (43) were Sunni jihadists accused of attacks upon Western compounds and government buildings during the 2003-2006 period, the remaining victims were Shiite dissidents, most notably the revered and prominent cleric Nimr al-Nimr.

The resulting backlash from Beruit to Tehran, from Baghdad to Bahrain, has been nothing short of explosive. Expect this execution to be remembered as a major catalyst in the regional chaos to come.

To conclude, much of what’s happening (and will continue to happen) in the Middle East is a direct result of a transition of power which happened early last year in Saudi Arabia. Although a new King was placed on the throne, the guy who’s really pulling the strings is his son, Prince Mohammed bin Salman , who is pejoratively known as “Reckless.”
To get caught up on what’s been happening in the Saudi “Game of Thrones,” see:
This is not to say that the prior Saudi King was some sort of teddy bear, but the guy currently running the show seems to be certifiably insane. It appears “Reckless” is about to set the entire region in flames.

The leader of Lebanese Shiite militant group Hezbollah has strongly condemned Saudi Arabia for executing prominent opposition Shiite cleric Nimr al-Nimr.

In a televised speech on Sunday, Hassan Nasrallah described al-Nimr as a brave martyr and holy warrior, who didn’t carry weapons or espouse armed conflict and was killed only for his criticism of the Al Saud ruling family. Celebratory gunfire rang out in central Beirut at the speech’s beginning and end.
Nasrallah said the Saudis could not take any criticism, and thus they executed al-Nimr in what amounts to a “serious crime” that “cannot be taken lightly.”
Earlier, protesters gathered in Beirut at the Saudi Embassy and United Nations buildings to denounce the execution.
Audiences at the rallies and watching Nasrallah’s speech chanted: “Death to the house of Saud.”

Police in Bahrain have fired birdshot and used water cannons to push back demonstrators protesting Saudi Arabia over its execution of a Shiite cleric.

The protest happened Sunday on Sitra Island, south of Bahrain’s capital, Manama. The demonstrators numbered into the hundreds and chanted that Nimr al-Nimr is “our martyr.”
Hundreds also marched in al-Daih, west of Manama, chanting slogans against Saudi Arabia’s ruling Al Saud family and the Sunni family ruling Bahrain.
Al-Nimr was an outspoken critic of Saudi Arabia’s Sunni monarchy but denied ever calling for violence. His execution has sparked outrage among Shiites across the region.

Witnesses say some 400 protesters have gathered at the Saudi Embassy in Tehran after it was stormed overnight.
Authorities had told demonstrators not to protest in front of the embassy and instead gather at a square in central Tehran. The 400 protesters apparently disregarded that, shouting: “Death to Al-Saud!”
Iran’s powerful Revolutionary Guard has compared Saudi Arabia’s execution of an opposition Shiite cleric to attacks carried out by the extremist Islamic State group.
The Guard says in a statement Sunday that Saudi Arabia’s “medieval act of savagery” in putting Sheikh Nimr al-Nimr to death will lead to the “downfall” of the monarchy.
Iran’s Supreme Leader says Saudi Arabia will face “divine revenge” after the execution of a revered Shiite cleric.

Iraq’s top Shiite cleric has condemned the execution of a prominent Shiite opposition figure in Saudi Arabia, calling him a “martyr.”
In a statement Sunday, Grand Ayatollah Ali al-Sistani extends his condolences for the “martyrdom” of Sheikh Nimr al-Nimr and others from eastern Saudi Arabia, where the Shiite minority is concentrated.
Meanwhile, in addition to the Iranian reactions mentioned above. The following was reported by the Guardian:

Iran’s supreme leader, Ayatollah Ali Khamenei, called on Saudi Arabia’s western backers to directly condemn the execution, which came three years after Nimr was arrested following his vocal support for anti-government protests in Bahrain and Riyadh.
“This oppressed cleric did not encourage people to join an armed movement, nor did he engage in secret plotting, and he only voiced public criticism … based on religious fervour,” said Khamenei, who criticised “the silence of the supposed backers of freedom, democracy and human rights” over the execution.
“Why are those who claim to support human rights quiet? Why do those who claim to back freedom and democracy support this government?”
In response, the Saudis have decided to cut off diplomatic ties with Iran.

Following the initial halt in CSI-300 Futures at the 5% limit down level, the afternoon session opened to more carnage and amid the worst 'first day of the year' in at least 15 years, Chinese stocks collapsed further to a 7% crash. At 1334 local time, stock trading was halted for the rest of the day across all exchanges (at least two hours early).

Chinese stock trading was halted for the rest of the day after the CSI 300 Index plunged more than 7 percent.

Trading of shares and index futures was halted from about 1:34 p.m. local time, according to data compiled by Bloomberg.

Stocks fell as manufacturing contracted for a fifth straight month and investors anticipated the end of a ban on share sales by major stakeholders.

Under the mechanism which only became effective Monday, a move of 5 percent in the CSI 300 triggers a 15-minute halt for stocks, options and index futures, while a move of 7 percent close the market for the rest of the day. The CSI 300 of companies listed in Shanghai and Shenzhen fell as much as 7.02 percent before trading was suspended.

Dow futures are now down over 150 points from NYE close, Gold and Treasuries are bid, and offshore Yuan has plunged most since the August devaluation.

A lot of people were expecting some really big things to happen in 2015, and most of them did not happen.  But what did happen?  It is my contention that a global financial crisis began during the second half of 2015, and it threatens to greatly accelerate as we enter 2016.  During the last six months of the year that just ended, financial markets all over the planet crashed, trillions of dollars of global wealth was wiped out, and some of the largest economies in the world plunged into recession.  Here in the United States, 2015 was the worst year for stocks since 2008nearly 70 percent of all investors lost money last year, and it is being projected that the final numbers will show that close to 1,000 hedge funds permanently shut down within the last 12 months.  This is what the early stages of a financial crisis look like, and the worst is yet to come.
If we were entering another 2008-style crisis, we would expect to see junk bonds crashing.  When financial trouble starts, it usually doesn’t start with the biggest and strongest companies.  Instead, it usually starts percolating on the periphery.  And right now bonds of firms that are considered to be on the risky side of things are rapidly losing value.
In the chart below, you can see that a high yield bond ETF that I track very closely known as JNK started crashing in the middle of 2008.  This crash began to unfold before the horrific crash of stocks in the fall.  Investors that saw junk bonds crashing in advance and pulled their money out of stocks in time saved an enormous amount of money.
Now, for the very first time since the last financial crisis, we are seeing junk bonds crash again.  In December, there was finally a sustained crash through the psychologically-important 35.00 level, and at this point JNK is sitting a bit below 34.00.  This stunning decline is a giant red flag that tells us that stocks will soon follow in the exact same direction…

One of the big reasons why junk bonds are crashing is because of the crash in the price of oil.  Over the past 18 months, the price of oil has plummeted from $108 a barrel to $37 a barrel.
There has only been one other time in all of history when we have ever seen an oil price crash of this magnitude. That was in 2008 – just before the greatest financial crisis since the Great Dep
Why can’t people see the parallels?
Crashes are happening all around us, and yet so many of the “experts” seem completely blind to what is going on.
Unlike 2008, the price of oil is not expected to rapidly rebound any time soon.  The following comes from CNN

Meanwhile, the prices of industrial commodities have been crashing as well.  For example, the chart below shows that the price of copper started crashing hard just before the great financial crisis of 2008, and the exact same thing is happening once again right before our very eyes…

Things are unfolding just as we would expect they would during the initial stages of a new global financial crisis.
And we have already seen a full blown stock market crash in many of the largest economies around the planet.  For instance, just look at what has been happening in Brazil.  The Brazilians have the 7th largest economy in the world, and Goldman Sachs says that they have plunged into an “outright depression“.  In the chart below, you can see the sharp downturn that took place in August, and Brazilian stocks actually kept falling all the way through the end of 2015…
The truth, of course, is that signs of financial chaos are erupting all around us.  Corporate profits are plunging, the bond distress ratio just hit the highest level that we have seen since the last financial crisis, and corporate debt defaults have risen to the highest level that we have seen in about seven years.

Anyone that tries to tell you that “things are getting better” and that 2016 is going to be a better year than 2015 is simply not being honest with you.
A new global financial crisis erupted during the last six months of 2015, and this new financial crisis is going to intensify throughout the early months of 2016.  Financial institutions will begin falling like dominoes, and this will result in a great credit crunch around the world.  Businesses will fail, unemployment will skyrocket and millions will suddenly be faced with economic despair.

By the time it is all said and done, this new financial crisis will be even worse than what we experienced back in 2008, and the suffering that we will see around the world will be off the charts.
So does that mean that I am down about this year?
Not at all.  In fact, my wife and I are greatly looking forward to 2016.  In the midst of all the chaos and darkness, there will be great opportunities to do good and to make a difference.
What a great shaking comes, people go looking for answers.  And I think that this will be a year when millions of people start to understand that our politicians and the mainstream media are not telling them the truth.
Yes, great challenges are coming.  But now is not a time to dig a hole and try to hide from the world.  Instead, this will be a time for those that have prepared in advance to love others, help others and show them the truth.
What about you?
Are you ready to be a light during the dark times that are coming?

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