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<ul class="summary-list"><li><keyword id="12128146" type="UNKNOWN" weightage="60" keywordseo="uranium-prices" source="Orion">Uranium prices</keyword> have climbed 60% in four weeks as an investment fund embarked on a buying spree. </li><li><keyword id="11957019" type="UNKNOWN" weightage="60" keywordseo="morgan-stanley" source="Orion">Morgan Stanley</keyword> commodity strategists say it may be hard to maintain robust investment demand into 2022. </li><li>The <keyword id="12128147" type="UNKNOWN" weightage="60" keywordseo="sprott-physical-uranium-trust" source="Orion">Sprott Physical Uranium Trust</keyword> has purchased a massive 28 million pounds since mid-August. </li></ul><a href="https://markets.businessinsider.com/commodities/uranium-price">Uranium prices</a> have shot up about 60% over the past month on the back of big purchases of the nuclear-energy element by an investment fund, but the rally is likely to lose steam next year, Morgan Stanley said this week. Spot prices for <keyword id="12062407" type="UNKNOWN" weightage="60" keywordseo="uranium" source="Orion">uranium</keyword> were at 2021 lows in August before they started advancing toward what's become a 58% gain in four weeks. The price traded above $47 on Friday and this week touched $50 for the first time since 2012, according to S&amp;P Global Platts. Morgan Stanley's commodity strategists in Europe said the Sprott Physical Uranium Trust is the driving force behind resurgent interest in uranium. The Canada-based fund is the only one that holds the physical commodity rather than futures contracts. Stronger investment demand for uranium is adding to a spot market that's already been active because of disruptions in mine supplies by the COVID-19 pandemic. The price rally has further to run but strategists Marius van Straaten and Susan said they are "not yet convinced" it can be sustained into 2022 as investor demand could struggle to maintain momentum. The Sprott uranium trust has been on a uranium buying binge in the spot market since mid-August following its inception in July. The fund has bought more than 28 million pounds of the radioactive element, including Thursday's massive <a href="https://twitter.com/Sprott/status/1438657757679341570">purchase of 1.45 million pounds</a> of so-called yellowcake. The <a href="https://sprott.com/media/4119/uranium-trust-presentation-deck.pdf">trust's investment case for uranium</a> includes its view that nuclear energy is a clean and efficient power source that's gaining favor among policy makers worldwide who are trying to reach carbon-reduction targets. "It needs to be seen how long the current rate of investment demand can be maintained, but some bulls argue that we won't see the price dipping if fund buying slows, as improved market liquidity has aided price discovery and revealed the 'true' spot price," said Morgan Stanley. "On the other hand, better visibility of previously hidden uranium stocks could become an overhang to the market, with outflows from physical funds also a potential risk," the strategists added. Morgan Stanley said uranium has joined a wider price rally in natural resources. But while "coal and natural gas prices are driven up by actual market tightness, uranium's underlying supply-demand fundamentals haven't meaningfully changed over the last few months to warrant this price surge." The World Nuclear Association sees a balanced market until 2028 through drawdowns in utility inventories and idled-mine supply returning, with the latter requiring that prices rise first. Industry consultancy UxC projects a drawdown in global inventories of as much as 30 million pounds a year. "Only when these utility inventories are worked off materially, the real need for a higher price to incentivize the return of idled supply will become more pressing, we think," said Morgan Stanley.The commodity strategists remain bullish on uranium in the medium term and forecast a price high of $49 a pound by 2024. "That said, the current investor-driven rally might not seamlessly transition into a 'real' deficit-driven bull market, and we could see some price weakness in between." Meanwhile, uranium stocks "finally got noticed by retail investors this week," said Vanda Research, which monitors trading activity among retail investors."Purchases were concentrated in the <a href="https://markets.businessinsider.com/etfs/global-x-uranium-etf-us37954y8710">Global X Uranium ETF</a> and <a href="https://markets.businessinsider.com/stocks/ccj-stock">Cameco</a>, which also experienced a sharp rise in call volumes - a sign that speculative retail investors are chasing the momentum," it wrote this week. Cameco is a Canadian uranium producer.

Uranium prices have touched multi-year highs but the rally looks unsustainable into 2022, Morgan Stanley says

<ul class="summary-list"><li>US stocks fell on Monday, marking a fourth consecutive loss for Wall Street's major indexes. </li><li>Investors are focusing on a hard-landing scenario for the economy as the Fed pursues more rate hikes. </li></ul>Stocks finished in the red on Monday, extending a string of losses with more interest rate hikes and recession worries in sight among investors as the end of the 2022 trading year approached.All three of Wall Street's major indexes ended with a fourth consecutive decline and have lost ground over the past two weeks, including last week's fall of 2.1% on the S&amp;P 500. Monday's session saw all 11 of the S&amp;P 500's sector close lower, led by the communications services and information technology groups. Signs of easing inflation led the Federal Reserve last week to reduce the size of its latest rate increase to 50 basis points, but the central bank still has more rate hikes in the pipeline. The European Central Bank last week also reduced its rate hike size to 50 basis points but struck a hawkish tone for its outlook on rates. "The prior observation that bad economic news is good news for equities, allowing the Fed to take their foot off the financial conditions pedal, is shifting. Policy errors are being reflected more in a greater focus on economic growth," Huw Roberts, head of analytics at Quant Insight, said in a note.Here's where US indexes stood at the 4:00 p.m. closing bell on Monday: <ul><li> <a href="https://markets.businessinsider.com/index/s&amp;p_500?utm_source=markets&amp;utm_medium=ingest?utm_source=markets&amp;utm_medium=ingest">S&amp;P 500</a>: 3,817.63, down 0.90%</li><li><a href="https://markets.businessinsider.com/index/dow_jones?utm_source=markets&amp;utm_medium=ingest?utm_source=markets&amp;utm_medium=ingest">Dow Jones Industrial Average</a>: 32,757.40, down 0.50% (163.06 points)</li><li><a href="https://markets.businessinsider.com/index/nasdaq_composite?utm_source=markets&amp;utm_medium=ingest?utm_source=markets&amp;utm_medium=ingest">Nasdaq Composite</a>: 10,546.03, down 1.49%</li></ul>Risky assets are "between a rock and a hard place given the resolve for both the Fed and ECB last week — weaker economic data raises the specter of recession, stronger data raises the specter of rates remaining higher for longer. This likely keeps equities in a fat and flat range with bounces being sold until a clearer regime emerges," Roberts wrote. Among individual stocks, <a href="https://markets.businessinsider.com/stocks/tsla-stock">Tesla</a> shares turned lower but had risen earlier in the session after voters in a poll put up by CEO Elon Musk said he should quit running Twitter. Musk said he would "abide by the results." <a href="https://markets.businessinsider.com/news/stocks/elon-musk-criticisms-twitter-stock-sales-tesla-investor-issues-complaints-2022-12">Tesla investors and analysts</a> have expressed concern that Musk's focus on Twitter is hurting Tesla.<a href="https://markets.businessinsider.com/stocks/meta-stock">Meta</a> fell after the EU filed an antitrust complaint that could put the Facebook parent on the hook for a <a href="https://markets.businessinsider.com/news/stocks/meta-stock-price-slides-facebook-parent-pay-118b-antitrust-violations-2022-12">$11.8 billion penalty</a>. Here's what else is happening today:<ul><li>The <a href="https://markets.businessinsider.com/news/stocks/stock-market-outlook-2023-recession-earnings-2008-downturn-mike-wilson-2022-12">worst earnings recession since 2008</a> could hit stocks next year, said Morgan Stanley chief US equity strategist Mike Wilson. </li><li><a href="https://markets.businessinsider.com/news/stocks/ipo-volume-global-2022-rates-hikes-inflation-nasdaq-nyse-markets-2022-12">Global IPO launches sank by 45%</a> during a volatile 2022 for markets after a record-breaking year of offerings, according to EY. </li><li><a href="https://markets.businessinsider.com/news/commodities/lumber-prices-new-low-homebuilder-sentiment-decline-housing-market-2022-12">Lumber prices hit a new 2022 low</a> after homebuilder sentiment dropped for the 12th month in a row.</li><li>The <a href="https://markets.businessinsider.com/news/commodities/us-crude-oil-profit-strategic-petroleum-reserve-releases-crude-joe-biden-2022-12">US made $4 billion selling oil</a> this year on President Biden's unprecedented releases from the Strategic Petroleum Reserve. </li><li><a href="https://markets.businessinsider.com/news/stocks/dr-doom-nouriel-roubini-world-train-wreck-recession-fed-2022-12">"Dr. Doom" economist Nouriel Roubini</a> said the world is on a "slow-motion train wreck" and an oncoming recession will be severe.</li><li>A <a href="https://markets.businessinsider.com/news/commodities/russia-war-in-ukraine-bill-gates-nuclear-startup-uranium-fuel-2022-12">next-generation nuclear reactor project</a> backed by Bill Gates and the US Department of Energy has hit a wall because its only source for the uranium it needs is Russia.</li></ul><ul><li>In commodities, bonds, and crypto:</li></ul><ul><li><a href="https://markets.businessinsider.com/commodities/oil-price?type=wtisource=markets&amp;utm_medium=ingest?utm_source=markets&amp;utm_medium=ingest">West Texas Intermediate crude</a> gained 1.6% to 75.45 per barrel.<a href="https://markets.businessinsider.com/commodities/oil-price"> Brent crude,</a> the international benchmark, picked up 0.6% to $80.10. </li><li><a href="https://markets.businessinsider.com/commodities/gold-price?utm_medium=ingest&amp;utm_source=markets">Gold</a> fell 0.2% to $1,796.15 per ounce. </li><li>The<a href="https://markets.businessinsider.com/rates/u-s--rates-10-years"> 10-year Treasury yield</a> jumped 13 basis points to 3.58%.</li><li><a href="https://markets.businessinsider.com/currencies/btc-usd">Bitcoin</a> fell 1.1% to $16,573.12.</li></ul>

US stocks fall for the 4th straight session as recession fears persist

Russia's war on Ukraine isn't the only reason for Europe's energy crisis — EU policy and extreme weather also haven't helped.Below, I break down the other variables contributing to Europe's perfect storm. This post first appeared in 10 Before the Opening Bell, a newsletter by Insider that brings you the inside scoop on what traders are talking about — delivered daily to your inbox. Sign up <a href="https://www.businessinsider.com/subscription/newsletter/10-things-opening-bell?r=US&amp;IR=T">here</a>. Download Insider's app <a href="https://link.insider.com/click/27645591.160803/aHR0cHM6Ly93d3cuaW5zaWRlci5jb20vYXBwP25yX2VtYWlsX3JlZmVyZXI9MSZ1dG1fc291cmNlPVNhaWx0aHJ1JnV0bV9tZWRpdW09ZW1haWwmdXRtX2NvbnRlbnQ9T3BlbmluZ19iZWxs/62667762063d6b9bef0cffb3Bf9c9aa56">here.</a><a href="https://markets.businessinsider.com/news/commodities/europe-energy-crisis-russia-natural-gas-perfect-storm-bofa-electricity-2022-8"></a>1. Pieces of the crisis were in place even before Russia invaded Ukraine. And Russia's weaponization of energy has <a href="https://markets.businessinsider.com/news/commodities/europe-energy-crisis-russia-natural-gas-perfect-storm-bofa-electricity-2022-8">brought those variables to light</a> over recent months. Natural gas is becoming <a href="https://markets.businessinsider.com/news/commodities/european-natural-gas-prices-electricity-plunge-biggest-decline-since-march-2022-8?utm_medium=ingest&amp;utm_source=markets">increasingly expensive</a>, with Dutch TTF futures more than 1,000% higher than a year ago, and more pain could come as Russia's Gazprom shutters Nord Stream 1 this week. Electricity costs, too, have soared. "Last week Europe awoke to a bitter truth: <a href="https://markets.businessinsider.com/news/commodities/europe-energy-crisis-russia-natural-gas-perfect-storm-bofa-electricity-2022-8">the energy crisis is here to stay</a>," Bank of America analyst wrote Monday. Now, EU nations are scrambling to find alternative resources, with coal in particular <a href="https://markets.businessinsider.com/news/commodities/europe-energy-crisis-russia-natural-gas-perfect-storm-bofa-electricity-2022-8">emerging as a key commodity</a>. The move marks a reversal for Europe, as it had been <a href="https://markets.businessinsider.com/news/commodities/europe-energy-crisis-russia-natural-gas-perfect-storm-bofa-electricity-2022-8">closing down coal plants for years</a> due to climate initiatives. "Before the war, Europe had wanted to be a leader in decarbonizing, and that's worked out to a certain extent with wind and solar, <a href="https://markets.businessinsider.com/news/commodities/europe-energy-crisis-russia-natural-gas-perfect-storm-bofa-electricity-2022-8">but they made a choice</a> to place significant reliance on Russia," portfolio manager Rob Thummel told me.He added that, after years of underinvesting, coal is now harder to access and more expensive. Nonetheless, Europe has little choice other than to <a href="https://markets.businessinsider.com/news/commodities/europe-energy-crisis-russia-natural-gas-perfect-storm-bofa-electricity-2022-8">fire up shuttered plants</a> because that offers a faster solution than trying to build out brand new LNG facilities, he said, adding that it'll likely take the continent several years to build up the infrastructure to get out of the crisis.On top of all that, <a href="https://markets.businessinsider.com/news/commodities/europe-energy-crisis-russia-natural-gas-perfect-storm-bofa-electricity-2022-8">weather has emerged as a key antagonist</a> for Europe, too. Extreme heat waves have led to declining river levels, which <a href="https://markets.businessinsider.com/news/commodities/europe-energy-crisis-russia-natural-gas-perfect-storm-bofa-electricity-2022-8">limits shipments of coal</a> and other key supplies. What's more, less river water means <a href="https://markets.businessinsider.com/news/commodities/europe-energy-crisis-russia-natural-gas-perfect-storm-bofa-electricity-2022-8">less hydro-electric power generation</a>, and less capacity to ramp up nuclear operations, according to Bank of America."With the war in Ukraine becoming increasingly entrenched, the European energy crisis seems to have <a href="https://markets.businessinsider.com/news/commodities/europe-energy-crisis-russia-natural-gas-perfect-storm-bofa-electricity-2022-8">no end in sight</a>," BofA said.Are there any other factors you think are contributing to Europe's energy crisis? Email <a href="mailto:prosen@insider.com">prosen@insider.com</a> or tweet <a href="https://twitter.com/philrosenn">@philrosenn.</a>In other news:<a href="https://markets.businessinsider.com/news/stocks/federal-reserve-powell-inflation-jackson-hole-speech-el-erian-markets-2022-8"></a><div type="image" title="Jerome Powell speaks at a Fed meeting" height="1249" width="2500" msid="93878682" hostid="261"></div>2. US stock futures rise early Tuesday, as investors continue to absorb Fed Chair Jerome Powell's remarks from Wyoming on Friday. <a href="https://markets.businessinsider.com/premarket">Here are the latest market moves.</a>3. On the docket: Best Buy Co. Inc., GAZPROM PJSC, and HP, all <a href="https://markets.businessinsider.com/earnings-calendar">reporting</a>. Plus, look out for the Housing Price Index, due to be released by the Federal Housing Finance Agency later this morning. 4. Goldman Sachs analysts shared their best "smart money" stocks most loved by hedge funds right now. These are the latest entries in a basket of stocks that have beaten the broader market over the past 20 years. <a href="https://www.businessinsider.com/stock-picks-to-buy-smart-money-hedge-fund-vip-list-goldman-2022-8">See the list of 17 names here.</a>5. Jerome Powell finally sent the right message at Jackson Hole about the central bank's commitment to fighting inflation. That's according to economist Mohamed El-Erian, who has criticized the Fed in recent months:<a href="https://markets.businessinsider.com/news/stocks/federal-reserve-powell-inflation-jackson-hole-speech-el-erian-markets-2022-8"> "He should have done that months ago."</a>6. Uranium stocks soared on Monday after Japan signaled openness to more nuclear power and Elon Musk applauded the alternative energy source. Japanese Prime Minister Fumio Kishida said last week that the country would evaluate the potential build of new nuclear power plants, <a href="https://markets.businessinsider.com/news/stocks/uranium-stocks-elon-musk-applauds-nuclear-alternative-energy-source-cameco-2022-8">while Musk voiced his support on Twitter</a>.7. Wharton's Jeremy Siegel said the Fed is at risk of tightening policy too much and it's not clear what inflation indicators Powell is watching. To the professor, the Fed Chair's speech last week was "unsatisfactory" in drilling down into specifics regarding inflation. <a href="https://markets.businessinsider.com/news/stocks/federal-reserve-powell-interest-rates-inflation-economy-policy-jeremy-siegel-2022-8">Get the full details here.</a>8. A billionaire oil-refining exec who called the July top explained why crude could plunge by another 25%. If demand at the pump continues to drop, oil prices could follow suit and thus signal inflation is easing, he explained. <a href="https://www.businessinsider.com/crude-oil-price-outlook-forecast-declines-possible-solution-john-catsimatidis-2022-8">He also broke down a solution that could curb a possible recession. </a>9. These 15 top stocks will enjoy superior returns over the next year, according to Morgan Stanley. The firm just released its annual Vintage Values list, which outperformed the market last year. The grouping is based on both fundamental and quantitative analysis. <a href="https://www.businessinsider.com/investing-best-stock-picks-to-buy-high-returns-morgan-stanley-2022-8">These are the names to know. </a><a href="https://markets.businessinsider.com/news/stocks/digital-world-acquisition-stock-price-trump-truth-social-delay-ipo-2022-8"></a><div type="image" title="Digital world trump stock" height="1241" width="1269" msid="93878686" hostid="261"></div>10. Digital World Acquisition Corp. extended its four-day decline on Monday. "The Fake News Media is devastated by how well TRUTH is doing so, quite on cue, they are working overtime to criticize and demean it," former president Trump wrote. <a href="https://markets.businessinsider.com/news/stocks/digital-world-acquisition-stock-price-trump-truth-social-delay-ipo-2022-8">Here's how the stock is moving.</a>Keep up with the latest markets news throughout your day by checking out <a href="https://link.chtbl.com/therefresh">The Refresh from Insider</a>, a dynamic audio news brief from the Insider newsroom. <a href="https://link.chtbl.com/therefresh">Listen here.</a>Curated by Phil Rosen in New York. (Feedback or tips? Email <a href="mailto:prosen@insider.com">prosen@insider.com</a> or tweet <a href="https://twitter.com/philrosenn">@philrosenn</a>).Edited by Max Adams (<a href="https://twitter.com/maxradams">@maxradams</a>) in New York and Hallam Bullock (<a href="https://twitter.com/hallam_bullock">@hallam_bullock</a>) in London.

Europe's energy crisis has 'no end in sight' as the perfect storm continues to rage on. Here's what you want to know.

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"></div></div></div>The Goldman Sachs Senate hearing on commodities got nasty yesterday, <a href="http://dealbook.nytimes.com/2014/11/20/goldman-in-testy-exchange-at-senate-panel-over-its-role-in-commodities-market/?ref=business&amp;_r=0">The New York Times reported</a>. "What's the point? Maybe you can help me out here," the Times quoted a frustrated Senator McCain (R-Arizona) as saying to a panel of Goldman executives.
It was the first of a 2-day hearing over the bank's sway in the commodities market. The Senate's Permanent Subcommittee on Investigations claims that Goldman has been able to drive certain commodities prices higher through its ownership of Colombian coal mines, Detroit aluminum warehouses, and a London-based uranium trading firm.
Goldman says it doesn't impact the market, and that it should be able to keep these holdings. Other banks, including JP Morgan Chase and Morgan Stanley, have faced similar allegations and have pledged to cut down their commodities assets. At the hearing, shots were fired. Senators got sassy. At one point, Senator McCain responded to Goldman executives with a sarcastic "Remarkable," the Times reported. Senator Carl Levin (D-Michigan), also on the subcommittee, said "Come on … I'm just trying to get you to acknowledge what is obvious."
What is obvious, according to the Senators, is that bank regulation dating back to the 1950s prevented banks from owning physical commodities. However, a combination of deregulation in the 1990s, and the chaos of asset purchases after the financial crisis landed some of these commodities on bank balance sheets. Now regulators and legislators alike are trying to go back to something more like the way things were.
And their worry isn't just price manipulation. The Senate report on Goldman says that the bank was holding commodities valued at 12% of their Tier 1 capital. McCain and Levin wrote that they feared a disaster - a BP-sized oil spill, for example - could blow a massive hole in a systemically important bank's balance sheet.
<a href="http://www.nytimes.com/interactive/2014/11/20/business/dealbook/20commodities-report.html">Here</a>'s the subcommittee's 400-page report on how Goldman artificially boosted the price of aluminum.

The Senate Hearing On Goldman's Alleged 'Merry-Go-Round' Deals Was Very Uncomfortable

<div class="KonaFilter image-container float_right"><div class="image">AP Photo</div></div>As Crimea has voted to join Russia, and as tensions between Russia and the Ukraine mount, the U.S. has announced <a href="http://www.businessinsider.com/crimea-vote-referendum-sanctions-obama-putin-2014-3">sanctions against seven of Vladimir Putin's cronies</a>.
The EU has joined the U.S. and is <a href="http://www.reuters.com/article/2014/03/17/us-ukraine-crisis-eu-idUSBREA2G0J720140317">imposing sanctions on 21 people</a> in Russia and Crimea and has said it will consider harsher sanctions when it meets this week.
Morgan Stanley's Russia economics and strategy team writes that they are <a href="http://www.businessinsider.com/impact-of-sanctions-against-russia-2014-3">"cautious about the effectiveness of sanctions on Russia."</a>
"Russia is a large country, with extensive resources, accounting in 2012 for 2.8% of global GDP, 4.7% of international merchandise trade and 13% of internationally traded oil. Typically, sanctions have been applied against much smaller countries, such as Iran, Iraq, Libya and North Korea, with significantly fewer resources."
But how effective are sanctions really?
Recent history suggests not so much. In a <a href="http://www.businessweek.com/articles/2013-05-23/why-economic-sanctions-rarely-work">Bloomberg Businessweek column, Carla Anna Robbins</a>, an adjunct senior fellow at the Council on Foreign Relations, points out three such failures. 
"Sanctions have failed to dissuade Iran from continuing to enrich uranium. They haven't dislodged North Korea's repressive and erratic leaders or forced a rollback of their nuclear and missile programs. For all the international pressure on Syria's Assad, the regime is getting more ruthless, not less, and the policy debate in Washington has moved on to how much military support to provide the rebels."
A study by Gary Hufbauer, Jeffrey Schott, and Kimberly Ann Elliot (HSE) first promulgated "key evidence that sanctions can achieve ambitious foreign policy goals." In their study, the reviewed 115 cases between 1914 and 1990 where sanctions were used, and found that 40 cases, or 34% were successful. 
In a seminal paper for International Security, titled <a href="http://www.stanford.edu/class/ips216/Readings/pape_97%20%28jstor%29.pdf">"Why Economist Sanctions Do Not Work," Robert A. Pape </a>writes that sanctions were in fact only effective 5% of the time, not 34%.
Pape argues that the world would need to change significantly before economic sanctions could "be a reliable alternative to military force." Here are some of his key arguments.
<ul>
<li>The political cooperation we saw in the early 1990s is unlikely to continue, as countries are increasingly likely to put their interests first before considering Western policies.</li>
<li>The main reason sanctions fail is because of the nature of the target state. "They key reason that sanctions fail is that modern states are not fragile. Nationalism often makes states and societies willing to endure considerable punishment rather than abandon their national interests. States involved in coercive disputed often accept high costs, including civilian suffering, to achieve their objectives. …Even in the weakest and most fractured states, external pressure is more likely to enhance the nationalist legitimacy of rulers than to undermine it."</li>
<li>The expectation that cooperation from different states will make sanctions more effective, relies on two expectations: "that greater cooperation will increase the economic punishment on target states, and, more critically, that increased punishment will make targets more likely to concede." The latest especially is "dubious," according to Pape. For this to work, economic punishments will have to be "dramatically higher" than they have been in the past, and even this is only a "speculative possibility."</li>
</ul>
None of this is to say that sanctions never work, the dissolution of South Africa's brutal apartheid regime is a case in point. And turning to sanctions proves that the 'coercer state' is willing to try a more peaceful method of negotiation first. But the effectiveness of sanctions is very much in doubt.

Why Sanctions Don't Work

<div class="KonaFilter image-container float_right"><div class="image on-image">AP Photo/Felipe Dana</div></div>As tensions between Russia and Ukraine continue to mount, President Obama just announced <a href="http://www.businessinsider.com/obama-sanctions-russia-putin-ukraine-2014-7">new sanctions on Russia</a>. 
The sanctions are leveled against large banks, and energy and defense firms, like Gazprombank, Russia's largest bank and Rosneft, the world's largest oil company.
Back in April, the U.S. has announced <a href="http://www.businessinsider.com/crimea-vote-referendum-sanctions-obama-putin-2014-3">sanctions against seven of Vladimir Putin's 'cronies'</a> mostly freezing their assets and imposing travel bans.
Morgan Stanley's Russia economics and strategy team previously wrote that they are <a href="http://www.businessinsider.com/impact-of-sanctions-against-russia-2014-3">"cautious about the effectiveness of sanctions on Russia."</a>
"Russia is a large country, with extensive resources, accounting in 2012 for 2.8% of global GDP, 4.7% of international merchandise trade and 13% of internationally traded oil. Typically, sanctions have been applied against much smaller countries, such as Iran, Iraq, Libya and North Korea, with significantly fewer resources."
But how effective are sanctions really?
Recent history suggests not so much. In a <a href="http://www.businessweek.com/articles/2013-05-23/why-economic-sanctions-rarely-work">Bloomberg Businessweek column, Carla Anna Robbins</a>, an adjunct senior fellow at the Council on Foreign Relations, points out three such failures. 
"Sanctions have failed to dissuade Iran from continuing to enrich uranium. They haven't dislodged North Korea's repressive and erratic leaders or forced a rollback of their nuclear and missile programs. For all the international pressure on Syria's Assad, the regime is getting more ruthless, not less, and the policy debate in Washington has moved on to how much military support to provide the rebels."
A study by Gary Hufbauer, Jeffrey Schott, and Kimberly Ann Elliot (HSE) first promulgated "key evidence that sanctions can achieve ambitious foreign policy goals." In their study, the reviewed 115 cases between 1914 and 1990 where sanctions were used, and found that 40 cases, or 34% were successful. 
In a seminal paper for International Security, titled <a href="http://www.stanford.edu/class/ips216/Readings/pape_97%20%28jstor%29.pdf">"Why Economist Sanctions Do Not Work," Robert A. Pape </a>writes that sanctions were in fact only effective 5% of the time, not 34%.
Pape argues that the world would need to change significantly before economic sanctions could "be a reliable alternative to military force." Here are some of his key arguments.
<ul>
<li>The political cooperation we saw in the early 1990s is unlikely to continue, as countries are increasingly likely to put their interests first before considering Western policies.</li>
<li>The main reason sanctions fail is because of the nature of the target state. "They key reason that sanctions fail is that modern states are not fragile. Nationalism often makes states and societies willing to endure considerable punishment rather than abandon their national interests. States involved in coercive disputed often accept high costs, including civilian suffering, to achieve their objectives. …Even in the weakest and most fractured states, external pressure is more likely to enhance the nationalist legitimacy of rulers than to undermine it."</li>
<li>The expectation that cooperation from different states will make sanctions more effective, relies on two expectations: "that greater cooperation will increase the economic punishment on target states, and, more critically, that increased punishment will make targets more likely to concede." The latest especially is "dubious," according to Pape. For this to work, economic punishments will have to be "dramatically higher" than they have been in the past, and even this is only a "speculative possibility."</li>
</ul>
None of this is to say that sanctions never work, the dissolution of South Africa's brutal apartheid regime is a case in point. And turning to sanctions proves that the 'coercer state' is willing to try a more peaceful method of negotiation first. But the effectiveness of sanctions is very much in doubt.

Here's Why Sanctions Don't Work 

<div class="image-container display-table float_right"><div><div class="image">REUTERS/Gary CameronJ.P. Morgan CEO Jamie Dimon (front) leaves the U.S. Justice Department after meeting with Attorney General Eric Holder, in Washington, September 26, 2013.</div></div></div>LONDON/NEW YORK (Reuters) - The U.S. Federal Reserve was pressing <keyword id="111830" type="CITY" weightage="60" keywordseo="JPMorgan-Chase">JPMorgan Chase</keyword> &amp; Co <JPM.N> to distance itself from its metals warehousing business more than a year ago, documents seen by Reuters show, long before the issue became a focal point in the debate over Wall Street's role in physical commodities trading.</JPM.N>
A series of letters between JPMorgan's lawyers and the Fed, released to Reuters through a Freedom of Information Act request, show Wall Street's primary regulator took a tough stance on the bank's efforts to hold onto the global network of Henry Bath &amp; Sons warehouses, part of the larger RBS Sempra commodity trading business it bought in mid-2010.
The correspondence shows the Fed balked at JPMorgan's request to turn the one-time trading assets into a strictly arms-length financial investment back in June 2012, and told the bank it must provide quarterly updates on what it was doing to either comply with banking rules, or sell the business.
The Fed also pressured JPMorgan to dilute the amount of metal held by its own traders in Henry Bath, an issue that has riled major metal consumers and critics of a copper investment fund the bank was trying to launch.
Eventually, by May this year, JPMorgan had decided to simply sell the business, the letters show. Three months later, with broader pressure mounting over Wall Street's involvement in the raw materials supply chain, JPMorganwould put its entire physical commodity trading business on the block.
The documents, which consist of six letters over a period of 13 months, provide the deepest look yet at how the Federal Reserve has wrestled with the thorny regulatory question of banks and physical commodity markets.
They show the Fed has at times taken a tough line with banks in the sector, and may darken the outlook for Goldman Sachs <GS.N> and Morgan Stanley <MS.N>, both of which still own physical commodity trading assets such as warehouses, pipelines and oil storage tanks. Both banks argue that a 1999 law gives them greater latitude to own and operate assets as they are former investment banks.</MS.N></GS.N>
The letters also raise questions about the Fed's willingness to allow Wall Street to convert former trading assets into passive merchant investments that they can own for up to a decade. Both Goldman and Morgan Stanley have claimed this authority to retain or pursue new investments in recent years, Reuters reported last week.
Spokespeople for JPMorgan and the Fed both declined to comment on the letters.
WALL STREET'S WAREHOUSES
The Federal Reserve announced in July that it was reviewing the broader role of Wall Street banks in physical commodity trading amid rising political scrutiny, and fears that so-called "too big to fail" banks may be taking on unnecessary risks by operating oil tankers and power plants.
But it has been tackling the issue for years as Wall Street deepened its collective push into commodity markets, a trend that reached its zenith with JPMorgan's $1.6 billion purchase in 2010 of RBS Sempra, which included Henry Bath.
JPMorgan knew from the outset that the warehouses presented a problem. As a Fed-regulated commercial bank, it did not have the authority to own "non-conforming" assets such as warehouses for longer than a two-year grace period (with three possible one-year extensions). The Fed had already ordered the previous owner, Edinburgh-based Royal Bank of Scotland <RBS.L>, to get out of the business of owning commodities storage.</RBS.L>
In addition, metals warehousing has drawn attention due to allegations that banks and merchants have tried to game the London Metal Exchange (LME) warehousing rules, deliberately creating bottlenecks for aluminum consumers such as drinks can makers to boost storage income, while raising physical prices.
JPMorgan has long said its Henry Bath customers face no long queues, in contrast to the Metro International Trade Services warehouses operated by Goldman Sachs, where metal owners have to wait as long as a year. Goldman has previously denied Metro was driving up prices or violating any laws.
But JPMorgan has nevertheless been named in a series of class-action lawsuits targeting the industry, and is the subject, alongside other banks and merchants, of a Commodity Futures Trade Commission (CFTC) probe. TheDepartment of Justice is also looking into the matter.
JPMorgan also created controversy in metal markets by trying to launch a physical copper exchange-traded fund for small investors, which would have been backed by metal stored in Henry Bath sheds. Many in the market feared it would artificially tighten supplies and drive up prices.
By early 2012, other metals traders said JPMorgan was directing aluminum supplies into its own warehouses inRotterdam, Europe's largest port, and in Chicago. Since the late 1980s, Henry Bath has been owned by trading firms that tended to use it primarily as a place to store their own metal rather than rent out space to other companies.
It is not clear what percentage of metal held in Henry Bath was owned by JPMorgan's traders, but it was high enough to alarm the Federal Reserve and to make it difficult for JPMorgan to classify the asset as a strictly passive investment. By law, banks can only claim the so-called "merchant" authority if there is no interconnection between the bank and the business.
Although JPMorgan operated Henry Bath at arm's length on a corporate level, the commercial ties ran deeper, according to a person familiar with the matter.
"Henry Bath has always been a creature of its owners," said an executive at a rival warehousing firm. Prior toJPMorgan and RBS, Henry Bath had been owned by Sempra Commodities, Enron and legendary German trading house Metallgesellschaft.
FED REJECTION
Despite the apparent obstacles, JPMorgan initially told the Fed it wanted to keep Henry Bath under its merchant authority, which would have allowed it to keep the firm until 2020.
In June 2012, it requested a one-year extension of the grace period to conform the business. But the Fed paused. Instead, after what JPMorgan said were "conversations with (Fed) Board staff", the bank's lawyers submitted a revised request in August, seeking three one-year extensions all at once, with no mention of how it intended to own the business.
Again, the Fed balked, eventually granting just a basic one-year extension that November, and stipulating that the bank must file a detailed road-map on plans to either conform or sell the business, including quarterly updates.
It is not clear why the Fed declined the three-year extension to the grace period, or what occurred during the discussions held during the interim. But the tone suggests a clear shift in approach.
"It seems that long before July they made a decision to sell it because the focus of the letters seemed to shift from conformance to divestiture," said a banking lawyer who reviewed the letters but was not authorized to speak to the press.
By March of this year, it was holding discussions regarding an "outright sale" of the business while also continuing efforts to conform it. JPMorgan was talking to other commodity companies about storing more metal in Henry Bath, in an attempt to "decrease the average percentage" of metals owned by the bank in its 75 warehouses, according to a letter that month.
Just over one month later however, JPMorgan had given up attempting to retain the business as a merchant investment, a letter dated May 1 shows.
JPMorgan's decision to sell Henry Bath this year was made after "internal and external" discussions, said a source familiar with the matter.
RBS had also contemplated seeking to keep Henry Bath as a merchant deal after buying into the SempraCommodities business in 2008, but ultimately decided that it would be better to divest Henry Bath than hold it at arm's length, according to a person familiar with the decision.
The sources were not authorized to speak to the media.
PROFITS HIT
To be sure, even as the Fed was pressing, the attraction of being in the metals storage business was waning.
The LME was working on a major overhaul of its warehousing policy aimed at appeasing industrial users who have complained about long wait times and inflated prices for their metal. It proposed a series of tougher new rules this July, and beefed up those measures early in November.
Henry Bath reported a profit of just $2.4 million last year, down from $28 million in 2011 mainly due to higher taxes, according to filings with British commercial register, Companies House.
Others are also feeling the heat.
Even though Goldman Sachs and Morgan Stanley have argued that their physical commodity businesses should be grandfathered, both are moving to sell or spin out some parts.
Goldman Sachs executives have publicly said the business remains "core" to its operations, but last week it emerged that the bank would resume talks with parties interested in buying Metro, and was also moving to sell its uranium trading desk.
"JPMorgan and other banks have adjusted their game depending on the playing field," said Saule Omarova, associate professor of law at the University of North Carolina and a visiting professor at Cornell.
"The calculus remains complex. And the economics depend on regulatory decisions."
(Editing by Richard Chang)

JPMorgan Tried But Failed To Satisfy The Fed On Metals Warehousing

<div class="KonaFilter image-container display-table"><div><div class="image">AP</div></div></div>Earlier this week - for the third time this year - the U.S. announced a new round of sanctions on Russia for its involvement in destabilizing the crisis in Ukraine.
As with each time before it, U.S. officials portrayed them as the most crushing sanctions to date. Speaking from the South Lawn of the White House, <a href="http://www.businessinsider.com/obama-russian-sanctions-ukraine-statement-july-29-2014-7" target="_blank">President Barack Obama said they'll have a "bigger bite."</a>
But foreign-policy and sanctions experts and, privately, administration officials are skeptical the new sanctions will have their intended effect - changing Russian President Vladimir Putin's calculus.
"They're getting more serious, yes. But these are still easily absorbed by Putin and won't make him reconsider his Ukraine strategy," Ian Bremmer, the president of Eurasia Group, told Business Insider of the new sanctions. 
The consensus is these sanctions will hurt the Russian economy. Still, it could be a while before Putin feels pressure to change course - even amid the united Western outrage in the aftermath of the shooting down of Malaysia Airlines Flight 17, which the U.S. and its allies have blamed on pro-Russian separatists using a missile likely supplied by Moscow. 
Observers point to the two other times western governments increased sanctions on Russia in the wake of the crisis in Ukraine as evidence economic pressure can't change Putin's calculations. Putin also did not shift course in the weeks when he was expecting the sanctions - <a href="http://www.businessinsider.com/us-heres-where-russian-troops-are-shelling-ukraine-2014-7" target="_blank">he only escalated Russia's involvement</a> in the crisis. Furthermore, Ukraine is too important for Putin to concede without a fight - and there are still questions whether the U.S. and European Union consider Ukraine to be important enough to take truly serious action.
Moreover, if there's one leader who's completely unpredictable along otherwise seemingly rational lines, it's Putin.
"Still, the point is this is Russia's single most important foreign policy interest. And they're too powerful economically to be successfully 'isolated' by the West. Especially over Ukraine - neither the Americans nor the Europeans are prepared to truly go to the mat over this," explained Bremmer.
THE 'BIGGER BITE' 
The new U.S. sanctions, which were imposed in conjunction with similar sanctions from the E.U., target Russia's energy, arms, and finance sectors. Taken together, they constitute the most extensive sanctions by the U.S. and E.U. on Russia since the end of the Cold War.
<div class="KonaFilter image-container display-table float_right"><div><div class="image">REUTERS/Kevin Lamarque U.S. President Barack Obama and Russian President Vladimir Putin walk away after speaking about their meeting during the G8 Summit at Lough Erne in Enniskillen, Northern Ireland June 17, 2013. </div></div></div>Among the targets of the new measures include the Bank of Moscow, the fifth-largest bank in Russia; the Russian Agricultural Bank, the fourth-largest; and VTB Bank, the second-largest. The sanctions prohibit U.S. citizens or companies from providing new financing to the three major Russian financial institutions, thereby cutting off their access to U.S. capital markets. Along with sanctions announced two weeks ago, the U.S. has now targeted five of the six largest state-owned banks in Russia.
The new sanctions also hit United Shipbuilding Corp., the Russian-state owned <keyword id="6354810" type="ORGANIZATION" weightage="60" keywordseo="Defense">defense</keyword> technology firm. The U.S. government is also prohibiting exports of energy-related parts, as well as the sale of military items, to Russia. The Commerce Department also said it would deny export licenses "if products are destined for deep water oil exploration and production" or Arctic oil.
"The sanctions will force Russian banks to raise money elsewhere (eg. the Russian central bank - similar to how EU banks have raised money since 2008)," said Bruce Johnston, an analyst at Morgan, Lewis &amp; Bockius. "The ban on energy equipment will make it harder to develop new oil and gas fields in Russia."
Even Obama, though, was implicitly skeptical they= sanctions would have an immediate impact on Putin's actions. He said in his statement announcing the third set of sanctions that the U.S. and E.U. alone couldn't make Putin "see more clearly." He said it's "something President Putin has to do on his own."
Overall, the historic effect of <a href="http://www.businessinsider.com/why-sanctions-wont-work-july-16-2014-7" target="_blank">sanctions is dubious</a>. It's even more questionable whether they will work in a powerfully positioned country like Russia, which accounts for almost 3% of global GDP and 13% of internationally traded oil, according to Morgan Stanley.
Sanctions to date have helped depreciate the Russian ruble nearly 8% since the beginning of the year, forcing Russia's Central Bank to spend nearly $30 billion to stabilize the currency. The International Monetary Fund expects nearly $100 billion in capital flight from Russia this year, and Standard and Poor's recently downgraded Russia's sovereign credit rating to BBB-. 
Still, none of <a href="http://www.businessinsider.com/mh-17-plane-crash-ukraine-crisis-putin-obama-2014-7" target="_blank">those things have made Putin change course</a>.
"He has opened up a potential Pandora's Box by stoking the flames of nationalism on both sides of the Russian-Ukrainian border, caught between calls by the international community to back down and nationalists at home to escalate further," said Garrett Khoury, the director of research at <a href="https://medium.com/the-eastern-project" target="_blank">The Eastern Project</a>.
Khoury also noted Putin didn't use the MH17 tragedy as an opportunity to reduce tensions. "The shooting down of MH17 was an opportunity for Putin to use some event to break with the separatists and de-escalate the situation. He didn't, though, and indeed seems to have become more defensive of his perceived interested in East Ukraine than ever. If Putin is going to change his tone and de-escalate in Ukraine, it isn't going to be happening any time soon. That much is clear," Khoury said. 
One example administration officials often cite as the playbook for sanctions is Iran, where sanctions have steadily increased for more than a decade and successfully squeezed the financial system. Those sanctions did not stop Iran from enriching uranium, but officials credit them with bringing the country to the table in ongoing negotiations aimed at resolving issues over its nuclear-energy program.
Mark Dubowitz, the executive director of the Foundation for Defense of Democracies, told Business Insider the administration could do more if it wants to follow the Iranian playbook. For example, the U.S. could designate individual Russian banks as institutions of primary money laundering concerns, hinting it could end with the designation of the entire Russian financial sector as money laundering concerns. Congress, he said, could also start to push for Iran-style sanctions that would designate foreign financial institutions doing business with blacklisted Russian banks.
But there's no hint the U.S. is considering any of these steps.
"What is still lacking is a policy that combines sanctions with robust military aid for Ukraine and visible signs, not symbolic hints, that the U.S. and NATO are positioning defend the borders of other vulnerable Eastern European countries," Dubowitz, who <a href="http://www.thedailybeast.com/articles/2014/07/14/thank-obama-for-iran-s-growing-economy.html">helped write a report</a> detailing how Iran's economy has rebounded amid sanctions pressure subsiding, told Business Insider. 
Dubowitz also noted Putin's aggressively nationalistic positions seem to be <a href="http://www.businessinsider.com/putins-position-within-russia-seems-secure-2014-7/">helping to boost his popularity within Russia</a>. 
"Finally, Russia continues to illegally occupy Crimea. We are no longer hearing about that illegal occupation and it is being treated as a fait accompli by the U.S., E.U. and U.N. That has forced the U.S. and E.U. to treat the eastern border of Ukraine as a redline which Putin again has violated by using Russia special forces and pro-Russian militia to seriously destabilize the country," Dubowitz said. "As long as redlines fade into pink lines, sanctions remain too incremental and calibrated to be sufficiently punitive, and Putin's defiance remains wildly popular with the Russian people, it is doubtful his strategic calculus will change." 
COULD THINGS CHANGE?
One thing that could make Putin alter his strategy, according to analysts, is if there's a revolt - or some pressure - from the Russian business community and from the Russian ruling class that has been hit with sanctions. The sanctions on the banks are viewed as particularly important, as many companies are already seeing their windows to available foreign capital closing rapidly.
One U.S. official, for example, said VTB holds 80% of its debt in U.S. dollars. Russian Agricultural Bank holds 90% of its debt in dollars, and Bank of Moscow holds all of its debt in dollars. According to Morgan Stanley, Russia's non-financial state companies are due for $41 billion in external debt over the next 12 months. State banks will owe another $33 billion in debt. <div class="KonaFilter image-container display-table float_left"><div><div class="image">REUTERS/RIA Novosti/Alexei DruzhininRussia's Prime Minister Vladimir Putin visits an agricultural exhibition at Russia's Exhibition Centre in Moscow October 11, 2008. </div></div></div>"This is completely different from the first rounds of sanctions: much clearer and more limited, but in a very painful way," the head of a Russian financial holding company backed by one of the country's leading oligarchs <a href="http://www.ft.com/intl/cms/s/0/8f054d20-1733-11e4-87c0-00144feabdc0.html?siteedition=intl#axzz38xiK7soW" target="_blank">told The Financial Times</a>. 
According to The New York Times, <a href="http://www.nytimes.com/2014/07/30/world/europe/as-sanctions-pile-up-russians-alarm-grows-over-putin-tactics.html" target="_blank">quiet alarm is growing that the sanctions will end up</a> damaging the economy "to the extent that ordinary Russians feel it." 
The downing of MH17 has indeed upset the careful balance Putin constructed throughout the Ukrainian crisis. When Russia annexed Crimea, Putin painted it as an intervention to protect Russian-speaking nationals in the peninsula. Since then, he has taken extra precaution to keep the Kremlin's fingerprints away from the rebels' actions. 
"Putin was on a winning streak until MH17, but like all reckless gamblers who throw the dice one too many times, he's crapped out and desperation is making him chase his losses with more bad bets," said Tom Nichols, a professor at the Naval War College and a former aide to Pennsylvania Sen. John Heinz. 
Amid these escalating tensions, Nichols suggested the sanctions could cause Putin's allies to put pressure on the Russian leader to back down. 
"So there is no way for the West to directly influence Putin's calculus, because he's so personally invested in this whole adventure. He also clearly loathes President Obama and will go to great lengths to avoid appearing like he's backing down from this White House. But what could change all this is if people close to Putin - who really will start feeling the bite from sanctions - start pressing him to pull back," said Nichols.
Stephen Holmes, a law professor at New York University who specializes in Russian law, agrees Putin's strategy may not be sustainable in the long-term. But any change will take a while - and considering his recent escalation, it could present more danger for the crisis.
"The sanctions have already shifted the balance of power within the Putin coalition, favoring the more parochial 'heavies' against the more internationally minded kleptocrats. This will continue," Homes told Business Insider. "In the end, the economic (not security) elite in Russia may begin to see Putin as too belligerent for their taste, even if the public likes his sticking it to the West; this won't be soon, but the tit-for-tat that the new sanctions will unleash will be very destabilizing domestically and not sustainable I believe."

It Would Take A Really Long Time To Stop Putin WIth Economic Sanctions 

<div class="KonaFilter image-container float_right"><div class="image on-image">REUTERS/ Eric ThayerA man takes part in the annual No Pants Subway Ride in New York January 12, 2014.</div></div>Good morning! Here's what you need to know.
- In exchange for relief from sanctions, Iran and six world powers <a href="http://www.businessinsider.com/main-points-of-the-iran-nuclear-deal-2014-1">agreed on a nuclear enrichment deal</a> first struck in November. Iran says it will not enrich uranium over 5% for six months beginning January 20 and allow daily UN inspection, freeing up $7 billion in sanctions while a "comprehensive solution" is reached.
- Three of America's "big four" banks <a href="http://www.businessinsider.com/bank-earnings-preview-2014-1">will report earnings this week</a>, but analysts are expecting to see falling revenue due to decreased loan activity. Fines from regulators could also prove a drag on business, but not to the extent that it will decrease bonus activity.
- Workout apparel giant Lululemon has <a href="http://www.businessinsider.com/lululemon-cuts-forecasts-2014-1">cut its earnings forecast</a> after store traffic dropped off in December. "We were on track to deliver on our sales and earnings guidance through the month of December; however, since the beginning of January, we have seen traffic and sales trends decelerate meaningfully," said Lululemon CFO John Currie. "Based on this recent performance and assuming these trends continue through the remainder of January, we are reducing our outlook for the fourth quarter."
- As the cannabis industry lights up Washington and Colorado, the <a href="http://www.nytimes.com/2014/01/12/us/banks-say-no-to-marijuana-money-legal-or-not.html?ref=business&amp;_r=0">biggest issue facing budding marijuana businesspeople is banking</a>, according to a New York Times report from Serge F. Kovaleski. Pot merchants "are grappling with a pressing predicament: Their businesses are conducted almost entirely in cash because it is exceedingly difficult for them to open and maintain bank accounts, and thus accept credit cards," Kovaleski reports. "Banks, including state-chartered ones, are reluctant to provide traditional services to marijuana businesses. They fear that federal regulators and law enforcement authorities might punish them, with measures like large fines, for violating prohibitions on money-laundering, among other federal laws and regulations." As a result, perfectly legal businesses are hoarding dangerous amounts of cash and stashing suitcases around town.
- Target <a href="http://www.businessinsider.com/target-significant-changes-in-security-2014-1">will make "significant changes" after its high-profile data breach</a> debacle over holiday season, the company's CEO Gregg Steinhafel said in an interview with CNBC. The company has installed malware on point of sale registers and is working to figure out who is responsible for the hack that resulted in the stolen personal information of at least 70 million Target customers. 
- Asian markets were mixed in overnight trading, with Japan's Nikkei and Korea's KOSPI up 0.20% and 0.54% respectively, while Shanghai was down 0.51%. European markets were all trading higher, but U.S. futures were pointing south.
- Thailand continues to inch toward a civil war, as <a href="http://www.businessinsider.com/thailand-is-heading-towards-a-civil-war-2014-1">protestors "shut down" the capital Monday</a> in protest of Prime Minister Yingluck Shinawatra. "Protesters led by former opposition politician Suthep Thaugsuban started blocking major intersections late on Sunday, aiming to create traffic chaos in a city of an estimated 12 million people where roads are clogged at the best of times," Reuters reports. 
<a class="cite"></a>- This afternoon at 2:00 p.m., the Treasury will make its monthly budget statement for December. Economists are expecting a $44.0 billion surplus. "Underlying improvement continues as payroll and income tax hikes boost receipts and spending remains restrained by sequester caps, but the main contributor to the positive swing from last year in December is GSE dividend payments," <a href="http://www.businessinsider.com/monday-scouting-report-jan-13-2013-2014-1">Morgan Stanley's Ted Wieseman wrote clients</a>. "With regular earnings running near record levels and Freddie Mac making an additional one-off payment for a deferred tax asset accounting reversal (which Fannie Mae did in June), Treasury received a $39 billion GSE dividend on December 31, up from $5 billion a year ago. For all of fiscal year 2014, we see the deficit narrowing to $585 billion, or 3.4% of GDP, from $680 billion, or 4.1% of GDP, in FY 2013."
- Bulls beware, the <a href="http://www.businessinsider.com/goldman-market-valuation-is-lofty-2014-1">market is getting a little pricey</a>, according to Goldman Sachs' David Kostin. In a new note to clients, Kostin writes that the "biggest surprise is how many investors expect the forward P/E multiple to expand to 17x or 18x." The current aggregate forward P/E multiple is at 15.9. While market participants tend to believe a 15x P/E multiple is the long-term average, "The common perception is wrong." In fact, "Most investors are surprised to learn that since 1976 the S&amp;P 500 P/E multiple has only exceeded 17x during the 1997-2000 Tech Bubble and a brief four-month period in 2003-04. Other than those two episodes, the US stock market has never traded at a P/E of 17x or above."
- Leonardo DiCaprio <a href="http://www.businessinsider.com/list-of-golden-globes-winners-2014-2014-1">took home the Best Actor for Musical or Comedy prize</a> at last night's Golden Globes for his performance as Jordan Belfort, the drug-addicted 90s-era pump-and-dumper, in Martin Scorsese's The Wolf of Wall Street. Matthew McConaughey, Cate Blanchett, and Amy Adams were among the other winners. 
Analysts are still weighing how last week's surprisingly terrible jobs report will affect the Federal Reserve's decision-making going forward. Here's Brown Brothers Harriman's Marc Chandler in a new note to clients this morning:
At the risk of oversimplifying, there seems to be a single overriding driver of the global capital markets in the coming days. It is how investors see the implications of last week's dismal jobs data. In particular, many observers are suggesting that it raises doubts over the Fed's willingness to continue to pull back from its asset purchases, as generally outlined alongside last month's tapering decision. Some observers have linked it to arguments that the economy has become dependent on QE and at the first sign of withdrawal, there is a loss of activity... We expect the Fed to go ahead with slowing of QE purchases. Fed officials have argued that there has been a cumulative improvement in the labor market. A month's disappointment will not change that understanding, though a second dismal report may be harder to shake off. Moreover, one does not have to venture much beyond the weather is seen mitigating factors.

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