Just last week we revisited the surging 'flations' in almost everything we 'need' - led of course by the screaming credit-fueled bubble in college tuition. Today's episode of "nope, no inflation here' is brought you to by the number "+101%" and the words "college textbooks." As the CEO of the Education Policy Institute exclaims "we are on an untenable trajectory;" a fact that is so evident in the difference between 'recreational' books (-1.5% in the last decade) and 'college text'-books (+101.5% in the same period). The rise is more than triple that of CPI and, as Bloomberg reports, is "one of the reasons that students drop out, because its an unforeseen cost." But rising prices are good, right? Just ask investors in the Caracas Stock Exchange... (especially when unit labor costs are stagnating)... and now JPM ceasing its student loan operations, we are sure, will help...
As the US Congress considers whether to authorize American military intervention in Syria, its members should bear in mind a basic truth: While Syrian President Bashar Al-Assad has repeatedly used extreme violence to retain power, the United States – and other governments in the Middle East and Europe – share responsibility for turning Syria into a killing field. The US government’s misguided move from potential mediator and problem solver to active backer of the Syrian insurrection was, predictably, a terrible mistake. It is time for the US to help stop the killing in Syria. That means abandoning the fantasy that it can or should determine who rules in the Middle East.
It is unclear just why Tepco released the following clip of what it alleges is a leak at Fukushima two and a half years after the infamous March 2011 catastrophe. If it is to restore confidence that it is finally trying to regain control over the Fukushima situation, that is simply laughable: for an organization that had to be nationalized and then lied for years, making up "safe" numbers out of thin air to avoid panic, this is not an option. If it is to indicate that the hype about the danger surrounding Fukushima is overblown, perhaps it should not have lied for years, and if really desperate to show just how safe the Fuku detritus is, maybe the great Japanese propaganda machine could have had some unlucky soul injest the water, as happened back in 2011. For whatever reason, the only thoughts that cross our minds as we watch this video is "what else is leaking over there?"
What started out a quiet Asian open is startting to esclate rapidly. Japanese stocks futures had levitated along with a weaker JPY and US equity futures all day and opened higher. News confirming further leaks at Fukushima (1) started the selloff, but soon after that AFP reported that (2) Madrid may be edging out Tokyo for the 2020 Olympics (stocks leg down), and then the big one hit:
*S.KOREA MAY BAN IMPORTS OF SOME JAPAN FISHERIES PRODUCTS:YONHAP
As South Korea bypasses the currency wars and goes straight to a trade-war (3) and tanking the Nikkei 225 by over 200 points and slamming USDJPY back under 100.00. Treasuries are modestly bid with 10Y trading with a 2.97% handle.
Wednesday's 10-7 vote in the Senate Foreign Relations Committee supporting an authorization of military attacks on Syria may have been affected by varying levels of financial support the senators got from political action committees representing the defense industry, and from the companies' employees. As The Daily Mail reports, on average, a 'yes'-voting senator received 83% more money from defense contractors than one who voted 'no.' Committee members who voted Wednesday to support the proposal collected an average of $72,850 in defense campaign financing between 2007 and 2012, Wired magazine reported, based on data collected by the Center for Responsive Politics. Those who dissented in the committee vote averaged $39,770, with the four senators who received the least amount of defense dollars, ranging from $14,000 to $19,250, all voted no. At a Pentagon-estimated cost of around $5 billion per month (for a 2-month deployment) - and in light of our previous discussion on lobbying ROIs - is it any wonder?
With TrimTabs seeing real wage and salary growth at a mere 0.7% year-over-year in August, some of the more 'robust' expectations for tomorrow's non-farm payroll report appear a little exuberant. However, Goldman's 200k estimate (based on 24 labor market indicators) suggests there will be enough to provide cover (aside from the cornering via sentiment, deficits, technicals, and international resentment) for a Fed "Taper." SocGen's Brian Jones is top-dog at a stunning 220k expectations (2-sigma above the 180k median expectation for 'probably the most important data point in the world'). At the other end of the scale of 95 estimates summarized below by Bloomberg, is TrimTabs' Madeline Schnapp who sees a 5-sigma miss at a mere 79k jobs added. Goldman expects the unemployment rate to hold steady at 7.4%.
As the U.S., led by the Obama Administration, moves towards yet another possible war in the Middle East, using covert terrorists as proxies and enacting violent policy based on dubious or non-existent evidence and far flung accusations, we realize that with all the blathering voices out there telling us what to think, what to do, what to fear, who to admire, who to worship, how to live, and what to aspire, perhaps it is time for each of us to solemnly question what we stand for, and what America is supposed to stand for? Really, think about it. What are we here for? What purpose do we serve in the grand scheme of things? What are our defining principles? Have we lost track of ourselves as Americans so completely that we cannot even explain in a reasonable fashion what kind of people we want to be, and what kind of world we want to live in?
In a desperate need to keep the spice flowing into the commission-takers' pockets, any and every excuse is being pulled out of the hat for why interest-rates are rising and why Emerging Markets are collapsing; apart from the most obvious - that the market is terrified of the end of the 'flow' of Fed liquidity. The following chart suggests otherwise. While correlation is not causation (but it suggests you're close), the relationship between "Taper" fears and global bond yields is clear as the global Fed carry trade unwind accelerates.
This week's brief 'outage' in US equity markets has been shrugged off by most, with some proclaiming that "we are getting used to it now." However, there is at least one group that are not ignoring this. Paddy Power has inaugurated bets on the next exchange in the world to suffer from a greater-than-2-hour outage, and the winner (for now) is... NASDARK. At 5/2 Odds, the pride of US capital markets is more than double as likely to suffer such an outage again by the end of 2014 than Tokyo and London and four times as likely as the emerging market Brazil's BOVESPA. USA is number 1 once again, well played...
In all the stories surrounding mass interception, recording (and abuse) of every form of private electronic communication by the NSA, there was always one missing link: encryption. After all, the NSA's primary task has always been to decrypt data, not to record and store every bit of communication traversing the ether or the internet. And yet, with the advent of recent encryption technologies, it would, or at least could, have made such pervasive interception by the spying agency problematic at least. However, according to a just released exposed by the NYT and ProPublica, it turns out the NSA had that base covered too. Presenting Bullrun, or "there's a hack for that."
Ahead of tomorrow's all-important facade of the NFP print, US equity markets traded on very low volume in the 2nd narrowest range in 6 months. Sectors were a litte more disprsed with rate-sensitive names hurt and Utes underperforming. The real story of the day was the "Taper-On" trades in Treasuries, precious metals, and the USD. The belly of the Treasury curve smashed another 10-11bps higher (now up 21bps from Friday's pre-Obama speech) as the 10Y trod water at 2.98% from the European close only to jump up to 2.99% into the close. As we crossed the US open, gold and silver were summarily punched lower, down 1-2% on the week as the USD surged following Draghi's chatter and better macro data this morning. Credit markets were decidely more nervous going into the close than stocks. Gold and the S&P 500 are now exactly equal with each other and unchanged from the 6/18 FOMC "Taper" moment (and Silver is up 7%).
Asia is a damned excited part of the world. And Singapore is the financial epicenter of all of it. For the last 24-hours, banker and fund manager friends of mine have been telling me stories about oil refinery deals in North Korea, their crazy investments in Myanmar, and the utter exodus of global wealth that is finding its way to Singapore. In the last few weeks we are seeing two new groups moving serious money into Singapore - customers from Japan and India. The contrast is very interesting. From Japan, people who see the writing on the wall just want to be prepared with a sensible solution. They’re taking action before anything happens. From India, though, people are in a panicked frenzy. They waited until AFTER the crisis began to start taking any of these steps. As a result, they’re suffering heavy losses and taking substantial risks... some wealthy Indians are trying to smuggle out diamonds... anything they can do to skirt the government's capital controls.
With all eyes squarely focused on Syria, attention spans have drifted from Iraq but as Stratfor explains, things are once again going from bad to worse in that 'stable democratic' nation. Coordinated, high-casualty attacks have become common in Iraq since the withdrawal of U.S. forces from the country at the end of 2011. The geographic focus of the attacks indicates that the reach of militants is limited to areas in which they can routinely operate freely, typically where the Shiite, Sunni and Kurdish spheres of influence intersect.
Where does one even start with this one. Six months ago we discussed the plight of Revel - New Jersey's "state of the art" casino - which filed for bankruptcy less than a year after opening its doors, despite numerous sunk incentives an millions of dollars in an "economic development incentive" by the financially troubled state. A few months later, following a prepackaged debt-for-equity, the casino has emerged from bankruptcy with $1.2 billion of its pre-petition $1.5 billion in debt converted into equity. While it is unclear if the casino will ever turn a profit even with the much streamlined balance sheet one thing is clear: it is trying. So hard, in fact, that as the AP reports Local 54, Atlantic City's main casino workers' union, is complaining to state labor and political officials about Revel Casino Hotel's use of part-timers. Is the irony here becoming apparent?