Late last night news broke that the Senate Foreign Relations Committee had proposed a resolution for US involvement in Syria which among other things, would limit Obama's Syrian military strike - whose "clinical" purpose and intentions are still very much unclear - to 90 days. As reported earlier, Republican war hawk John McCain said he would not support the resolution, arguably because he hopes to see a wider, more spread out campaign, one which would certainly infuriate Russia and China. Or a simpler reason: the usual bipartisan breakdown in Congress strikes again. Moments ago, yet another republican who previously said he was for Obama's campaign following Boehner's support, the committee's top republican Bob Corker got cold feet, and as Politico reports, may delay if not scuttle the Senatorial vote altogether.
The following chart from Bank of America shows that while as a result of record low interest rates housing affordability until very recently was at record highs (if mostly for those with access to subsidized REO-to-Rent loans or the 60% "all cash" flippers/buyers), this index has plunged in recent months, is back to 2008 levels, and has effectively trimmed its spread to the long-term historical average by half.
It seems the exuberance of a recovering housing market has spread not just to Ford, Toyota, and GM this morning but to the luxury-end of the 'renaissance'-ing auto industry... Because nothing says 'recovery' like a $4.4 million, 750 horsepower, 6.6 liter V12 'Batmobile'-style Lambo...
UPDATE: The entire Boehner-based drop has been retraced. It would appears that one should sell on war but buy on even moar war... which makes some idiotic sense since a longer-protected episode will indeed provide the deficit surging room for moar QE.
It seems perhaps Senator McCain missed the most salient (surgical strike, non-regime-change) points of John Kerry's compelling case yesterday and has decided that:
US REPUBLICAN SENATOR JOHN MCCAIN SAYS DOES NOT BACK SENATE PANEL DRAFT RESOLUTION AUTHORIZING USE OF FORCE IN SYRIA
Maybe in order to deter McCain's strategy of going in blind "all in", raising all the way to nothing short of WWIII, someone should advise the confused presidential candidate he is no longer playing poker on his iPhone
Ahead of tomorrow's ever-so-friendly G-20 meeting in St. Petersburg - where the US Secretary of State hopes that "the Kremlin has a change of heart," - Russia's President Putin just raised the rhetoric. As Reuters reports:
- PUTIN ACCUSES U.S. SECRETARY OF STATE KERRY OF LYING TO CONGRESS ABOUT AL QAEDA'S ROLE IN SYRIA CONFLICT
- RUSSIAN PRESIDENT PUTIN SAYS U.S. CONGRESS HAS NO RIGHT TO "LEGITIMISE AGGRESSION" AGAINST SYRIA
With the Moskva sailing into the Med along with many many others, it seems as Obama just admitted during his Sweden press conference, [on Putin:] "We've kinda hit a wall on additional progress"
With Syrian strikes looking to be a 90-day minimum 'surgical strike' and being supported by the US Congress, it is hardly surprising in this bad-is-good-news 'opposite' world, that both precious metals and crude oil prices are getting slammed lower this morning...
When last week the revised Q2 GDP print was announced, which beat expectations solidly driven entirely by a surge in net exports, we said that "with China on the rocks and tightening, the Emerging Markets in free fall, and Europe still a net exporter (so not benefiting the US), anyone hoping this trade led-recovery will be sustainable, will be disappointed." Sure enough, the first trade data update for the third quarter as of July, confirmed just this, as the trade deficit widenedfrom a revised $34.5 billion deficit, to a substantially larger monthly deficit, amounting to $39.1 billion. This was $500MM more than consensus expected, or $38.6 billion, and it means that as we predicted, the downward revisions to Q3 tracking estimates are about to start rolling in, trimming ~0.1%-0.2% from US GDP for this current quarter. Specifically, imports for the month rose from $225.1 billion to $228.6 billion while exports fell from $190.5 billion to $189.5 billion. But perhaps most notable is that in July, the US trade deficit with China and the EU rose to a record of $30.1 billion (from $26.6bn last month) and $13.9 billion (from $7.1bn) respectively.
"It's not worth shopping in China," said one disgruntled middle-class Chinese consumer, adding, "If you can wait, do it elsewhere." The reason is simple - massive price inflation. As the WSJ reports, clothing and other apparel is on average 70% more expensive for consumers in China than in the US. Government taxes and import tariffs are to blame for some of the price discrepancy, but, the WSJ goes on to note, for years the burgeoning Chinese middle class also seemed willing to pay more for products with consumer cachet, particularly imported goods - especially given the easy availability of credit. But today more Chinese consumers are pushing back, weary of sticker shock - and enlightened by the ability to compare prices elsewhere, thanks to the Internet - and China is starting to crack down on over-zealous pricing.
- Yes: Support Builds in Congress for U.S. Strike Against Syria (WSJ)
- No: Boehner backs Obama on Syria, but House leaning toward ‘no’ (The Hill)
- U.S. Congress fight over Syria pits establishment versus upstarts (Reuters)
- Wednesday humor: Japan’s Abe Says Fukushima Will Be Resolved Before 2020 Olympics (BBG)
- Bank of Japan to Consider Further Easing if Sales Tax Hike Goes Ahead (Reuters)
- S&P accuses U.S. Justice Department of filing $5 billion lawsuit against it in "retaliation" for the company's downgrade of America's debt in 2011 (WSJ)
- German Candidates Spar Over Records (WSJ)
- Emerging Nations Save $2.9 Trillion Reserves in Rout (BBG)
- Split Congress Mulls Denial of Military Force Request (BBG)
- Sharp Fall in Overseas Investment By Chinese Firms (WSJ)
- Jorge Lemann: He Is...the World's Most Interesting Billionaire (BusinessWeek)
- Why Amazon Is on a Warehouse Building Spree (BW)
It was just yesterday, when we reported on the build up of Russian naval forces in the Meditteranean, in this case two new marine-carrying amphibious assault ships, that we made a simple forecast: "Our prediction: the next ship to be dispatched in direction Syria will be the missile cruiser Moskva, the "flag ship of the Black Sea fleet" and more of its affiliated warships... That, and a whole lot of submarines." We were right.
RUSSIA SENDS MISSILE CRUISER MOSKVA TO EAST MEDITERRANEAN: IFX
RUSSIA SENDS DESTROYER, FRIGATE TO EAST MEDITERRANEAN: IFX
The deployment is, more than anything, symbolic. It means Russia will no longer take US military build up in the region on the sidelines. Because while the Mediterranean build up is inevitable (and can be tracked here), the next step will be the arrival of Russian air and land-based support in Syria. Oh, and China. Let's not forget China.
There is Whitney Tilson, there is Dennis Gartman, there is Bill Ackman, but when it comes to epic, blatant muppet genocide nobody, nobody in the history of Wall Street, can compare to Goldman's chief FX strategist Thomas Stolper. Nobody. "Trade Update: Closing long EUR/GBP after strong UK data offset other Sterling negative factors. We recommend closing long EUR/GBP positions for a potential negative return of 0.2%."
Today's morning summary is a carbon copy of yesterday's. Some things happened, China continues to make up data to fit its current policy outlook, things in Europe continue to go bump in the night ever louder as we approach the German election despite reflexive diffusion indices - this time Service PMIs - desperately signalling a surge in confidence, Italy has just reminded everyone it is a big political basket case as Berlusconi is said to consider withdrawing his support for the Letta government and calling for elections this year, and so on, but it is still all about Syria. Last night the Senate Foreign Relations Committee has agreed on a resolution on using military force against Syria. The resolution would limit the duration of any US military action in Syria to 60 days, with a 30-day extension possible if Obama determines it is necessary to meet the goals of the resolution. In other words, a "surgical strike" lasting a minimum of 90 days, and then with indefinite additional extensions tacked on. Yet judging by the modest drop in crude and gold, the market may need more than just fighting words at this point to push to th next level of risk aversion.
Equity markets across AsiaPac are once again a sea of crimson with India and Indonesia taking front of stage... but in divergent ways for a change. After slamming lower to new record lows (not surprising given the forwards weakness all day), speculation was rife that the RBI intervened in the Rupee and Indian stocks jumped exuberantly on the news (NIFTY +1.3%). But no such luck for Indonesia where the Jakarta Comp is -2%. Conversely (for now), Indonesia's Rupiah is relatively well bid (+1.28%) and the Rupee is still -0.6%. Elsewhere, the Philippines are being hit FX down and stocks -1.9% and even the larger equity markets of China, Australia, and Japan are red. US Treasuries are leaking higher in yield (10Y +2bps at 2.88%) and US equity futures are limping higher (now +1pt). Silver is pushing lower (-0.8%) while gold and Crude are only modestly lower.
A nation pushing toward war as a distraction from internal problems and political failures is as old as human civilization itself. It is a tried and true method for hanging on to positions of power and often ends up in massive displays of destruction, chaos and death. Sadly, we find ourselves on the precipice of such a moment right now. Not only did the U.S. government and intelligence agencies play key roles in Saddam’s far worse chemical weapons attacks in the 1980?s, but now we discover that the UK had approved sarin gas components for export to Syria as recently as last year! The sale was only blocked due to EU regulations.