Archive - Jul 2011

Just released from John Boehner, clarifying his position on why he has terminated all debt ceiling hike discussions with Obama. Following Obama's statement, Boehner will have his own press conference at 7:15 pm

A week after Barack Obama stormed away from Republican negotiations on the debt ceiling, it is now Boehner's turn. Per Obama's live speech which is currently ongoing, John Boehner has broken away discussions with the president. Obama's response is to demand a meeting with Bohner, Pelosi and McConnell at 11 am tomorrow to explain to the president how it is possible that America will be in non-selective default in as little as ten days: "I want them here tomorrow at 11am...we have run out of time." Readers can watch the live webcast here.

Following yesterday's market ramp on the latest European bailout which after some contemplation the world realized was far less definitive than most had expected, in essence being yet another rotation of risk from the PIIGS to the core, today's market action was very listless, although sure enough, courtesy of the abysmal volume which was at monthly lows for both ES and the MVOLNYE. If even yesterday's European TARP was unable to get the buying interest into the market then pretty much nothing will. Oh sure, the market will ramp on news of a debt ceiling deal which will likely come next week, which explains why there a short covering squeeze with seconds to go, but the secular trend of ever declining stock volume means that the Fed will soon need to reevaluate its policy of boosting the stock market as a proxy for the economy as not even the kleptocrats have any desire to rotate worthless fiat into future dividend promises.

Default will be painful, but it is all but inevitable for a country as heavily indebted as the U.S. Just as pumping money into the system to combat a recession only ensures an unsustainable economic boom and a future recession worse than the first, so too does continuously raising the debt ceiling only forestall the day of reckoning and ensure that, when it comes, it will be cataclysmic. We have a choice: default now and take our medicine, or put it off as long as possible, when the effects will be much worse.

As noted by Richard Heinberg on June 22nd, 2011, the media has lacked the ability to connect the economic situations in the Middle East and their uprisings to what is happening in Europe. I would avoid the word “Revolution” in the case of the Middle Eastern uprisings, seeing as no dramatic systemic changes have taken place, only the ousting of dictators. Same as I would avoid the words of social upheaval in the case of European protests, which have been quite calm and only demanding to maintain the social safety nets produced through years of labor struggle. Rather, the odd occurrence is the ostensibly quiet population of the United States who are in many cases having the same economic problems and austerity based government solutions. This is a place where the media does want to ask the public the question, “Why aren’t you protesting?”

As of an hour ago the official temperature in New York hit 102 degrees: an all time recor, topping the previous 101 from 1957. And courtesy of a power grid in dire need of upgrading and repair, the ConEd outages in the TriState area are starting to trickle in. At last check on the interactive map, at least 8000 customers have been hit with power outages so far. The number will almost certainly rise with as the day progresses and as residents return to their sweltering toaster apartments and crank the A/C to the max.

RANsquawk Weekly Wrap - we answer 3 questions that have come to the desk, and we highlight some of next weeks important news and data to look out for.

The news of today's Norway bombing is still developing and already the Telegraph has started the blame game. The target? Why jihadists of course. And while there may be reason to assume this is the case, the fact that there are absolutely no known confirmed facts at this point allows us to be very grateful for the phenomenon of broad ethnic and racial stereotyping and profiling. Incidentally, according to preliminary reports, the description of the shooter at the Labor Party youth camp is 6 foot tall, and blond: last time we checked Libya didn't have an endogenous Aryan population.

The global economy may be collapsing but at least companies are making out like bandits right? Wrong. While America is enjoying yet another above average earnings season when it comes to multinationals (and certainly not financials- those have had an abysmal earnings season), Europe, which has had a very lousy week despite the makeshift triage for the EUR which will last exactly a few months, as confirmed by both yesterday's PMIs and today's German Ifo survey, is on track to experience its worst earnings season in a decade! As Bank of America summarizes, of the 49 companies that have reported so far, 36.7% have beaten and a massive 53.1% have missed. And even more surprising is that the sectors which have outperformed in the US are precisely those that are doing the worst in Europe, specifically discretionary, industrials and staples. But such is life in a relative value fiat world. Surely, Europe's corporations are now lamenting the fact that its idiotic feudal lords will do anything in their power to keep the EUR artificially high for no other reason that to rub their vanity in that special place... ignoring that this experiment in vanity massage is now costing Germany tens if not hundreds of billions in almost guaranteed economic output loss. How long before Europe's corporatocracy screams enough and starts demanding that the USD take its place as the most overvalued currency? Of course since all such complaints will end up in Trichet's inbox, we expect every such lament to be met with the usual broken parrot response: "the euro is a ‘Solid, Strong, Credible Currency."

And the answer is...the Dollar Index is going lower!

Dramatic footage of a post-bomb explosion Oslo comes via Reuters. Presented without comment.

The question is will the extreme heat bring us big storms. There's a good case for that to happen.

Time to put on the boots. The shit is getting thick...

For all you twits who think the law will protect your "gold-plated" pensions...wake up already!!!

If we knock down all the flimsy screens of artifice and obscuring complexity, what we see in Europe is a continent of debt-serfs, indentured to the banks under the whip of the European Union and its secular religion, the euro. What else can we call the stark domination of the big banks other than Neo-Feudalism? In one way or another, every one of the 27-member nations' citizens are indentured to the big international banks at risk in Europe, most of which are based in Europe.
We can clear up much of the purposeful obfuscation by asking: exactly what tragedy befalls Europe if all the sovereign debt in the EU was wiped off the books? The one and only "tragedy" would be the destruction of the "too big to fail" banks, not just in Europe but around the world. As the big European banks imploded, then their inability to service their counterparty obligations on various derivatives to other big banks would topple those lenders. While the political vassals call that possibility a catastrophe, it would actually spell freedom for Europe's 500 million debt serfs. From the lofty heights of the Manor House, then the loss of enormously concentrated power and wealth is indeed a catastrophe for the Lords and their political lackeys. But for the debt-serfs facing generations of servitude for nothing, then the destruction of the banks would be the glorious lifting of tyranny.