Archive - Oct 2013

Dept. of Defense on Irregular Financial Warfare

With even the Federal Reserve throwing doubt on the veracity (or usefulness) of the 'official' unemployment data (having finally caught on to the reality we have highlighted for a number of years), Petr Pinkhasov has created a more 'real' unemployment index reflecting the reality of every day for the average American...

The last time a Tesla Model S struck an object in the road and burst into flames, it resulted in a rather dramatic stock price demise and a hastily put together PR blitz explaining that "there is nothing to see here, move along." We wondered at the time how soon we would hear the second 'crackle' of battery packs exploding and sure enough, less than a month later, Jalopnik reports (as the clip below shows) another Tesla Model S has caught fire in a Mexico city following a crash. How many Fiskers went up in flames before people started doubting that company's reassurances?

While on the surface today's bond auction of "only" $32 billion in 2 Year paper (last month and previously it was $33 billion or more, which is now declining alongside the dropping US deficit and net funding needs, if not the absolutely flat amount of debt monetized by the Fed), was uninspiring, there was some stirring beneath the surface. Specifically, the high yield of 0.323% was through the When Issued of 0.328%, while the Bid To Cover of 3.32 was above last month's 3.09, and was the highest since the 3.63 in April. Has the trend of declining Bids to Cover finally ended? Looking at the internals shows a return to some recent normalcy, namely that the Directs took down a substantial 30.97%, the highest since February, Indirects had a modest 29.02% allocation leaving just 40% to the Dealers, which was also the lowest Primary Dealer take down since October of last year. Perhaps most importantly, the flatline in the yield which has been in the 0.3% range since August 2011 indicates that absolutely nobody belives the Fed will hike rates any time before 2016.

In these climax years of industrial technocratic society, two opposing forces shape the destiny of government: the desperate effort to control everything versus the decline of the ability to carry out that effort. The result will be the loss of legitimacy and the collapse of government from the highest levels, moving downward until the real power to make anything work re-sets at a feasible and appropriate level — probably very local. This dynamic is seen very clearly in three spectacles du jour: the “national security” (spying) mess, government-sponsored accounting fraud in finance, and the ObamaCare rollout.

In the paradoxical New Normal media world in which the legacy creators of original content (even if most of it is designed to suit a specific agenda) are hopelessly burning cash at an ever faster pace, while those who (at least for the time being) are profitable and cater to the "social network crowd" do so on the backs of kittens, slideshows and headlines designed to attract the lowest common denominator, what is one to do? One suggestion, as the following XKCD table shows, is to rewrite history, while focusing on the only thing that matters: trolling for reads, bobbing for CPM and clickbaiting, of course.

Apple announces after the market close today. For my subscribers, I believe true valuation hovers around my base case scenario from the last Apple update.

With 'spies like us' who needs enemies. With the world upset at what Obama now claims is all Bush's doing, the installation of a new FBI Director (James Comey) may just have some irony to it; especially since the White House has specifically noted he will be making some 'remarks'. Of course, the hope is that President Obama will use this opportunity to answer a few questions from an uninspired press corps...

This is a topic that has been on our radar screen for a while, but one that very few Americans seem to be paying attention to despite the egregious revelations concerning NSA spying that have emerged recently.The latest push for tracking devices in cars is being sold as necessary in order to raise funds to pay for the nation’s decayed highway infrastructure. For example: As America’s road planners struggle to find the cash to mend a crumbling highway system, many are beginning to see a solution in a little black box that fits neatly by the dashboard of your car. This is simply idiotic. There is already a tax per gallon on gasoline, so people are already being taxed based on how much they drive. Only a control-freak, moronic government bureaucrat would come to the conclusion that the solution to this problem is to install Orwellian tracking devices in people’s cars.

To Bill Gross @PIMCO: If you really want to do good, why not join http://t.co/nn6jp9E2ch like Gates, I and many others have?

— Carl Icahn (@Carl_C_Icahn) October 28, 2013

One of the prevailing themes in recent weeks has been that Spain has transformed out of Europe's economic basket case into a success story. This was further exemplified today by the following quotes by DieselBOOM:SPANISH RECOVERY IS ON TRACK;SPAIN COULD BE FRONT RUNNER OF EURO-AREA RECOVERY. It could, if one listens to bureaucrats peddling snake oily hope, but certainly not based on actual dynamics in its housing market, where mortgage apps have tumbled 90% from all time highs... and certainly not based on loan to companies or households, which continue to be the worst in the Eurogroup.

Last month was all ponies and unicorns as hope was extrapolated that a 19-month high in the Dallas Fed meant this time was different and not entirely cyclical as we have pointed out again and again. Once again it seems the government-budget-based hope has collapsed as even optimism for the future dropped to its lowest in 4 months. This is the biggest miss of expectations on six months and the lowest print in 5 months. Reflecting the margin pressures that we discussed previously, prices received dropped dramatically as price paid soared.

Despite Joe Lavorgna's seemingly gigantic cognitive dissonance in the face of this report, the pending home sales data collapsed in September (and remember this is before the shutdown and was heralded at the time as buyers rushing to buy before the risk of the shutdown slowed acceptances). Affordability, argued by some serial extrapolators as still being 'relatively' positive - has drastically weighed on housing at the margin just as we argued previously. This is the first annual drop in 29 months, the biggest drop in 40 months, and the biggest miss against expectations in 40 months. Even the typically full of spin, NAR Chief economist had to admit "this tells us to expect lower home sales for the fourth quarter, with a flat trend going into 2014." Apparently, if one is to believe the spin, overheard everywhere in September: "Hmm, government may shut down next month - let's not buy a house."

The status quo is as intellectually bankrupt as it is financially bankrupt. Our leadership cannot conceive of any course of action other than central bank credit creation and expanding state control of the economy and social benefits, paid for with money borrowed from future generations.

Industrial Production data for September rose by 0.6%, beating expectations by the most in 11 months as pre-government shutdown data was 'helped' by a revision lower in August (from 0.4% to 0.2% growth). Manufacturing production rose only 0.1% (missing expectations of +0.3%) as gains in car makers' output was offset by declines in comptures, furniture, and applicances. Capacity Utilization surged to 5 year highs with its biggest beat of expectations since Dec 2010. All-in-all, a strangely mixzed bag of great and dismal data once again... Good enough 'trend' to warrant 'taper'? who knows... but we posit the cyclical trend remains and the government shutdown likely renegs some of this better-than-expected data when we see it.