Archive - Jul 24, 2013

While hardly a surprise, following recent speculative punditry (which failed miserably in forecasting Mark Carney as the next BOE head, something Zero Hedge predicted half a year ahead of the event due to one simple variable - he is from Goldman) and numerous trial balloons on Bernanke's successor coming hot and heavy from every direction, it was time for the Fed's own mouthpiece, Jon Hilsenrath, to speak, and bring back much needed drama and confusion.

Stocks had their worst day in a month; Treasuries their worst day in 3 weeks; and the USD strengthened the most in 3 weeks as Gold dropped. All seeming signals that the printing machine is less a factor than it was yesterday. The 'Taper' action apparently reflects better headline data this morning (EU PMI once again being claimed that all is well - just like in Jan 2012; US home sales beating expectations (but home prices collapsing); and US PMI beating expectations (in its typical lower highs cyclical pattern of the last few years). Today's good-is-bad drop in stocks was also accompanied by the heaviest volume in almost 3 weeks (as the 3rd day in a row saw the S&P 500 fail to break 1,700 at the opening rush). WTI slid back to around $105 (as gas prices have stabilzied at highs) and the spread to Brent leaks back wider. VIX rose 0.6 vols (its most in a month) back above 13%.

With parent income and savings dwindling, grants and scholarships (and student loans) are making up a greater and greater share of the budget for the typical family paying for college.

“We welcome the ruling party’s victory,” said one of the faces of Japan Inc. Others chimed in. They’d been handed a huge gift.

"We are left in the world of Wile E. Coyote who had the habit of dashing off cliffs in the pursuit of the elusive Road Runner, before  noticing the thin air below. Plenty of economists and money managers have their eyes fixed on leading indicators and tell me that Southern Europe’s economies are "stabilizing" and "prosperity is around the corner." In reality economic activity in Greece, Portugal, Italy, Spain, and also France, is collapsing."

In every era, there are certain people and institutions that are held in the highest public regard as they embody the prevailing values of society. Not that long ago, Albert Einstein was a major public figure and was widely revered. Can you name a scientist that commands a similar presence today? Today, some of the most celebrated individuals and institutions are ensconced within the financial industry; in banks, hedge funds, and private equity firms. Which is odd because none of these firms or individuals actually make anything, which society might point to as additive to our living standards. Instead, these financial magicians harvest value from the rest of society that has to work hard to produce real things of real value. Money is power. And history has shown that power is never ceded spontaneously or willingly. But the stability of this parasitical system begins to weaken quickly when the lifeblood it depends on begins to dry up. And that's when things can begin to go south in a hurry

The judge has decided to over-rule both objections and that nothing with regard the Chapter 9 process is held up.

• *DETROIT JUDGE OVERRULES OBJECTIONS CLAIMING BANKRUPTCY INVALID
• *DETROIT JUDGE SAYS HE HAS POWER TO GRANT GOVERNOR SUIT IMMUNITY
• *DETROIT BANKRUPTCY FILING IS VALID, FEDERAL JUDGE RULES
• *DETROIT BANKRUPTCY ELIGIBILITY TO BE DECIDED IN FEDERAL COURT

Now, we proceed to the Federal eligibility hearing (whether the city is eligible to proceed with Chapter 9). Remember this took almost a year with Stockton, CA. For now, Unions 0 - Orr 1 but it seems like neither side will be a winner when this is all over (which makes sense as while there is the law and the Obama-law, there is simply no money). The current plan (for now rejected by creditors) means a 90% loss for muni-worker retirees, 81% loss for unsecured creditors, and a 75% loss for secured creditors.

Presenting: the American middle class and its leader.

Did the world of retail investors just realize that they are indeed the greater fool (as we showed here), as it seems this high-volume dip in US equities - the largest since the July 5th ramp-fest began - is not seeing the BTFATH mentality coming in quite yet. Or perhaps it is the somewhat belligerent tone that the President is using towards the hard-working US CEOs who see profits over employment.

Just 45% of those surveyed in the NBC News-WSJ poll said they approved of the job the President was doing. This is a big drop from just a few months ago - even as stocks surge (and apparently so do jobs?). This is close to the lowest ever approval rating for a President proclaiming things are on the up. Congress is even worse - with its lowest approval rating on record - as bad as during the debt-ceiling debt debacle. What is most stunning is that a huge 57% of those surveyed would vote fopr a ballot measure to replace all members of Congress. As is clear from the charts below - people in the real economy do not care about the market (anymore) as it appears the link between Obama's popularity and stocks broke in February 2013.

We had absolutely no concern about the outcome of today's 5 Year auction: after all, when push comes to shove, Bill Gross who yesterday was pitching 5 Year bonds to twitter would have certainly bought up the entire issue. Yet we were surprised to find that Direct Bidders, among which such bond kings as PIMCO, tendered only $6 billion (a 47% hit rate) in bids into today's $35 billion auction. Odd - could Bill Gross have been untruthful in expressing his interest in the bond and was merely looking for greater fools? Unpossible.

With his report cards firmly in the 'failing' category, President Obama begins his own 'New Deal' path. Starting with today's speech at Knox College (scheduled to begin at 1255ET), Obama will unveil his grand plan for "A Better Bargain for the Middle Class." Explaining what it means to be 'middle-class in America' (who are ranked 27th in the world), he notes "the success of our economy has always depende not just on the size of our GDP, but on the reach of our prosperity." Sounds to us like some more wealth transfer is on its way. As long as Bernanke can keep elevating stock prices then the wealthy can afford to vig a few points off to the plebians to keep the social unrest at bay.

As the President prepares to address Congress (and the nation) with his next new new 'better bargain' deal to secure the economic future for the US, we thought it appropriate to dust off the economic scorecard for how things are going under his old new deal. Obviously, the President of the United States is not really solely responsible for where we are economically. The condemnation, or praise, must be applied equally to all branches of government responsible for the fiscal and monetary policy decisions made. The problems that exist today were not due to just the last few years of excess but rather come as a result of more than 30 years of fiscal irresponsibility that spans both Republican and Democratic Administrations alike. However, since President Obama has taken the position of responsibility for "clearing away the rubble and getting us back to where we were", we can review the economic data to see whether, or not, this is indeed the case.

Cybercrime is any criminal activity that involves IT technology. It could include diverse areas such as simply downloading illegal movies or music from the internet in its basic every format or it could extend to hacking into systems and using information or stealing.

My eye!--Stevie SAC-lops