Archive - Jul 2013

S&P 500 futures just lost the lows of yesterday's session on heavier than average volume. JPY is well bid breaking back under 98 against the USD. Despite USD weakness, gold and silver just got monkey-hammered down 1% in a minute. But US Treasuries are stoically rising above this tempest in a teapot and tracking sideways (for now). Oh, and AMZN is up 1% (makes perfect sense).

‘Vote For Gold’
"You have to choose, as a voter, between trusting to the natural stability of gold and the natural stability and intelligence of the members of the government. And with due respect to these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold."

... Well, not today's Ben Bernanke of course - a far more honest version of the current Fed Chairman, one speaking before the New York Chapter of the National Association for Business Economics, on October 15, 2002.

"I worry about the effects on the long-run stability and efficiency of our financial system if the Fed attempts to substitute its judgments for those of the market."

So do we Ben.

As municipal bankruptcies become the New Normal, it's worth noting that litigation does not generate more wealth to distribute, it simply burns existing wealth, leaving less to distribute. Yes, this is stating the obvious, but what's obvious is precisely what's ignored when fantasy attempts to trump reality. Every constituency in every municipal bankruptcy believes they're the most deserving, and they believe that litigation will reveal the obvious truth of their claim. Unfortunately for those counting on the Grand Federal Bailout, the queue at the Federal bailout window is already long: $100+ billion bailout of FHA, which issued hundreds of billions of dollars of mortgages to unqualified buyers; $100+ billion in uncollectible student loans owned or guaranteed by Federal agencies, and of course the $1+ trillion annual deficits needed just to fill the massive feeding troughs of the Status Quo.

As Libertarians, we seek a world of liberty; a world in which all individuals are sovereign over their own lives and no one is forced to sacrifice his or her values for the benefit of others.

Our goal is nothing more nor less than a world set free in our lifetime, and it is to this end that we take these stands.

Here is the cover of the latest New Yorker magazine, which one can only hope puts to rest the latest surreal episode of a man who has become a walking parody of himself, and which increasingly blurs the boundary between US politics and reality TV (and cunningly so: 69% of 18-29 year olds believe he should continue his mayoral campaign).

Despite more than two-third of respondents expecting interest rates to rise in the year-ahead, and inflation to increase; and despite dramatically higher current mortgage rates and a surging gas price, consumers haven't been this 'happy' since July 2007. Unfortunatley for those expecting something more, it appears the slightly-better-than-expected print is not good enough to cause the market to plunge (in a good-is-bad "we've done our job" manner) and not bad enough to cause the market to soar (in a "we need moar animal spirits manner). Of course, we've seen this before (here and here) and it doesn't end well.

There appear to be three critical aspects playing out behind the scenes in markets that are little discussed as potentially catalyzing events. With all eyes focused on FOMC next week (and Kuroda Sunday), the ABCs (Angela Merkel's election, Bankrupt Detroit's fallout, and Corrupt Cohen's potential contagion) make few strategists' notes but could quickly ascend to public enemy number one for the secular bull case. Little Red Riding Hood thought it a lovely day to walk to Grandma’s house. Then look what happened.

In the last month not a day appears to pass without some news about a glitch, malfunction, or full-blown fire, affecting the ironically named Boeing Dreamliner (resulting in the stock soaring to daily all time highs). Today promises to be no different, with not one, not two, but three separate incidents impacting the airplane. Reuters reports that Qatar Airways has taken one of its 787 Dreamliners out of service following what it described as a "minor" technical issue. "Minor" as in a burnt-out indicator light, or "Minor" as in the plane nearly fell out of the sky burnt to a crisp? The distinction can be important.

With hotter than expected inflation in Japan (yes we know that's what they wanted), it appears (from Nikkei and JPY) that there is a growing concern Kuroda will back off just a little during his speech on Sunday night (NY time) from the print-til-we-stink paradigm. Japanese stocks are down over 5% since Tuesday and the JPY is surging (suggesting markets are crying out for Kuroda to do a Bernanke and shift to longer/lower forward guidance). US equities - dragged by JPY-related carry unwinds - are also diving, back near yesterday's lows.

Government efforts to curb imports is meant to limit that downward pressure on the Rupee but has instead driven a surge in illegal imports (smuggling) of the precious metal. As the WSJ reports, the measures are having an effect. Gold imports declined 11% to 859.7 tons in 2012 from 969 tons in 2011 and the total for June fell about 80% to 30 tons from 162 tons. But while supply may be falling, demand isn't - "Trying to manage this demand, which is so diversified, by restricting supply will lead to undesirable consequences." Sure enough, "smuggling of gold seems to be increasing month on month," the number of people arrested by the department for gold smuggling rose to 32 in Q2 2013 from just 4 the year before - and officials are able to "detect only about 5% to 10% of the gold smuggling." The value of the gold seized during the quarter was 270 million rupees, more than 10 times that of last year.

The raw economic truths from the Street. What's the difference between your common street thug or hustler and the K Street/Wall Steet/Central Banker? Read this to find out...

Is Vladimir Putin, tired with Edward Snowden recasting himself as Tom Hanks in the Moscow transit terminal, about to send the NSA whistleblower packing, bound and gagged, and gift wrapped back to Obama? It increasingly appears so. Reuters reports that, in a sudden and abrupt shift to the previously defiant tone out of Putin, Russia's FSB federal security agency and its U.S. counterpart, the FBI, are in talks over the fate Edward Snowden, who is stuck at a Moscow airport, Russian President Vladimir Putin's spokesman said on Friday. Dmitry Peskov said the Kremlin was not involved in talks over the 30-year-old American, who is wanted by the United States on espionage charges.

Today, to much fanfare, the FT and other media blast that "Japan posts highest inflation rate since 2008" using this as evidence that Abenomics is once again working (i.e., that the Nikkei 225 has resumed its upward nominal path). Unfortunately, as usually happens, there is a problem here: this is simply not true.

• The Citadel-SAC connection (BBG) - just wait until the Citadel-FRBNY connection emerges
• Letter backs Yellen for Federal Reserve role (FT) - or said otherwise, the Democrats would like the Fed to rule (and monetize deficits) for ever
• Obama, Republicans gear up for bruising U.S. budget fight (Reuters)
• Up for Debate at Fed: A Sharper Easy-Money Message (WSJ)
• UBS to Pay $885 Million to Settle U.S. Mortgage Suit (BBG), Banks shiver as UBS swallows $885 million U.S. fine (Reuters)
• Japan finmin Aso: CPI shows gradual shift to inflation from deflation (Reuters)
• Japan's PM calls for high-level talks with China (Reuters)
• Holder Targets Texas in New Voting-Rights Push (WSJ)
• Another Nightmareliner incident: Probe opened as Air India Boeing Dreamliner oven overheats midair (Reuters)
• Samsung Boosts Capital Spending as High-End Phone Demand Slows (BBG)