Archive - Aug 26, 2013

After a brief and hopeful respite, the Indonesian Rupiah has collapsed by 3.9% in the evening's session - the biggest drop in 5 years. A close second is the Indian Rupee which has colapsed back from its best day in 11 months with a 1.5% plunge. EM bonds are being sold with India and Indonesia leading the way along with Thailand which just joined the bear-market crowd in equity land as its stock market is down 20% from May highs (down 9 days in a row - the most since 1998). Stock markets are all lower with India (banks -2.5% today and 35% from highs) and Philippines worst. Gold remains 'held' under $1400 as the USD (Asian Index) jumps to its highest in 14 months. Treasuries are modestly bid overnight (and US equity futures down slightly). Elsewhere, the Turkish Lira just hit a fresh record low against the EUR and India, Indonesia, Thailand, Malaysia, and Philippines stocks are all down over 12% Quarter-to-date in USD terms.

US-Russian relations are rapidly going from bad to worse to hopeless. As if open public disagreement over Syria expressed in every possible venue and medium, and foreign policy in general was not enough, now the two countries' animosity has spilled over into private diplomatic affairs. Moments ago, AP reported that the State Department postponed a meeting, which was originally scheduled for August 28, with Russian diplomats on Syria this week to an indefinite future date. The meeting at The Hague was about setting up an international conference to find a political resolution to the Syrian crisis.

The ever-expanding role of government in healthcare provides an excellent example of Ludwig Von Mises’ warning that “The Middle of the Road Leads to Socialism.” Beginning in the 1940s, government policies distorted the health care market, causing prices to rise and denying many Americans access to quality care. Congress reacted to the problems caused by their prior interventions with new interventions, such as the HMO Act, ERISA, EMTLA, and various federal entitlement programs. Each new federal intervention not only failed to fix the problems it was supposedly created to solve, it created new problems, leading to calls for even more new federal interventions. This process culminated in 2010, when Congress passed Obamacare.

Once again we ask (rhetorically of course), just what is it that the-powers-that-be mean when they discuss "inflation"? As we noted a year ago, while the "ZIRP is the answer to all" solution has led to a rise in the price of almost everything that matters (and doesn't for that matter); one 'cost' stands out among the others (whether under Bernanke or Greenspan) - in the past 3 decades there has been no other cost that comes even remotely close to matching the near hyperinflationary surge in college tuition and costs.

It appears Mikael Charoze (remember him from the list of "people bringing you your daily does of 'currency manipulation'") is bright and early in the BIS' Hong Kong office delivering the daily dose of "sell" to gold futures markets everywhere. As JPY strengthens on risk-aversion among the carry crowd, Gold spiked up to its highest since June 7th (at $1,407.42)... but that cannot stand so it was smashed back down in an almost perfect replay of last night's price action back under the all-important $1400...

A study carried out recently by Nature Climate Change took a look at and analyzed past and present floods in the world and was able to predict the future floods that will take place concerning 136 cities.

Following John Kerry's press briefing, it appears the Obama administration seems absolutely determined to help radical Islamic jihadists that have beheaded Christians, that have massacred entire Christian villages, and that have pledged loyalty to al-Qaeda topple the Assad regime and take over Syria.  Yes, the Assad regime is horrible, but if these jihadist lunatics take control it will destabilize the entire region, make the prospect of a major regional war much more probable, and plunge the entire nation of Syria into a complete and utter nightmare.  This is setting up to become a colossal foreign policy disaster for the United States.

The total amount of Greek government debt outstanding has grown so much over the last 15 months that it has retraced over 60% of the 'haircut'-based reduction and has jumped a stunning 14.5% in that period. As KeepTalkingGreece notes, this is despite three years of strict austerity measures, incredible taxes and a debt haircut of 53% (~100billion euros in March 2012). As To Vima reports, Greek debt stands at EUR 321 billion, which is considerably higher than the pre-crisis levels of 2009. Is it any wonder that Merkel and Schaeuble have been forced to admit that a new bailout will be required? And how long before a 'new template' will be enforced?

Americans Are Sick of War

WAR DRUMS: An official tells @CNN The U.S. could strike #Syria within hours- @PoliticaILine -Israelis scramble for gas masks- @TimesofIsrael

— Breaking911 (@Breaking911) August 26, 2013

While Portuguese bond spreads suggest all-is-well, stocks rally, and the nation's leaders proclaim the worst is over, there is a hard-to-manipulate statistic that should shock many about the truly dismal state of the troubled nation. As The FT reports in the brief clip, Portuguese road-traffic fell 50% in 2012, and a stunning 68% in Q1 2013... and the detail are even worse.

BREAKING. @MajorCBS says that at a Saturday White House meeting there was no debate that a military response against Syira is necessary.

— Charlie Kaye (@CharlieKayeCBS) August 26, 2013

Less than a month ago, potash stocks around the world cratered overnight following news that Russian potash producer OAO Uralkali announced its decision to break up a 'marketing venture' that controlled around 43% of global potash exports in the process ending the cartel that many US fertilized companies enjoyed for years. The end of the cartel was also a big hit for former partner Belarusian Potash Company (BPS) and the host nation Belarus, a country of 9.5 million people, where revenue from its potash industry accounts for almost 20 percent of the budget.  Everyone, Goldman Sachs, included were confounded by the move: Such behavior by Belaruskali in a structurally oversupplied potash industry should push for stricter competition for end customers and result in a significant swift decline in pricing... " What was most surprising is that Uralkali would voluntarily engage in this move, knowing full well that the Belarus government would retaliate. The only question is how severely. Turns out the answer is "very."

It seems "glitch" is rapidly becoming the new normal for our cloud-based world as last week's epic fail on the NASDARK (and Amazon's 30-minute 'dark' period) has now been followed up by a "glitch" at one of Amazon's data centers last night knocking out users of Vine, Instagram, and Netflix. While NASDAQ remains tight-lipped over the source of its glitch, Amazon has narrowed the search for the vindictive bug to a 'partial failure of a network device' in a northern Virgina data center. As The BBC reports, the problems began around 1600ET and continued for several hours. We await news from EUREX on what 'glitch' caused their systems to fail epically this morning also.

Remember what the 2012 leaked Stratfor memo said about the focal point of western airborne power? Here it is again: "Syrian air defenses are a lot more robust and are much denser, esp around Damascus and on the borders with Israel, Turkey. THey are most worried about mobile air defenses, particularly the SA-17s that they've been getting recently. It's still a doable mission, it's just not an easy one. The main base they would use is Cyprus, hands down. Brits and FRench would fly out of there. They kept stressing how much is stored at Cyprus and how much recce comes out of there. The group was split on whether Turkey would be involved, but said Turkey would be pretty critical to the mission to base stuff out of there. EVen if Turkey had a poltiical problem with Cyprus, they said there is no way the Brits and the FRench wouldn't use Cyprus as their main air force base." (sic) Well, it has begun. Guardian reports that "Warplanes and military transporters have begun arriving at Britain's Akrotiri airbase on Cyprus, less than 100 miles from the Syrian coast, in a sign of increasing preparations for a military strike against the Assad regime in Syria."