Archive - Aug 29, 2013

Initial claims continues its saw-tooth shallow trend lower with a drop of 6,000 this week, very slightly beating expectations. The previous week's 'miss' and unexpected rise was due to a surge of 51,000 new claims in California. It would seem clear that firms have reached a cost-cutting maximum as claims have been in a generally tight range now between 320k and 350k for the entire year.

What is important to understand is that, despite rhetoric to the contrary, "record" earnings or profits are generally fleeting in nature.  It is at these divergences from the long term growth trends where true buying and selling opportunities exist. Are we currently in another asset "bubble?"  The answer is something that we will only know for sure in hindsight.  However, from a fundamental standpoint, with valuations and profitability on a per share basis well above long term trends it certainly does not suggest that market returns going forward will continue to be as robust as those seen from the recessionary lows.

Some took a prior report the that the "developed" nations would use Cyprus as a warplane strike base just as a leaked memo predicted in 2011, skeptically. Today we finally got official confirmation from that Britain that it is sending six RAF Typhoon jets to Cyprus "as a defensive measure amid growing tensions over Syria and talks of Western military intervention." It's defensive in case Syria launches an airborne assault of the UK we take it? And just as expected, with the US already piling up naval assets in both the Mediterranean and the Arabian Sea, Russia is responding in kind, and has dispatched a submarine and a cruiser to the Mediterranean. Finally, keeping things exciting, China reiterated that the West should stay the hell out.

• UN Insecptors to leave Syria early, by Saturday morning (Reuters)
• Yellen Plays Down Chances of Getting Fed Job (WSJ)
• JPMorgan Bribe Probe Said to Expand in Asia as Spreadsheet Is Found (BBG)
• No Section 8 for you: Wall Street’s Rental Bet Brings Quandary Housing Poor (BBG)
• Euro zone, IMF to press Greece for foreign agency to sell assets (Reuters)
• Brothels in Nevada Suffer as Web Disrupts Oldest Trade (BBG)
• U.S., U.K. Face Delays in Push to Strike Syria (WSJ); U.S., U.K. Pressure for Action on Syria Hits UN Hurdle (BBG)
• Renault Operating Chief Carlos Tavares Steps Down (WSJ)
• Vodafone in talks with Verizon to sell out of U.S. venture (Reuters)
• Dollar Seen Casting Off Euro Shackles as Fed Tapers (BBG)

Those curious if the Indian Rupee cratered once again in overnight trading will be disappointed: following the previously reported intervention by the RBI in which it would provide US dollars only to crude companies, the currency rose strongly at the open only to fade and trade rangebound before closing in the mid 67 range. In other words, much more will be needed by the central bank to stabilize the currency, the markets and the economy. The main overnight story, however, remains the Syrian conflict and market reactions to it. Stocks traded higher in Europe early today, with credit spreads tightening as market participants scaled back expectations of an imminent strike on Syria after US Defense Secretary Hagel said that the US will act on Syria only with international collaboration. Of note, the G-20 is set to take place next week where Syria is widely expected to be the hot topic for discussion among global world leaders. But while futures ramped in early trade following a spike in the USDJPY over 98, they have since retraced most of their upside, and crude is back to nearly unchanged.