Archive - Aug 2013

With crude prices at multi-year highs and India promising to save its oil companies it is perhaps not entirely surprising that all the attention in this opposite world pushed the Energy sector (most notably the biggest names) to lead the market higher on low volumes today. Sadly, Chevron and Exxon accounted for 40 of the Dow's 48 point gain and the S&P energy sector gained an impressive 1.8% as the rest sat around close to unchanged (and Staples lower). Treasuries began selling off from the Asian open last night with the belly 6-7bps higher in yield on the day (-3-5bps on the week)... But 330RAMP was missing as all indices gave back considerable gains into the close with Trannies red (and S&P at its 100DMA again).

Since the Vietnam War, the United States has engaged in several military interventions. As the West looks ready to act against Syria, accused of using chemical weapons against its own citizens, WaPo presents 10 instances when America has intervened, sometimes without authorization from the United Nations.

This chart seems to sum up our fiscal challenges as well as anything else...

Debunking U.S. Claims about UN Weapons Inspections In Syria

President Obama commemorates 50 years of "believing"... in jobs and freedom

If Syria is invaded by the West, then we should be getting ready for a hike in the price of Brent that some say may reach a much as $150 since it will escalate into a regional problem and affect supplies coming out of Iraq.

If you remove this sector, then earnings for the S&P 500 in the second quarter so far are DOWN 2.9%

Despite trillions of dollars of interventions and zero interest rates by the Federal Reserve, combined with numerous bailouts, supports and assistance from the Federal Government, the economy has yet to gain any real traction particularly on "Main Street."  Are we currently experiencing the second "Great Depression?"  That is a question that we can continue to debate currently, however, it will only be answered for certain when future historians judge this period. One thing is for sure.  With the lowest rate of annualized economic growth on record there is a problem currently that is not being adequately recognized. The depression may indeed be on "Main Street" once again with the only difference being that the "breadlines" are formed in the mailbox rather than on street corners. And while many are quick to dismiss comparisons to the Great Depression, there is one important difference: the rate of population growth which, as opposed to the depression era, has been on a steady and consistent decline since the 1950's.

While Nigel Farage personal view that it is 'probable' that Assad did what the US and British are accusing him of, he notes "it is not absolutely certain," and before we go to war, "we must have absolute proof and certainty." Commenting on the British and US seeming enthusiasm for another Middle Eastern 'war', Farage provides a few minutes of common sense in this brief clip when he notes that Europe remains split - though "moral outrage" at the accusations will likely mean they support the attacks (adding that "moral outrage alone is not enough to warrant attacks."). The UKIP leader then warned that "military intervention in Syria could lead to something far bigger, and even more worrying than we are seeing at the moment." Finally, Farage notes that "whenever we get involved in the Middle East, we tend to make things worse, not better," and as ghastly as the actions being committed are, there is nothing the British (or American) military can do to make things better.

While unlikely to surprise too many people, the chairman of the ironically-named "MainStreet Bank" used over one-third of the TARP-supplied funds his bank received to buy himself a luxury home. Darryl Woods plead guilty to using $381,000 of the TARP funds to buy waterfront Florida property "at a time when many Americans were losing their homes," the US District Attorney exclaimed. Disgustingly, Mr Woods had previously written to TARP regulators describing Mainstreet as a small community bank and saying the funds "will provide vitally needed infusions to a bleeding patient." As The BBC reports, his wrongdoing was uncovered when regulators began examining how the money was used - which has so far uncovered 140 cases of misused funds...

As we reported last week, as a result of spiking yields and due to an odd confluence of calendars and cash yields, today's 5 Year might end up as a 7 Year reopening (specifically 7 Year Series P-2018 CUSIP 91282RE2). It did: as a result of falling in the indicated yield range and having a 1.5% cash coupon, today's 5 Year is effectively a 7 Year bond reopening. From the TSY: "Although a new 5-year note offering was announced on Thursday, August 22, 2013, the interest rate of 1-1/2 percent determined at today's auction for these securities matches that of an outstanding 7-year note with the same maturity and interest payment dates. In accordance with Treasury's past procedure, the 5-year notes will be considered an additional issue of the outstanding 7-year notes of Series P-2018 (CUSIP No. 912828RE2) originally issued August 31, 2011." Curiously this happened even as someone was dumping the 5 Year aggressively into the auction, which closed at 1.624%, a fraction away from the 1.625% permitted range, and tailing materially from the WI which was trading at 1.620% at 1 pm.

When it comes to the accuracy of its reporting, PressTV is somewhere just left (or right) of Debka, so take this with a metric ton of salt. However, it bears reporting on the off chance it is accurate. From PressTV:

US troops backed by tanks and fighter jets have been mobilized along the Jordan-Syria border, as the West appears to be moving toward military action against Damascus, reports say.

That said, we would wait for confirmation from at least SyriaNow before lending much if any credibility to this report.

Until now, the loudest and most material opponent to a Syrian invasion by the "liberating" powers was Russia. Moments ago, China joined the anti-western axis. BBC reports: "Russia and China have stepped up their warnings against military intervention in Syria, with Moscow saying any such action would have "catastrophic consequences" for the region." Adding to the picture, Interfax reported moments ago that representatives of Russia and China have withdrawn from a UN Security Council session on Syria. And since both countries have UN veto power, just like back in 2012 when this whole scenario was being replayed, there can be not joint UN resolution.

At a time when we claim to be seeking a permanent solution to the circular situation which exists between Israel and Palestine (Palestinians), it is incongruous to reality that we fail to see what is happening all around the Middle East.  The old United Arab Republic, Syria and Egypt, have over 90 million people divided and fighting, whether in open civil war or through socioeconomic confrontation.  It has less to do with political regimes, and so-called dictatorships such as those of Mubarak and Assad, and more to do with the existing distribution of wealth and power.  And equity may or may not come through dialogue (hopefully) or civil struggle (unfortunately).