Archive - Aug 2013

And The King of Beers...

With a debt once again jumping higher, GDP stalling, crime soaring, unemployment surging, and homelessness rife - oh, and the money-men (women) proclaiming that "Greece should never have entered the Euro" - the government is now backtracking on a previous decision that "expired foodstuffs will be made available for purchase as of September 1st." Unsurprisingly, the announcement of the new regulation on Monday sparked angry reactions from consumers, and prompted the Consumer Ministry to explain on State TV that the directive had been misinterpreted by media reports and does not represent a public health hazard.

The aftermath of the biggest crash in the Indian rupee in history is becoming clear: business are scrambling to refine budgets, import and export activity is disappearing as there is zero clarity what the actual transaction prices net of FX are, purchases of hard assets are exploding as people are desperate to protect what little purchasing power they have left, capital controls are being instituted virtually everywhere, and the overall economy - at least that part that is reliant on foreign trade flows - is grinding to a halt. In fact, it got so bad, that moments ago the 1 month USDINR forward hit a ridiculous 70.

A Sr US official tells NBCNews "we're past the point of return" and US airstrikes against Syrian targets appear inevitable."within days."

— Richard Engel (@RichardEngel) August 28, 2013

It's funny: nearly five years ago, when we first started, and said that the world is doomed to an endless cycle of bubble, financial crisis and currency collapse as long as the Fed is around, most people laughed: after all they had very serious reputations aligned with a broken and terminally disintegrating economic lie. With time some came to agree with our viewpoint, but most of the very serious people continued to laugh. Fast forward to last night when we read, in that very bastion of very serious opinions, the Financial Times, the following sentence: "The world is doomed to an endless cycle of bubble, financial crisis and currency collapse." By the way, the last phrase can be written in a simpler way: hyperinflation. But that's not all: when the FT sounds like the ZH, perhaps it is time to turn off the lights. To wit: "A stable international financial system has eluded the world since the end of the gold standard." Q.E.D.

Pending home sales missed expectations for the first time in 3 months, falling 1.26% MoM (vs a 0.0% expectation). This forward-looking measure of housing based on actual contract signings suggests that all the anecdotal evidence of an artificial echo-boom in real estate coming to an end. With the West down 4.9% and Northeast down 6.5% MoM (the biggest 3-month drop in 3 years), even the much-vaunted fair-and-balanced National Association of Realtors are forced to admit that "higher mortgage interest rates and rising home prices are impacting monthly contract activity." Whocouldanode?

With 'drums' growing ever-louder, Russia's "emergency situations" ministry has sent a second aircraft to evacuate citizens willing to leave war-torn Syria. As RiaNovosti reports, "an Ilyushin-62 plane took off for Latakia. This special flight is for Russian and CIS nationals who had earlier expressed their determination to return to Moscow," emergencies ministry spokeswoman Irina Rossius said. The plane also bore humanitarian aid for, what a Russian foreign ministry spokesman said at the time was, about 30,000 other Russians that were still living across the country.

ISRAEL IS DEPLOYING ALL OF ITS MISSILE DEFENSES AS A PRECAUTION.

It makes perfect sense that the precious metals are being slammed lower (as well as WTI modestly) as US equity markets open. No other asset-classes are exhibiting the vertical moves. Pre-open margin calls?

Still confused what that fateful FOMC day just three weeks away from today may bring, in the aftermath of a Jackson Hole symposium which was mostly focused on the adverse side effects of Quantiative Easing and the proper sequencing of unwinding the Fed's nearly $4 trillion balance sheet? Here is the explanation straight from the firm whose chief economist has dinners with none other than the Fed shadow Chairman, Bull Dudley, on a frequent basis. To wit: "First, we expect Fed officials to adjust the “mix of instruments” somewhat away from QE towards forward guidance at the September meeting, which appears to be an appropriate strategy in light of these results. Second, we expect that the FOMC will focus most if not all of the tapering on Treasury purchases rather than (current coupon) MBS purchases, consistent with the evidence that the latter are more effective in lowering mortgage rates and easing financial conditions." So: $10-15 billion reduction in TSY monetization announced in September, enacted in October, and a seismic shift in FOMC communication away from actual intervention to promises of such, aka forward guidance. Judging by the recent track record of "forward guidance" so far, the global market volatility exhibited so far may well be just a walk in the park compared to what is coming.

Astute investor, Jim Rogers has warned overnight in an interview with Tara Joseph of Reuters that "oil and gold will go much, much higher" due to "market panic" regarding Syria and the coming end of free money... "when this artificial sea of liquidity ends we're gonna see panic in a lot of markets, including in the US, including in West developed markets."

With the 22 Arab League member stopping well short of endorsing outside military action - though urging the UN to agree on 'deterrent' measures - the burden of proof for attacking the Assad regime remains firmly on the shoulders of the US. As as the WaPo reports that the administration is planning to release evidence possibly as soon as Thursday, that it will say proves that Syrian President Bashar al-Assad bears responsibility for what U.S. officials have called an “undeniable” chemical attack that killed hundreds on the outskirts of the Syrian capital.

The Border Security, Economic Opportunity, and Immigration Modernization Act. It’s a mammoth of a reform bill and runs 844 pages (plus 350 pages of annexes). A needed overhaul of the 1986 law, but it will have its downsides too.

If last night the year 1993 was notable for India, as the Rupee had its largest plunge since March of that year two decades ago, today 1993 is just as memorable for CNBC. The reason: according to the latest Nielsen data, in July the financial network's prime (25-54 demographic) viewership just tumbled to a fresh 20 year low of just 37,000, the lowest since, you guessed it, March of 1993. Why is this a problem? Considering CNBC came on air in its current post-FNN incarnation in 1991, the core viewership is now about as low as it has ever been for the struggling broadcaster which as recently as 2007 was ranked as the 19th most valuable cable channel in the US.  Now: not so much.

When it comes to Syria, there is a lot of ins, a lot of outs, a lot of what-have-yous. And uh, lot of strands to keep in Obama's head, man. Lot of strands in old Duder's head.

• Merkel Blames SPD’s Schroeder for Letting Greece Into Euro (BBG)
• U.S. Bank Legal Bills Exceed $100 Billion (BBG)
• U.K. to Request U.N. Action to Protect Syrians From Chemical Weapons  (WSJ) - and Russia to veto any decision
• U.N. inspectors in new Syria mission as West prepares to strike (Reuters)
• Emerging-Market Rout Intensifies on Syria Jitters (WSJ)
• Rebels Without a Leader Show Limit to U.S. Role in Syria War (BBG)
• Anger at IRS Powers Tea-Party Comeback (WSJ)
• China has much at risk but no reach in Middle East (Reuters)
• 'London Whale' Penalties Put at $500 Million to $600 Million (WSJ)
• U.S. lawmaker says 'compelling' evidence of Syrian chemical attack (Reuters)