Archive - Sep 2013

"It's really just politics as usual," notes Mark Thornton in this brief perspective-giving clip that seemingly confirms the grandstanding idiocy of our politicians that Rick Santelli pointed out earlier. Thornton notes, "Congress has been acting irresponsibly for years," enabled by an always-willing-to-lend Federal Reserve that provides no incentive for fiscal responsibility (that a gold-standard could provide). Thornton also notes that despite the fear-mongery, "it's not really government shutting down," as 'essential features of government' will remain active.

When minimum-wage supply and taxpayer-funded demand collide, the naked truth comes out...

The Federal Reserve continues to cling to a destabilizing and ineffective strategy. By maintaining its policy of quantitative easing (QE) – which entails monthly purchases of long-term assets worth $85 billion – the Fed is courting an increasingly treacherous endgame at home and abroad. By now, the global repercussions are clear, falling most acutely on developing economies with large current-account deficits. But there is an even more insidious problem brewing on the home front - wealth effects are for the wealthy (as the Fed knows too well). QE benefits the few who need it the least. That is not exactly a recipe for a broad-based and socially optimal economic recovery.

Get on your bailout bikes and ride!

The Obamacare that consumers will finally be able to sign up for next week is a long way from the health plan President Obama first pitched to the nation. As Politico notes, millions of low-income Americans won’t receive coverage. Many workers at small businesses won’t get a choice of insurance plans right away. Large employers won’t need to provide insurance for another year. Far more states than expected won’t run their own insurance marketplaces. And a growing number of workers won’t get to keep their employer-provided coverage. But, apart from that - and all the exemptions - six more days and we will all get to see the shiny new exchanges; which may (or may not) prove Sen. Barraso right when he said "It was bad policy and bad politics. They got it wrong on all accounts."

Private prisons are antithetical to a free people. Of all the functions a civilized society should relegate to the public sector, it’s abundantly clear incarceration should be at the very top of the list. Jailing individuals is a public cost that a society takes on in order to ensure there are consequences to breaking certain rules that have been deemed dangerous to the happiness and quality of life within a given population. However, the end goal of any civilized culture must be to try to keep these costs as low possible. This should be achieved by having as few people as possible incarcerated, which is most optimally achieved by reducing incidents of criminality within the population. Given incarceration is an undesirable (albeit necessary) part of any society, the idea is certainly not to incentivize increased incarceration by making it extremely profitable. This is a perverse incentive, and one that is strongly encouraged by the private prison industry to the detriment of society.

Another year, another record low for the average verbal SAT score, and another sad achievement for a nation that is getting fatter, dumber and ever more in debt.

"Doing God's work" is not free. In fact, it seems that god is a firm believer in a year end bonus. Goldman CEO Blankfein just announced that his company survived because it was "stable" during the crisis and what the reason for that "stability" was:

• *BLANKFEIN: GOLDMAN WOULDN'T HAVE BEEN STABLE WITHOUT BONUSES

So... if taxpayer bailouts hadn't funded bankers' bonuses, which in the year after the bailout hit an all time high, all hell could have broken loose at the world's largest depositor-insured hedge fund. Just think how much higher employment and income growth could have been in that worst-case scenario.

Nothing to see here, move along... trade accordingly...

Another day, another POMO pump followed by a collapse to close at the the lows as the S&P 500 has its first 5-day negative closing run in 2013. Only the NASDAQ remains above Un-Taper levels with the Dow back below 'Summers' levels and the S&P heading that way. Treasury yields slid further (-4 to 5bps) to 7-week lows (down 10 of the last 11 days) as the 7Y broke back below 2.00%. Gold and Silver rallied (after the ubiquitous opening smackdown idiocy) with both positive on the week now. The USD sold off as JPY strengthened to the week's highs and EUR pushed back to unchanged on the week. WTI was slammed lower (in a seeming mirror of the PMs) ending back at $102.28 (-2.4% on the week) nearly 11 week lows. For the second day in a row VIX closed lower as stocks sold off (unwinding hedges and reducing underlying exposure perhaps?)

The last time the State Department issued a comparable worldwide terror alert, the majority of US embassies in the Muslim world were promptly evacuated and a few weeks later the Syrian false flag affair was unleashed upon the world. One wonders just what provocation John Kerry has in mind this time.

STATE DEPT ISSUES NEW WORLWIDE CAUTION ON TERRORIST THREATS; STATE DEPT DETAILS POSSIBLE THREATS IN EUROPE, ASIA, AFRICA

At least the evil terrorizers have not infiltrated the Arctic circle yet. As for the always convenient scapegoat:

STATE DEPT SAYS AL-QAEDA PLOTTING IN MULTIPLE REGIONS

They sure are: mostly in Syria, but luckily they are now armed with US weapons.

After a small bounce earlier in the month, Gallup's US Economic Confidence Index has slumped back to its lowest level in 6 months. Combined with record misses in UMich Confidence and the slide in the Conference Board's sentiment measures, it would appear the animal spirits are fading as reality hits once again...

Unfortunately for almost every politician in the US, the way-back machine is fully functional in our new technologically miraculous normal. These are "strange times," CNBC's Rick Santelli notes, as he begins to systemically destroy the credibility of all the gaping wide mouths of the politicians (on both sides of aisle) that doth protest too much over the debt-ceiling debate. Santelli is breathless in his rage at the hypocritical comments of the Democrats based on their views from 2006 (when "W" was in the White House) as they decried the "rubber-stamping" of fiscal irresponsibility (raising the debt ceiling) of the Republican Congress. His ire raises as he shines a light on Harry Reid (Dem.) and Charles Grassley (Rep.) among others.

Whereas Americans last quarter had net worth of $70.3 trillion, as a result of a small definition revision, the now have $73.5 trillion. Revisionist Definition wealth for everyone!

Earlier in the week, we warned the mortgage settlement that JPMorgan might face could reach $20 billion. Well, 'officials' at the DoJ according to AP have stated that:

• JPMORGAN NATIONAL SETTLEMENT MAY REACH $11B, AP SAYS
• JPMORGAN PACT MAY INCLUDE $7B CASH, $4B CONSUMER RELIEF
  

What is most surprising is that JPM did not arrange the $11 billion "settlement" as $12 billion in consumer relief and a $1 billion cash payment from the government.