Archive - Oct 2014

Simply put, illegal activities are now the difference between economic growth and economic recession in Europe.

A recent weekend experience reminded me of how 99% of them are completely useless

Do as we say, not as we do...

The September jobs report was greeted by a flurry of robo-trader exuberance because another print well above 200k purportedly signals that growth is underway and profits will remain in high cotton as far as the eye can see. But how many years can this Charlie Brown and Lucy charade be taken seriously - even by the headline-stalking talking-heads who inhabit bubblevision? For the entirety of this century they have actually been gumming about little more than “born again” jobs, not real expansion of labor inputs to the faltering US economy.

The Smart Money is dumping stocks for real assets.

Gold is valuable and extremely rare, and therefore the yellow metal is usually protected at all costs. However, there have been multiple occurrences in history where evildoers have breached security measures and bullion has fallen into the wrong hands.

As we have discussed numerous times in the past, the US' debts and unfunded liabilities far exceed its assets. But making matters worse, the country is suffering from a prolonged failure to save and invest -- both at the personal and national level. Being over-indebted and under-capitalized is a recipe for hardship as we move into the future, especially if economic growth is going to be harder to come by.

You can mess with Greece with only modest repercussions, but, as Bloomberg reports, mess with Libya and trouble comes fast. In a strangely familiar case of deja vu, Libya’s sovereign wealth fund (LIA) sued Goldman Sachs over money-losing investments made in 2008, saying the bank exploited the LIA’s inexperience to sell risky derivatives. An LIA executive cursed at the Goldman bankers that they had "screwed" him and threatened "get out of my country," according to witness statements, adding that "he would come after their families."

It’s not supposed to be like this. We’ve all been told earnings are great, corporate profits are great, analysts estimates have been rising. As a matter of fact, if one dared to question any of these metrics we were referred to as “idiots.” (And that is an actual quote.) Today as we enter this earnings cycle we have a new phrase that I’m sure will enter the lexicon of the lay person in reference to stocks, but will send shivers down actual Wall Street’ers as they have to defend, argue, or give a smoke and mirrors story that will have a chance of being believed. That phrase will be “a trap door event.”

Just a month ago, Goldman Sachs' head progonsticator David Kostin went full bulltard, telling clients to buy high-beta, high-momentum stocks because (paraphrasing) "hedge funds suck" and will need to play catch-up. Today, his tune has changed. The "dash-for-trash" meme has outperformed dramatically in the last few years as Fed experimentation breathed life into the zombie-est weak-balance-sheet companies and traders rode that artificial wave. However,as Kostin notes, tightening financial conditions have the greatest impact on firms with high leverage and weak balance sheets; and thus, with the Fed more biased towards tightening than loosening (and the market discounting that), the "dash-for-trash" is over (as we noted in July).

Just hours after President Obama dined at a $10,000-per-plate fundraiser in Washington, former Obama administration CIA Director and Defense Secretary Leon Panetta lamented with MSNBC's Andrea Mitchell how "there is a feeling that the president has given up on the big issues facing this country." The problem, Panetta explains, is Obama "approaches things like a law professor," when he should be "rolling up his sleeves." With allies like that, who needs ISIS?

Stocks close not "off the lows"

Just hours after the World Health Organization warned "It is quite unavoidable, that [Ebola] incidents will happen in the future because of the extensive travel both from Europe to the affected countries and the other way around," CDC Director Tom Frieden announced that:

U.S. TO ANNOUNCE FURTHER TRAVEL MEASURES VS EBOLA IN DAYS: CDC

This merely confirms all suspicions and our earlier note that 'air traffic is the driver' of global contagion.

The summer rebound is well and truly over, and the latest nail in the short-lived rebound came moments ago when the Fed reported that in August, consumer credit rose by only $13.5 billion: only because it was far below the $20 billion expected and a plunge from the $26 billion surge in July, since revised far lower to $21.6 billion. Worse, revolving credit actually declined in the month by just over $200 million, its first decline since February. But don't worry: while US consumers put their credit cards on ice, they had no problems continuing to borrow like drunken sailor when it comes to car and student loans, which rose to a new record high of $2.366 trillion, an increase of $13.7 billion, which still was the lowest monthly increase since January.

“I’m Not Going To Sit Here And Say That If A Person Who [Has Ebola] Were To Sneeze Or Cough Right In The Face Of Somebody Who Wasn’t Protected, That We Wouldn’t Have A Transmission”