Archive - Mar 20, 2014

It appears the madness is contagious. Turkish Prime Minister Recep Tayyip Erdogan, embroiled in an ongoing and huge corruption probe, lashed out at "international conspiracies" in a speech at a rally in Bursa. "We'll dig up Twitter - all of them - from the roots," he raged, "they'll see the power of the Republic of Turkey." With the looming elections - sure to fair and equitable to all - he warned he would "settle scores" after winning. Indeed...

“Often when you think you're at the end of something, you're at the beginning of something else.” ? Fred Rogers

The people sanctioned via the Russian foreign ministry:

• Caroline Atkinson
• Daniel Pfeiffer
• Benjamin Rhodes
• Harry Reed
• John Boehner
• Robert Menendez
• Mary Landrieu
• John McCain
• Daniel Coats

After warning of the potential for "dangerous risks of escalation" President Obama, absent his Congress, has signed an Executive Order authorizing further penalties on more Russian individuals and also a bank. "We’re imposing sanctions on more senior officials of the Russian government,” Obama said. “In addition, we are today sanctioning a number of other individuals with substantial resources and influence who provide material support to the Russian leadership, as well as a bank that provides material support to these individuals.” The list includes Bank Rossiya (Russia's 5th largest bank), and 20 more individuals including Billionaire Gennady Timchenko, and Duma Deputy Speaker Evgeny Bushmin.

As is widely known by now, Barack Obama, in an executive order, earlier this week as well as moments ago in a very dramatic follow up performance, decided to sanction a handful of Russian military leaders and Kremlinites close to Putin. He didn't touch Putin of course, that could be seen as too strong a signal one which may cut off German gas supplies for a day or two. Remember: there are "costs" and stuff. So while Russian official debate just how to retaliate best to US and European sanctions, as they said they would, ordinary Russians are taking matters into their own hands. And on twitter. Here are some examples in which the "Russian on the street" has some fun with Obama's sanctions, and prohibits the US president and people close to him to approach, enter and/or use the facilities.

No conventional scenario accounts for the methodical disabling of the communications systems, the bizarre altitude changes and professional navigation to way points, or the presumed turn south and a flight path that extended to at least 8:11 a.m. Every plausible theory about what happened to Flight 370 has to not only fit the most reliable facts (radar tracks and satellite data) but basic geography.

Despite Russia's scoffing at the extent of the West's sanctions and Ukrainian politicians seemingly resigned to the fact that Crimea is lost (and wanting some compensation), we are sure President Obama will want to reset the narrative. As Jay Carney noted earlier in the week, we suspect a broad-based "sell Russia" recommendation will be issued along with threats of more "costs" and strongly worded language...

The chart below from Bank of America - showing the progression of first-time US homebuyers in recent months - should scare everyone who still believes that there is some sort of "housing recovery" in the US.

Vladimir Putin's approval rating has soared to new five-year highs as the State Duma ratifies the agreement on Crimea's admission to Russia. However, it is the clear distain that the Russian Foreign Affairs Committee Deputy Chairman Alexander Romanovich had for the West's response so far. "The US and EU sanctions against Russia are absurd and unreal," the lawmaker scoffed, adding "this is an operetta, and we can only laugh." So much for non-mutually-assured-destruction-based sanctions. The Duma are considering how retaliatory sanctions could be imposed.

Another month, another confirmation that the so-called housing recovery is sputtering on its last breath and is being held up entirely by the higher end segment, which however is also coming to an end now that wealthy Chinese have started liquidating their ultra luxury housing. In February, according to the NAR, some 4.6 million annualized existing homes were record, in line with expectations, and a 0.4% decline from the 4.62 million print in January. This was the 19th monthly drop in a row, and the lowest since July 2012, and a 7.1% drop year over year. But the worst news is that housing is increasingly unaffordable to the poorer Americans, with houses costing in the $0-$100 bucket down 18% from a year ago. Since nobody is applying for a mortgage any more this is hardly surprising. Finally, in addition to the usual weather excuse for weak housing sales, a new scapegoat has appeared: soaring student loans: "20 percent of buyers under the age of 33, the prime group of first-time buyers, delayed their purchase because of outstanding debt. 56 percent of younger buyers who took longer to save for a downpayment identified student debt as the biggest obstacle." Oops.

Why Mainstream Economists Like Krugman Are So WRONG and So DANGEROUS

The Philly Fed Factory Index surge 15.3 points from February's plunge for its biggest jump in nine months. New Orders recovered most of last month's loss but the employment sub-index dropped to its lowest since June 2013. Perhaps even more troubling was the drop in the business outlook with the average workweek and new orders expected to drop.

Short, sweet and to the point.

Any minute now...

Just like with the fabled Abenomics recovery which is said to be just around the corner, so Caterpillar, whose stock has discounted a Phoenix-like rise from the ashes, continues to disappoint month after month, with no actual pick up in sales, and as was just released moments ago, in February the heavy industrial equipment maker posted the 15th consecutive decline in global retail sales, which declined 8% from February of 2013, which in turn was a 13% decline from 2012.

When we started discussing the upcoming onslaught of corporate defaults in "Minsky Moment" China, now that the bankruptcy seal has been broken, we warned that the worst is about to come. Well, it's coming. Overnight, Hong Kong's The Standard reported that in addition to the solar, coal and real-estate developer companies that are on everyone's radar as potential future bankruptcy candidates, one can also add steel makers to the list, with its report that Highsee Group, the largest private steel makers in Shanxi province has defaulted on CNY3 billion of debt, unable to repay its bonds on time.