Archive - May 13, 2014

There is something very, very wrong with the Albuquerque, New Mexico police department, and the citizens have just about had enough.

With the additional deployment of a submarine and a missile ship, there are now 86 Chinese vessels accompanying the oil rig's installation in Vietnam's Exclusive Economic Zone (EEZ). Local news reports that 3 Chinese military ships are surrounding a Vietnamese marine police vessel this morning and water cannon use continues against Vietnamese ships. We addressed the who, what, where, when and how of China’s HD-981 oil rig foray into Vietnamese waters here but, as we discuss below, the enduring question, as with many of China’s recently provocative actions in the Asia-Pacific, remains why?

The Wall Street Journal appears to be saving money by dispensing with journalists and using human drop boxes instead. Thus in the New York markets the “Hilsenramp” signal is already a well-known event which occurs at approximately 3pm on/during/after Fed meeting days, and is posted under the byline of “Jon Hilsenrath”. In simple packaged form it provides fast money speculators with a message from the B-Dud, otherwise known as William Dudley, President of the New York Fed, on why the Fed will back-up another run at still higher record highs. So today comes a drop box message with respect to ECB policy posted under the byline of “Brian Blackstone”.

Based on the historical profit cycles of the US Airline industry, this most recent exuberance is starting to come to an end. However, as Morgan Stanley notes in their 'deep dive' report, "other revenues" continues to rise as airlines nickel, dime, and benjamin travelers for everything from flushing toilets to extra bags... here, in one simple table, is everything you need to know about Airlines' add-on fees but were afraid to check online...

Every year Deutsche Bank releases its fascinating index of real-time prices around the world which looks at the cost of various goods and services from a purchase-price parity basis. And as we did last year, we focus on one specific subindex: that looking at the price of "cheap dates" around the world. The index consists of i) a standard bouquet of roses, ii) cab rides, iii) pizza, iv) a soft drink, v) two movies tickets and vi) a couple of beers. While once again there is no data on the "hit rate" of said basket in culminating with a desired date "end goal", what is clear is that the disparity between the most (London ) and least expensive (Mumbai) place for a cheap date is vast, at nearly five times, yet the difference continue to surge (the rich are getting richer, the poor are getting poorer, but all want to procreate) and is nearly double the 250% difference observed just one year ago.

If the secret to economic prosperity was the erection of Che Guevara murals, Cuba would be the wealthiest nation on Earth.

Does the economy move in predictable waves, cycles or patterns?  There are many economists that believe that it does, and if their projections are correct, the rest of this decade is going to be pure hell for the United States.  Many mainstream economists want nothing to do with economic cycle theorists, but it should be noted that economic cycle theories have enabled some analysts to correctly predict the timing of recessions, stock market peaks and stock market crashes over the past couple of decades.  Of course none of the theories discussed below is perfect, but it is very interesting to note that all of them seem to indicate that the U.S. economy is about to enter a major downturn.  So will the period of 2015 to 2020 turn out to be pure hell for the United States?  We will just have to wait and see.

"Faith" in America's central planners goes from the sublime to the ridiculous...

It should hardly come as a surprise for a nation such as the US that is used to being told what a "fair" price for interest rates is... and a "fair" price for housing is... and a "fair" price for stocks is... that Venezuela (perhaps a few years ahead of America in the socialism stakes) has seen its 'price regulator' declare today its new "fair" prices for various foods. Coming to a Safeway near you any day now... (as US food price inflation soars - especially ahead of the barbecue season).

Over a third of the global population is now overweight, and the percentages are increasing. Some neuroscientists have suggested that the rise of so-called "hyperpalatable foods" may partially explain the unprecedented rates of obesity.

Last week the Fed's Janet Yellen warned of a small cap bubble and now German Finance Minister Wolfgang Schaeuble says in a speech in Munich today that "monetary policy must reduce its dominant role" to allow a return to "reasonable" interest rates. He did not stop there though...

• *SCHAEUBLE SAYS RATES NOT FULFILLING THEIR ECONOMIC FUNCTION NOW
• *SCHAEUBLE: FINANCIAL MARKETS HAVE ALMOST 'EXCESSIVE CONFIDENCE'
• *SCHAEUBLE SAYS MARKET LIQUIDITY POINTS TO NEW BUBBLES

Don't fight the Fed... or the German finance minister... (though with the DAX and S&P at record highs today, he must be talking about bonds or Russian stocks as the bubble that is excessively confident)

With Western nations heavily indebted, including the hugely indebted U.S.,  Russia looks like the only realistic source of such funds. Geopolitical risk remains very much underestimated and there remains the risk of financial, economic and currency wars where the Kremlin uses gold as a geopolitical weapon to undermine the dollar.  

Having noted America's surging government dependence before, the impact of almost 50 million people on food stamps is hard to imagine if you are not in retail food. The spike in business beginning on the 3rd of each month is truly astounding. By the 10th of the month the business begins to normalize and by the 22nd the ship is sinking. When you combine the number of people that receive their daily bread from taxpayer funds with the number of people who work for government we dare say it will be impossible to have an election that ever removes the corrupt from office. Who is going to vote against their pay-check or the food on their table? Sadly, it appears, the soup line is here to stay.

UPDATE: *NYSE REVIEWING TRADES FOR 'AOL,' 'NBR,' 'MPC,' 'LO,' 'CNQ' FROM 3:49:00PM-3:51:00PM ET

By now it is clear to everyone that the market is rigged, manipulated and broken. But this rigged, manipulated and broken? Honestly, we don't know, hence our question: is this now "normal" or are these just the death throes of a "market" busted beyond all repair?

The Dow had its narrowest range day of the year today and volume was dismal (as weak as yesterday's) but we made new record highs so USA USA USA. From the start of the day stocks were in a wild world of low volume levitation of their own as bonds made lower and lower yields and USDJPY was not supportive at all. Once Europe closed, the bid for US equities disappeared and Nasdaq and Russell tumbled, with the Dow and S&P catching down to unch. Bundesbank bullshit sent the EUR lower (cracking below 1.37 at 6 week lows) and thus the USD higher (+0.3% on the week). Treasury yields tumbled (and flattened) all day with 30Y -2bps on the week (and 7Y -6bps from today's highs). VIX had another seizure today (this time spiking up) and closed higher.