Archive - May 15, 2014

China's at it again! On Thursday the Philippines released photos to validate its claim that China is building structures and a possible airstrip on the disputed Johnson Reef.

Who could have seen this coming? USA Today reports deputies have charged an 18-year-old South Carolina woman with the fatal shooting of a male friend who had donned a bulletproof vest and allegedly asked her to "shoot me."

Treasuries are still cheap. The FOMC statement says that “even after employment and inflation are near mandate-consistent levels” the committee may keep “the target federal funds rate below levels” viewed as normal in the longer run. Whenever we read this, we think of Desi Arnaz screaming, “Lucy! You got some ‘splainin’ to do!” Treasury prices do not care if Q4 is around 4%. Economic data matters little for the time being. Prices are being driven more by positions, relative value, and future Fed policy. Markets know the Fed is ending QE. What it really wants to know is the terminal Fed Funds level in the new ‘world order’. In the meantime, stay long.

Once upon a time Wall Street Journal reporters were economically literate. Now, apparently, when they muster-in for the job they get a Keynesian chip implant while signing their HR forms. Otherwise, how can you explain the bullshit penned this morning by Brian Blackstone on the EU’s “disappointing” Q1 GDP report. He didn’t say Keynesian economists say you need more inflation to get jobs and growth. He just declared it!

Embargos as a rule rarely achieve their intended goal of overthrowing governments. Instead, embargos tend to deprive the poor of basic necessities, enrich government cronies while giving the government an excuse for why their economic policies are failing.

In a somewhat stunningly hypocritical step for a nation that seems so hell-bent on proclaiming Russia's provactive actions as tantamount to World War over Ukraine, the White House has issued a statement "taking no position" on China's "disputes" in the China Seas...

• *BIDEN MEETS CHINESE ARMY CHIEF OF STAFF FANG AT WHITE HOUSE
• *BIDEN SAYS U.S. TAKES NO POSITION ON TERRITORY CLAIMS AT ISSUE
• *BIDEN SAYS NATIONS SHOULD AVOID PROVOCATIVE STEPS IN DISPUTES

So - the Chinese undertook "provacative actions" into the "disputed territory" of another sovereign (allied) nation... and the US retaliates with no sanctions, no damnation, no hellfire? Good to know who your friends are...

Just last month we highlighted how the collapse in China's shadow-banking system, it's concomittant credit crunch, and vicious circle of commodity-financed credit creation could spread contagiously to the rest of the world - through refusal to pay. It seems we were prophetic as Reuters confirms that money owed to Chinese firms by their customers has reached a record high. As China's economy continues to cool, companies are waiting longer and finding it harder to get paid for goods and services they've already sold, leading to record amounts of receivables - and potential write-offs - on corporate balance sheets. As one Chinese business owner exclaimed: "If you don't pay me and I pay others, aren't I just a sucker? I'm not that stupid." Receivables on average (across 2300 firms) reached $160.49 million at the end of last year, more than double the $65.9 million average at the end of 2009 and median collection time for billings crawled up from 71.4 days to 90.42 days (the first time above 90 days). "It's a pretty loud warning bell," warns a Peking professor.

The political situation in Belgium - as Europe heads into elections - could well be the writing on the wall for every European country. Economists and politicians love to juggle with figures in the trees so you can not see the forest. Economics is not always easy, but we have noticed that you can do it with an island of 100 people to make it understandable. Let's call this island "Rainbowland"... as we show below, you do not have to be a genius to realize that a country such as " Rainbowland" can not survive in reality.

Fact...or Fiction... "No, that goes against the oligarchic principles on which this country stands"

Two days ago Russia retaliated against US sanctions by banning the US from using the International Space Station after 2020, and by barring the use of Russian rockets as launch vehicles for US military satellites. Then, moments ago, a Russian Proton rocket, with advanced satellites on board, crashed during take off, during the activation of the third rocket stage some 9 minutes into the launch.

You would think that with all the surefire bets in housing that people would be dialing up their realtors and heading out every weekend to make those lustful multiple offers presented in PowerPoint format on properties. Yet the overall market data shows a different story. The house horniest of them all, investors, are clearly pulling out of markets including sunny and inflated California. Apparently home prices do matter when making investment decisions. Cash strapped hormonal buyers will keep on buying but housing prices are set on the margin. That margin is becoming razor thin on current volume. I find it interesting that the biggest housing supporter of them all, the National Association of Realtors is also somewhat tepid on this recovery. Why? Because home sales volume is pathetic. Keep in mind they make money on selling and buying. Volume is key. Their model doesn’t work so well with banks holding onto properties like Gollum holding onto the ring and the foreclosure process being dragged out like the forever college student enjoying year 10 at Santa Monica City College. You see this overarching trend occurring in many metro areas across the country. Investors have been propping up the market since 2008. They are now slowly pulling back. You are also starting to see a convergence of analysts putting out their predictions on how overvalued housing is and backing it up with mountains of data. The other side of the argument points to prices. Sure, they’ve gone up but value is created by actual price and that is sort of the point. The answer as always isn’t so simple but using your thinking cap it is important to understand that housing is not a “no brainer” decision in this market.

"I want this to be something that somebody else can use. Or that we could parlay into some kind of political—something, you know–’Hey wake up! The banks do lie, cheat, and steal. That’s the whole goal, you know.”

The following solicitation from the U.S. Department of Agriculture almost defies belief. We’ve seen this type of bizarre behavior before, but it has mostly originated from the American Gestapo, aka the Department of Homeland Security (DHS).

Having unsuccessfully lobbied its slave-driving masters with one-day strikes and angry tongue-lashings, Thursday sees the fast food workers’ movement wants to broaden its reach as it pushes for a $15-an-hour wage (that restaurant companies say is unrealistic). In addition to 150 strikes across the US, NY Times reports, support protests will take place in 80 cities in more than 30 countries, from Dublin to Venice to Casablanca to Seoul to Panama City. "Fast food workers in many other parts of the world face the same corporate policies — low pay, no guaranteed hours and no benefits," warned one union leader but judging by the response from the restaurants association, "These are made-for-TV media moments - that’s pretty much it." Workers generally have the same message - "I don’t make enough money to take care of my kids," but as we have noted before (and as Motoman Robot below indicates) raising the minimum wage will have unintended consequences few strikers consider, "it would have consequences on hiring patterns for Main Street businesses across the country."

With two of Tepper's top six positions being new, and quite massive, calls in either the SPY or QQQ, we would be nervous too...