Archive - May 31, 2014

There was much said in last week's primetime interview between Edward Snowden and NBC's Brian Williams. But perhaps more interesting than what was said in the one hour time-slot, was what was contained in the three extra hours of conversations that were not broadcast, such as Snowden's questioning of the American intelligence community’s inability to stop the September 11, 2001 terrorist attacks. One such segment, as transcribed by RT, involves the former NSA contractor's response to a question from Williams on how to prevent further attacks from Al Qaeda and other "non-traditional enemies" in which Snowden suggested that United States had the proper intelligence ahead of 9/11 but failed to act.

Despite all the shadow banking system hand-wringing, macro-data-collapsing, real-estate-bubble-bursting, stock-market-tumbling reality facing the China; somehow, China's official government manufacturing PMI just printed 50.8 - its highest in 2014 and the 20th month of expansion in a row. Given the mini-stimulus efforts of the government, perhaps it is not surprising that the official (more SOE-biased) data signals all-clear (when HSBC's PMI is still in contraction for the 5th month in a row). The employment sub-index fell to a 3-month lows and the Steel industry's output and new orders has cratered... So what's wrong with this chart?

The Godzilla of incompetence...

Following Russia’s historic $400 billion natural gas supply deal with China last week, Japanese lawmakers are looking to revive efforts to tap into Russian natural gas supplies themselves.

Welcome to the new normal reality of job-hunting in 2014... "Our venture-funded vertical-driven content prosumer phablet platisher is rapidlygrowing and we need to add some Ninja Rockstar Content Associates A.S.A.P. See below for a list of open positions!"

Friday's latest resignation of yet another former Obama administration faithful - that of White House press secretary Jay Carney - got us thinking: how many people have jumped off the USS Obamic? The answer is, in short, a lot. Below is a list (by no means complete) of the most prominent officials and advisors who have quietly exited the Obama administration stage left over the past 6 years.

On the heels of this week's mainstream US media interview with Edward Snowden, it appears the general public is growing increasingly aware of the US surveillance leviathan's reach. In the following (part 2 of a 2-part series, part 1 here), PBS' FrontLine reveals the dramatic inside story of how the U.S. government came to monitor and collect the communications of millions of people around the world - and the lengths they went to trying to hide the massive surveillance program from the public. From 9/11 to Edward Snowden and on to NSA reform - what must be done... a must-watch for all US citizens (if they can spare some time away from Americas Got Talent or Instagram).

You can smell this one coming a mile away... the ECB is now energetically trying to revive the a market for asset-backed commercial paper (ABCP) - the very kind of “toxic-waste” that allegedly nearly took down the financial system during the panic of September 2008. The ECB would have you believe that getting more “liquidity” into the bank loan market for such things as credit card advances, auto paper and small business loans will somehow cause Europe’s debt-besotted businesses and consumers to start borrowing again - thereby reversing the mild (and constructive) trend toward debt reduction that has caused euro area bank loans to decline by about 3% over the past year. What they are really up to, however, is money-printing and snookering the German sound money camp.

Pause and think about what linoleum means to you. If flooring isn’t your thing, go ahead and think about Formica cabinets or anything else that fits the genre. To me, it is something functional, which looks okay from a distance, but doesn’t stand up well to closer inspection. It conveys the disappointment of something that looked good, but turns out only to be a thin veneer covering cheap particle board. That is how we see the economy right now.

I know how to disappear you...[Cover your keyboards]

Could the euro rally on a 10-15 bp cut in key rates?  Technical indicators suggest this may be likely.  

With real incomes stagnant and the cost of everything from food, school tuition and healthcare premiums skyrocketing for millions of Americans, it appears that borrowing against one’s home is once again a key source for consumption, if not survival, for the nearly extinct socio-economic demographic known as the middle-class. The Wall Street Journal reported yesterday that home-equity lines of credit (Helocs) had increased at a 8% rate year-over-year in 1Q14...The new American Dream.

Easy money and the timing of the Fed’s policy shift continue to dominate across the globe. Recovery is widely assumed for the next two years; but as Abe Gulkowitz exposes in this week's The PunchLine chartapalooza, deep-seated weaknesses have also become more evident. Very obvious financial vulnerabilities, repercussions from various political stalemates and serious geopolitical concerns are aggravating the problems of clearly insufficient growth in the world economy. And let’s not forget that many of the challenges cannot be resolved easily...

The interesting part is how the Econ Data and Central Bank events for the next three weeks all directly affect the next event, and how the market digests all these events as a whole.

At the beginning of the year, all - as in all - of the smart money expected a rising yield environment and a recovering economy. They were all wrong. Oddly enough, they still believe pretty much the same, using seasonal scapegoats to explain away their mistakes. As for what the most selective subset of the smart money believes, here is Goldman's David Kostin with the summary: "Almost all clients have the same outlook: 3% economic growth, rising earnings, rising bond yields, and a rising equity market." Goldman's own view doesn't stray much: "Our S&P 500 targets of 1900/2100/2200 for end-2014/2015/2016 are slightly more conservative but generally in line with consensus views." And of course, when everyone expects the same, the opposite happens... even if this is one of those financial cliches we wrote about yesterday.