Archive - Jun 24, 2014

Moments ago, in what would be a clear escalation in the Iraq war, and confirmation that the US has finally gone "kinetic" as it warned on several occasions in the past it would, Iraq state-sponsored Iraqiya TV reported that US drones had struck ISIS targets near the Iraq-Syria border attack without giving details or saying how it obtained the information.  BBC Arabic has more:  "U.S. planes bombed targets in the drone region based on the Iraqi-Syrian border, according to sources close to Iraqi Prime Minister Nuri al-Maliki." This however was following moments later by the Pentagin Press Secretary issuing a sternly tweeted denial: "No truth to rumors in media today that US drones struck ISIL targets in Iraq." Clearly someone is lying.

While today's Case Shiller data was widely disappointing across the board, indicating a significant slowdown in price gains (and on a sequential seasonally adjusted basis, practically a decline), the one market we paid particular attention to was San Francisco. What we found is a red flag for everyone waiting to time the bursting of the latest housing bubble. Because after an unlucky 13 months of posting consecutive 20% Y/Y price gains, the San Francisco bubble appears to have finally burst, posting "just" an 18.2% price increase, the lowest since January of 2013.

Who could have seen that coming? "Most shorted" stocks, having recovered from the early squeeze, have been monkey-hammered higher once again as the confidence and home sales data hit. It's Tuesday after all - so why not buy the junkiest of the junk and ride it for a 3x beta outperformance...

While we will have much more to say about the price dynamics in the West in a follow up post, where the Western housing market appears to be appreciated right now is in the just released New Home Sales report, which showed that in May new home sales soared by a whopping 18.6%, orders of magnitude above the 1.4% increase expected, and resulting in some 504K new houses sold, far above the 439K expected, and certainly above the downward revised April print of 425K. What caused this surge? Simple: the West, which saw a 34% surge in new home sales, from 97K to 130K, the highest one month jump since February 2013.

The American consumer has not been as confident as this since January 2008... can you feel the confidence? The reaching for credit, the spending beyond your means; what could go wrong? Oddly, despite the exuberance, fewer people expect an increase in income (borrow or charge we assume?). The biggest driver of this confidence appears to be the spike from 79.7 to 99.5 in the Pacific region's confidence... but plunged in the Mountain and Central regions. Only 26.7% believe stocks can fall from here - near the lowest since 2009. Furthermore, those aged under-35 saw confidence plunge to 2014 lows.

We have not been shy about exposing the dark shadowy under-belly of lobbyists funding politicians (as most recently noted with Cantor's catastrophe) but now, as Engadget reports, finding out which representatives are in the pocket without a lot of tedious research just got a lot easier. A 16-year-old programmer has developed a browser plugin - Greenhouse - that, when you mouse-over the name of a US lawmaker, will serve up a list of which parties have donated to their campaign funds, and the quantities. Better than flappy-birds? The developer notes, "whether Democrat or Republican, we should all want a political system that is independent of the influence of big money and not dependent on endless cycles of fundraising from special interests."

There is a reason why Case-Shiller titled its summary presentation of the April housing market based on its 20-City Composite index "Rate of Home Price Gains Drop Sharply." The reason is simple: in April the housing market, while still preserving some upward momentum, appears to stumbled severely in April, with the Y/Y increase in the 20-City composite rising "only" 10.8%, down from 12.37% the month before, and the lowest annual increase since April of 2013. And this time there is no snow to blame it on.

We sat, we listened, and we could not quite believe our ears...

It's a simple question, yet one which is so difficult to answer (for lack of available data), and which fills most workers (especially those with a chip on their shoulder and/or delusions of grandeur) with dread: "Am I over, or underpaid in my job?"  The following handy chart, created by Reddit user Dan Lin, attempts to answer just this question with a breakdown of some 820 jobs listed by the BLS, with percentile data (25th, 50th, 75th, 90th) for the wage of any given occupation, allowing the determination where, relative to the median, one is paid.

It has long been the case that Jihadist Al-Qaeda groups tend to find the occasional odd, western groupie, but probably never before has there been a case as peculiar as that of 18-year-old Mohammad Hadi, from the city of Coventry, who as Al Arabiya reports, is believed to have joined the infamous and brutal Islamic militant group which is causing nightmares for the US state department, the Islamic State of Iraq and Levant aka ISIS. Meet Osama Bin Bieber.

Bloomberg reported yesterday that the German campaign to repatriate German gold from the U.S. has ended. The leader of the German gold repatriation movement, “Repatriate our Gold,” Peter Boehringer immediately refuted the article and posted in the comment section at the bottom of the article … The campaign to achieve a free market in gold and silver prices will continue.

Long before there was a Greece (and its existential threat to world order), there was Dubai's sovereign crisis in 2009 with Nakheel; and Dubai World (the floating islands) faced with massive debt loads and interconnectedness were bailed out. Since then it's been nothing but ponies and unicorns... until now. The debt is all still there (and the interconnectedness)... and despite the mirage of wealth creation that equity's massive rally has created, the drop in Dubai's stock market we noted yesterday turned into a rout overnight as it dropped a further 8% as one of the countries largest companies (Arabtec - Dubai's largest builder) plunged after high-level executive dismissals. “This is indiscriminate selling,” Ramez Merhi, director of asset management at Dubai-based Al Masah Capital, said by e-mail. “The markets took the stairway up, and an elevator down.”

• The Kerry Konfusion Kontinues: Kerry urges Kurds to save Iraq from collapse (Reuters)
• Abe Unveils Japan’s New Growth Strategy (WSJ)
• Because the recovery: Avon to Cut 600 Jobs as CEO McCoy Seeks to Trim Expenses (BBG)
• Iraqi Parties Pressure Prime Minister Nouri al-Maliki to Step Down (WSJ)
• Ukraine Rebels Call Cease-Fire to Match Government Truce (BBG)
• IRS accused of obstruction over lost emails in Tea Party affair (Reuters)
• IRS chief scorched as 'liar' (WND)
• Big Investors Missed Stock Rally (WSJ)
• U.K. Jury Finds Coulson Guilty of Conspiracy to Intercept Phone Voice-Mail Messages (WSJ)
• HSBC to halve countries served by private bank, sells assets (Reuters)
• Bond Market Has $900 Billion Mom-and-Pop Problem When Rates Rise (BBG)

Judging by the surprising reversal in futures overnight, which certainly can not be attributed to the latest data miss out of Europe in the form of the June German IFO Business Climate report (print 109.7, Exp. 110.3, Last 110.4) as it would be naive to assume that centrally-planned markets have finally started to respond as they should to macro data, it appears that algos, with their usual 24 hour delay, have finally discovered Dubai on the map. The same Dubai, which as we showed yesterday had just entered a bear market in a few short weeks after going turbo parabolic in early 2014. It is this Dubai which crashed another 8% just today, as fears that leveraged traders are liquidating positions, have surfaced and are spreading, adversely (because in the new normal this needs to be clarified) to other risk assets, while at the same time pushing gold and silver to breakout highs. Recall that it was Dubai where the global sovereign crisis started in the fall of 2009 - will Dubai also be the place where the first domino of the global credit bubble topples and takes down the best laid plans of central-planners and men?