Archive - Jul 16, 2014

"Sanctions have a boomerang effect and without any doubt they will push U.S.-Russian relations into a dead end, and cause very serious damage, and it undermines the long term security interests of the US State and its people."
"This means that U.S. companies willing to work in Russia will lose their competitiveness next to other global energy companies." Putin said the sanctions will hurt Exxon Mobil Corp which has been given the opportunity to operate in Russia. "So, do they not want it to work there? They are causing damage to their major energy companies." Putin said the sanctions will hurt Exxon Mobil Corp which has been given the opportunity to operate in Russia. "So, do they not want it to work there? They are causing damage to their major energy companies."

While we understand that there are many nuances in the ongoing illegal immigrant debate, and there are certainly two sides to every story, we can't help but wonder if the US government granting a $50 million award to BCFS Health and Human Services to house "young illegal immigrants at the site of the current Palm Aire Hotel and Suites" in Weslaco, Texas is the best use of government funding. As KRGV reported, " A center for unaccompanied minors set to open in Weslaco later this year will be the first of its kind in the nation, officials with a network of non-profits said.  A center for unaccompanied minors set to open in Weslaco later this year will be the first of its kind in the nation, officials with a network of non-profits said... Representatives with BCFS said the Palm Aire will undergo a multi-million dollar transformation."

In one of the most uncomfortable (and must-see) interviews, UK Channel 4's John Snow 'discusses' Israel's bombing raids and policies towards Hamas with Israeli government spokesman Mark Regev. The interview starts with a punch, "How does killing children on a beach contribute to your purpose of protecting Israeli civilians?" Regev ducks and weaves from question to question, flummoxed when Snow jabs, "if you couldn't tell these were 4 young Palestinian children playing football on a Gaza beach, you need better equipment," only to be slammed towards the end with, "why not be brave and talk directly to Hamas? You haven't got the courage." Not the kind of interview one is likely to see on US TV.

It appears, unlike in the mid 2000s, that the low level of volatility and high level of stocks has not had the desired effect on ramping animal spirits among the general population. Judging by the number of "optimistic" stories, peak animal spirits passed at the start of 2012... as optimism is now back at crisis lows...

When scientists start using phrases such as "the worst drought" and "as bad as you can imagine" to describe what is going on in the western half of the country, you know that things are bad. Thanks to an epic drought that never seems to end, we are witnessing the beginning of a water crisis that most people never even dreamed was possible in this day and age. The following are 20 signs that the stunning drought is starting to become apocalyptic...

If you thought the latest round of US sanctions against some largely unknown Russians and a few new companies listed here, most notably Rosneft and Gazprombank - but not Gazprom, never Gazprom - that would cut off Russian gas to Europe and Merkel doesn't want that - would be largely a non-event, you are right. Unless you own a Kalashnikov, aka AK-47 rifle. In which case read on.

This week’s market reaction to Fed chair Janet Yellen’s Humphrey Hawkins testimony – which was initially perceived as hawkish – provided another highlight of just how nervous investors have become about the risk of tighter monetary policy, post the very strong June payrolls report. As BofA warns, the current pace of jobs creation mirrors what forced the Fed’s hand in the 1994 rate hiking cycle, which led to lower stocks and wider credit spreads. Simply put, as the indicator of just how insane "markets" have becomes, rapidly improving job growth (as fallacious as it is under the surface) means BOFA thinks that hedges should be set and long positions in risky assets reduced.

The Argentina default battle is in its final fortnight, with a July 30 grace period expiration looming, one which would result in a second bankruptcy in 13 years to formally be written down in the history books, and which could spoil the serene glow all global capital markets have found themselves in thanks to the central bankers' soothing words. As a result, Argentina has resorted to a last ditch strategy to ferret out the full list of holdout creditors (the hedge funds led by Elliott, Aurelius and various other known and unknown bondholders) as well as get a full list of the restructured bondholders (those who are perfectly happy to clip whatever coupon Argentina will pay them instead of seeing their payment stop altogether if and when CFK announces an official default). The logic behind the ruse: to circumvent the court and pay the restructured debtholders in the 11th hour.

Ironically, Carl Icahn - poster-child of the leveraged financial engineering that has overtaken US equity markets on the back of Central Bank largesse - told CNBC that he was "very nervous" about US equity markets. Refelecting on Yellen's apparent cluelessness of the consequences of her actions, and fearful of the build of derivative positions, Icahn says he's "worried" because if Yellen does not understand the end-game then "there's no argument - you have to worry about the excesssive printing of money!" So in 12 hours, we have been told: some sectors are stretched (Yellen), there is a bubble but we don't want to pop it (Fisher), when the Fed ends QE, there'll be abear market (Druckenmiller), and now Icahn is "worried about markets." Cue, Cramer explaining how none of these buffoons know anything about stocks...

The official measure of Q1 productivity growth currently looks likely to be revised down to almost -6% (annualized) - the worst in almost 70 years. As Goldman points out, even on a longer-term basis, the 4-, 8-, and 12-quarter trends are all in a 0.2%-0.6% range when the Q1 estimates are included, dramatically below consensus 2% estimates of the long-term trend. While Goldman notes productivity is a very noisy series, because it is calculated as the difference between noisy GDP numbers and noisy hours worked numbers; if these numbers are an accurate representation of the long-term trend, the implications for the long-term growth in US living standards would be very negative.

This week, 70 years after Bretton Woods, leaders from China, Russia, India, Brazil, South Africa, and several other nations are hard at work in Fortaleza, Brazil creating a new development bank that will compete against the US-controlled World Bank. This is a major step in an obvious trend towards a new financial system. Every shred of objective data is screaming for this to happen. It’s a different world. Everyone realizes it except for the US government, which is still living in the past where they’re #1 and get to call all the shots.

"I hope we can all agree that once in a century emergency measures are no longer necessary five years into an economic recovery," begins Stan Druckenmiller as he unleashed a torrent of uncomfortable truthiness on a crowd of Fed apologists stunned by his reality check that the Federal Reserve is putting the economy at risk by continuing its aggressive market intervention.. Blasting the counterfactual "mob", Druck slams, "To economists and Fed officials who continually cite that we are better off than we would have been without ZIRP for long I ask why is that the relevant policy time horizon? Five years after the crisis and with growing signs of economic normalization it seems to be time to let go of myopic goals." Simply put, Druckenmiller concludes, rather ominously, "I am fearful that today our obsession with what will happen to markets and the economy in the near term is causing us to misjudge the accumulation of much greater long term risks to our economy."

Janet Yellen is always one step behind.  If people start to ask you "Are you fat?", then you ARE fat!

Having underperformed Russia by almost 20% since unleashing the first set of sanctions and sell recommendations, President Obama has decided enough is enough and has wielded the credit market ax in this round of sanctions for what the world is really not sure. As we noted here, of course, Russian firms can handle restricted access to US debt markets (probably better than American firms). Nevertheless, the teleprompter is up... the people are excited, and President Obama is about to explain how these sanctions (unilaterally placed on Russia since Europe did not back them) are different and better and "fair"...

One thing that has become crystal clear since the Edward Snowden revelations, is that much of Congress has no problem at all with unconstitutional spying. Rather, they are primarily upset it was exposed and are dead set on making sure no other whistleblower can ever do the same. Enter CISA, or The Cybersecurity Information Sharing Act.