Archive - Aug 19, 2014

After June's very disappointing housing starts and permits numbers, which plunged to 893K and 963K respectively well below consensus expectations, it was time for the Department of HUD to show how it's done, and moments ago the July housing starts and permits data literally blew away Wall Street expectations, as Starts soared from an upward revised 945K to 1093K, the highest print since November 2013, while permits surged from an also upward revised 973K to 1052K, smashing expectations of 1000K and the biggest beat since October. Why? Multi-family housing is back with a vengeance with "rental" permits and starts soaring by 24% and 33% respecitvely in the month of July.

Well that didn't last long...

*ISRAEL ARMY SAYS 3 ROCKETS WERE FIRED FROM GAZA
*ISRAEL ARMY SAYS ROCKETS LANDED IN OPEN AREAS, NO INJURIES

The Israeli military has declared the cease-fire broken. So this is the escalation that will enable a pent-up de-escalation buying opportunity?

Consumer Price Inflation rose a mere 0.1% MoM in July, its equal lowest since November 2013 and in line with expectations as falling energy and transportation costs (both -0.3% MoM) led the stabilization (with a 5.9% plunge in airfares). The biggest drop was in personal computers (-1% MoM) which is now -6.0% year-over-year. Food prices rose 0.4% MoM. Ex-food-and-energy, prices also rose 0.1%, missing the 0.2% expectations, to the slowest pace of core inflation since April 2013. So much for all that inflation is about to break out and tear bond yields higher chatter... (no matter how real or unreal the government's hedonically-manipulated data is). The 2-month change in Core CPI swung from hottest in 7 years to coldest in 14 months...

• Just how many rats are there? Steven Cohen's Firm Loses Another Top Executive (WSJ)
• Iceland Sees a Potential Volcanic Eruption, and Airlines Cower (Bloomberg)
• Iraqi forces battle to drive jihadists from Saddam's home town (Reuters)
• Israel, Palestinians Agree to Extend Gaza Truce for 24 Hours (BBG)
• Pimco now buying junk (BusinessWeek)
• Pakistan arrests 147 in Punjab towns as protests in capital continue (Reuters)
• Ex-Rabobank Employee Pleads Guilty in Libor-Rigging Probe (BBG)
• Ebola Orphans Targeted by Aid Groups as Newest Victims (BBG)
• Two California youths accused of plotting high school shooting spree (Reuters)
• Only Rich Know Wage Gains With No Raises for U.S Workers (BBG)

A quick reminder of how geopolitics governs markets: on Friday, the market plunged 0.005% over fears Ukraine and Russia may be about to go at it all out after a fake report Ukraine shelled a Russian military convoy. On Monday, the same "market" soared just under 1% as the news that had caused the "crash" was refuted. That has been the dominant rinse, repeat theme for the past month and will continue to be well after Yellen's Friday speech at Jackson Hole (although one does wonder why she is not speaking on Wednesday when the symposium begins). Not surprisingly, with only modest re-escalation news overnight (that Russia is preparing further retaliatory sanctions against the West), which is simply "pent up de-escalation" in the eyes of Keynesian algos, futures are again up a solid 0.2% and rising, and the way the rampy USDJPY is being manipulated before its pre-market blast off, we may well see the S&P hit 1980, if not a new all time high before 9:30am, let alone during today's cash session. In any event, whatever you do, don't you dare suggest that algos should care one bit about Ferguson and its implications for US society.