Archive - Aug 1, 2014

So much for the "Russia is becoming increasingly isolated" meme that the West would like many to believe. As Russia continues to sign de-dollarization deals and trade agreements with its BRICS allies while pushing ahead with retaliatory actions against the US and Europe, it appears the 'sanctioned' friends of Putin are taking matters into their own hands. Billionaire oligarch Gennady Timchenko, among the first to be hit by travel bans and asset freezes by the US, has decided to tear up his Visa and Mastercard, shifting all his credit cards to China's UnionPay, noting that "in some ways it is more secure than Visa - at least the Americans can't reach it."

Among this week's most notable moves was the decompression of high-yield credit spreads to near 9 month wides (and continued outflows). What went notably-under-reported by the mainstream media, however, was an even bigger selloff in US mortgage bonds. While JPMorgan is unable to see "any fundamental reason" for the plunge in prices, the worrying indication from the magnitude of the drop relative to volumes is that liquidity has evaporated. As Bloomberg notes, with dealer inventories sold down (due to new regulations that make repo and agency securities unpalatable), they have no way to 'smooth' the selling when investors want to exit positions. Weakness of this magnitude when the 10Y gained only 2bps on the week is a big wake-up call that traders are looking for the exits from housing debt and the door is very narrow.

As long as people remain obsessed with false paradigms and faux enemies, the establishment's goal of complete centralized dominance will be predictably attainable. If we change our focus to the internationalists as the true danger instead of playing their game by their rules, then things will become far more interesting...

As the Argentina farce rolls on, it is worth noting that this is nothing new. As Bloomberg Briefs shows below, Latin American nations have been serial defaulters for the last 20 years.

Friday nite open caption contest...

The Times Of Israel has removed a provocatively-titled blog post after huge blowback, denunciations, and ridicule across social media. The post - "When Genocide Is Permissible" (in full below) - concludes, "Prime Minister Benjamin Netanyahu clearly stated at the outset of this incursion that his objective is to restore a sustainable quiet for the citizens of Israel. We have already established that it is the responsibility of every government to ensure the safety and security of its people. If political leaders and military experts determine that the only way to achieve its goal of sustaining quiet is through genocide is it then permissible to achieve those responsible goals?" Removal or not, we are sure this will do nothing to endear Israel to the world.

The European Union (EU) is still in the midst of an economic slump. Many members of the political class in Brussels claim that fiscal austerity is to blame. But, this diagnosis is wrong. It's time for the public to stop listening to the EU's anti-austerity hypocrites and start looking at the numbers.

America Used COMMUNIST Torture Techniques SPECIALLY DESIGNED to Produce F·A·L·S·E Confessions

Having publicly shunned President Obama, it appears Turkish Prime Minister Erdogan has no problem upsetting the status quo. As Reuters reports, the fifth cargo of crude oil from Iraqi Kurdistan was loading at Turkey's Mediterranean port of Ceyhan on Thursday and was scheduled to set sail on Friday, Turkish energy officials said. Baghdad is unhappy - missing out on the oil revenues. We are sure US is unhappy - oil being sold out of its control. And OPEC may be getting upset as it appears an 'anonymous' buyer is more than willing to buy the oil from the 'not sovereign status' seller militia at a healthy discount. De-petrodollarization?

3D printing is an incredibly disruptive technology and there will be some massive home runs in this space

"In the immediate aftermath of 9/11, we did some things that were wrong. We did a whole lot of things that were right, but we tortured some folks. We did things that were contrary to our values."

"The most important thing we can convey about inequality as a current political theme is that it is sharply exacerbated by the current mix of governmental policies in the developed world, particularly in America. If policies were oriented toward unlocking America’s considerable growth potential (policies described elsewhere in this report), then the rise of asset markets would be balanced alongside considerable improvement in the economic conditions of the vast middle class. But that is not the case in America, where growth-suppressive policies exist alongside extreme monetary ease. This terrible combination is at the root of today’s perception of growing inequality, but the policymakers who are causing this set of circumstances are the ones railing (for political gain) against inequality... [the resultant] societal unrest that may make the current politically-useful “inequality” riffs, blaming the “1%” and attacking those “millionaires and billionaires” who refuse to “pay their fair share,” look like mere warm-ups for real class warfare."

The minimum-wage-hiker-in-chief will not be happy this morning. Former Obama administration economist Alan Krueger has some choice words for the hope-filled living-wage seekers of America:

*KRUEGER SAYS WORKERS NEED TO 'RATCHET DOWN WAGE EXPECTATIONS'

Isn't it odd how quickly the views of ethical economists change once they have tenure and the shackles of government-servitude are removed. We don't remember hearing Krueger arguing that a 'fair' wage is a little much to expect in the current environment. It would appear Mr. Krueger should stop being cynical and just get hopey.

After several months of quite complacency, investors were woken up Thursday by a sharp sell off driven by concerns over potential rising inflationary pressures, rising credit default risk and weak undertones to the economic data flows. One of the primary threats that has been readily dismissed by most analysts is the impact from rising interest rates...

The year's best performing major index was its biggest loser this week. Trannies tumbled almost 4% - the worst week in 22 months. The rest of the indices fell 2-3% with the Russell 2000 down 4 weeks in a row for the first time since November 2011. Dow ends -0.5% and Russell -4% for 2014. Away from stocks, Treasury yields collapsed today erasing most of the post-GDP losses and ending the week only 3-5bps wider at the long-end and 1.5bps lower at the front-end. 10Y closed under 2.5%. The USD Index mirrored bonds, surging on GDP and then plunging today to end the week up 0.35%. Gold and silver oddly decoupled today (silver lower) ending week down 1% and 2% respectively on the week. Ugly week for WTI crude, ending under $98 (Feb lows) down 4.4%.  High-yield credit spreads rose 9.7% (to over 350bps - worst since Nov 2013) for the worst non-roll week since May 2012.