Archive - Aug 2014

If it was crashing German business confidence yesterday setting the somber mood for European economic "growth" in the second half, with a European GDP decline if not outright contraction now almost practically inevitable, then overnight it was disappointing data from virtually every other spot in the globe (and Europe again) to hammer the message in, starting with a historic 6.8% drop in Japanese GDP driven by a record plunge in consumption, quickly followed by total social financing out of China which in aggregate rose by only RMB273.1bn in July, or just 18% of what was expected, with missing industrial production and retail sales just the cherry on top. Then it was Europe's turn again, where June Industrial Production contracted -0.3% on expectations of a 0.4% increase, to set the stage for tomorrow's Eurozone GDP print which, following Italy's triple-drip recession shocker last week, probably means it will be not only Japan but also Europe which are about to have taken a sharp move for the worse. All of which of course, explains why just as Europe opened, the USDJPY blasted off and took both EuroSTOXX and US equity futures higher with it, and at last check ES was some 10 higher.

The Tirumala Tirupati Temple in India has deposited gold, and is getting paid interest in gold. Why is no one else paying interest in gold?

The riots and looting that erupted in Ferguson is symptomatic of something much more worrisome in America. This is a problem that is brewing and is extremely dangerous to say the least. The killing of this black teen is not simply racism. The problems are much deeper. Claiming this is just racism deflects the entire issue and makes it simply black-v-white. This is something far more serious for it is impacting our entire society. The police are being transformed from protecting the public into protecting government from the public. Most do not even see what transformation they have gone through.

As The Economist finds, the internet is making the buying and selling of sex easier and safer (from what we have been told). But it's not all Pretty Woman... not only is the oldest profession in the world seeing prices going down (the dreaded deflation) as the shift online has boosted supply by drawing more locals into the trade; but as the following four charts show, rates vary dramatically by 'services', ethnicity, geography, build, and bust size.

How in the world is it possible that more than 170 health workers have been infected by the Ebola virus? That is the one question about Ebola that nobody can seem to answer. The World Health Organization is reporting this as a fact, but no explanation is given as to why this is happening. We are just assured that Ebola “is not airborne” and that getting infected “requires close contact with the bodily fluids of an infected person”. If this is true, then how have more than 170 health workers caught the disease? These workers are dressed head to toe in suits that are specifically designed to prevent the spread of the virus. So how is this happening?

Six weeks ago we highlighted how "screwed" Las Vegas is as the ongoing 14-year drought weighs on water levels. Today, AP reports, Lake Mead - the main source of fresh water for Las Vegas and its 40 million visitors - just hit record low levels at 1080 feet. Most concerning - at 1,000 feet, drinking water intakes will no longer function and Las Vegas will go dry. As analysts concluded previously, "unless it can find a way to get more water from somewhere, Las Vegas is out of business. Yet they’re still building, which is stupid."

FDC 4/2599 ZKC MO..AIRSPACE FERGUSON, MO..TEMPORARY FLIGHT RESTRICTIONS WITHIN AN AREA DEFINED AS 3 NM RADIUS OF 384428N0901812W (ST LOUIS VORTAC STL129011.0) SFC-3000FT TO PROVIDE A SAFE ENVIRONMENT FOR LAW ENFORCEMENT ACTIVITIES. PURSUANT TO 14 CFR SECTION 91.137(A)(2) TEMPORARY FLIGHT RESTRICTIONS ARE IN EFFECT. ONLY RELIEF AIRCRAFT OPERATIONS UNDER DIRECTION OF ST. LOUIS COUNTY POLICE DEPARTMENT ARE AUTHORIZED IN THE AIRSPACE. AIRCRAFT LANDING AND DEPARTING ST. LOUIS LAMBERT AIRPORT ARE EXEMPT FROM THIS TFR. ST. LOUIS COUNTY POLICE DEPARTMENT, TELEPHONE 3148892360 , IS IN CHARGE OF THE OPERATION. KANSAS CITY /ZKC/ ARTCC, TELEPHONE 9132548500, IS THE FAA COORDINATION FACILITY. 1408121315-1408182000

The western world has placed many sanctions on Russia and its economy. However, Russia holds major leverage over Europe; it has oil and Europe needs it (and may just do a 'deal').

"So there are no proxies and there is no functioning Iraqi state. If the Washington war party decides to keep bombing just exactly what purpose will be served - other then defending a map which is now heading for the dustbin of history?"

Compared to the 3.6% drop in GDP when Japan last hiked its consumption tax in 1997, today's Q2 GDP collapse of 6.8% annualized is an utter disaster (even if it is slightly better than the expected -7.0% expectations thanks to a surge in the deflator). Inventory additions added 1.0% growth. Consumer Spending collapsed 5.2% QoQ - the most on record. Of course, in the traditional of Keynesian hockey-sticks, this XX% collapse in Q2 is expected to surge back to a 2.5% growth figure in Q3 and lead Japan to the holy grail once more.. only it didn't quite work out that way last time for Japan. Simply put this is the worst posible outcome for bulls, small beat not enopugh to rejuice QQE. As a gentle reminder of just what happened in 1997 - the last time Japan hiked taxes - we provide the eerily analog chart below...

In what appears to be the peak of arrogance (at the ignorance of the American people), Secretary of Defense Chuck Hagel has just announced that an additional 130 "military advisers" - mostly Marines - will be sent to Iraq to help the Kurds fight ISIS. We have two simple questions: 1) Since when did Marines become non-combat-troops? and 2) Is the President going to call all their wives and explain that their boots will not touch the ground? As gentle reminder, no less than 8 hours ago the adniinstration was considering 75 'military advisers' and now it's nearly double that?

While income inequality maybe the hot topic du jour, the following chart suggests America has another - even bigger - problem - Inebriation Inequality. Perhaps stunning to many, the top 10% of US adults consume - on average - 10 drinks per day!!!

The global monetary system is diverging and fraying.  Central bank post-crisis quasi-coordination has broken down.  Initially, foreign central banks unhappily followed the Fed in cutting rates toward zero; or else risked an appreciating currency affecting competitiveness. As domestic challenges developed and the Fed initiated ‘tapering’, many central banks pushed rates back up.  Developed world economies have grown from around 30% of global GDP 20 years ago to 50% today.  This improvement has helped motivate the unfolding of a new international economic order between developed and developing world economies. 

Coal production in the U.S YoY is down 0.3 percent and continued production slowdowns could continue to hurt firms like Peabody Energy which is down almost 19 percent YTD.

If a trader knew nothing about the growth, the debt, the inflation, the exporters vs. importers, the serial defaulters, currency manipulators, hot-money or conversely deflation fighters; simply grouping the nations of the world on whether they were 'friend' or 'foe' to the US would provide an odd highly correlated value perspective on the interest rates paid on 1yr and 10yr sovereign debt... It appears your status with the central bank cabal was more important than your ability to repay the loaned money?