Archive - Sep 2014

A new armed group in Algeria calling itself the "Caliphate Soldiers"  - a re-splinter from Al-Qaeda splinter group ISIS - has, according to AP, beheaded a Frenchman abducted in Algeria in a video posted online on Wednesday, after giving a 24-hour deadline to Paris. Herve Gourdel, a 55-year-old hiker from the southern French city of Nice, was kidnapped on Sunday by Jund al-Khilifa, which demanded France stop its air strikes against IS in Iraq.

In what is certainly the most impotant news of the day, the WSJ reports that China's long-serving central banker Zhou Xiaochuan, "the face of the Chinese economy to markets globally" is about to be given the boot. According to the WSJ, "Chinese leader Xi Jinping is considering replacing Mr. Zhou, say party officials, as part of a wider personnel reshuffle that also comes after internal battles over economic reforms." And while it is true that at the age of 66, Zhou has passed China's retirement age, and his departure will be spun as an old man spending more time with his family, the reality is that this is part of a major Chinese shift in the "balance of power between reformist and reactionary forces, with the momentum for reforms being eroded by the loss of growth momentum in the economy," said Eswar Prasad, a Cornell University China expert. Zhou's replacement: a career banker, who will do the bidding of, you guessed it, banks, which means "liquidity to the max."

The Scottish referendum and waves of secession movements - from Spain's Catalonia to Turkey and Iraq's ethnic Kurds - are working in different directions to the world's status quo sustaining leaders' hopes for increased centralization and 'planned' economic growth. More than half a century after World War II triggered a wave of post-colonial nationalism that changed the map of the world, buried nationalism and ethnic identity movements of various forms are challenging the modern idea of the inviolable unity of the nation-state, not just in Europe, but across the entire world...

New Home Sales rose a magnificent (seasonally-adjusted annualized rate) 18% in August - the biggest monthly rise since January 1992 albeit with a 16.3 90% confidence interval, meaning the final number may well be +1.7%. At 504k, new home sales are back at May 2008 levels (though obviously massively below the 1.4 million homes sold at the peak in 2005). As a reminder, May's 504K new home sales print was later revieed later to 458K. But even more stunning, new home sales in The West rose a mind-numbing 50% in August (and up 84.4% YoY - nearly double).  And just to confuse matters, the average new home sale price rose to a new record high of $347,900. So as existing home sales are sliding (and prices dropping), new home sales are surging (to new record highs) - makes perfect sense. We await the extrapolations for how great this move is. (or the realization that it is entirely seasonal-adjustment-biased and unsustainable given the realities of mortgage applications).

"We did it for your own good," could perhaps be the mantra of President Obama's address to The United Nations' General Assembly this morning as the Nobel Peace Prize winner looks his fellow world-leaders in the eye and explains why the US unilaterally invaded Syria to save them all from the Dread Pirate Roberts ISIS/ISIL/Islamic State (and now The Khorasan Group). As AP reports, on Wednesday afternoon, Obama will convene an unusual meeting of the U.N. Security Council, during which members were expected to adopt a resolution that would require all countries to prevent the recruitment and transport of would-be foreign fighters preparing to join terrorist groups such as the Islamic State group. Good luck with that.

EURUSD is back under 1.28 (for the first time since July 2013) as sustained USD demand since around 845ET has driven the USD Index up to fresh 4-year highs. Bonds are not reacting much to this significant move (for now) but stocks are pushing to the lows of the day as carry-induced euphoria is failing fast. Precious metals are sliding led by Silver.

Listening to the iPhone and Alibaba infotainment channel, the name TNT Express has been mentioned exactly zero times today. For those who are unaware, Dutch TNT Express, which UPS tried to acquire in 2012, is one of the world's largest logistics companies competing with UPS, FDX and DHL. And the reason the name is important this morning, and thus why it is being avoided on this side of the Atlantic, is because earlier today it provided the latest confirmation of Goldman showed previously, namely that the global economy has not only hit a brick wall, but is now in reverse, when it warned that as a result of "weak growth in Europe and the US" it would not meet its overoptimistic full-year targets. The result: its stock plunged by 11%. And since global logistics and trade, or lack thereof, is universal, expect FedEx and UPS to follow shortly with guidance cuts of their own in the coming days and weeks.

You’ve got to hand it to the brain surgeons running America’s foreign policy. They possess an uncanny ability to seamlessly forge alliances, break alliances and turn former allies into existential enemies, while simultaneously demonizing regimes, making amends with demonized regimes, and then quickly forming alliances with the same bitter enemies... “I want to thank those countries who genuinely supported us. Western countries had their personal interest, the Western countries and the United States had their own personal goal,” Mr. Karzai said, adding "this war is for the personal interest of foreign policies and this is fight of outsiders in which Afghans are sacrificed."

If only a year ago, someone had suggested that World Proxy War I would break out on the territory of what used to be Iraq and Syria, they would be deemed insane and put away in the Marriner Eccles building or some other insane asylum. And yet, as AFP's latest map shows, as of this moment nearly 20 nations from around the globe have deployed boots on the ground to battle a terrorist threat, which at least according to the people of Iraq, was once again created by the CIA.

Remember when conventional wisdom was that the world in 2014 was humming on all cylinders? Good times. Then this happened: according to Goldman's Global Leading Indicator, aka its famous "Swirlogram", global growth just hit a brick wall in the month of September.

• A Month of Bombs Dropped in One Night of Strikes on Syria (BBG)
• Air strikes in Syria hit Islamic State-held areas near Turkey (Reuters)
• Pimco ETF Draws Probe by SEC (WSJ)
• Shadowy al Qaeda cell, hit by U.S. in Syria, seen as 'imminent' threat (Reuters)
• Yellen Warns on Market Calm Before ‘Considerable Time’ Up (BBG)
• Dudley Says Fed Needs U.S. Economy to Run ‘A Little Hot' (BBG)
• Websites Are Wary of Facebook Tracking Software (WSJ)
• Just a joke now: Barclays Fined Twice in One Day for Compliance Failures (BBG)
• Fired UPS worker kills two supervisors, self, in Alabama shooting (Reuters)

If yesterday the bombardment, no pun intended, of bad news from around the globe was too much even for Mahwah's vacuum tubes to spin as bullish - for stocks - news, then tonight's macro economic updates have so far been hardly as bombastic, with the only real news of the day has Germany's IFO Business Climate reading, which dropped from 106.3 to 105.8, declining for the 5th month in a row, missing expectations, and printing at the lowest level of since April 2013! (More from Goldman below) Net result: Bunds yields were once again pushed in the sub-1% category, even if stocks today are higher because the European data is "so bad it means the ECB has no choice but to do (public instead of just private) QE" blah blah blah.

Despite or maybe because of the recent bout of price weakness, gold and silver American eagle coin sales from the U.S. Mint have picked up significantly from last month. Smart money continues to accumulate bullion when prices are pushed lower.

The ECB again cut the interest rates it controls, deeper into negative territory. It says it’s trying to nudge prices higher, but it’s actually feeding the cancer of falling interest.