Archive

February 19th, 2014

"Polar Vortex" Shock And Awe: The Utility Bill Arrives (And Why It Will Get Worse Before It Gets Better)

The "polar vortex" shock has arrived, only this time it is not in the form of another 12 inches of overnight snow accumulation but in the shape of household utility bills. A reader was kind enough to send us his just received ConEd bill for the month ended Februery 10. The result speaks for itself. It also speaks for where so much of US household disposable income will go in first quarter. Spoiler alert: not toward discretionary purchases.

GE Sues IRS For $658 Million Tax Refund

As goes GE so goes...? Not satisfied with the increasing offshoring of taxation (amid the Double Irish with a Dutch Sandwich and so on), US corporations are increasingly digging elsewhere in the vain hope of finding "revenue" to keep the shareholder dream alive. While GE is not alone in this, its latest move perfectly summarizes the farce that US accounting (and tax) regulations have become (and Immelt's angelic position advising Obama on jobs and the economy). As Reuters reports, GE is suing the Internal Revenue Service for a $658 million tax refund related to a tax loss the company claimed as it exited the reinsurance market more than a decade ago.

Pivotfarm's picture

Goodbye Dollar, Hello Yuan

You know what’s it like, the driver stands there in front of the car that has just hit you up the back while looking at something happening down the street rather than checking on you hitting your breaks…and yet, he says “sorry, but you stopped too quickly, it wasn’t my bad driving”.

Oil Train Derailments Reaching Crisis Point

On February 13 a Norfolk Southern Railway train bound for New Jersey derailed in Vandergrift, Pennsylvania. About 3,500 to 4,500 gallons of crude oil spilled, although miraculously it somehow didn’t leak into nearby water supplies. The Federal Railroad Administration announced that it will investigate the crash. The episode is merely the latest in a series of derailments and will raise pressure on federal regulators to issue new safety rules. It is hard to imagine the National Transportation Safety Board (NTSB) not taking action soon as the problem has become too common to ignore. The big question is whether or not PHMSA will require and accelerate the phase out of DOT-111 cars, making reinforced cars mandatory. The House Transportation and Infrastructure Committee will hold a hearing on rail safety on February 26, an indication that after multiple train derailments and explosions, the issue is finally getting greater attention on Capitol Hill.

 

Japanese Trade Deficit Explodes To Record - No J-Curve Miracle In Sight

With exports up 9% but imports up a massive 25% YoY, Japan's Trade balance pushed to itslargest deficit on record. This is the 2nd largest drop in the trade balance on record - beaten only by March/April 2011 (the Tsunami and Fuskushima). The miracle of the J-Curve (the hoped for recovery in exports that will come any minute now from the devaluation of the currency) is simply non-existent!! We love the smell of GDP downward revisions in the morning... Foreigners sold Japanese stocks for the 4th week in a row for the first time in 16 months.


Gold, The Fed's "Stockholm Syndrome", & Keeping An Open Mind

Once the family/gang has carved out their turf, they then turn to controlling and exploiting the resoruces (either natural or human) inside of it. How different is today's President-Congress-Governor-Mayor-Worker relationship to the mafia's boss-soldiers-associates model? Is it simply ironic that the term "bankster" has become so ingrained? As Santiago Capital's Brent Johnson explains in this brief presentation... if you can keep your mind open, today's business leaders and politicians are no different as they run protection, extortion, control the flow of 'drugs', and manage 'crime'. Is it possible, he asks, that we are all collectivley empathizing and sympathizing (and in many cases defending) the very system and the very people that are holding us captive?

Facebook Blows $16 Billion On SnapChat Competitor WhatsApp; Stock Tanks

After being rebuffed by SnapChat last year to the tune of $3 billion, Facebook decided that growth at any price was all that matters by blowing more than 5 times as much on the purchase of privately-owned WhatsApp. For $16 billion ($4bn cash and $12bn stock), Facebook gets 320 million active WhatsApp users at a whopping $50 per user. Why whopping? Because a few days ago Rakuten bought Viber's 300 million users for $900 million, or about $3 a pop, and about ten times less than what Facebook just paid. Not surprisingly FB shareholders are not happy. The company, which allows users to send messages over the web for free (as opposed to traditional text messages which most Telcos are now offering for free also) "is on a path to connect 1 billion people," Zuckerberg said, adding that they are "adding 1 million people per day..." It seems, as we noted previously, that the real bubble is in private markets not public.

Self-Reliance And "Vive La Revolution"

Ukraine and Thailand are in the midst of chaotic turmoil right now, characterized by riots and violent clashes between protestors and police. It reminds us of the old quote from Louis XVI upon being informed in 1789 that the French people had stormed the Bastille. “Is it a revolt?”, the King asked; “No, sire,” the duke replied, “It is a revolution.” History is packed with examples of how people rise up in the streets whenever economic conditions deteriorate. The French Revolution in 1789 is one famous example where the people finally reached their breaking points after nearly starving to death. In our system we award a tiny elite with the power to kill, steal, wage war, educate our children, and conjure unlimited quantities of paper money out of thin air. This is just plain silly. The real answer is within ourselves.

Ukraine Government-Opposition Truce Announced

With the Hryvnia at near-record lows (9.08 to the USD) and 3-month bill yields at 42%, we get a glimmer of good news from Ukraine:

  • *UKRAINE PROTEST CAMP WON'T BE STORMED TONIGHT, OPPOSITION SAYS
  • *UKRAINE GOVT, OPPOSITION AGREE ON TRUCE, YANUKOVYCH SAYS
  • *UKRAINE TALKS AIMED AT STOPPING BLOODSHED, YANUKOVYCH SAYS

Though sadly we have seen this before...

Nasdaq Winning Streak Snaps As Fed Fans Flames Of Confusion

The last week or two appeared to be dominated by hope that the transitory weakness in data was weather-related, the recovery was all good, and that the Fed would un-taper to give it a helping hand just in case... Today's FOMC minutes made it clear the latter was not the case and today's macro data made it clear this weakness is not just the weather. With US macro data at six-month lows, the last 2 days saw credit and equity protection markets well bid - even as underlying stocks surged back to unchanged on the year. However, between Fed talking-heads and the FOMC minutes, hope faded... stocks tumbled, credit widened, Treasury yields surged higher, the USD jumped, and precious metals were slammed into the red on the week. Volume - surprise surprise - was the highest in over a week.

The Chart That No "US Manufacturing Renaissance" Believer Wants To See

With inventories of unsold cars at or near record highs and the Big 3 up to their old tricks of channel-stuffing (as we have vociferously exposed), it seems time has run out for the US manufacturing renaissance. The 'if we build cars, they will come and buy them' mentality has hit a literal wall as not only are dealers bloated with stock, the buyers have dried up. As the following chart shows, the average number of days it takes to sell a car in the US has surged recently after 9 months of improvement. This is the worst (slowest) pace of sales since August 2009. Not what the 'recovery' faithful wanted to hear...