Archive - Aug 29, 2012 - Story

Just what does all this easily accessible and now pervasive student debt fund? The chart below, courtesy of Bloomberg, provides the answer: in the past 3 decades there has been no other cost that comes even remotely close to matching the near hyperinflationary surge in college tuition and costs.

• Hurricane Isaac Whips Storm Surge on Path to New Orleans (Bloomberg)
• Republicans Vow to Transform Obama’s U.S. With Low Tax, Freedom (Bloomberg)
• Little-known Ryan to take center-stage at Republican convention (Reuters)
• An $800 billion stimulus tempest in a teapot: China State Researcher: Local Govt Investment Plans Largely Symbolic (WSJ)
• China Says Payment Delays, Defaults May Worsen (Dow Jones)
• G-7 Countries Call for Increased Oil Output to Meet Demand (Bloomberg)
• Creeping Socialism: Clegg calls for emergency tax on rich (FT)
• United Airlines computer problem delays 200 flights (Chicago Sun Times)
• Paulson, Investors Avoid Fireworks Despite Brutal Run (Bloomberg)
• Occupy Sets Wall Street Tie-Up as Protesters Face Burnout (Bloomberg)
• The nostalgic grass is always greener: Serbia Joblessness Swells as Milosevic-Era Leaders Return (Bloomberg)

Just under a year ago, in early November 2011, the ECB specifically made it a very clear prerogative that it would not buy Italian bonds under the SMP program, or in any other way seek to lower Italian bond yields, which promptly soared to all time highs, as long as the intransigent Silbio Berlusconi, then career PM, remained in his position as head of Italy. A few days after Italian bonds soared, Silvio quietly and reluctantly stepped down, paving the way for that other Goldmanite - unelected technocrat Mario Monti to take over the reins. We are now just over two months until the one year anniversary of the historic Berlusconi ouster by a central bank (whose head amusingly wrote an Op-ed in a leftist German publication that his organization is apolitical; just as the Fed is apolitical until Wall Street darling Chuck Schumer tells Bernanke to "get to work Mr. Chairman"), and suddenly Silvio is back in the picture. As Italian daily Repubblica notes, the former PM "fears the repercussions of a conviction in the Ruby process before the vote" currently scheduled for 2013, and as a result Berlusconi would agree to sign off on a plan to reform the electoral law in the next few days on the condition that early elections will be held in November. Whether or not this means that Silvio is seeking to retain his PM throne, or merely to regain prosecutorial immunity from engaging in various questionable activities (mostly of a sexual nature) is unknown, but the fact that the Italian political theater may regain its old tragicomic luster has us smiling at the prospect of what the end of 2012 has to offer, especially since America's own presidential election will culminate at about the same time.

When jawboning is stuck on max, and mere talking and exortations to just "believe" lead to no incremental benefit for PIIGS bonds and the leve of the Dax, what is a central planner to do? Why start, er, fingerboning, and write extended missive on the future of one doomed utopian vision or another. Sure enough, the former Goldmanite has just released the following Op-ed in German Zeit, titled, "The future of the euro: stability through change", which contains this piece of sheer brilliance: "The ECB is not a political institution. But it is committed to its responsibilities as an institution of the European Union." The European Union which is first and foremost a... political institution.

In what is shaping up to be another listless trading day, where attention is glued to Hurricane Issac making not one but two landfalls, and the implication for US refining capacity or the lack thereof, here is what has happened so far, via BBG and Deutsche. The overnight session is mixed with Chinese equities under-performing again. The Nikkei and the KOSPI are both around two-tenths of a percent higher. The Shanghai Composite (-0.4%) is lower as the economic slowdown is adding negative pressure on cyclical sector earnings, closing at fresh 3 year lows. Iron ore prices continued to fall amid the weaker growth backdrop in China. Spot iron ore prices were down nearly 5% overnight to their lowest since November 2009. Rio Tinto's 5yr CDS has widened by about 25bp in a week. Rio's share price is down by about 6.6% over the same period. European markets fall, led by the commodity-heavy FTSE 100, with Swedish, Swiss markets rising. The euro rebounds against the dollar. Crude oil falls, metal prices decline. Spanish, Italian bond yields rise slightly, German, U.K., Irish bond yields fall. U.S. futures little changed and 2Q GDP figures are released later today. The state of Italy has sold EUR9 billion in 6 month bills at a 1.69 BTC, yielding 1.585%, the lowest since March, on prayers that Draghi, who was last heard defending the ECB as a non-political institution (whose sole product is the political construct known as the Euro - go figure), will finally step up and act instead of just continuing to talk and make empty promises.