Archive - Jul 2013 - Story

While it was not surprising that the BOE did nothing to change its rate or QE program, it was surprising (to some) that in the first official statement following the appointment of Goldman's Mark Carney as head of the Bank of England, the bank did mention that forward guidance and intermediate thresholds would likely be considered at the August assessment. Which, of course, is code for expect a major change in monetary policy. And now we also know the date, meaning that some time in August Goldman's latest central bank head will proceed doing what Goldman central bank heads do best: crush currencies in order to boost nominal, not real, returns and ensure another record Goldman bonus pool.

Given the US holiday, markets are likely to be thin today but there are some big news stories floating around at the moment.  If the fast and furious events from the past few days in a revolutionary Egypt bear a striking resemblance to what happened in the spring of 2011, it is because they are strikingly comparable. Only this time, following the ouster of yet another US-supported "leader" by the US-supported military, the country's CDS has normalized at a level that is roughly double where it was two years ago as the implicit backing of the US looks increasingly shaky, following what was yet another bungled foreign policy venture by the Obama administration. But for now, the people are celebrating, just as they did in 2011. One wonders what happens between now and the next coup, somewhere two years (or less) hence. For now focus merely on who controls the Suez - after all that is really all that matters for the US. The other major story of yesterday, Portugal, continues to be in limbo,

As southern Europe buckles under the weight of unserviceable debt and 60%+ youth unemployment rates, Germany is coasting along with an almost historically low unemployment rate; the disparity between Germany and its southern neighbors could not be more obvious. So it is ironic that Angela Merkel is leading the public pledge to ‘tackle’ the continent’s job crisis. Of course, European policy to deal with the jobs crisis is quite simple: print more money. Their latest initiative, a few billion more to fight the youth unemployment rate, was mercilessly eviscerated yesterday in the European Parliament by Nigel Farage... one of the few voices of reason left on the continent.

The consequences of the Fed's decision tosses hand grenades into the wind with tumultuous reverberations. Shrapnel is ensuing. More blood will be spilt. Dominoes, anyone?

The price of gold fell last week to the $1,200 level. The lemming sentiment in capital markets is uniformly bearish, yet every price-drop brings forth hungry buyers for physical gold from all over the world. Even hard-bitten gold bugs in the West are shaken and frightened to call a bottom, yet it is these conditions that accompany a selling climax. This article concludes there is a high possibility that gold will go sharply higher from here. There are three loose ends to consider: valuation, economic and market fundamentals.

As I have said since the Egyptian revolution, the United States supports a set of core principles, including opposition to violence, protection of universal human rights, and reform that meets the legitimate aspirations of the people. The United States does not support particular individuals or political parties, but we are committed to the democratic process and respect for the rule of law. Since the current unrest in Egypt began, we have called on all parties to work together to address the legitimate grievances of the Egyptian people, in accordance with the democratic process, and without recourse to violence or the use of force....I now call on the Egyptian military to move quickly and responsibly to return full authority back to a democratically elected civilian government as soon as possible through an inclusive and transparent process, and to avoid any arbitrary arrests of President Morsy and his supporters. Given today’s developments, I have also directed the relevant departments and agencies to review the implications under U.S. law for our assistance to the government of Egypt.

The Portuguese government is on the rocks. The junior coalition partner the People’s Party (CDS-PP) will hold a meeting this afternoon to determine whether to support the government, if it withdraws support in parliament, elections seem inevitable, although they could be delayed for some months. Such a move would seriously hamper Portugal’s economic reform program, which is already off track. Portugal has only met its deficit targets due to one-off measures while competitiveness adjustments have slowed and contingent liabilities remain a hidden risk. With the country on the cusp of an unsustainable debt burden any delays would likely be the final straw which pushes Portugal into needing some form of further assistance. Things must be getting serious in Portugal, they just announced a short-selling ban on select banking stocks - how long before capital controls?

College is usually a good investment, but that is not the case for every single school in America. As the following infographic shows, you may want to rethink your decision before handing over that big tution check.

From the lows in March 2009, the S&P 500's 4.3 year rally is now the 6th longest of the 24 bull markets of the last 113 years of data. Interestingly, of those bull markets, the average performance has been +127.36% (over 3.16 years)- the current market's performance is +127.72%.

While images projected on every media channel show lasers, fireworks, and celebrations, there are tensions rising still. As Al Jazeera reports, police are arresting crews of local TV stations affiliated with the Muslim Brotherhood, and as BBC Arabic notes, there are stores being ransacked in Qena and gun shots and clashes in Alexandria. As Stratfor notes, pro-government and opposition demonstrators have gathered in several places across Cairo (as indicated in the image below) and while no military force has been used to disperse the crowds yet - the military seems content to pre-position forces in a standby role and maintain order through a show of potential force - the skirmishes that are being reported hint at the potential for future instability.

The iWatch; Google Glass; the convergence between body and computer continues at a torrid pace, yet nobody knows just what the winning formula will be to make lazy, internet addicted consumers even lazier if more connected to the binary void. One proposal for what will certainly be an "out of the box" (or "in the box" as the case may be) next generation product, and one which may appear avant garde, controversial and even shocking, comes from the Onion which as usual is years ahead of its time in a world which is now straight from, well, the Onion which represents "a wearable computing device that streams videos into one eye, the internet into the other, and sucks your cock all at the same time." In short (to pardon the pun), a gold mine.

As central banks around the world conduct the greatest monetary experiment in human history in real-time around us, it's important to keep the Bullwhip Effect in mind. The mathematical odds that the world's many central planners, with their manifold partners in distributing fiat liquidity, are going to have the finesse to successfully steer their ships to safety through the shoals of inflation and deflation that threaten on either side, are very low. And that's before taking into account the unintended consequences of their more extreme measures. The bottom line is if another liquidity crisis hits (which Chris is warning may be at our doorstep), the one thing we can count on is that the response from our leaders will be ill fitting to the situation. To explain why, we connect the Fed and beer - very appropriate given the holiday tomorrow...

Well that was quick:

MORSI SPEECH YESTERDAY DIDN'T MEET PEOPLE'S DEMANDS
EARLY PRESIDENTIAL ELECTIONS TO BE HELD
EGYPT'S CONSTITUTION TO BE SUSPENDED UNDER PLAN
MILITARY AGREED GOVERNMENT OF TECHNOCRATS TO BE FORMED

US Official: Non-essential diplomats and embassy staff to leave Egypt

Egypt Muslim Brotherhood TV taken off air

Head of Egypt constitutional court to be sworn in as interim head of state on Thursday

*CLASHES IN EGYPT AFTER ARMY STATEMENT LEAVE 6 DEAD NATIONWIDE

*STATE DEPT TELLS U.S. CITIZENS IN EGYPT TO LEAVE COUNTRY

While the situation remains fluid, and the US state department remains in the dark as far as it wants the public to know, Reuters is reporting that Egypt's state news agency MENA states "Egypt's leading Muslim and Christian clerics and the leader of the liberal opposition alliance Mohamed ElBaradei will jointly present a roadmap for a political transition shortly." Of course, use of the word 'coup' is expressly forbidden but as @RichardEngel asks (rhetorically), "Is it a coup if the people ask for the military's help?  The brotherhood clearly thinks it is."

Game Over?