Archive - Aug 2013 - Story

Even though the United States has the highest incarceration rate and the largest total prison population in the world by a very wide margin, hundreds of communities all over America are being overwhelmed by crime and violence.  For many years, violent crime had actually decreased in the United States, but now the trend is going the other way. The frightening thing is that crime statistics are going up even though police departments in some major cities have publicly announced that they will not even respond to certain crimes anymore. So what is causing the rise in crime and violence?  Well, we live at a time when economic opportunities for young people are extremely limited.  The younger you are, the more likely you are to be unemployed, and poverty in America has been steadily rising even in the midst of this so-called "economy recovery". When people are poor and feel like they are out of options, they tend to get desperate.  And desperate people do desperate things.

The New York metro region’s recovery from Superstorm Sandy is well under way. Spending on restoration and rebuilding activities following a natural disaster is a potentially powerful economic stimulus to the affected area. Indeed, money from outside the region - in the form of federal aid and private insurance payments - flowing to the damaged areas in the region gives a temporary boost to economic activity. But, in the latest NYFed-driven tax-payer-funded research study, the PhDs ask "does this mean that Sandy - along with the federal aid and insurance payouts associated with it - was actually good for the region’s economy?" All sounds very Krugmanesque, however, hidden deep in the study is the awful truth... "So while this [stimulus driven] economic activity may have been boosted from such spending, the region’s net wealth hasn’t changed."

It appears, as UBS' Stephane Deo notes, that in a rising rate environment, so-called risk-parity portfolios were susceptible to draw-down as yields 'gap' higher. As it turned out the 'equalization of risk across assets within the portfolio' failed dramatically after the Fed's June 19th FOMC statement which sent rates and stocks higher (and moreover rate volatility considerably higher) - the consequence for some risk parity funds was a significant loss. The question is whether this will happen again, or was this event a one-off? We believe this is a relatively mild foretaste of what is to come... as the 'speed limit' for rising bond yields is smashed.

What the Quebec tragedy demonstrates, says Banica, is that pipelines are a far better option than rail. “Whereas pipelines do not kill as many people as rail (or even truck transport, as more drivers die due to accidents), they do pose a bigger environmental risk than rail due to larger potential leaks and releases.” So the issue of pipeline leak detection will increasingly be on everyone’s radar. Most leaks are found eventually - but there is money to be saved and damage to be avoided by catching them at the smallest rupture. Right now, we rely on 'pigs' in the pipeline to do this, but there is new technology out there.

What happens when 63.5K ounces of registered gold in your warehouse (16% of total) just has their warrants detached and the vault is about to finds itself 63.5k ounces of gold emptier? If you are JPM you call the gold vault with most inventory in town, that of HSBC, and politely request that they transfer as much eligible gold as they can on short notice - in this case a tiny 6,444.936 oz to be exact. None of which changes the fact that in a few days, the inventory in JPM's gold vault will drop to another record low of only 380K ounces and the JPM "rescue" pleas from HSBC and other Comex members will become ever louder and more desperate until one day they may just go straight to voicemail.

There are still more than 3 million Americans who have been unemployed for more than 52 weeks and, as WSJ reports, economists (via recent studies) worry they will never work again. Of course, with benefits at such heights (and work punished), it is not surprising but on the demand side, for the long-term unemployed, interview "callback rates decrease dramatically at 9 months of unemployment." Worst still, for those applying for medium-to-low skilled jobs (so the majority), being long-term unemployed reduced interview requests by 20% - the equivalent of shaving four years of work experience off their resumes. Critically, one study found employers showed "a strong distaste for applicants with long spells of non-employment."

It’s long been a common approach for government sliding into insolvency to confiscate wealth from their own citizens. Charles I of England infamously commandeered 200,000 pounds of his own citizens’ gold right before the English Civil War in 1638. Roosevelt confiscated his entire nation’s gold holdings roughly three centuries later. And of course, Cyprus raided domestic bank accounts earlier this year in a desperate attempt to bail-in the national banking system. It’s foolish to think that these things cannot happen, especially when you look at the numbers. This is why we are concerned that the IRS is refusing to issue tax ID numbers for single-member LLCs that are owned by an IRA... which is the specific structure that US taxpayers need to create in order to ship their retirement savings overseas.

(a/k/a the shortest post in Zero Hedge history)

Because who really needs Generally Accepted Accounting Principles anyway...

"You can't go up forever," noted Bob Pisani before piling on a series of excuses for the recent 'weakness' that quite frankly could have been used at any 1.1% drop in stocks of the last 3 years... While stocks bounced off lows today and are making the headlines for a third down day for the first time in 2 months, the real story that most are ignoring is the surge in the JPY. The USD is legging lower confusing the 'Taper' chatter but it is the JPY strength that is dominating (up 3.6% against the USD in the last 4 days (and the Nikkei futures -800 from Friday's highs). Treasuries rallied 3-4bps (and the curve flattened) as it seems the modest weakness in stocks is being met with some safe-haven demand. Despite bonds' bid, Homebuilders were battered (-4.5% on the week). Gold and silver strengthened off pre-open lows as WTI fell back to around $104. VIX spiked to 13.9% at the open but ended around 13% at the close. Back to CNBC for the close: "off the lows," but not in credit Maria...

Has the long-awaited "kinetic strike" catalyst finally arrived?

#BreakingNews - Activists: #FSA downs Iranian cargo plane at #Damascus International Airport. #Syria

— Al Arabiya English (@AlArabiya_Eng) August 7, 2013

Every time real personal income goes negative, a recession occurs. Now that personal income is falling, a recession is baked in. The Big Lie of the "recovery" is that it is self-sustaining. Minus government transfers, the reality that the Fed and Federal government are simply enriching the top 1/10th of 1% with access to unlimited credit at zero interest is revealed.

In early May, when the first of the Hilsenrath "taper" leaks hit, we made a prediction that the correct time frame for the actual taper announcement by the Fed would be September. As a reminder back then this was a heretical suggestion with prevailing consensus expecting a 2014 taper or a December 2013 move at the earliest. Fast forward to today, when the September FOMC is the consensus date for a taper announcement. However, what is still debated is whether or not the taper is actually "priced in" to risk assets: some say this is what the bond swoon of June was for, even though equities have largely digested the bond move 100 bps wider,  and are just a fraction off their all time highs. Well, a few hours ago someone just decided that not only is the taper not priced in, but that there will be a substantial shock surrounding the September VIX bucket. And they put their money where their mouth is.

So much for hopes that US consumers were loosening the purse strings and starting to "charge it." Moments ago we got the latest, June, consumer credit which was expected to increase $15 billion following the May revised $17.6 billion. More importantly, there was an expectation that following the surge in May revolving credit which rose by $6.4 billion or the second most in the past three years (only matched by the comparable pre-summer surge in 2012). Sadly, neither expectation was met: total consumer credit rose by "only" $13.8 billion, but more importantly, the revolving component posted a $2.7 billion decline. This also matched last year's pattern when June saw a major reduction of $2.8 billion. In other words, the only credit creation in the month of June was, once again, entirely for student and car loans, which rose by a whopping $16.5 billion - the most since February and the second highest increase since July 2011. So much for US consumers seeking to relever for discretionary purchases.

Following yesterday’s announcement that Amazon.com founder Jeffrey Bezos would be purchasing daily newspaper The Washington Post, sources confirmed today that Post associate editor and legendary investigative journalist Bob Woodward had already been repositioned at a new staff position in one of Amazon’s main warehouses just outside of Seattle... “The one thing I’ll give him is that he does seem very curious,” Griffin added. “I mean, he’s always asking questions and he has a little notepad and a tape recorder out at all times, so hopefully he picks something up from all that.”