Archive - Sep 9, 2013 - Story

It's difficult to have a meaningful national debate about economic policy when "headline numbers" are juiced to make things appear rosier than reality. Since unemployment statistics are either suspect or blatantly bogus, we must look for other less manipulated statistics for some modicum of truth. Key statistics of employment, income and production are vital propaganda tools for the status quo, and the temptation to adjust them to manage perceptions is apparently irresistible. The con being played here is the assumption that more jobs means more wages which means things are getting better and better in every way, every day. If payroll withholding taxes are declining, and wages/salaries are flatlined, things are not getting better and better in terms of earned income flowing into household bank accounts, purses and wallets.

Update: Just as suspected, Syria promptly complies with the Russian check: SYRIA WELCOMES RUSSIA'S PROPOSAL FOR DAMASCUS TO PUT ITS CHEMICAL WEAPONS UNDER INTERNATIONAL CONTROL- FOREIGN MINISTER WALID AL-MOUALEM.

In a time when Obama is pitching his entire campaign around one core, if strawman, theme - preventing future chemical weapon attacks by the Assad regime, Putin once again shows why when playing geopolitical chess, it is safe to bet on the pesky Russian. Moments ago, Russia suggested that Syria skip straight to step 2 of the US military campaign, and hand over its chemical weapons to "international control" which would immediately obviate the US campaign completely, whose entire premise for public consumption is just that - to put Syrian chemical weapons under adult supervision and third party control.

• RUSSIA SAYS WILL URGE SYRIA TO PUT CHEMICAL WEAPONS UNDER INTERNATIONAL CONTROL IF THAT WILL AVERT MILITARY STRIKES
• SYRIA SHOULD GIVE UP WEAPONS IF IT WILL AVOID STRIKE: RUSSIA
• LAVROV SAYS SYRIA’S CHEMICAL WEAPONS COULD BE DESTROYED

And now the ball is in Obama and Kerry's court following this surprising move of appeasement by Russia, and implicitly by Syria.

The 77-year old billionaire twitterer extraordinaire, Carl Icahn, shows everyone just how it's done, making a levered profit in the process, but not before he lets a few sharp barbs out to tell everyone just how he feels.  To wit: "We jokingly ask, “What’s the difference between Dell and a dictatorship?” The answer: Most functioning dictatorships only need to postpone the vote once to win.... One of the great strengths of our country is that we abide by the rule of law.  However, state laws dealing with corporate governance often favor incumbent corporate boards and management and are weak in many areas.  While we must abide by these laws, we believe that they can and must be changed.  Among many other things, boards should not be able to treat elections as totalitarian dictatorships do; where if they lose, they simply ignore the results.
"

Another successful US opening - after probably the deadest overnight session in weeks - has lifted the all-important Dow back above 15,000 confirming that all is well in the world. 'They' must be pleased though it seems the earlier attempt to slam-down precious metals failed miserably this time. AAPL is back above $500, Gold under $1,400, and Dow above 15,000 - Mission Accomplished...

The Secretary of State, his emotional appeal to populist empathy using hundreds of YouTube clips showing the alleged aftermath of a chemical attack but not one piece of evidence proving Assad launched said attack, falling on deaf ears and eyes, has revised his track for a Syrian intervention. The latest spin from John Kerry: the Syrian attack would be "unbelievably small" as he characterized it today at a London press conference. Or, in the parlance of our times, "just the tip." Bloomberg adds: "We’re not talking about war, we’re not going to war." He spoke of a “limited, very targeted, very short-term effort." This happened while Syria’s Foreign Minister Walid al-Muallem left for Moscow today, seeking a joint approach with Russia to defuse Western assertions that the Syrian regime is using chemical munitions against its own people." In other words: Gazpromia refuses to be denied the "most unfavoured nation" status when it comes to being the marginal supplier of natgas to Europe.

As we watch, night after night, the collapse in the Indian Rupee (and the nation's stock market); whether driven by an unwind of Fed liquidity slooshing around the world or Europe's austerity-driven surplus imbalances, it is easy to 'feel sorry' for the highly dispersed nation. However, we shouldn't feel too bad for the 'elites' since, as the chart below shows, in the last few years - as central bank largesse was in full swing, the number of household dollar millionaires surged by a stunning 21% in India (closely followed by China and Singapore). Whether by market forces, or government hand - as the G-20 agrees to share tax records in a crackdown on tax-fraud, the uber wealthy are about to see their inert wealth confiscated by the very same mechanisms that made them wealthier.

The asbolute, mind-blowing kicker is when, in another secret presentation, the NSA itself mocks Orwell, using a reference from the iconic Apple "1984" advertisement... As it says the man who has become "Big Brother" is none other than AAPL's visionary deceased leader Steve Jobs... And is so very grateful for Apple's paying client "Zombies" who make its job so much easier

Just as we warned 4 months ago, the oldest bank in the world now faces a critical need to raise EUR2.5 billion in fresh capital - more than double its original plan. "There is no chance on the planet that they can raise [this] in 12 months... they are heading towards nationalization," exclaimed one investment banker, confirmed by another who added via Reuters, "it will be difficult to find someone to shell out all that money." The capital raise is equivalent to the entire market cap of the bank currently and it is becoming increasingly clear that the Italian state will be forced to provide the equity. The problem (for BMPS bondholders and depositors) is that under such a scenario, as Bloomberg notes, EC State Aid rules regarding a subordinated-debt bail-in could apply. However, given the small size of sub-debt in the capital structures, it is unclear who will get the haircut including senior bondholders and depositors.

While the US president is spinning his Nobel Peace Prize-backed case on the national media to garner support for yet another "defensive" war of moral and ideological US aggression against Syria, his Russian counterpart is already planning the next steps in the middle east, and solidifying his anti-western alliance, whose key oil-producing member is Iran. According to RIA, Russian President Vladimir Putin and Iran Hassan Rouhani will meet in the near future, said the deputy head of the Russian Foreign Minister Mikhail Bogdanov at a meeting with his Iranian counterpart Hoseynamirom Abdollahiyanom. "In the near future there will be a summit with the new President of the Islamic Republic of Iran. Additionally, we now have new leadership in the Foreign Ministry," - said Bogdanov. The immediate reason for such a meeting is clear: to provide Russian support to Iran ahead of what may be a conflict that "inadvertently" drags Iran into a confrontation with Israel. Both moral and military. The bigger reason behind the meeting, however, probably has something to do with this chart...

In the US, retail sales on Friday will be the main data release. In addition, Congress will return from its 5-week recess on Monday and will likely keep their focus on Syria this week. Finally, San Francisco Fed President Williams (who does not vote on FOMC policy this year) will speak on Monday. Last week, Williams argued that the FOMC should maintain its focus on the unemployment rate, despite its limitations. After Friday's employment report saw the unemployment rate drop again due to falling participation, this issue is likely to resurface. The Fed's communication blackout period begins on Tuesday so Williams will be the last FOMC speaker before the September meeting ends on the 18th.

• Hedge Funds Cut Back on Fees (WSJ) as we predicted would happen in May
• Syria's Assad denies chemical weapons use; U.S. presses case for strike (Reuters)
• Unemployment Falling for Wrong Reason Creates Fed Predicament (BBG)
• U.S. tapped into networks of Google, Petrobras, others (Reuters)
• Chinese Zombies Emerging After Years of Solar Subsidies (BBG)
• Monte Paschi doubles planned capital hike to 2.5 billion euros (Reuters)
• Loan Size to Be Cut for Fannie, Freddie (WSJ)
• Japan Growth Revision Opens Door to Sales Tax Rise (FT)
• Inside the End of the U.S. Bid to Punish Lehman Executives (NYT)
• Financial Crisis: Lessons of the Rescue, A Drama in Five Acts (WSJ)
• Time Warner Joins IBM in Health Shift for Retirees (WSJ)
• Mideast Derails Key Issues in Congress (WSJ)

As macro news continues to trickle in better than expected, the latest batch being benign (if completely fake) Chinese inflation data (CPI 2.6%, Exp. 2.6%, Last 2.7%) and trade data released overnight which saw ahigher than expected trade balance ($28.5bn vs Exp. $20.0; as exports rose from 5.1% to 7.2%, and imports dipped from 10.9% to 7.0%, missing expectations), markets remain confused: is good news better or does it mean even more global liquidity will be pulled.  As a result, the release of an encouraging set of macroeconomic data from China failed to have a meaningful impact on the sentiment in Europe this morning and instead stocks traded lower, with the Spanish IBEX-35 index underperforming after Madrid lost out to Tokyo to win rights to host 2020 Olympic Games. Even though the news buoyed USD/JPY overnight, the pair faced downside pressure stemming from interest rate differential flows amid better bid USTs. The price action in the US curve was partly driven by the latest article from a prolific Fed watcher Jon Hilsenrath who said many Fed officials are undecided on whether to scale back bond purchases in September. Hilsenrath added that the Fed could wait or reduce the programme by a small amount at the upcoming meeting. Going forward, there are no major macroeconomic data releases scheduled for the second half of the session, but Fed’s Williams is due to speak.

All the latest updates and developments in the lethal Syrian foreplay farce.