Archive - Mar 2014 - Story

In the aftermath of what appears a tenuous detente over the Crimea while Putin plans his next step of how to "merge" with east Ukraine as he sets off to rebuild the USSR, Syria just may be set to regain its place at the top of the global geopolitical risk pyramid. Case in point, early this morning, the fragile ceasefire between Syria and Turkey was shatered after a Turkish F- 16 shot down a Syrian plane on Sunday after it crossed into Turkish air space in a border region where Syrian rebels have been battling President Bashar al-Assad's forces.

Vice President Biden was in Warsaw last week to reassure our eastern NATO allies that they have the support of a “steadfast ally.” But if Russia moved against Poland or the Baltic States, would the United States really go to war? Or would we do nothing and effectively destroy the NATO alliance? President Obama has ruled out a “military excursion” in Ukraine. America is not obligated legally to take action against Russia for annexing Crimea. We would not go to war if Russia mounted a large-scale invasion of Ukraine to restore the ousted, pro-Moscow government of Viktor Yanukovych, currently under U.S. sanctions. And we would not even send troops if Ukraine was partitioned, or absorbed by Russia. Americans have no interest in such a conflict, and no stomach for it.

For the answer of which firm is responsible, and has the largest number of current and former tenants occupying the building located at 15 CPW which we profiled before, and which Bloomberg TV defines as the "world's most powerful address" - a location whose residents control nearly half a trillion in assets under management - fast forward to 3:20 in the clip below. Hint: listen for the "dog whistle."

Not only is GM facing record high inventories of slow-to-sell cars and the recall of million sof its cars (and a sale halt), Reuters reports that the terrible ignition switch problem - that has caused 13 deaths - may have been known about (and not disclosed) prior to the bankruptcy (and subsequent taxpayer bailout). The Justic Department is investigating whether GM understated (or hid) the information from regulators and committed bankruptcy fraud.

One could see this one coming from a mile away.

While every other asset class in the world has now been found to be subject to some form of manipulation (from LIBOR rates to FX fixes and from commodity warehousing to HFT equity front-running), the stakes in a COMEX silver/gold/copper manipulation lawsuit are staggering. Not only is market manipulation the most serious market crime possible, the markets that have been manipulated and the number of those injured are enormous. It is likely not an exaggeration to say that any finding that JPMorgan and the COMEX did manipulate prices as we contend could very well result in the highest damage awards in history. That’s no small thing considering the tens of billions of dollars that JPMorgan has coughed up recently for infractions in just about every line of their business. Our point is that no legal case could be potentially more lucrative or attention getting than this one. It is clear the CFTC will never act and so class-action lawsuits may just be the only way the data is du into deep enough to uncover the truth.

There is a reason why in the past we have referred to Russia simply as Gazpromia. Here is why...

It is widely known that Russia is owed billions by Ukraine for already-delivered gas (as we noted earlier, leaving Gazprom among the most powerful players in this game). It is less widely know that Russia also hold $3b of UK law bonds which, as we explained in detail here, are callable upon certain covenants that any IMF (or US) loan bailout will trigger. Russia has 'quasi' promised not to call those loans. It is, until now, hardly known at all (it would seem) that China is also owed $3bn, it claims, for loans made for future grain delivery to China. It would seem clear from this action on which side of the 'sanctions' fence China is sitting.

The two big stories of our day are: (1) Our economic problems: The inability of economies to grow as rapidly as they would like, add as many jobs as they would like, and raise the standards of living of citizens as much as they would like. Associated with this slow economic growth is a continued need for ultra-low interest rates to keep economies of the developed world from slipping back into recession; and (2) Our oil related-problems: One part of the story relates to too little, so-called “peak oil,” and the need for substitutes for oil. Another part of the story relates to too much carbon released by burning fossil fuels, including oil, leading to climate change. While the press treats these issues as separate stories, they are in fact very closely connected, related to the fact that we are reaching limits in many different directions simultaneously.

In what many thought was a miracle of modern money-printing-driven yield-chasing, Puerto Rico managed to get $3.5 billion of bonds off last week with no problem (albeit at a 8.73% yield). The issue (while perhaps not as surprising as the low yield issues of Uganda we have reflected on previously) raised some eyebrows and in the trading since its release, FINRA noticed something concerning.  The bonds, as Bloomberg reports, are supposed to 'minimum denomination $100,000' blocks and yet 75 trades this week have been for no more than $25,000 violating regulations which deem these for "institutional purchasers" and strongly suggesting the heavy hedge fund demand was nothing more than a pump-and-dump scheme to unsophisticated retail investors. PR bonds have plunged from par to $92 this week.

At the young age of 22 Henry Hazlitt figured out the future involves too many factors for anyone to predict, not to mention just knowing what the relevant factors are. Jim Grant admitted it took him 40 years in the business to finally realize he couldn’t understand the future, noting, however, unfortunately the folks working at the Eccles Building have not come to this realization. The PhDs believe they can depreciate the currency at the proper rate to cause everyone gainful employment and live happily ever after. Hazlitt also has a fan in Rich Santelli who notes that if government makes loans, that private lenders won’t make, to entities that can’t pay back, economic signals get destroyed, and chaos ensues. Chaos, indeed...

The red flags contained in the national and global headlines that have come out thus far in 2014 should have spooked investors and economic forecasters. Instead the markets have barely noticed. It seems that the majority opinion on Wall Street and Washington is that we have entered an era of good fortune made possible by the benevolent hand of the Federal Reserve. Ben Bernanke and now Janet Yellen have apparently removed all the economic rough edges that would normally draw blood. As a result of this monetary "baby-proofing," a strong economy is no longer considered necessary for rising stock and real estate prices. But unfortunately, everything has a price, even free money.

With Bernanke gone, the remaining Fed members knowing full well they will be crucified, metaphorically of course (if not literally) when it all inevitably comes crashing down, are finally at liberty with their words... and the truth is bleeding out courtesy of the president of the Dallas Fed, via Bloomberg.

• FISHER SAYS QE WAS A MASSIVE GIFT INTENDED TO BOOST WEALTH

We wonder how President Obama, that crusader for fairness, equality and all time Russell 200,000 highs, will feel about that? In the meantime, just like the Herp, QE is the gift that keeps on giving.. and giving... and giving... to the 0.001%.

As we reported earlier, while Ukraine military forces are either slowly leaving the Crimea or joining the Russian army, one outpost, that at the Crimean airforce base of Belbek, remains undaunted by Russian demands to hand over the premises as the Russian ultimatum to surrender has expired, and moments ago wire services reported that shots were fired as Russian forces stormed the front gate of the Crimean outpost. Watch a live webcast from the scene below as the Russian force take control of the last place of presence of Ukraine forces in the Crimea.

As of Friday, the Ukraine has, as we predicted a month ago, been officially divided in two.  As AP reported earlier, "two almost simultaneous signatures Friday on opposite sides of Europe deepened the divide between East and West, as Russia formally annexed Crimea and the European Union pulled Ukraine closer into its orbit. In this "new post-Cold War order," as the Ukrainian prime minister called it, besieged Ukrainian troops on the Crimean Peninsula faced a critical choice: leave, join the Russian military or demobilize. Ukraine was working on evacuating its outnumbered troops in Crimea, but some said they were still awaiting orders." However, it appears it is not so much a question of figuring out how to evacuate the troops, but rather motivating them. As RIA reports, "less than 2,000 of Ukrainian troops serving in Crimea decided to leave the peninsula for Ukraine, the Russian Defense Ministry said on Saturday. "As of March 21, less than 2,000 out of 18,000 Ukrainian servicemen staying on the territory of the Republic of Crimea decided to go to Ukraine," the ministry said in a statement.