Archive - Apr 2014 - Story

One of the founding fathers of the United States famously remarked that death and taxes are the only certainties in life. And as tax day rolled around once again in the US, individuals the length and breadth of the country were participating in the annual ritual of filing their income tax returns with the federal government. Outside of the United States, banks, custodians, brokers and investment advisers are also working to meet a tax deadline coming soon—registration with the United States Internal Revenue Service to comply with FATCA. And so the diminished privacy that has become a feature of our modern lives now looks set to pervade the conventional banking system. Citizens will render unto Caesar the things that are Caesar’s, but the wisest among them will continue to avail of the privacy and asset protection offered in certain jurisdictions.

"The Fed has created a world where the best action may be to cash out; not buy high - and wait. You can’t squeeze water from rock. Wait for the rain."

One of the easiest ways to put someone on the defensive in America is to accuse him/her of being an elitist. The power of this accusation derives from a complex mix of dynamics. At least one goes all the way back to the founding principles of the nation: a profound and abiding distrust of monarchy and landed nobility, and a well-grounded fear that democracy could be subverted and a new form of feudal monarchy returned to power. It is increasingly clear that a new form of feudalism has indeed subverted democracy, and that the New Feudalism is powered by concentrations of private wealth and centralized state control: what I call the New Nobility. Class warfare reflects a dysfunctional divide-and-conquer society.

"Augustus was the original Keynesian..." is how Bob Swarup, author of ‘Money Mania’, begins to explainto John Authers the constant threads of similarity between financial crises dating back to the 4th century BC; and why, it seems, we are entirely incapable of learning our lessons from them. Crucially, innovation and crises are related; and both have their roots in growing complexity, interaction and in human nature. Of course, as we noted recently, not one of our current slew of 'great thinkers' believes we will have another economic contraction, let alone another crisis...

If there’s one thing we all know about banks and bankers: they love to tell tales in public of how much they value their customers. However, what you’ll never hear them profess in private: is how much they trust them. Although one may think that’s unseemly, believe it or not there is another entity banks hold at an even lower tier. Other banks.  One of the known facts people remember about the melt down in 2008 (as opposed to general public) was when the banks no longer trusted each other, and what they earlier claimed was “collateral” wasn’t actually worth what it was stated to be. As we recently explained in How China’s Commodity-Financing Bubble Becomes Globally Contagious, the implications of this development and the consequences it portends just might make it the proverbial “canary in a coal mine.” The underlying issue that makes this far more dangerous or different from times past is three-fold...

Moments ago, Russia casually hinted that Ukraine should use part of the IMF aid (which has been promised in virtually all increments between $1 billion up to $18 billion, but at last check not one penny has been wired) to repay Gazprom's debt, which is anywhere between the $2.2 billion Gazprom has said Ukraine is delinquent on for 2014 gas supplies, and an additional $11.4 billion which is what Gazprom said Ukraine's state-owned energy firm Naftogaz owes for unused take-or-pay arrangements in 2013. This happened just hours after Ukraine reportedly used the 'nuclear option' and halted the bulk of water supply to Russia's newest territory: Crimea.  Tit for tat?

The concept of “net neutrality” is not an easy one to wrap your head around. Particularly if you aren’t an expert in how the internet works and if you don’t work for an ISP (internet service provider). In fact, we think that lobbyists and special interest groups make the concept intentionally difficult and convoluted so that the average person’s eyes glaze over and they move on to the next topic. We are by no means an expert in this area; however, in this post we will try to explain in as simple terms as possible what “net neutrality” means and what is at risk with the latest FCC proposal. We also highlight a wide variety of articles on the subject, so we hope this post can serve as a one-stop-shop on the issue. In a nutshell, the latest rules from the FCC is truly the American way of censorship

Since stupidity rapidly goes mainstream, the same excuse used to "explain" away housing and economic deterioration was instantly (ab)used by a barrage of public company CEOs, whose earnings results were disappointing for only one reason (in their minds) - the weather. Because one always needs a narrative - any narrative - to explain away stories such as this: "Q1 Earnings Season Summary: More Than Half Have Missed Revenues"...

It is becoming abundantly clear that any further attempts by the west (and Russia which ironically is a member of the OSCE) to inject third parties in what is a clear conflict between Russia and Ukraine, will be met with failure. Which is why we read with amusement that in the latest attempt to de-escalate violence, now that diplomacy has failed, the OSCE has dispatched a negotiating team to try to secure the release of the first OSCE group, a German government source said on Saturday. "A negotiating team from the OSCE is on the way to the region," said the source, declining to give further details, including exactly where they were heading.

Defending the nation's mass surveillance programs because "people were desperate to avoid another [9/11] attack," Hillary Clinton, speaking at University of Connecticut on Wednesday night, noted that a balance must be found to "make sure that we're not infringing on Americans' privacy, which is a valued, cherished personal belief that we have." But her most controversial comments were swved for Edward Snowden, as she though it "odd that he would flee," since, she noted, "we have all these protections for whistle-blowers, " and concluded rather cryptically that, "turning over a lot of that material... gave all kinds of information, not only to big countries, but to networks and terrorist groups and the like."

The last time the Russian "Doomsday Plane" was seen in the air doing its trademark loops at 27,000 feet telegraphing Vladimir Putin was somewhere nearby, was on March 31, just days after the formerly Ukrainian region was annexed by the Kremlin. Until today, when over the past 4 hours, the Tu-214 has been quietly circling in position just shy of Finland and the Baltics, where as it is known, NATO has been depositing hundreds of western soldiers in a "defensive" build up.

The 21st century is still young, but it has already presented the United States with a series of internal and external challenges. History tells us that when one hegemon is in decline, international relations become more complex and uncertainties increase the risks. We may be in such a period today.

In response to the verbal attacks pitched at him over thelast few days, Cliven Bundy has held a brief press conference to explain his perspective on 'slavery' and allegations of racism. Much as the world seems 'happy' to live a life of debt serfdom, Bundy notably remarked that he wonders if any of us are better off now "as slaves to charity and government subsided homes."

Kevin Hassett recently debated Thomas Piketty on his book, "Capital in the 21st Century". After presenting some interesting points on Piketty's work, Hassett reminds his audience, somehow ironically, that not just Marx, but also Joseph Schumpeter thought that capitalism was going to die. As he wrote in his voice "Capitalism" for the Encyclopaedia Britannica, Schumpeter was convinced that "the capitalist process by its very success tends to raise the economic and political positions of groups that are hostile to it."

As readers will recall from our recent preview of what equity performance this month was supposed to look like, at least based on historical data, April was supposed to be the best month of the year. Sadly for the bulls, it has been anything but. That's the good news. The bad news is that as most know the old saying "sell in May and go away", there is nothing but pain for the next six months