Archive - Jun 2014 - Story

Ahead of tomorrow's make-or-break FIFA World Cup game against Portugal, the Ghana "Black Stars" are not happy. Amid controversy over match-fixing, the players have demanded that the World Cup appearance fees they are owed be paid; and as Bloomberg reports, "The players insisted that they will want physical cash." The Ghanaian government has chartered a plane and the dollars are on their way to Brazil. Perhaps the players want to invest it in the latest grand idea - Ghana's first hedge fund has just been launched (prepare for more emails).

While news of high-ranking financial executive suicides in the west have become week to week news, the troubling trend has spread to Asia. A string of Chinese officials have killed themselves in recent months, with speculation linking many to a crackdown on graft. However, as SCMP reports, this weekend saw the head of China's largest copper producer 'fell to this death' from a hotel owned by his company with a state-run newspaper claiming the 52-year-old committed suicide (due to work pressures) following corruption allegations. The timing of Wei Jianghong, chairman of state-owned Tongling Nonferrous Metals Group, suicide appears catalyzed by the growing anxiety over the widespread implications of China's rehypothecation commodity-finance scandal. That leaves one question - what did he know that markets remain ignorant of for now?

"According to the U.S. Energy Information Administration's reference scenario, domestic oil production is going to peak at 14.6 million barrels a day in 2019 and then drop to 12.7 million barrels a day in 2040. Given the 2013 consumption level of 18.9 million barrels of crude a day, the U.S. will never be a net oil exporter under this scenario,... The U.S. crude producers need the flexibility of exporting oil or selling it domestically. As for the political dreams of making the U.S. a major oil exporting power, or even of energy independence backed by the shale boom, they are just that -- dreams."

Now that both Hillary and Chelsea have managed to insert their feet deep inside their mouth when discussing their relative wealth (or lack thereof) and/or their perception of money, it is up to ole' slick himself to pull their feet out of the fire so to speak. Watch him opine live on the US economy, immigration and certainly Hillary's bank account in the following live Bloomberg webcast from the Clinton Global Initiative.

Presented with little comment (since putting into words an open-mouthed gasp is difficult) but Treasury Secretary Jack lew has chimed in on the IRS "Lost Emails" scandal:

LEW: SOMETIMES A BROKEN HARD DRIVE IS JUST A BROKEN HARD DRIVE

Perhaps the NYPost put it best: "The thing about dogs eating homework is, it could actually happen. This can’t. This is "The dog ate my hard drive, broke into another building, ate the backup of the hard drive, then broke into six other top officials’ offices and ate their hard drives also."

Janet Yellen has dismissed rising inflation figures. They were “noisy,” she said. She didn’t like the sound of them. Valid numbers are harmonious. Invalid ones are cacophonous. But after so many years of listening to such loud noise coming from her own colleagues, poor Ms. Yellen may be tone deaf. At least, that is one explanation for her nonchalance toward the threat of inflation.

Moments ago, in a unanimous decision, the Supreme Court gave the NSA monopoly rights to electronic data, communication and exchange after it decided that Police must obtain a warrant before searching mobile devices after arresting someone, stating "privacy interest outweigh police convenience". So... Americans still have privacy rights despite all the Snowden revelations - amusing.  According to the WSJ, "the court, in a unanimous ruling by Chief Justice John Roberts, said both the quantity and quality of information contained in modern handheld hand-held is constitutionally protected."

The conventional view of the Baby Boomers' retirement is a happy story: since we're living longer and remaining productive longer, Boomers will not be as much of a burden on Gen-X and Gen-Y as doom-and-gloomers assume. Not only are Boomers staying productive longer, they will draw upon their vast generational wealth as they age, limiting the financial burden on younger generations. This happy story is wrong on multiple counts.

Stocks are green on the worst economic growth data in five years... you just have to laugh...

"...we think that Q1 GDP was an aberration, and is not representative of the strengthening underlying trend in US growth." There is nothing we can add to such brilliant weatherman insight as what Jan Hatzius from Goldman just unleashed on the unwitting muppets (all of whom can't wait for Goldman's second above-consensus GDP forecast to pan out... unlike the last time in 2010). In brief: Goldman just boosted their Q2 tracking GDP from 3.8% to 4.0% because Q1 GDP imploded. And scene.

Markit's US Services PMI printed at 61.2 (massively beating the 58.0 expectations) and soaring to its highest since records began. In other words, it doesn't get any better than this. This, based on Markit's analysis, implied a Q2 GDP surge to +6% - we can only wait. There's one thing though... Business expectations (the line item that represents company's confidence in the future) plunged from 79.3 to 75.9 - not what Yellen needs... furthermore, margins continue to come under pressure as prices charged drop as input prices rise. One wonders how long before this miracle is revised due to a technical glitch?

As the 'leaked recordings' scandal grows in Poland, the Prime Minister has taken a dramatic step and called for a vote of confidence ahead of crucial meetings in Brussels. As Bloomberg reports, Polish Prime Minister Donald Tusk says he needs mandate to rule on eve of talks in EU, he tells parliament; adding that the taping scandal erupted after government took serious steps against importers and distributors of coal and also comes in “context” of people involved in gas trading. The Polish Zloty has given up its earlier gains on this news.

Between the second and final revision of Q1 GDP something dramatic happened: instead of contributing $40 billion to real GDP in Q1, Obamacare magically ended up subtracting $6.4 billion from GDP. This, in turn, resulted in a collapse in Personal Consumption Expenditures as a percentage of GDP to just 0.7%, the lowest since 2009!

It appears the sad reality that a consistently tapering Fed won't be able to support this fairy castle with words (forward guidance) alone as - rather unusually -this morning's double whammy of bad news has been taken as "bad news" by the market. Thanks to decisive break below 102 in USDJPY, stocks are dropping and bonds are rallying. Gold and silver are well bid (as copper and oil slide) and the USD is fading fast.

Following last month's far-stronger-than-expected 'defense-spending-stuffed' Durable Goods orders, which were subsequently revised downwards, they plunged in May (at the heart of Q2 GDP creation). Against expectations of no gain, Durable Goods Orders tumbled 1.0% - the biggest miss in 2014. It seems the brief bounce back from weather has now gone entirely as it seems no submarines were ordered this month or excess Blackhawks to save the day. Not exactly great news for Q2 GDP (especially after the Q1 collapse). New orders ex transportation dropped for the first time since January - again hardly differentiating Q1 'weather' from Q2 'rebound'.