Archive - Jun 2014 - Story

When it comes to the Benghazi embassy killings, the administration will kindly request that Americans focus all their negative energy on this (very bearded) face: the one belonging to the repetedly interviewed by US press alleged "masterming" of the deadly Benghazi attack, Ahmed Abu Khatallah (profiled previously) who for nearly two years was hiding in plain sight in Libya, and who has finally, after extensive Google searches on his current whereabouts by the CIA, been found and captured (a process CNN described as "a large group of trappers quietly snaring rare and dangerous prey") and is being brought back to the US to be waterboarded until Hillary Clinton's book sales finally pick up.

• Levin Hearing Ups Volume in High-Frequency Call to Action (BBG)
• Ukrainian President Fires Central Bank Chief (BBG)
• Argentina Plans Debt Swap (WSJ)
• Fed Decision Day Guide From Dot Plots To Exit Strategy (BBG)
• World Bank Economist: China May Face US-Style Financial Crisis (WSJ)
• Premier Li says no hard landing for China, expects medium to high growth (Reuters)
• Putin Talks Peace With Ukraine Leader After Gas Pipe Fire (BBG)
• Poll Shows Erosion in President's Support (WSJ)
• U.S. mortgage applications plunge in latest week (Reuters)
• Ex-Goldman director goes to prison, still owes $13.9 million fine (Reuters)

it is suddenly not fun being a Fed president (or Chairmanwoman) these days: with yesterday's 2.1% CPI print, the YoY rate has now increased for four consecutive months and is above the Fed's target. Concurrently, the unemployment rate has also dipped well below the Fed’s previous 6.5% threshold guidance, in other words the Fed has now met both its mandates as set down previously. There have also been fairly unambiguous comments from the Fed’s Bullard suggesting that this is the closest the Fed has been to fulfilling its mandates in many years. Finally, adding to the "concerns" that the Fed may surprise everyone were BOE Carney’s comments last week that a hike “could happen sooner than the market currently expect." In short: continued QE here, without a taper acceleration, merely affirms that all the Fed is after is reflating the stock market, and such trivial considerations as employment and inflation are merely secondary to the Fed. Which, of course, we know - all is secondary to the wealth effect, i.e., making the rich, richer. But it is one thing for tinfoil hat sites to expose the truth, it is something else entirely when it is revealed to the entire world.

In a day and age in which corporations rule the world, the brutal Al-Qaeda spin off known as ISIS is learning from the best, and as part of its credentialising and image-building has done something only major corporations do at the end of every year: it has issued annual reports for the past 2 years (unaudited). That's right: as the FT reported earlier, "Since 2012 the Islamic State of Iraq and the Levant, (known as Isis) has issued annual reports, outlining in numerical and geographical detail its operations – the number of bombings, assassinations, checkpoints, suicide missions, cities taken over and even “apostates” converted to the Isis cause."

Copper, Iron Ore, Rebar, Rubber, and now Cotton are all at multi-year lows as the Qingdao CCFD ponzi probe continues to broaden to all the commodities we warned about previously. As CottonCN reports, the probe's increased uncertainty and scrutiny of shipments may hurt imports of of cotton in the form of consignment sales, as international traders delay shipments or deliveries to wait for clear policies as authorities continues their investigation. Even soybeans and palm oil have been on a notably downswing since the probe intothe collateral evaporation started. Then comes the news that Chinese commodities trading firm CITIC admission that over half  of its 220,000 tonnes of alumina are missing. This is far from over...

What would you say if we told you that Americans are nearly 60 trillion dollars in debt?  Well, it is true.  When you total up all forms of debt including government debt, business debt, mortgage debt and consumer debt, we are 59.4 trillion dollars in debt. 2008 should have been a major wake up call that resulted in massive changes. But instead, our leaders just patched up the old system and reinflated the old bubbles so that they are now even larger than they were before. They assure us that they know exactly what they are doing and that everything will be just fine. Unfortunately, they are dead wrong.

Shortly after the US revealed that, in addition to aircraft carriers and amphibious assault ships it was also sending a few hundred "special forces" on the ground in Iraq, contrary to what Obama had stated previously, Washington made quite clear it wants Prime Minister Nuri al-Maliki to embrace Sunni politicians as a condition of U.S. support to fight a lightning advance by forces from the Islamic State of Iraq and the Levant. Then something unexpected happened: Iraq's Shi'ite rulers defied Western calls on Tuesday to reach out to Sunnis to defuse the uprising in the north of the country, declaring a boycott of Iraq's main Sunni political bloc and accusing Sunni power Saudi Arabia of promoting "genocide."

Now, for the first time, we have empirical proof that hedge funds are indeed on the verge of extinction. In its hedge fund quarterly note (which it clearly ripped off from Goldman), Bank of America has concluded what we said in the beginning of the decade: "Hedge Funds are less attractive post the financial crisis with lower alpha and less diversification benefits." Or, in other words, hedge funds (for the most part: this excludes those extortionists also known as activists who successfully bully management teams into levering up in order to buyback record amounts of stock, in the process burying their companies and employers when the next downturn arrives) no longer provide a service commensurate to their astronomical fees.

The world is a very complicated place, and the Middle East is a particularly difficult region to try to get your head around. Between decades of colonialism, gigantic oil reserves, governments that are essentially feudal kingdoms, and the never-ending and always shifting Western government propaganda that often changes the targets of demonization on a whim, it’s no wonder people are so confused. The following provides a perspective based on what we have seen so far, and more importantly, ask readers to ask their own set of questions. What is happening is very bad, and it is the direct result of the idiotic children calling the foreign policy shots in Washington D.C. Ever since 9/11, everything about the status quo’s decision making has been irrational and dangerous.

Tomorrow will bring the word from on high with regard the great-and-powerful Fed's forecasts, dot-plots, and money-printing-replacing-forward-guidance. While one must 'never' question the PhDs, or fight the Fed (unless they say "sell" or "complacent"), we thought the following chart of their success at "forward guidance" should help investors with their allocation of 'faith' tomorrow...

The Bush and Obama presidencies have effectively dismantled the rule of law and the Constitution by invoking essentially unlimited executive powers in the name of "national security." After 13.5 years, there is more than enough evidence for reasonable people to conclude that the presidencies of George W. Bush and Barack H. Obama are easily the most destructive in U.S. history. The Big Lie is that this destruction of the foundations of the rule of law and civil liberties is for our own good: if the President and the National Security State don't grab all these powers and deprive you of your constitutional rights, bad guys will destroy the nation. This is of course the same old tired justification used by dictators and despots everywhere, and it is always a lie.

Presented with no comment...

Advocates of minimum wage often base their support for the measure on ethical grounds, claiming that all workers deserve a degree of compensation regardless of their productivity. But a little know exemption (called 14(c)) allowing employers to pay certain staff below minimum wage, begs a question. If people with disabilities are exempt from minimum wage because their earning capacity is impaired and finding employment might otherwise be impossible, why don’t people without disabilities whose earning capacity is equally low also qualify for an exemption?

When the masses just won't play along and BTFATH (with only central banks buying), the real 'wealth' transfer is much more insidious (and more voting)...

The market is highly confident that it has a good handle on tomorrow’s FOMC meeting, despite the fact that several factors will require modification.  There is high conviction that the Fed will not surprise the market, but rather take a “steady as she goes” approach that delivers a market consensus outcome.  The reasons for this view are obvious and logical; however, such complacency breeds risk as well as opportunity, because the arguments for accelerating tapering to $15 billion (per month) are quite compelling.