Archive - Jun 2014 - Story

It is hard not to gloat when reading the latest embarrassing mea culpa from Bank of America's Ethan Harris, who incidentally came out with an "above consensus" forecast late last year, and has been crushed month after month as the hard data has lobbed off percentage from his irrationally exuberant growth forecast for every quarter, and now, the year. As a result, BofA has finally thrown in the towel, and tongue in cheekly admits it was wrong, as follows: "our tracking model now suggests growth of -1.9% in 1Q and 4.0% in 2Q for a first half average of just 1.0%.... Momentum is weak, but fundamentals are strong. We have lowered second half growth to 3.0% from 3.4%."

Following last month's drop and disappointing miss, University of Michigan Consumer Confidence just got even worse. Despite record high stock prices and near record high car purcahsing exuberance, consumer confidence tumbled for the 2nd month in a row (just when the pent-up demand of Q1 is supposed to kick in). This is the biggest miss of expectations since Dec 2012 and appears to confirm the lack of exuberance seen in the government's survey data. Inflation expectations dropped to the lowest in 2014 as hopes for the economic outlook dropped to 3-month lows. Not the animal-spirity, wealth-creatingy, exuberance the Fed (and every multiple expansion-hoping muppet) was expecting...

With nicknames like "The Money Wizard" and "Gran Hustle," 88 people have been indicted in what the FBI calls "one of the largest federal food program frauds ever." Grocery stores were created for the express purpose of laundering WIC (Women, Infant & Children) and Food Stamp (EBT) funds from willing benefits-receivers who were given discounted cash for the "food" stamps canvassed from "low income neighborhoods" in Georgia. The government seeks the forfeiture of $20 million in bank accounts and assets, including two luxury vehicles, a 2008 Mercedes Benz and a 2008 Land Rover. Exceptional!

Here is what happens to GM when month after month it confirms it has flunked the Derek Zoolander school for bailed out companies who can't build cars good: GM has now recalled 70% more cares than it sold in all of 2013, and has recalled 83% more cars in the first 6 months of 2014 than it did in the entire 2008-2013 period!

In case there was any concerns that the US Secretary of State is unable to handle the rapidly moving events in Iraq due to being stuck on his boat (again), here comes the Ketchup heir-in-law, speaking at the London Global Summit to end sexual violence in conflict (!) to diffuse all fears that "just once" the US may not be on top of its foreign policy game: KERRY SAYS OBAMA MOVING `RAPIDLY' TO DECIDING ON IRAQ RESPONSE; KERRY SAYS "WE ARE LASER-FOCUSED ON DEALING WITH THE CRISIS AT HAND." And just like that, the jihadists who are too extreme even for Al Qaeda, will surely promptly scatter, fearful what drastic sanctions the US will impose on the Al Qaeda central bank and, heaven-forbid, the travel ban that will likely also follow...

After the surge in prices in April, May's Producer Prices fall 0.2% MoM (compoared to a +0.1% expectation). Year-over-year inflation rose 2.0% (down from last month's 2.1% and missing expectations of 2.4% significantly). This is the first MoM drop since Febuary for the headline and core numbers as it appears vehicle rental appeared to see prices implode. PPI Ex Food and Energy (core), saw prices rise at 2.0% - the fastest since May 2012.

In December 2012, 70% of those polled viewed Hillary Clinton favorably; in March 2014 it was down to 56%; and now, as President Obama's approval rating hits record lows, only 52% view Hillary Clinton favorably. "She is down across the board," notes the poll, "even with groups that have been her most ardent supporters." As Bloomberg reports, among likely 2016 voters, Clinton remains ahead with 47% support compared to 38% for each of her potential opponents.

While the US scrambles to figure out what the least painful way is to admit yet another humiliating foreign policy defeat, things in Iraq continue to deteriorate as the relentless blitzkrieg unleashed by the ISIS/ISIL Al-Qaeda spin off, which has shocked everyone by its speed and scale, takes two more towns, as it rushes for its target: Baghdad itself.

• Tea Party struggles to repeat Cantor-style shock in Tennessee (Reuters)
• Iran Deploys Forces to Fight al Qaeda-Inspired Militants in Iraq (WSJ)
• Oil Rallies as Militant Advance in Iraq Threatens Crude (BBG)
• Gold Set for First Back-to-Back Weekly Gain Since April (BBG)
• Hedge Funds Get Stung by Slow Markets (WSJ)
• Sterling nears 5-year high after Carney speech (FT)
• Britain Warns Boom in Real-Estate Prices Threatens Economy (WSJ)
• East Europe Leaders Urge EU Unity to Counter Russia (BBG)
• Formula One Said to Be Valued at $8 Billion as Malone Seeks Stake (BBG)
• Dumb and dumber: Abe Plans Company Tax Cut in 2015 as Kuroda Warns on Budget (BBG)

Believe it or not, the main driver of risk overnight had nothing to do with Iraq, with the global economy or even with hopes for more liquidity, and everything to do with a largely meaningless component of Japan's future tax policy, namely whether or not Abe (who at this pace of soaring imported inflation and plunging wages won't have to worry much about 2015 as he won't be PM then) should cut the corporate tax rate in 2015. As Bloomberg reported, Abe, speaking to reporters in Tokyo today after a meeting with Finance Minister Taro Aso and Economy Minister Akira Amari, said the plan would bring the rate under 30 percent in a few years. He said alternative revenue will be secured for the move, which requires approval from the Diet.

This is the story of Ethan Chaplin, who back in April was twirling a pencil in his 7th grade class in Vernon, NJ. One of the class bullies saw an opportunity to be a jerk and yelled: "He’s making gun motions, send him to juvie." Rather than demonstrating any sort of common sense, the teacher apparently had a panic attack and reported him, which resulted in a two-day suspension. As if that part of the story isn’t bizarre enough, Ethan wasn’t allowed to return to class until he underwent a psychological evaluation. Amazingly, the saga manages to get even worse. Just today, we find out that New Jersey is threatening to take Ethan away from his father. Incredibly, the state is claiming that the prior psychological evaluation wasn’t sufficient and more testing needs to be done. Since his father Michael is pushing back, the loss of custodianship has been threatened.

America’s and the world’s appetite for drugs is insatiable. Billions upon billions of dollars have been spent on both the consumption of illicit drugs and fighting the war on drugs. At first glance as an investor, you probably don’t think this affects you (that is, if you don’t use or sell drugs). But a closer look will reveal the enormous economic impact that the war on drugs has on America. Prepare yourself for some very alarming numbers.

“Go and get educated, you weakly fools, learn to compete; it’s a tough world out there.” And with that push by the Knightly Elite, Americans by the millions have entered a path offering them skills or greater opportunity, instead of taking the alternate route to an almost guaranteed permanent welfare. In their obsequious tradition of creating self-serving opportunities and promoting waste, legislators have allowed the creation of a field of uncontrolled helter-skelter, unqualified schools (new or existing) offering shelter to mostly unemployed or unemployable men and women wearing student uniforms. Yet, as this throw-away part of society gets “educated” there are none-to-few jobs waiting for them. These “money advances,” appear as the only way to subsist. For now... we’ll just wait until this bubble bursts.

The next time you are stuck alone in a room with Vladimir Putin and that awkward silence strikes, just ask him about NATO's missile shield being for protection against Iran (and not Russia)... and that should break the ice nicely. As the following interviewer found, the iron fist of Russia has a lighter side... we think...