Archive - Jun 2014 - Story

Following the rather stunning shenanigans of Q1 GDP with regard healthcare spending (as we detailed here), we thought, four years after its passage in 2010, it worth analyzing Obamacare's economic impact? Beforehand, economists generally believed that the broader coverage would raise the demand for healthcare goods and services, although there was some disagreement about related effects on healthcare inflation. In reality, as UBS notes, there was too much optimism about a positive immediate economic impact and a negative price inflation effect.

Since everyone and their pundit grandmother has opined on volatility in the past month, we will say no more and instead of Wall Street, we will do a Wallace Stevens, with 13 ways of looking at record low volatility, in charts.

"It is fair to say that this particular constellation of issues, problems if you will, has never been faced before at these levels. Never," warns Chris Martenson (of The Crash Course) but what does he mean when he says "Great change is upon us." This brief condensed look at The Three 'E's of - Economy, Energy, and Environment are all one needs to understand the current situation is anything but a sustainable status quo (no matter how reassured by record high stock prices the general public may be).

Don't worry, it's just "special" boots on the ground...

As individuals, it is entirely acceptable to be "optimistic" about the future. However, "optimism" and "pessimism" are emotional biases that tend to obfuscate the critical thinking required to effectively assess the "risks". The current "hope" that Q1 was simply a "weather related" anomaly is also an emotionally driven skew. The underlying data suggests that while "weather" did play a role in the sluggishness of the economy, it was also just a reflection of the continued "boom bust" cycle that has existed since the end of the financial crisis. The current downturn in real final sales suggests that the underlying strength in the economy remains extremely fragile.  More importantly, with final sales below levels normally associated with the onset of recessions, it suggests that the current rebound in activity from the sharp decline in Q1 could be transient.

There are a few “market anomalies” affecting the seasonality of stock returns that have captured some investor attention, like the day-of-the-week effect or the January effect, for example. They are called anomalies because – according to financial theory – the market should arbitrage away the regularity of such patterns. But in reality, it does not. As Goldman notes, there are similar patterns exist with respect to market volatility; and they are equally puzzling.

To: My Fellow Zillionaires - "You probably don’t know me, but like you I am one of those .01%ers, a proud and unapologetic capitalist. I have founded, co-founded and funded more than 30 companies across a range of industries - from itsy-bitsy ones like the night club I started in my 20s to giant ones like Amazon.com, for which I was the first nonfamily investor... But let’s speak frankly to each other. Seeing where things are headed is the essence of entrepreneurship. And what do I see in our future now? I see pitchforks... And so I have a message for my fellow filthy rich, for all of us who live in our gated bubble worlds: Wake up, people. It won’t last. If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us."

Late last week, Mexico appears to have taken the US "border-crossing" issue to a whole new level even if it was really a case of a drug bust gone horribly wrong,  when as AP reported, on Thursday Mexican law enforcement crossed into Arizona by helicopter and fired two shots at U.S. border agents, a border patrol union leader says.  According to the Customs and Border Protection: "At approximately 5:45 a.m. Thursday morning, a Mexican law-enforcement helicopter crossed approximately 100 yards north into Arizona nearly 8 miles southwest of the Village of San Miguel on the Tohono O'odham Indian Nation while on a law-enforcement operation near the border. Two shots were fired from the helicopter, but no injuries or damage to U.S. property were reported. The incident is currently under investigation." Art del Cueto, president of the local border patrol union, said four agents were in a marked patrol vehicle when they were shot at. "They could say they didn't fire at the agents intentionally. But for them to say that they were no shots fired within the United States, toward the United States Border Patrol, is a lie. They got in contact with our managers and apologized for the incident," del Cueto said.

We noted previously the comedic melt-up in stocks in the last few minutes of the day but away from the simple-to-see shenanigans in VIX and the major equity indices, Nanex shows a massive number of stocks experienced a stunning coordinated WTF moment at 1550ET... unrigged?

A state economy is nothing without the businesses that call it home. But, as WaPo notes, those businesses are not created equally - bigger businesses naturally have outsized influence, generating more revenue, paying more taxes and employing more people. As Bloomberg notes below, some are less surprising - GM runs Michigan, ExxonMobil runs Texas, and Berkshire Hathaway runs Nebraska but for Washington (home of Microsoft), it is CostCo that runs the state. So what's the biggest business in your state?

Many believe the most significant battle of our era is between the forces of Decentralization vs. Centralization. Niall Furguson takes that battle and looks at it from a historical perspective, describing it as Networks vs. Hierarchies, and warns we "need networks, for no political hierarchy, no matter how powerful, can plan all the clever things that networks spontaneously generate. But if the hierarchy comes to control the networks so much as to compromise their benign self-organizing capacities, then innovation is bound to wane."

China's own Big Apple may be rotting from the core. A new central business district modeled after New York City is going up in Tianjin but the project is in jeopardy. While the growth of China's ghost cities of entirely derelict and unlived-in residential real estate have become anathema; the story of the nation's 'if we build it they will come' commercial real estate bubble has been less exposed but is no less incredible. As Bloomberg reports, China’s project to build a replica Manhattan is taking shape against a backdrop of vacant office towers and unfinished hotels, underscoring the risks to a slowing economy from the nation’s unprecedented investment boom. Stunningly, the development has failed to attract tenants since the first building was finished in 2010 leaving one commercial real estate investor to proclaim, "Investing here won’t be better than throwing money into the water... There will be no way out - it will be very difficult to find the next buyer."

The economic releases of the past few days are putting the lie to the Keynesian escape velocity myth. The latter is not just around the corner—-and 2014 is now virtually certain to mark the fifth year running when the boom predicted by Wall Street economist at the beginning of the year fizzled as actual results unfolded.

Moments ago, none other than the Pentagon's rear admiral John Kirby confirmed that there is a glaring problem with Obama's intentions to disburse $500 million to "moderate" Syrian rebels.

• KIRBY SAYS A LOT OF WORK NEEDED TO VET MODERATE SYRIAN REBELS
• KIRBY SAYS CONCERNED ABOUT AID `ENDING UP IN THE WRONG HANDS'

While we share his sentiment (which we doubt is much of a concern to the US MIC as it will merely provide one set of US-made weapons to destroy another set of US-made weapons), we repeat that there is a simple solution. It comes from Andy Borowitz, who appears to have read our mind, and is breathtakingly simple. Presenting: The Moderate Syrian Rebel Application Form.

While Marc Faber has said "I will never sell my gold," he also noted "I like the idea of Bitcoin," and the battle between the 'alternative currencies' continues. The following infographic provides a succinct illustration of the similarities and differences between gold and bitcoin.