Archive - Jul 2014 - Story

With the "Islamic State" grabbing all the headlines, it appears the Taliban have had enough. As Reuters reports, Taliban insurgents set fire on Saturday to about 400 oil tanker trucks supplying fuel for NATO forces in an attack just outside the Afghan capital Kabul, police said. It was unclear how the fire was started. Some Afghan media reported that insurgents had fired rockets at the tankers late on Friday. The attack precedes Monday's preliminary announcement of Afghanistan's presidential election winner - in which both sides have accused the other of mass fraud. The Taliban had vowed to disrupt the process.

No lesser mortal than commodity-king Andy Lees (ex-UBS and current manage of ALM Macro) explains that today's declining global productivity is and was always a consequence of government policy of taxing productivity in favor of social transfers. The gradual dumbing down of capitalism and move towards social democracy over the last 50 years relied on building a Ponzi scheme of financial innovation to keep the illusion alive. But, he offers hopefully, system dynamics of the natural environment (how land that was once lost to the desert by over taxing it can be returned to a productive use) offer hope that this ponzi trend can be broken. Simply put, Lees concludes, "the system has to change. The issue is whether government and ultimately society can survive during the change; whether the public can unite behind a leadership that can implement tough decisions and allocate capital productively, or whether further sacrifice will be needed first, and how that sacrifice may come"

Abu Bakr al-Baghdadi, the leader of Islamist militant group Isis, has finally broken his video silence, and has called on Muslims to obey him, in his first video sermon recording. The video appears to have been filmed on Friday during a sermon at the al-Nouri Mosque in Mosul, northern Iraq. It surfaced on Saturday amid reports that he had been killed or wounded in an Iraqi air raid.

"First they ignore you, then they ridicule you, then they fight you, and then you win." Mahatma Gandhi

"It is no crime to be ignorant of economics... but it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance." - Murray Rothbard

In what has quickly become viral as yet another example of extreme (and unchecked) police behavior against the people, California Highway Patrol says that it is investigating footage posted on YouTube that shows a policeman repeatedly punching the face and head of a prostrate woman. "If you look at the video, there are 15 hits. To the head, and not just simple jabs. These are blows to the head. Blows. Really serious blows. And this is ridiculous to me... I find it hard to believe there [was] no other remedy in this situation." Life, liberty, and no pursuit of police brutality?

The biggest congressional leakage scandal in the past year is the most recent one to cross the rabit hole of all-out absurdity: According to Reuters, the Ways and Means panel said on Friday it should not have to comply with a federal regulator's demand for documents sought for an insider-trading probe involving the staff director of a subcommittee and a lobbyist. The House Ways and Means Committee argued in a court filing that U.S. District Judge Paul Gardephe in New York should deny the Securities and Exchange Commission's attempt to subpoena documents from the committee and its healthcare subcommittee staff director Brian Sutter.

Until now, whenever Warren Buffett's preferred mode of industrial transportation - that would be trains - derailed, it would usually involve spilling generous amounts of oil into the surrounding area, far more than any hypothetical pipeline disaster to date would have resulted in. Then, in an apparent first, overnight a train derailed in Montana and spilled fuselages of Boeing 737 airplanes into the Clark Fork River. One wonder if all of these airplane orders had been funded by the Ex-Im bank.

Not even we anticipated this particular "unintended consequence" as a result of the US multi-billion dollar fine on BNP (which France took very much to heart):

• NOYER: BNP CASE WILL ENCOURAGE ‘DIVERSIFICATION’ FROM DOLLAR

And, the biggest irony of all is that in "punishing" France for dealing with Russia, that core country of the Eurasian alliance of Russia and China, the US just accelerated the graviation of France (and all of Europe) precisely toward Eurasia, and away from the greenback.

Many in Ukraine are talking about major revisions to the Constitution (leading one local journalist to ask – “Why don’t we use the American Constitution? It was written by really smart guys, it has worked for over 200 years, and they’re not using it anymore…”) He’s right. Much of the West, in fact, has descended into the same extractive system as Ukraine. There’s a tiny elite showering itself with free money and political favors at the expense of everyone else. Ukraine may be in the midst of turmoil right now, but they at least hit the big giant reset button and are looking to build something new. The West, meanwhile, continues down its path of more debt, more money printing, more regulations, and less freedom. How long can this really go on without consequence?

It's different this time...

Having surrendered our independence for the quick, easy fix, we will inevitably surrender our health, liberty and freedom.

Yet another in a long stream of relatively esteemed hedge fund managers has decided enough-is-enough and is shuttering his firm. The reason? Same as the rest... As WSJ reports, Steve Eisman, who emerged as one of the stars of the financial crisis with a winning bet against mortgages, has wound up his fund because he believes that "making investment decisions by looking solely at the fundamentals of individual companies is no longer a viable investment philosophy." As Baupost's Seth Klarman reminds us "Six years ago, many investors were way out over their skis. The survivors pledged to themselves that they would forever be more careful, less greedy, less short-term oriented. But here we are again, mired in a euphoric environment in which some securities have risen in price beyond all reason, where leverage is returning to rainy markets and asset classes, and where caution seems radical and risk-taking the prudent course. Not surprisingly, lessons learned in 2008 were only learned temporarily. These are the inevitable cycles of greed and fear, of peaks and troughs."

What this chart shows is that when it comes to core manufacturing and service trade, that which excludes petroleum, the US trade deficit hit some $49 billion dollars in the month of May, the highest trade deficit ever recorded! In other words, far from doubling US exports, Obama is on pace to make the export segment of the US economy the weakest it has ever been, leading to millions of export-producing jobs gone for ever (but fear not, they will be promptly replaced by part-time jobs). It also means that the collapse in Q1 GDP, much of which was driven by tumbling net exports, will continue as America appear largely unable to pull itself out of its international trade funk, much less doubling its exports.

This week was very busy with economic data. For the most part, the majority of the data came basically inline with expectations. However, the internals of the various reports were much less encouraging. The most noteworthy report, and the least important from an investment standpoint, was the monthly employment report which came in at 288,000 jobs for the month. As with the bulk of other reports, the more important details were lost to the headlines... full-time employment relative to the working age population has remained primarily stagnant since the financial crisis and actually fell in the latest month. This is a key reason why economic growth continues to struggle.

While it is all too easy to show the massive outperformance of Russian stocks (even after Carney's "sell" recommendation) as evidence that US sanctions were not 'punishing' as the mainstream media might suggest; this week's release of trade data shows the utter farce that the so-called "costs" imposed on Putin actually are. As WSJ reports, despite all the scaremongery and sanctioning, US exports to Russia in May hit $1.2 billion - a record high (up 21% from pre-sanctions). That will certainly teach them!!