Archive - Aug 11, 2014 - Story

This may get messy. Following days of loud warnings by the West that Putin should not take any moves to send "humanitarian" aid into East Ukraine, due to western fears that this would be merely a pretext for invasion, Putin said on Monday that Russia will go ahead and send an aid convoy to eastern Ukraine anyway.

Despite the early volumeless lift, helped by USDJPY, it appears stock investors began to get the hint that the US economy (Stan Fischer), Iraq (coup), Ukraine (Russian will do it anyway), and Israel are not all fixed. Bonds rallied modestly early on ignoring the equity bounce and then as Europe closed (and a few Ukraine and Iraq headlines of reality hit), stocks leaked back off their highs. Treasuries end the day unchanged (5Y -1bps), Silver popped 0.75% back above $20, copper and oil modestly higher and gold down small to $1310. FX markets appeared quiet (USD ended practically unchanged) but EUR weakness was offset by CAD and SEK strength. S&P futures volume was 40% below average.

The world is suddenly a very sad place: people killing people across the globe, deadly viral epidemics claiming over a thousand, hate crimes, human misery and drama at levels not seen in years. What is one to do to find a little precious humor? Why read this latest Dennis Gartman excerpt ahead of his daily CNBC appearance of course.

• MALIKI SAYS AL-ABADI NOMINATION IS LEGALLLY WORTHLESS
  
• MALIKI SAYS IRAQ FACES A SERIOUS CONSTITUTIONAL VIOLATION
  
• MALIKI SAYS U.S. STATE DEPT. TOOK SIDE OF THOSE VIOLATING LAW
• MALIKI SAYS NO ONE BUT HIM HAS RIGHT TO REPRESENT STATE, DAWA
• MALIKI SAY PEOPLE, SECURITY FORCES ARE IN A HOLY BATTLE

Ten-year bond yields in six euro-area nations ended at a record low on Friday as geopolitical tensions fueled demand for the safest fixed-income securities (before everything was ruled 'fixed' later in the US day). As the world's central banks policies begin to diverge, it appears US Treasuries are increasingly attractive on a relative basis for the 'reach for yield' herd (especially as high-yield technicals dominate) in this new normal world (even on an FX-risk-adjusted basis).

"The outbreak of Ebola virus disease in west Africa continues to evolve in alarming ways, with no immediate end in sight," is the ominous warning this morning from the World Health Organization. The WHO statement confirmed that a stunning 170 health-care workers (the ones covered from head to toe in protective garments) have been infected with Ebola and at least 81 have died. "Treatment facilities are oveflowing," they note as they prepare to hold an emergency meeting today on experimental therapies. But apart from that, as Western media says, it is contained and does not pose a risk to Americans...

While the US is alternating between bombing the north of Iraq, and occasionally paradropping MREs and jugs of water to keep up the "noble" facade of intervention, it is very much unclear if Iraq currently has a government and in fact, who is in charge. As reported yesterday, current PM al-Maliki, seemingly unhappy with relinquishing power when a new Prime Minister, Haider al-Abadi was chosen, decided to conduct what many described as a military coup and encircled the residence of the president. Since then things have gotten quite confusing.

On September 9th, 1965, US Navy pilot James Stockdale was shot down over North Vietnam and seized by a mob. He would spend the next seven years in Hoa Lo Prison, the infamous “Hanoi Hilton”. When asked who didn't make it out? "Oh, that’s easy...The optimists." The lesson, he explains, is a valuable one for investors today: "you must never confuse faith that you will prevail in the end - which you can never afford to lose - with the discipline to confront the most brutal facts of your current reality, whatever they might be."

As stocks soar higher amid dismal volumes, Treasury yields remain trapped in a very narrow range and just slipped lower on the day. It seems bonds don't believe the world's geopolitical carnage is over...

Curious what pure, unadulterated government efficiency in practice, if not in theory, looks like? Then the following chart of USPS operating profits, pardon, losses over the past decade should be sufficient. The punchline: having generated revenues of nearly $700 billion in the past 40 quarters, the USPS has been bleeding red ink more or less consistently since 2006, and has now generated just over $47 billion in operating losses over the past ten years.

Having demanded "American blood," the news that a suspected American militant who pledged allegiance to the Islamic State terrorist group in chilling Twitter rants is being held without bail after his arrest at New York's Kennedy Airport is somewhat concerning. Donald Ray Morgan, 44, who has a previous conviction for firing a gun, had allegedly been brokering deals for military-grade weapons and ammo in his home state of North Carolina and was indicted for being a felon in possession of a firearm, according to The Daily News. The presiding judge noted, his actions "clearly implied to me that he is trying to go to Syria or Iraq as the next step and trying to be actively engaged."

Clinton told ABC’s Diane Sawyer in a June interview, “We came out of the White House not only dead broke, but in debt.” If being “dead broke” means dropping $100k on a 3-week rental in the Hamptons, then we’d like to be dead broke too.

Just the usual warmongering soundbites, because someone clearly is on a mission to escalate the cross border hostilities into all out war. From Reuters:

• UKRAINE MILITARY SPOKESMAN LYSENKO SAYS RUSSIA HAS 45,000 TROOPS ON ITS BORDER WITH UKRAINE WITH TANKS, MISSILE SYSTEMS, WARPLANES AND ATTACK HELICOPTERS

And meanwhile, from the other side: LAVROV: ONE MAY GET THE IMPRESSION THAT THE COUNTERTERRORISM OPERATION IN UKRAINE AIMS TO WIPE OFF SOUTHEASTERN UKRAINE FROM THE FACE OF THE EARTH AND TO MAKE ALL RUSSIANS GO

While the West is used to long lines of people waiting patiently for the next big thing from Apple, it appears there is another 'must-own' item this summer. As Sky reports, hundreds of people have gathered in one of Moscow's most expensive stores to buy T-shirts with Vladimir Putin's picture on them. Somewhat amusingly, among the crowd was no lesser celebrity than Mickey Rourke who snapped one up.

Why is it that central bankers always wait until after they quit their job before telling the truth?