Archive - Aug 12, 2014 - Story

With record rental expenses already forcing millions of Americans to have far less disposable income for everything else once the monthly bill for the roof above one's head is paid, here is a breakdown of 25 selected US metropolitan areas, ranked from most to least expensive, how much it costs to rent a two-bedroom apartment (one can only assume the $1,440 price listed for New York is based on some non-GAAP, magical numbers that exclude reality).

For some, comprehending the demise of the US welfare state ponzi is impossible; and so, in the interests of public safety, we present the illustrated guide to the rapidly approaching (and unstoppable) train wreck...

Despite Dubai's recent explosion of speculative fervor (stocks and real estate), and the world's leaders demanding we believe that global recovery is accelerating, there is yet another awkward anecdotal data point that suggests things are are far from 'normal'. As Bloomberg reports, Dubai’s hotels had the lowest occupancy in at least 18 years in July, standing more than half empty, as more rooms were created and demand declined, according to research firm STR Global.

Last Thursday's comments from NATO's Rasmussen on Russian incursions into Ukraine sent stocks reeling... and then the pre-announced end of Russia's military drill sent stocks soaring. All the while Treasuries oscillated in a relatively tight range, unmoved by equity's manic moves. Today, as Russian convoys sit 'aggressively' at the border, Israel plans new fight with Gaza as truce ends, and Iraq is escalating, stocks are fading back to last week's NATO levels (as the dollar, long-end bonds, and gold are all sliding).

Gallup's U.S. Economic Confidence Index dropped slightly to -17 for the week ending August 10th, hovering just off the lows of 2014 as only 38% of Americans believe the economy is "getting better." Perhaps even more concerning, given record high stock prices and cycle low unemployment rates, only 19% of Americans said the economy is "excellent" or "good," - the lowest in 5 months. Gallup concludes, generally speaking, Americans remain more negative than positive about the economy, but are less negative than they were in the first few years after the Great Recession - $4 trillion later.

ISIS has attracted an entire generation of radicalized Sunni militants to the region. If one watches interviews with their enemies such as e.g. Peshmerga fighters, one topic that is occasionally mentioned is that they don't seem to fear death much. Combined with their well-known brutality, this undoubteldy makes them a formidable fighting force. However, there is evidently far more to ISIS than that. All of the above suggests that it will be exceedingly difficult to effectively destroy ISIS. It seems to us that if the goals the president has announced in recent days are to be achieved, nothing short of a full-scale invasion of Iraq (as well as of Syria for good measure) is likely to suffice – and even then, success is by no means guaranteed.

There was some doubt, when the 3 Year auction priced at 0.992% or the highest since May 2011, if the August auction would finally see 3Y paper pricing wide of 1%. It did not: in fact, with a When Issue of 0.93%, the auction priced through moments ago, at a high yield of 0.924%, surprisingly the lowest level since April. The internals were somewhat more exciting, with the Bid to Cover dropping to just 3.04, the lowest coverage since June of 2013, which as the only BTC with a 2-handle going back all the way to 2010. As for the takedown, Indirects were largely unchanged at 36.2%, just below the 38.2% last month, offset by a jump in Directs from 12.7% to 19.0%, both in line with average, which meant that Dealers were left holding just 44.8% of the final allocation, the lowest since February.

It may be war, but there's no reason one can't poke some fun at the warring parties. Everything appears to be going according to plan...

A month ago, Carl Icahn told told CNBC that he was "very nervous" about US equity markets. Reflecting on Yellen's apparent cluelessness of the consequences of her actions, and fearful of the build of derivative positions, Icahn says he's "worried" because if Yellen does not understand the end-game then "there's no argument - you have to worry about the excesssive printing of money!" Today he follows up that warning with an op-ed that states "we are in a major asset bubble that continues to grow," supporting Stiglitz comments that "these very strong stock market prices are in a sense a symptom of the weak economy, not a symptom that we are about to have a strong recovery to our real economy."

The prospect of renewed war has little effect on the public anymore. But in reality, we can’t begin to understand how it feels to live under the threat of bombs and shrapnel every day. As Americans, and Westerners, we are gifted with the option to not partake directly in war, but play the casual observer. Is this really human progress? Have we reached the pinnacle of human existence where men can live comfortably cheerleading for mass murder? Did anybody think to question this outcome of secular materialism before celebrating its benefits?

In what is certainly a historic, and quite stunning, market first, not to mention prima facie evidence that Janet Yellen was right about the biotech (and not only) bubble, last week the equity markets experienced something that has not happened in decades: a biotech firm went public, traded for six days, only to announce Friday that it would void its IPO and won't issue shares after all, thanks to a key investor's failure to follow through on a commitment to buy stock. In other words, days after going public, yet another darling of the momo bubble mania du jour, decided to undo everything, and went back to being private (and soon: bankrupt).

Huh?

With French government bonds trading at record low yields under 1.5%, it is hard to argue that the troubled socialist nation is 'priced' for either recovery or credit risk... but then again, thanks to Draghi's promise and domestic banks' largesse, none of that matters. With joblessness at record highs, the following chart of France's "recovery" shows near-record high bankruptcies and record-low profitability. Oh the beauty of socialism...as Europe's core diverges dramatically.

Despite reassurances that there will be "no US combat troops in Iraq again" on Friday, it appears - thanks to nuance of spin - that President Obama has changed his mind...

*OBAMA SAID TO CONSIDER SENDING ABOUT 75 MILITARY ADVISERS TO IRAQ: CNN

The question we have is - when does a "military adviser" stop being an 'assassination consultant' and start being a troops' boot on the ground?

Despite the ongoing mainstream media meme that Russia is becoming 'isolated' from the rest of the world thanks to Western sanctions, it appears they have found a few new 'old' friends to become un-isolated with. On the heels of Russia's food-import-ban sanctions last week, Russian and Chinese officials have announced an agreement that China will start selling fruit and vegetables directly to Russia via a special logistics center in Russia's far east. Notably, this week saw Russia's GDP beat consensus expectations, Ruble rally, and stocks jump as German confidence plunged - can you say blowback?

Now that even the Fed has admitted the BLS' nonfarm payroll and unemployment rate are meaningless due to the "noise" from a record number of workers dropping out of the labor force, Janet Yellen is left with one fallback "favorite" indicator, the JOLTS survey (Job Openings and Labor Turnover). It is here that something rather unexpected just happened, when moments ago the BLS reported that US employers reported a whopping 4671K job openings in the month of June, beating expectations of a 4.6MM print and well above the downward revised 4,577K in May. This was the highest openings print since February 2001, and one which suddenly puts the "hawkish" Janet Yellen back in play as it suggests that slack in the labor market, at least based on the number of job openings, has not only filled the gap, but it is now overflowing!