Archive - Aug 26, 2014 - Story

The Government's Conference Board Consumer Confidence printed an astounding 92.4 - the highest since October 2007 and handily beating expectations of a modest retracement. The headline beat was driven by exuberance in the moment (up from 87.9 to 94.6) as expectations for the future dropped. Plans to buy a home and car rose but major appliances dropped as did expectations for jobs and income. For those in the middle-incomes, things got a lot worse but less-than-$15k and more-than-50k cohorts surged. What is most worrying on an historical basis is the gaping divergence between this government survey and the UMich confidence - near record highs.

President Obama would have proudly proclaimed Warren Buffett a true patriot in his bailing out of the banking system with expensive loans and his 'realization' that those earning more than $1 million should be tax-tax-taxed. However, the "Buffett Rule" appears to have one caveat... if you are making over a $1 billion, you're good to go with tax-avoidance strategies. In one of his career's most hypocritical moves Warren "tax-me-more" Buffett has decided that putting his money where his mouth is no longer makes sense.. and is funding $3billion of Burger King's "tax-inversion" takeover of Canada-based Tim Hortons. Somewhere on a golf course, a Presidential Putter is being snapped across a knee...

The fourth (or is it fifth?) dead cat bounce in the US housing market is rapidly fading, as we just confirmed by the latest Case-Shiller Home Price Index data for the month of June, which saw a Y/Y increase in home prices of just 8.07%, below the 8.3% expected, and the slowest increase since December 2012. As the report noted, "for the first time since February 2008, all cities showed lower annual rates than the previous month." On a monthly basis, the NSA index, Case-Shiller's preferred, rose by 1.0% for the 10 and 20-City composite, with the Seasonally Adjusted composite declining for the second consecutive month: the last time there were two consecutive monthly declines during a price declining phase was in late 2010.

When two of the richest presidents in the world currently met this morning in Minsk, the tensions was palpable. As Poroshenko (net worth ~$1.3 bn) and Putin (~$440bn) prepared for talks, the threats, promises, and hopes were everywhere...

*POROSHENKO SAYS 'OPTIMISTIC' ABOUT TODAY'S MEETINGS IN MINSK, INTERESTED IN EU, CUSTOMS UNION AGREEMENTS

But Vladimir Putin - having reminded everyone that Russian capital represents 32% of the Ukraine banking system (threat or statement?) warned any EU association pact may force Russia to scrap trade preferences.

The headline print of a record-breaking 22.6% gain - smashing the 8.0% expectation - hides the extremely obvious factor of the largest civilian aircraft orders (an entirely one-off non-repeatable factor). Durables ex Transportation collapsed from a 3% gain to a 0.8% drop - the biggest drop in 2014, missing expectations by the most in 8 months. Perhaps even more concerning, non-defense ex-aircraft new orders dropped 0.5% (missing expectations of a 0.2% gain).

The Status Quo is dysfunctional because its model of how the world works is broken. It won't matter if gridlock remains in place or one of the parties gets to impose its "brand" of policy-tweaks; since no one on the political spectrum has any concept that the current model described in these 12 points is broken, fixing the political dysfunction won't fix the systemic dysfunction.

A Moscow military source told Russian news agencies that a group of soldiers had surrendered to Ukrainian forces after crossing the border by accident. Needless to say, Ukraine didn't buy it: "This wasn't a mistake, but a special mission they were carrying out," military spokesman Andriy Lysenko said in a televised briefing. Russian news agencies quoted a defence ministry source as confirming that Russian servicemen had crossed into Ukraine but saying they did so inadvertently.  "The soldiers really did participate in a patrol of a section of the Russian-Ukrainian border, crossed it by accident on an unmarked section, and as far as we understand showed no resistance to the armed forces of Ukraine when they were detained," the source said.

• That will teach the UAE who's boss: U.S. Won’t Consult Syria on Militant Strikes: White House (BBG)
• Putin Set to Meet Poroshenko as Ukraine Tensions Escalate (BBG)... but the de-escalation algo?
• Tim Hortons’ Canadian Fans Squeamish of American Hookup (BBG)
• Israeli air strikes target more Gaza high-rises (Reuters)
• How Steve Ballmer Became a Rookie Basketball Mogul (WSJ)
• Buffett to Help Finance Burger King Tax-Saving Deal (BBG)
• U.S. Factories Keep Losing Ground to Global Rivals (WSJ)
• Boehner, Camp Profit From Corporate Bid to Avoid U.S. Tax (BBG)
• Experimental U.S. hypersonic weapon destroyed seconds after launch (Reuters)
• The Neo-Neocons (WSJ)

It is unclear exactly why stock futures, bonds - with European peripheral yields hitting new record lows for the second day in a row - gold, oil and pretty much everything else is up this morning but it is safe to say the central banks are behind it, as is the "de-escalation" algo as a meeting between Russia and Ukraine begins today in Belarus' capital Minsk. Belarusian and Kazakhstani leaders will also be at the summit. Hopes of a significant progress on the peace talks were dampened following Merkel’s visit to Kiev over the weekend. The German Chancellor said that a big breakthrough is unlikely at today’s meeting. Russian FM Lavrov said that the discussion will focus on economic ties, the humanitarian crisis and prospects for a political resolution. On that note Lavrov also told reporters yesterday that Russia hopes to send a second humanitarian aid convoy to Ukraine this week. What he didn't say is that he would also send a cohort of Russian troops which supposedly were captured by overnight by the Ukraine army (more shortly).