Archive - Aug 2014 - Story

The western world has placed many sanctions on Russia and its economy. However, Russia holds major leverage over Europe; it has oil and Europe needs it (and may just do a 'deal').

"So there are no proxies and there is no functioning Iraqi state. If the Washington war party decides to keep bombing just exactly what purpose will be served - other then defending a map which is now heading for the dustbin of history?"

Compared to the 3.6% drop in GDP when Japan last hiked its consumption tax in 1997, today's Q2 GDP collapse of 6.8% annualized is an utter disaster (even if it is slightly better than the expected -7.0% expectations thanks to a surge in the deflator). Inventory additions added 1.0% growth. Consumer Spending collapsed 5.2% QoQ - the most on record. Of course, in the traditional of Keynesian hockey-sticks, this XX% collapse in Q2 is expected to surge back to a 2.5% growth figure in Q3 and lead Japan to the holy grail once more.. only it didn't quite work out that way last time for Japan. Simply put this is the worst posible outcome for bulls, small beat not enopugh to rejuice QQE. As a gentle reminder of just what happened in 1997 - the last time Japan hiked taxes - we provide the eerily analog chart below...

In what appears to be the peak of arrogance (at the ignorance of the American people), Secretary of Defense Chuck Hagel has just announced that an additional 130 "military advisers" - mostly Marines - will be sent to Iraq to help the Kurds fight ISIS. We have two simple questions: 1) Since when did Marines become non-combat-troops? and 2) Is the President going to call all their wives and explain that their boots will not touch the ground? As gentle reminder, no less than 8 hours ago the adniinstration was considering 75 'military advisers' and now it's nearly double that?

While income inequality maybe the hot topic du jour, the following chart suggests America has another - even bigger - problem - Inebriation Inequality. Perhaps stunning to many, the top 10% of US adults consume - on average - 10 drinks per day!!!

The global monetary system is diverging and fraying.  Central bank post-crisis quasi-coordination has broken down.  Initially, foreign central banks unhappily followed the Fed in cutting rates toward zero; or else risked an appreciating currency affecting competitiveness. As domestic challenges developed and the Fed initiated ‘tapering’, many central banks pushed rates back up.  Developed world economies have grown from around 30% of global GDP 20 years ago to 50% today.  This improvement has helped motivate the unfolding of a new international economic order between developed and developing world economies. 

If a trader knew nothing about the growth, the debt, the inflation, the exporters vs. importers, the serial defaulters, currency manipulators, hot-money or conversely deflation fighters; simply grouping the nations of the world on whether they were 'friend' or 'foe' to the US would provide an odd highly correlated value perspective on the interest rates paid on 1yr and 10yr sovereign debt... It appears your status with the central bank cabal was more important than your ability to repay the loaned money?

Corporate "inversion" transactions already looked like a potential catalyst for tax reform over the medium term, but an uptick in deal activity seems to have increased the probability of near-term policy activity as well. Goldman's expectation is that such changes might be announced shortly after Congress recesses for the election in early October. Overall, it appears unlikely that Congress or the Treasury will make changes this year that eliminate the tax benefits of inversion, but the probability of incremental changes has increased.

Who could have seen that coming? Oh apart from all the 14 analysts that cover it (9 Buys, 5 holds). KING is down 25% after hours, at record lows after missing on revenues, gross bookings, and active users and slashing outlook:

*KING 2Q REV. $593.6M, EST. $605.7M

In a desperate attempt to save the stock price they announced a huge $150 million (46.9c per share) special dividend...but it's not working.

US equity futures started to slide once German confidence data hit early in the morning (and Treasuries rallied modestly) but as the US opened, the ubiquitous "markets are open and I must buy' rip hit... but didn't last. Stocks leaked lower but stopped as Europe closed (in a mirror of yesterday) but could not hold bounce gains as worries over Russia's convoy weighed on markets late on. The S&P and Dow end the day unch (Russell -0.5%, Trannies up 0.6%) on the week. As stocks old off, somewhat oddly, so did the US Dollar (on EUR strength - reptariation?), US Treasuries, gold and copper. 330RAMPCAPITAL turned up (well it is Tuesday), slammed VIX, and jammed stocks (except Russell) back to green (VWAP) but it didn't hold. S&P futures volume was over 40% below average.

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.