Archive - Aug 2014 - Story

Last week we noted the 'exponential' nature of the cases (and deaths) from Ebola. This week, according to the latest death and case counts from the WHO - the trend has got exponential-er - with 69 new cases and 52 new deaths in the last 2 days. With health workers dying at a fast clip too, it is little surprise that rumors of an outbreak in France were quickly denied by the government. As FranceTV reports, Patrick Balkany, citing "reliable medical sources" claimed that that "several cases [Ebola] have been reported on the French territory." The Ministry of Health rapidly denied any cases of infection in France.

Despite 30% general unemployment, the majority of youths jobless, GDP forecasts already disappointing, and government asset sales at rock-bottom prices, Greek leaders are preparing to blame any missed growth expectations on Russia. As Bloomberg reports, hopes of a 2014 exit from its deepest recession in a half-century may hit a stumbling block after Russian sanctions last week. "The impact could be quite damaging for industries such as tourism and agriculture amid the fragility of a slowly recovering economy," warns one think-tank as tourist arrivals from Ukraine are expected to drop by 50% and the 'fruit-and-vegetable' embargo will "send prices falling across Europe, hitting both the volume and value of Greek exports towards other countries." Is it any wonder the Greeks are so vociferously slamming "blind obedience to the Cold War strategies of Brussels and Washington."

Mass graves - transitory. Military coups - noise. ISIS direct calls for American blood - no problem. Siding with another unelected leader without being sure - new normal foreign policy. Arming kurd fighters - sure why not. Saving a few 100 Yazidi in the name of humanitarianism (oh and the oil sshh) - priceless. We hope President Obama has had a restful morning on his vacation at Martha's Vineyard as he speaks on the latest political developments in Iraq (which last week he explained were crucial if the army was ever to fight for the 'nation' ever again). Just a reminder, the call is 'audio only'  - listen hard for the calls of 'fore' in the background.

While the conflict in Ukraine rages on, EU member states havedecided to impose (not so much more stringent)economic sanctions against Russia, which was predictably followed by Russian counter-measures. The question which isn't being asked often enough, is whether these sanctions will actually improve the situation. Here's an analysis following four concrete questions:

1. Can things get even worse in Russia?
2. Is the West able to guide Russia and Ukraine down the right path?
3. Can the West contribute to a sharpening of the crisis?
4. How can the West protect itself against this conflict?

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."