Archive - Sep 2014 - Story

Who is the world’s No. 3 arms exporter, after the United States and Russia? Surprise. It is Germany, a country bound by law to supply only allies and peaceable folks like (neutral) Switzerland or Sweden. Off limits are “areas of tension” — bad neighborhoods that actually need the stuff. Yet somehow, Israel and Saudi Arabia, both living in the world’s powder keg, are among Germany’s best customers. So are Algeria, Qatar and the United Arab Emirates.

Sometimes, when you go looking for trouble... you find it!

35 breaches of The White House perimeter... "don't worry, we got this!"

President Obama, speaking at The Clinton Global Initiative, will explain how the administration and its partners are deepening their commitment to defend and strengthen civil society globally... (apart from the bombings and sanctions and FATCA and bank penalties and Fed intervention).

On the surface, earning $174,000 per year, while putting one solidly in the top 10% of all US earners, does not sound like much. This happens to be the 2014 allocated wage of America's elected political representatives, the members of the House of Representatives. And indeed, in the grand scheme of things it isn't much... until one considers that in the 102-day period between August 1 and November 12, this wage will be "earned" for just working a paltry 8 days, which, presuming 10 hour workdays, amounts to a whopping $608 per hour, on par with what some of America's most prominent lawyers earn. It is also several times the hourly compensation of anesthesiologists, one of the highest-earning professions, according to the Bureau of Labor Statistics, at $113 an hour on average.

Sad but true. Current owner of the Twinkies and Ho-Ho brands, Mexico's Grupo Bimbo, had planned to take advantage of an exuberant public stock market by bringing a secondary stock offering to reduce its leverage. Everything was good-to-go on Friday, but with the market now down a stunning 1.5% from pre-BABA IPO levels, they have pulled the offering:

*MEXICO’S BIMBO SAID TO POSTPONE FOLLOW-ON SHARE OFFER: REUTERS

No comment as yet on the reason, though we assume "market conditions" will be cited as the fickleness of capital markets' animal spirits is once again exposed for all to see. Perhaps Grupo Bimbo should rename themselves Grupo Bimbaba?

On one hand today's 2 Year bond auction priced, as expected, at the widest level since April 2011, or 0.589%, on rising concerns that the Fed may, all economic signs to the contrary, raise rates in the coming year. On the other hand, this was arguably the strongest 2 Year auction at this yield, in all of 2014. First, the auction stopped through a substantial 0.6bps through the 0.595% When Issued. Then, the Bid to Cover was a solid 3.564, the second highest of 2014, only lower than February's 3.605. Finally, the internals also were very solid, with Directs taking down 16.11% and Indirects holding 40.91%, the most since March 2014, leaving only 42.98% to the Dealers, which was also the lowest since March.

Just over a year ago, we warned on the very real concerns about corporate bond liquidity drying up and the potentially huge problems associated with that, if and when the Fed ever pulls the rug out from the one-way street of free-money injections. It appears, as Bloomberg reports, having realized, we suspect, that they can't get out of their positions, the world’s largest money manager, Blackrock, believes the corporate bond market is "broken" and in need of fixes to improve liquidity "before market stress returns." Ironically, as we have also explained in great detail, it is this 'broken' market that has enabled corporations to borrow cheap enough to buyback half a trillion dollars of their stock in 2014. As Blackrock concludes, rather ominously, "the risk posed by investors trying to dump bonds after the Federal Reserve raises interest rates is “percolating right under” the noses of regulators."

Since winning the 2009 Nobel Peace Prize, President Obama has now bombed 7 predominantly Muslim countries: Afghanistan, Pakistan, Yemen, Somalia, Libya, Iraq, and now Syria. As Glenn Greenwald notes, Humanitarianism is the pretense, not the purpose.

At what point is a drill more than just a drill? Maybe when it is so massive it could be confused for an invasion force, involving a mindblowing 155,000 troops, more than the armies of most sovereign nations, 4,000 armoured vehicles, 632 planes and helicopters and 84 vessels. Those are the staggering numbers taking part in the Vostok-2014 strategic exercises, Russian Defense Minister Sergei Shoigu told President Vladimir Putin on Tuesday, and whose main priority is ti "demonstrate that the degree of combat preparedness in Russian troops has risen." One almost wonders why...

China is slowly moving to dominate the global gold market and it is important to join the dots regarding a few key recent developments in China relating to gold. When the International Board of the Shanghai Gold Exchange (SGE) was launched last Thursday September 18 during an evening trading session, it was notable that the first transactions were put through by a diverse group comprising HSBC, MKS (Switzerland), and the Chinese banks,  ICBC, Bank of China and Bank of Communications.  One encouraging factor about the SGE and the SGE international platform is that there is a lot of physical gold flowing through the Exchange. Therefore, price discovery is not just based on an inverted pyramid of mostly unallocated gold as in London or mostly cash-traded futures paper gold as in New York.

Update: Birmingham Police Chief A.C. Roper said that the shooter appears to be dead.

What until recently was a surge in tragic and deadly "active shooter" cases mostly affecting various US army bases, shools and shopping malls, has now spread to more commercial structures, such as in this case a UPS Customer Center in Birmingham, Alabama. MyFoxAl reports that three people are confirmed dead in a shooting at the UPS Customer Center in the Inglenook community in north Birmingham.

While WHO Director Thomas Frieden's "gut" says the worst-case scenario won't come to pass (thanks to the actions that are being taken), the CDC is about to release its Ebola-epidemic scenario tool that suggests up to 1.4 million infections by mid-January. As The NY Times reports, these figures take into account the fact that many cases go undetected, and estimate that there are actually 2.5 times as many as reported. In the best-case model, the epidemic in both countries would be "almost ended" by Jan. 20, the report said. Perhaps more worrying is the WHO report also, for the first time, raised the possibility that the disease would not be stopped but would become endemic in West Africa, meaning that it could become a constant presence there. Aid group Samaritan’s Purse is gravely concerned at the spread of the disease, fearing "it's too late. Nobody's going to build 100,000 beds."

UPDATE: Stocks have roundtripped from their voyage into fantasy...

As we predicted an hour ago when the USDJPY was 50 pips lower, today's aggression against stocks would not stand. So, lo and behold, one or more central banks decided to aggressively collect 6J (USDJPY) liquidity rebates from the CME and have bought the pair in a straight line since this morning. And sure enough, after it dropped notably just a few hours ago, the NASDAQ and S&P is now back in the green, where it belongs in a "market" as rigged as this one.

Last night's airstrikes on ISIS in Syria came as a surprise to some (though apparently not ISIS who local reporters note had time to move weapons and personnel) as President Obama - and his local arab nation allies (acting in support), though notably no Western nations - unleashed hell on Assad's sovereign territory. The first stirrings of responses from Russia have been creeping out and now Israel is involved in the anti-ISIS coalition. The State Department has just confirmed that they did not give advance warning to the Syrian regime. If you are playing along at home, key words include "broad coalition", "Assad still a bad guy", "Vladimir who?", and "not Muslim."