Archive - Sep 2014 - Story

The constant to-and-fro of lies, propaganda, and misinformation continues among all sides in Ukraine; but this 'denial' occurred very rapidly. As Reuters reports, a senior aide to Ukraine's President Petro Poroshenko said on Sunday that Kiev had reached agreement during the NATO summit in Wales on the provision of weapons and military advisers from five member states of the alliance. However, four of those five swiftly denied making any such pledge.

Today, high inflation seems so remote that many analysts treat it as little more than a theoretical curiosity. They are wrong to do so. No matter how much central banks may wish to present the level of inflation as a mere technocratic decision, it is ultimately a social choice. And some of the very pressures that helped to contain inflation for the past two decades have been retreating. Modern central banking has worked wonders to bring down inflation. Ultimately, however, a central bank's anti-inflation policies can work only within the context of a macroeconomic and political framework that is consistent with price stability. Inflation may be dormant, but it is certainly not dead.

"We had a relatively dry period during the Medieval Warm Period, 900-1400AD. There were several prolonged periods of drought that lasted decades to over a century during that time. That period was followed by a cooler, wetter period (the Little Ice Age) that continued until the 19 century. However, the tree-ring records suggest that the 20 century was unusually wet, meaning we had fewer droughts on average than the previous 1000 years....  the past decade in California and the West has been pretty dry, and the concern is that these climate conditions could continue for several more decades. We've seen these broader cycles of wet-dry in the past."

Say hello to the next financial crisis, brought to you courtesy of the dumbest new bill of the week: H.R. 5148: Access to Affordable Mortgages Act.

In the wake of the theft of private images from several prominent celebrities, many people are rightly wondering whether how vulnerable their data is. The answer appears to be “very,” and if you use Apple, the following article from Slate may leave you seething with a sense of anger and betrayal.

Thanks to yesterday's dismal jobs data, we now know that there has never been a lower percentage of white men over 20 working in America...

Google "grocery prices last 12 months" and it's post after post beginning with "Consumer prices rise" or "Rising food prices bite." One person who is happy about this is the New York Times’ Paul Krugman, for instead of being like Europe, that is “clearly in the grip of a deflationary vortex,” America only teeters on the edge of a general price plunge. “And there but for the grace of Bernanke go we,” writes the voice of Grey Lady economics wisdom. However, Mr. Krugman shouldn’t declare defeat to the deflationists just yet. Bankers are learning to say ‘yes’ again, and that means velocity and price increases.

Think CDS were the scourge of humanity, think again. As Pension360 reports, several Wall Street firms are selling securities backed by longevity risk - the risk that retirees receiving benefits will live longer than expected (and thus incur a higher cost on their retirement plan). As Ted Ballantine notes, 'no one ever said Wall Street wasn't creative'; but one wonders just how the banks are mitigating this risk...

Perhaps unsurprisingly, numerous reports (from both sides) state that the long-awaited cease-fire in Ukraine is over. As RIA reports, the pro-Russian separatists noted Ukrainian special forces continued shelling towns and militia positions in the Donetsk region late Friday despite the ceasefire established hours before. Several reporters in the strategic 'land-bridge' city of Mariupol claims to have seen flashes from explosions and heard powerful detonations, where tanks are moving rapidly towards the eastern checkpoint. France24 also reports the Ukraine military is now accusing rebels of violating the cease-fire. AP further confirms sustained explosions outside the city of Mariupol with journalists reporting "people dying of bullet wounds." So it looks like more sanctions will be coming on Monday (European blowback any minute), no Mistral delivery (French losses), and a NATO rapid response team engage (more costs for Europe), leaving Putin with some decisions to make.

Just 2 months ago, the illustrious muppet catchers at Goldman Sachs stated that both stocks were 30-45% overvalued but lifted its year-end target in what we subjectively described as 'moronic drivel'. Then, 2 short weeks after that 'upgrade', the same thought-provoking sell-side strategist downgraded stocks on the basis that a 'sell-off in bonds could lead to short-term weakness in stocks'. Now, with the S&P 500 closing at new record highs on the worst employment data of the year, Goldman is at it again - upgrading equities to overweight for the next 3 months, rolling index targets forward, and piling investors into high-yield credit. Welcome to muppetville...

Tears of joy (over getting his way on a cease-fire enabling him to push out his pressure until Winter comes) or tears of sorrow (over NATO's rhetoric)? You decide...

“I’m beginning a new effort to fix as much of our immigration system as I can on my own, without Congress....  Deputies will identify actions my administration can take on our own, within my existing legal authorities, to do what Congress refuses to do and fix as much of our immigration system as we can. I expect their recommendations before the end of summer and I intend to adopt those recommendations without further delay." - White House, June 30

"Because of the Republicans’ extreme politicization of this issue, the president believes it would be harmful to the policy itself and to the long-term prospects for comprehensive immigration reform to announce administrative action before the elections" - White House, September 6

So far, and contrary to most expectations, the latest ceasefire between Ukraine and the eastern separatists, which was announced early yesterday, has managed to hold up. "Contrary" because while it is the talking point of the west that it is Putin's desire to perpetuate the proxy civil war, in reality it was Ukraine's own troops who voiced against a ceasefire as we reported yesterday:  "A ceasefire would be a disaster, we would lose everything. By fighting we can resist the invasion and send them back. With a ceasefire they will consolidate and carry on after a while," said Ukrainian soldier Taras. Ironically, their rebel opponents share the same but opposite opinion: "The ceasefire is looking good for now but we know they (the Ukrainian side) are only using it to bring in more forces here and ammunition and then to hit us with renewed strength," said one rebel commander in Donetsk known by his nickname Montana. In other words, both sides believe their adversary is merely using the break in the fighting to regroup and reinforce. But for all the rhetoric and posturing, one person summarized it best: "This is no ceasefire but a theatre," said Donetsk resident Ksenia. "This war will go on for five to nine years. Slavs are killing Slavs, there can be nothing worse than that."

A permanently high plateau of stock prices is a marvelous innovation: you can practically set your watch to the steady tick of new all-time highs, and all you need to plan your retirement or cash-out of your stock options is a ruler and a pencil--just extend the price line as far forward as you want, and calculate your wealth. The only downside of this permanently high plateau of stock prices is that it eliminates the need for the financial punditry and the workforce of money managers. With bearish influences and volatility both eradicated, there is nothing left to talk about except the upward slope of the permanent plateau.

Given the 2008 Russian invasion of Georgia and escalating conflict between Russia and the Ukraine, JPMorgan asks, where is Russia on the road to recreating something like the Soviet Union as an economic, political and financial counterweight to the West?