Archive - Apr 2015 - Story

As the international community struggles to understand how the interplay between a series of US foreign policy failures and geopolitical wrangling over what are viewed as “strategic” Middle Eastern states has somehow managed to produce multiple bloody proxy wars, there are many who still ask: “Who is ISIS?” A new piece from The Atlantic seeks answers from Iraqis with first-hand experience.

GM is halting production of the Chevrolet Volt electric car for the summer to whittle down about seven months of unsold inventory and smooth the way for the next generation of the plug-in hybrid sedan. Production of the current model, which costs $34,000 and up before federal tax credits, will halt early next month, the Detroit auto maker has said. It will be replaced by a 2016 model with a sleeker design and up to 50 miles range on an electric charge. That second generation Volt will go into production at the end of the summer.

In a shocking development, earlier today in the Palace of Justice in Central Milan located 1 kilometer away from Milan's Duomo cathedral - a major tourist attraction - a scene unfolded as if lifted from an Italian mob film, when a man on trial in a bankruptcy case opened fire killing the judge, a lawyer and a witness in the case against him according to emergency services reports. Reuters reports that the Police arrested the man, whom they named as Claudio Giardiello, in Vimercate, a town north of Italy's financial center, Interior Minister Angelino Alfano tweeted. He is being held at a military barracks nearby.

Yesterday's 10 Year auction was impressive, but one can't say the same about the just concluded, and final for the week, 30 Year reopening auction of Cusip RK6 which saw a whopping tail 3 bps to the 2.567% When Issued, when the the High Yield priced at 2.597% (still, about 8 bps tighter than the March 30 auction). The main driver of this subpar demand was not the Bid to Cover ratio, which while very low in historical terms was unchanged from last month at 2.18%, but the collapse in the Direct bid, which took down just 7%, the first single digits Direct take down since May of 2014, and the lowest overall since the 4.9% in March of 2013. However, the Direct slack was more than eagerly sopped up by foreign central banks which took down a near record 51.3%, just shy of the all time high of 53.2%. Dealers were left with 41.8%.

Despite what Bernanke says now, monetary policy is still talked about as if it were “pro-growth” and “stimulus”, powers that even its main proponent and practitioner no longer admits. The enduring legacy is bubbles and cycles, or, again to be fully specific, bubble-based supercycles. The problem is that the 14 million “lost” labor potential may only be the beginning.

It appears that when the US inadvertantly "misplaced" $500 million of weapons in Yemen, the bulk of which fell right in Houthi rebel hands, it created a very credible adversary... for the US and its Saudi-backed coalition allies. Because despite the bombing campaign by the Saudi-headed coalition, AP reports that the rebels seized a key provincial capital in a heavily Sunni tribal area on Thursday as their patron Iran called the two-week air campaign a "crime" and appealed for peace talks. According to media reports the Houthius overran Ataq, capital of the oil-rich southeastern Shabwa province, after days of airstrikes and clashes with local Sunni tribes. The capture marked the rebels' first significant gain since the Saudi-led bombing began.

"We find that in previous oil-sector downturns, job growth in non-energy sectors that are closely related to the oil & gas industry has declined by three to four times as much as the decline in oil & gas employment itself," Goldman says, implying we're likely to see a substantial number of cuts in the months ahead.

This great generational injustice is the direct consequence of central banks lowering interest rates to zero and inflating asset bubbles in a corrosive (and vain) attempt to generate a wealth effect of households borrowing and blowing their newly created asset wealth. In an economy that isn't whipsawed by central bank manipulation, the difference between middle class households' asset wealth is largely behavioral, not the random luck of coming of age before central banks began blowing destructive asset bubbles as a matter of policy.

Despite another data series revision by the Department of Commerce, there was no way to put lipstick on the pig of America's wholesale trade data, and as reported moments ago, the all important merchant sales for February dropped for 3rd month in a row in February, the longest stretch since the last recession.  What's worse however, is that the annual pace of decline has now stretched over both January and February, confirming that 2015 is now officially a year of contraction for the US economy. As a reminder, every time this series suffers an annual decline, there is a recession.

“I’m staying conscious. Some people are buying stocks like they’re gambling in Macau," an investor in Hong Kong tells Bloomberg, underscoring what happens when a bubble in one market begins to spill over into another market. We suppose this is further evidence that no one is planning on listening to the China Securities Regulatory Commission, who recently warned that investors “shouldn’t be thinking if they don’t buy now, [they’ll] miss it.”

My advice to Ben Bernanke is simple. If you consider yourself a public servant, spend less time trying to concoct ways to defend your legacy, and spend more time on what you did that didn’t work, what can be learned from it, and what current policy makers can change and do better. Here is a theoretical title to a Bernanke blog post that I would like to read, but don’t think will ever get wrriten “Things I was wrong about, what I learned, and what the Fed should do differently going forward.”

After the abysmal March payrolls number, there were expectations in the whisper forecast of today's initial claims that there would be a sizable jump in initial unemployment claims, one that may break the streak of 4 consecutive prints under 300K. It did not happen, and in fact the number which was released moments ago by the BLS indicated continued strength in the US labor market, where there was 281K initial claims in the past week, just under the 283K expected and higher than the revised 267K from last week. This is the lowest level for this average since June 3, 2000 when it was 281,500. The previous week's average was revised down by 250 from 285,500 to 285,250.

If there was any confusion whether Iran thought it had gotten the best of John Kerry and the Obama administration as a result of the non-deal April 2 "framework" announcement for some future possible deal, it can be swept away following a Reuters report that Iran will only sign a final nuclear accord with six world powers if all sanctions imposed over its disputed atomic work are lifted on the same day, President Hassan Rouhani said in a televised speech on Thursday.

The US had snow in the winter to "explain" why for the second year in a row Q1 GDP tumbled from 3% to around 0%; Europe, whose GDP unlike its market (the Stoxx 600 just hit a record high) will also miss lofty expectations for an economic recovery thanks to ECB money printing, may have a French air traffic controllers strike to blame the Q2 GDP miss for. Yesterday, the SNCTA union - France's largest - called the two-day strike in a dispute over working conditions. As BBC reports, later on Wednesday, the DGAC civil aviation authority asked airlines to halve scheduled flights on Thursday. The immediate result: hundreds of flights and thousands of passengers have been grounded.