What Hagel proposes is not cuts, but instead a shift in spending away from personnel and toward new high-tech weapons which are favored by and profitable to the military-industrial complex. Welfare spending is bankrupting the country. But military spending is also welfare: it is welfare for the well-connected military-industrial complex, which enriches itself manufacturing useless boondoggles like the F-35 fighter. A proper foreign policy would mean a strong national defense, but a huge reduction in interventions and commitments overseas. Why are we stirring up trouble in Ukraine? In Syria? In Africa? Why are we defending South Korea and Japan when they are wealthy enough to defend themselves? A proper sized foreign policy would defend the United States instead of provoking the rest of the world.
UPDATE: EU is suggesting it will help Ukraine pay its $2bn Russian gas bill (to keep its spice flowing)
The question many are asking this morning is what is the iron-first of Putin thinking? With his "military exercise" over, does he believe it enough to have shown the world his potential for disruption? We suspect another reason may have been weighing on his mind. As we noted previously, Europe accounts for around a third of Gazprom's total gas sales, and around half of Russia's total budget revenue comes from oil and gas... and whatever Putin's geo-political ambitions, we suspect he did not want to jeopardize that source of revenue - no matter how much sabre-rattling and Gazprom-fear-mongering. As the following chart shows, Europe should be sighing a huge relief this morning - but remain cognizant that this, we suspect, is far from over.
Because BTFWWIII is so yesterday, we present BTFICBMD:
RUSSIA TEST FIRES INTERCONTINENTAL BALLISTIC MISSILE: INTERFAX
RUSSIA TEST FIRED MISSILE FROM RANGE IN ASTRAKHAN REGION: IFX
RUSSIA MISSILE LAUNCHED AT 10:10PM IN SOUTHERN RUSSIA: INTERFAX
INTERFAX CITES RUSSIAN DEFENSE MINISTRY ON MISSILE TEST
But, the talking heads said Ukraine was fixed and Putin had folded?
The magical thinking highlighted in two charts, as WaPo reports; in his budget request, Obama projects public debt as a percentage of gross domestic project falling to 69% by 2024, while the CBO has it rising to 79% - a difference of 10 percentage points, or roughly $2.7 trillion. As WaPo notes, the likelihood of this scenario unfolding... zero.
It appears, given comments from Foreign Minister Lukashevich, that things are about to get ugly again...
"we will have to respond...if provoked by rash and irresponsible actions by Washington... and not necessarily symmetrically."
First it was Amazon, now it's Facebook's turn. As was reported previously, hot on the heels of its $19 billion purchase of Whatsapp, Facebook announced the purchase of New Mexico-based Titan Aerospace for $60 million. Who is Titan? It is a maker of solar-powered drones which can reportedly stay airborne for five years and which many have suggested can help Facebook achieve its goal of providing global Internet access, especially in places where the "organic" growth of its audience may be otherwise limited by the lack of infrastructure.
Volume is around 35% below yesterday's pro-rata but none of that matters. The S&P 500 is at record highs but it is the "most shorted" and most notably the Russell 2000 that is just exploding higher with a massive gap. Up over 3% on the day, smashing to new record highs, this is the best day in over 26 months. This is the biggest rise in stocks since October 2011 (when global central banks came to a co-ordinated rescue). Bear in mind that the Fed already noted small-cap multiples were over-extended (5% below here)... but BTFATH anyway.
Take Ray Selent, a 30-year-old former retail clerk in Fort Lauderdale, Fla. He was unemployed in 2012 when he enrolled as a part-time student at Broward County's community college. That allowed him to borrow thousands of dollars to pay rent to his mother, cover his cellphone bill and catch the occasional movie... Tommie Matherne, a 32-year-old married father of five in Billings, Mont., has been going to school since 2010, when he realized the $10 an hour he was making as a mall security guard wasn't covering his family's expenses. He uses roughly $2,000 in student loans each year to stock his fridge and catch up on bills. "We've been taking whatever we can for student loans every year, taking whatever we have left over and using it to stock up the freezer just so we have a couple extra months where we don't have to worry about food,"... Mr. Selent, of Fort Lauderdale, knows he is getting himself deeper in a hole but prefers that to the alternative of making minimum wage. In his 20s, he earned a bachelor's degree in communications from a local for-profit school but couldn't find a job.... He is now taking courses for a degree in theater so he can become an actor.
Is anyone surprised that the poorest and least credit worthy of Americans are being saddled with piles of debt in order to buy new cars? It’s not enough that a generation of our citizens will toil pointlessly to pay off more than $1 trillion of student loans, we may as well add some other form of debt burden on top of it. It’s hard to even imagine this is happening so shortly after the last credit bubble train wreck, but happening it is. Creative ways for people to purchase cars they can’t afford have been on our radar screen for some time now... Well the dancing has continued, and now we have Americans borrowing at all-time record levels to buy cars.
Having destroyed any credibility that this budget could possibly have yesterday, President Obama has outdone himself with the predictions in this $3.9 trillion budget...
- *OBAMA BUDGET PREDICTS FASTEST GDP GROWTH THIS YEAR SINCE 2005 (US GDP estimates collapsing)
- *OBAMA BUDGET SAYS ECONOMY MOVING FORWARD, HOUSING `COMING BACK' (home sales plunge at fastest pace since 2011)
- *OBAMA BUDGET CITES 'ENCOURAGING SIGNS' ACROSS INDUSTRIES (US Macro worst start to year since 2008)
But apart from that, yeah, "nailed it"
Having "condemned Russia's incredible act of aggression" which markets now appear to have forgotten about, we wonder just what Secretary of State John Kerry will have to say in this speech. Markets appear to think it's all over and east and west Ukraine can all sing Kumbayah with Putin leading the melody but other leaders continue to call for "crushing" sanctions against Europe's largest gas supplier. We are sure Kerry will clear it all up and explain where the line that was not crossed is... and for goodness' sake don't mention the Russian boots on the ground in Crimea...
The Bosphorus has been a busy place today where first two Russian ships, the Alligator Class landing ship 150 Saratov and the Ropucha class landing ship 156 Yamal have passed the Turkish strait in a northerly, Black Sea, direction, followed promptly by the Ukrainian frigate U130 Hetman Sahaydachniy. Full steam ahead to a Sevastopol rendezvous? Find out in a few hours.
Just six days after proudly proclaiming that it was unscathed by the Mt.Gox debacle, another Bitcoin bank - Flexcoin - has admitted that it will be forced to close after hackers stole 896 bitcoin, worth around $600,000, in an attack on Sunday. As The Guardian reports, the company shut its website and posted a statement on Tuesday morning detailing the loss..."as Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately."
It took just a few short hours after Putin's Cold War 2.0 "detente" overtures for Russia to show that there is a difference between actions and words. In this case, and as always, the former continue to outperform the latter, and Reuters reports that Russian navy ships have blocked off the Kerch Strait which separates Ukraine's Crimea region and Russia.
What? Us worry? Thanks to the magic of the 102.00 USDJPY tractor beam, the S&P 500 has decided that Ukraine is fixed, the worst macro data in 6 years, and a rapidly tumbling expectation of US GDP is just enough "news" to warrant BTFATH. Thanks to an epic squeeze of the shorts, once again, stocks are at all-time highs... rinse, repeat...