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The ISW's Strategy To Defeat The Islamic State

While a misnomer, if President Obama is to be believed, The Islamic State, according to The Institute for the Study of War, poses a grave danger to the United States and its allies in the Middle East and around the world. As they exclaim, reports that it is not currently planning an attack against the American homeland are little comfort. Its location, the resources it controls, the skill and determination of its leaders and fighters, and its demonstrated lethality distinguish it from other al-Qaeda-like groups..."It must be defeated," they conclude... and here's how.



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Europe Folds To Russian Demands, Delays Ukraine Free Trade Deal By Over A Year

While the world was poring through the details of the latest round of preannounced western sanctions against Russia - a round which Russia commented would have little actual impact - and just as excitedly awaiting the Kremlin's retaliation, which Putin warned is coming shortly, far from the glare of the center stage Europe quietly folded to a bigger Russian demand namely to delay the implementation of a Ukraine free trade deal by more than one year until the end of 2015 and likely beyond.



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5 Things To Ponder: "Bear-ly" Extant

"It is a bad sign for the market when all the bears give up. If no-one is left to be converted, it usually means no-one is left to buy.” The extraordinarily low level of "bearish" outlooks combined with extreme levels of complacency within the financial markets has historically been a "poor cocktail" for future investment success.



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WTF VIX Moment Of The Day

Because it's Friday... "unrigged?"



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Bonds Worst Run Since "Taper Tantrum" Sends Stocks To 4-Week Lows

The entire US Treasury complex surged higher in yield this week, rising 12-16bps (2Y +5bps) as the last 2 weeks are the worst for 10Y since last June's Taper Tantrum. Despite all the 'bonds-go-down-so-stocks-will-see-inflows' rotation buffoonery, stocks slipped to their worst week in the last six, as hawkish Fed concerns spread through markets. High-yield credit notably underperformed and VIX pushed back above 14 (its highest in a month). The USDollar rose 0.5% - 9th week in a row (despite EUR unch on the week) led by a 3% collapse in AUD and 2% in JPY & CAD. Gold and Silver dropped 3% on the week (worst in over 3 months, lowest in 8 months to $1230). WTI prices whipped around but ended -1% at $92. Of course, because it's Friday, the last hour saw manic VIX-selling, S&P futures buying (in 1 lots) to lift it magically off the lows to VWAP, but the S&P ended being the worst of the major US equity indices on the week (S&P <2,000; Dow <17,000).



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Obama's "Gravest" Threat

Hint (...not ISIS...)



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Outflows Signal High Yield Credit Concerns Remain; Deals Pulled, Potential Downgrades Surge

The high-yield credit market remains stressed. An active week ended poorly as a heavy pipeline saw Vistaprint pull its deal citing "market conditions" as perhaps both a re-awakening of liquidity fears (Fed hawkishness concerns), price/spread moves, potential downgrades soar, and outflows signal the flashing red light that HY markets are shining is as red as ever. With buybacks having dwindled already - removing a significant leg from the equity rally - it seems CFOs are realizing that maybe they should have used some of that easy money to build as opposed to buy as they face weak growth, a lack of liquidity, and a wall of maturing debt in the next few years that will have to be refinanced at higher yields and spreads.

 



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Rates 'Liftoff' Getting Closer, Goldman Warns

Recent comments from FOMC participants on the forward guidance and the appropriate timing of the first hike of the fed funds rate suggest, Goldman warns, a greater clustering of FOMC participants' views around a mid-2015 'liftoff' in rates. Similarly, private sector forecasts for the first hike are becoming more centered on mid-2015 rather than August to September.



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No Money, No Problem: You Can Now Lease An iPhone With Nothing Out Of Pocket

Subprime cars, subprime houses, and now subprime iPhones... on layaway.



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When A Hedge Fund Tells A Restaurant How To Cook

  • Olive Garden's breadsticks are part of the brand equity, as they come to every table. The breadsticks need to be of the highest quality, with a better taste and a firmer texture, and each table must receive hot breadsticks.
  • The pasta at Olive Garden must be significantly improved. It must be prepared at the proper water temperature, boiled in salted water, precisely timed to not overcook, and tossed with sauces for each dish instead of the current practice of ladling sauce on top of heaps of coagulated pasta.
  • We must rethink the amount of items from the flyer. Most fried foods are not authentically Italian and it slows service.
  • We will explore a few gluten-free options, as many consumers prefer gluten-free dishes (1) Based on extensive research and discussions with culinary experts and suppliers, we believe we can accomplish these goals at Olive Garden's current price points without hurting margins


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UK Suffers Biggest Capital Outflow Since Lehman As Scottish Vote Nears

Investors pulled $27 billion out of UK financial assets last month - the biggest capital outflow since the Lehman crisis in 2008 - as concern mounted about the economic and financial consequences if Scotland left the UK, according to Reuters. Furthermore, Morgan Stanley said daily equity flow data pointed to "some of the largest UK equity selling on record."



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S&P Slips To 4-Week Lows, Russell Red For 2014 As Rate Hike Fears Trigger Selling

With BofAML, Goldman, and now JPMorgan all bringing forward their 'liftoff' expectations for rates, US equity and bond markets are starting to quake a little. The Russell 2000 is now back in the red for 2014 and all but Trannies are red for September. The S&P is back to Aug 20 levels as 10Y yields push 15bps higher on the week to 2-month highs over 2.60%. VIX is back over 14, catching up with rates and FX volatility.



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Kerry Rocks Kasbah Caption Contest

1. Unveil strategy to "degrade and ultimately destroy" ISIS.

2. Unleash the Kerry.

3. ...

4. Declare mission accomplished.



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The Game Of Thrones & The Game Of Markets

There is a connection between modern capital markets and the NFL (and between Central Bankers and Roger Goodell). The connection is solipsism – a pathological egocentrism where reality is defined by an individual’s mental perceptions and constructs. Collective solipsism is what overwhelming Common Knowledge looks like. It’s the annihilation of an individual’s perception of reality in favor of a group perception of reality. The collective solipsism of modern markets is the most crucial game to comprehend.



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Harsh Austerity Sends Italian, Spanish Debt To Record Highs

Damn you debt-reducing austerity-that-is-blamed-for-everything-that-is-wrong-with-Europe's-triple-dip-recessionary-economy-when-it-is-the-corrupt-socialist-incompetent-politicians'-fault. Damn you to hell! Oh wait a minute:

Italy’s government debt rose to a record €2.169 trillion in July from €2.168 trillion in June, the Bank of Italy says in its public-finances supplement.
Spain total govt debt amounted to a record € 1.01 trillion in 2Q, up from € 995.9b in 1Q, Bank of Spain says; 2Q Total Govt Debt Rises to 98.9% of GDP From 97.4% in 1Q

With austerity like this, who needs to spend like a drunken sailor?



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