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Guest Post: Obama's Frightening Ferguson Fiasco

In the past, the president has been quick to weigh in on issues regarding race. Waiting until all the facts of a case are confirmed may be a better approach.



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Fed Fueled M&A Destroys Capital

The world’s central bankers have given companies the urge to merge. Merger and Acquisition (M&A) activity has already reached $2.2 trillion this year according to Thomson Reuters Deals Intelligence, up 70% from this time a year ago. The deals are big, with eight acquisitions, each over $5 billion, being announced in just a single week in July. However CEO buying sprees do not create new jobs and new products that make our lives better, but are instead just wasteful malinvestments that destroy capital. The cost of capital is integral to making these assumptions. The lower the assumed interest rate or cost of capital, the higher the price for the acquisition that the models will justify. Once interest rates go up, these valuation models will be blown to pieces.



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Obama Goes Gray In 42 Seconds

This is what 5 years of golf courses gets you...



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After 18% Rise & 8 Days Up In A Row, Hertz Withdraws 2014 Guidance & Crashes

Presented with little comment... because if this doesn't wake people up to the unreality of the stock 'market', nothing will. Hertz has ripped higher 8 days in a row, surging over 18% in that period as analysts and talking heads piled on proclaiming how wonderful it is.. and then:

*HERTZ HAS DECIDED TO WITHDRAW 2014 FINANCIAL GUIDANCE
*HERTZ EXPECTS TO BE WELL BELOW LOW END OF 2014 GUIDANCE

Must be a one-off idiosyncratic issue right?



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Summing Up Fed Policy In 2 Words: Vroom... Crash

The FOMC has used experimental tools for so long to keep the accelerator pressed that it fears what happens when the car stops. Therefore, the FOMC believes they have little choice other than to keep the car going forward, which works until it doesn’t. The risk/reward tradeoff continues to skew unfavorably. The farther markets move into the right-tail side of the distribution curve, the deeper they will eventually more into the left-tail. Vrooom...Crash.



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Eric Holder Releases "Message To The People Of Ferguson"

"At a time when so much may seem uncertain, the people of Ferguson can have confidence that the Justice Department intends to learn - in a fair and thorough manner - exactly what happened... In order to begin the healing process, however, we must first see an end to the acts of violence in the streets of Ferguson."



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St. Louis County Justice Center On Lockdown, Besieged By Protesters

The angry mobs have assembled early today, with KTVI reporting that moments ago the Justice Center in Clayton, MO has been put on lockdown. The reason: a flash mob has just appeared outside. We understand their anger, but what we don't get is why don't they just buy stocks instead: wouldn't the protesters rather be wealthy than furious and screaming? Plus, it's not as if there is any risk in buying stocks.



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Are Capital Inflows Propping Up U.S. Markets?

Nobody really believes the official narrative that the "recovery" is powering the remarkable strength of U.S. stocks, bonds and real estate. The real Main Street economy is quite obviously struggling, outside the energy and Federal government sectors, and so many see the Federal Reserve's free money for financiers (a.k.a. quantitative easing) bond and mortgage-buying programs as the real reason bond yields have declined and stocks have soared. This leads us to wonder if capital inflows into the U.S. aren't a largely overlooked driver of rising U.S. markets.



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Volume Collapse Sparks 5th Day In A Row Of Nasdaq Gains As Oil Plunges

S&P futures traded the lowest volume of the year today (for a non-holiday trading day) and volume has slid consistently lower as this rally of the last 8 days. The S&P outperformed today (up over 0.5%) as yesterday's oil-is-falling-so-buy-Trannies meme reversed into oil-is-falling-so-sell-Trannies which ended the day almost unchanged. The Nasdaq made new 14-year highs, up 5 days in a row. Treasury yields dropped notably early on then surged higher as US stocks opened (30Y +8bps on the week). The USD index also surged today (up 0.55% on the week) to new 11-month highs as EUR and CHF weakened notably. Commodities in general were clubbed like baby seals with copper, silver, and WTI hammered (but not Brent) after the inflation/housing data leaving oil under $95 - its lowest in 7 months. Gold fell much more modestly (but ended below $1300). AAPL closes at all-time high. VIX and HY Credit diverge notably from stocks after Europe closed.

 



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RANsquawk FOMC Minutes Preview - 20th August 2014



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Ignorance Is (Still) Bliss

If you like your blissful ignorance, you can keep it...



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Cameroon Blocks All Nigeria Borders As Ebola Cases Rise, 17 Liberian Escapees Recovered

On the bright side, Nigeria claims it is "cautiously optimistic" about the spread of Ebola in Lagos; however, 3 more cases reported and the fact that Cameroon has decided to block all borders with Nigeria because "it is better to act preventively rather than have to heal" suggests things are anything but under control. The 17 quarantined Ebola-symptomatic patients that escaped from a Liberia clininc have been found and put back into quarantine in another clinic. The WHO reports the rate of cases and deaths are accelerating further with 1,229 deaths and 2,240 reported cases with Austria the most recent nation to get a scare as APA reports two cases found.



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Another Police Shooting In St. Louis, Just 3 Miles From Ferguson: "Suspect Dead At The Scene" - Live Feed

St.Louis city police are investigating a fatal police shooting in St.Louis City - less than 3 miles from Ferguson - today at 1230pm. Residents heard at least 5 shots fired. The suspect approached the officers with a knife in an open-hand grip and screamed "shoot me, kill me now." One witness described it at 'suicide by cop'.



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Ukraine’s Next Crisis? Economic Disaster

Ukraine’s next crisis will be a devastatingly economic one, as violent conflict destroys critical infrastructure in the east and brings key industry to a halt, furthering weakening the energy sector by crippling coal-based electricity production.



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Charting The Diminishing Effects Of QE

For each $1 of additional quantitative easing by The Fed, the S&P 500 adds $4 of market capitalization. This correlation-is-causation 'fact' has been remarkably constant since the Fed unleashed QE on the world, but, as Bloomberg's Chase Van Der Rhoer notes, still well below the $12 market cap gains pre-2008 and that it now takes $41 billion in additional stimulus to nudge High-Yield credit spreads 1bp tighter. However, the largest 'diminishing effect' of QE is seen in job creation (were one to believe there was any causal link). It now takes a record $37,400 of additional QE for each additional job created (5 times the pre-Lehman levels). It seems it is indeed time to retire QE...



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