The arrogance, hubris and contempt for morality displayed by the ruling class is breathtaking to behold. They think they are untouchable and impervious to norms followed by the rest of society. They may have won the opening battle, but will lose the war. Discontent among the masses grows by the day. The critical thinking citizens are growing restless and angry. They are beginning to grasp the true enemy. The system has been captured by a few malevolent men. When the stock, bond and housing bubbles all implode simultaneously, all hell will break loose in this country. It will make Ferguson, Missouri look like a walk in the park.
Brent crude is rising this morning up from an earlier dip to $101.75. That is not the case for WTI crude which has been in freefall since this morning's CPI data print. Brent-WTI has soared from below $5 to over $6.50 in the last few hours as WTI drops to a $95 handle at its lowest since mid-January.
At this point, one has to wonder, just what is the point of all the Central Banks’ activities? The QE efforts in the US and Japan (two of the biggest in history) haven’t really generated jobs or GDP growth… so just what ARE they doing?
Consumer Price Inflation rose a mere 0.1% MoM in July, its equal lowest since November 2013 and in line with expectations as falling energy and transportation costs (both -0.3% MoM) led the stabilization (with a 5.9% plunge in airfares). The biggest drop was in personal computers (-1% MoM) which is now -6.0% year-over-year. Food prices rose 0.4% MoM. Ex-food-and-energy, prices also rose 0.1%, missing the 0.2% expectations, to the slowest pace of core inflation since April 2013. So much for all that inflation is about to break out and tear bond yields higher chatter... (no matter how real or unreal the government's hedonically-manipulated data is). The 2-month change in Core CPI swung from hottest in 7 years to coldest in 14 months...
- Just how many rats are there? Steven Cohen's Firm Loses Another Top Executive (WSJ)
- Iceland Sees a Potential Volcanic Eruption, and Airlines Cower (Bloomberg)
- Iraqi forces battle to drive jihadists from Saddam's home town (Reuters)
- Israel, Palestinians Agree to Extend Gaza Truce for 24 Hours (BBG)
- Pimco now buying junk (BusinessWeek)
- Pakistan arrests 147 in Punjab towns as protests in capital continue (Reuters)
- Ex-Rabobank Employee Pleads Guilty in Libor-Rigging Probe (BBG)
- Ebola Orphans Targeted by Aid Groups as Newest Victims (BBG)
- Two California youths accused of plotting high school shooting spree (Reuters)
- Only Rich Know Wage Gains With No Raises for U.S Workers (BBG)
A quick reminder of how geopolitics governs markets: on Friday, the market plunged 0.005% over fears Ukraine and Russia may be about to go at it all out after a fake report Ukraine shelled a Russian military convoy. On Monday, the same "market" soared just under 1% as the news that had caused the "crash" was refuted. That has been the dominant rinse, repeat theme for the past month and will continue to be well after Yellen's Friday speech at Jackson Hole (although one does wonder why she is not speaking on Wednesday when the symposium begins). Not surprisingly, with only modest re-escalation news overnight (that Russia is preparing further retaliatory sanctions against the West), which is simply "pent up de-escalation" in the eyes of Keynesian algos, futures are again up a solid 0.2% and rising, and the way the rampy USDJPY is being manipulated before its pre-market blast off, we may well see the S&P hit 1980, if not a new all time high before 9:30am, let alone during today's cash session. In any event, whatever you do, don't you dare suggest that algos should care one bit about Ferguson and its implications for US society.
The main event of the week will be Yellen's long awaited speech at the Jackson Hole 3-day symposium taking place August 21-23. The theme of this year's symposium is entitled "Re-Evaluating Labour Market Dynamics" and Yellen is expected to deliver her keynote address on Friday morning US time. Consensus is that she will likely highlight that the alternative measures of labour market slack in evaluating the ongoing significant under-utilisation of labour resources (eg, duration of employment, quit rate in JOLTS data) have yet to normalise relative to 2002-2007 levels. Any sound bite that touches on the debate of cyclical versus structural drivers of labour force participation will also be closely followed. Unlike some of the previous Jackson Hole symposiums, this is probably not one that will serve as a precursor of any monetary policy changes but the tone of Yellen's speech may still have a market impact and set the mood for busier times ahead in September.
Friday's main event, Ukraine's alleged attack of a Russian military convoy, has come and gone, and as we mused on Friday has promptly faded into the memory of all other fabricated headlines released by the country engaged in a major civil war and an even more major disinformation war. To be sure, Germany's DAX has recovered virtually all losses, US futures are up about 9 points, and the 10 Year is back to 2.37%. One wonders what algo-slamming headline amusement Ukraine has in stock for us today, although anyone hoping for a quick "de-escalation" (there's that word again) will have to wait following yesterday's meeting of Russian, Ukraine, German and French ministers in Berlin where Russia's Lavrov said he saw no progress on Ukraine cease-fire, Foreign Minister Sergei Lavrov says in Berlin, adding that a cease-fire should be unconditional.
Non-ideologically laden overview of the key issues shaping the investment climate in the week ahead.
The ragged Keynesian excuse that all will be well in Japan once the jump in the consumption tax from 5% to 8% is fully digested is false. Here’s the problem: this is just the beginning of an endless march upwards of Japan’s tax burden to close the yawning fiscal gap left after the current round of tax increases, and to finance its growing retirement colony. There is no possibility that Abenomics will result in “escape velocity” Japan style and that Japan can grow its way out of it enormous fiscal trap. Instead, nominal and real growth will remain pinned to the flatline owing to peak debt, soaring retirements, a shrinking tax base and a tax burden which will rise as far as the eye can see. Call that a Keynesian dystopia. It is a cautionary tale for our times. And Japan, unfortunately, is just patient zero.
Overview of the technical conditions of the major markets.
Here Comes The European Triple-Dip: Negative German GDP Sends Bunds Under 1% For The First Time EverSubmitted by Tyler Durden on 08/14/2014 07:11 -0400
The hammer finally hit for Europe when overnight both Germany and France reported Q2 GDP prints that missed expectations, the first actually contracting at a 0.2% rate with consensus looking for -0.1%, while France remained flat vs expectations for a tiny 0.1% rise. As a reminder, this GDP is the revised one, which already includes the estimated contribution of drugs and prostitution, suggesting the actual underlying economic growth is far worse than even reported. Then again, this is hardly surprising considering all the abysmal data out of Europe and the rest of the world in recent weeks, and with the Russian trade war sure to trim even more growth, look for all of Europe to join Italy in its first upcoming triple-dip recession in history.
With record rental expenses already forcing millions of Americans to have far less disposable income for everything else once the monthly bill for the roof above one's head is paid, here is a breakdown of 25 selected US metropolitan areas, ranked from most to least expensive, how much it costs to rent a two-bedroom apartment (one can only assume the $1,440 price listed for New York is based on some non-GAAP, magical numbers that exclude reality).
Since there is nothing on today's data docket, it will be all about, you guessed it, geopolitical risks, where "consensus" is best summarized by these two Bloomberg headlines:
- Stay USD Long as Geopolitical Risks Loom
- USD is mixed and world stock markets rise as concerns over geopolitical risks ease
That pretty much covers it, although in addition to the Ukraine civil war one can now add an Iraq coup to the list of geopolitical fiascoes instigated by US foreign policy.
Overview of the investment climate and the likey impact from data and events, delivered in dispassionate, even if dry prose.