Switzerland

The Buffets and the Gates of the US will be shedding a few tears this week as the United States and Switzerland have reached an agreement that brings the status of the latter as a tax haven for Americans (or will they?).

• Al-Qaeda Links Cloud Syria as U.S. Seeks Clarity on Rebels (BBG)
• Administration Tells Lawmakers of Evidence Linking Assad to Attack (WSJ)
• Director of National Intelligence James R. Clapper to publish numbers of secret spying orders (CBS)
• U.S., Switzerland strike bank deal over tax evasion (Reuters)
• Another Budget Deal Bites the Dust (WSJ)
• Contemplating Summers Drives Investors to Seek Beltway Expertise (BBG)
• Austerity Test Looms in Australia as Abbott Pledges Cuts (BBG)
• Gay Spouses in All States Now Married Under U.S. Tax Law (BBG)
• Shadow banks face limits to securities trading (FT)
• EU's Rehn sees European recovery strengthening in 2014 (Reuters) ... or 2015... or 2022... or never?

• UN Insecptors to leave Syria early, by Saturday morning (Reuters)
• Yellen Plays Down Chances of Getting Fed Job (WSJ)
• JPMorgan Bribe Probe Said to Expand in Asia as Spreadsheet Is Found (BBG)
• No Section 8 for you: Wall Street’s Rental Bet Brings Quandary Housing Poor (BBG)
• Euro zone, IMF to press Greece for foreign agency to sell assets (Reuters)
• Brothels in Nevada Suffer as Web Disrupts Oldest Trade (BBG)
• U.S., U.K. Face Delays in Push to Strike Syria (WSJ); U.S., U.K. Pressure for Action on Syria Hits UN Hurdle (BBG)
• Renault Operating Chief Carlos Tavares Steps Down (WSJ)
• Vodafone in talks with Verizon to sell out of U.S. venture (Reuters)
• Dollar Seen Casting Off Euro Shackles as Fed Tapers (BBG)

Those curious if the Indian Rupee cratered once again in overnight trading will be disappointed: following the previously reported intervention by the RBI in which it would provide US dollars only to crude companies, the currency rose strongly at the open only to fade and trade rangebound before closing in the mid 67 range. In other words, much more will be needed by the central bank to stabilize the currency, the markets and the economy. The main overnight story, however, remains the Syrian conflict and market reactions to it. Stocks traded higher in Europe early today, with credit spreads tightening as market participants scaled back expectations of an imminent strike on Syria after US Defense Secretary Hagel said that the US will act on Syria only with international collaboration. Of note, the G-20 is set to take place next week where Syria is widely expected to be the hot topic for discussion among global world leaders. But while futures ramped in early trade following a spike in the USDJPY over 98, they have since retraced most of their upside, and crude is back to nearly unchanged.

• Merkel Blames SPD’s Schroeder for Letting Greece Into Euro (BBG)
• U.S. Bank Legal Bills Exceed $100 Billion (BBG)
• U.K. to Request U.N. Action to Protect Syrians From Chemical Weapons  (WSJ) - and Russia to veto any decision
• U.N. inspectors in new Syria mission as West prepares to strike (Reuters)
• Emerging-Market Rout Intensifies on Syria Jitters (WSJ)
• Rebels Without a Leader Show Limit to U.S. Role in Syria War (BBG)
• Anger at IRS Powers Tea-Party Comeback (WSJ)
• China has much at risk but no reach in Middle East (Reuters)
• 'London Whale' Penalties Put at $500 Million to $600 Million (WSJ)
• U.S. lawmaker says 'compelling' evidence of Syrian chemical attack (Reuters)

This is one of those stories about the gold market that almost seems too wild to be true since the numbers are so extraordinary. According to a Reuters article from earlier today, Australian bank Macquarie has reported that gold is flooding out of London and into Switzerland at a mind-boggling rate. Specifically, 240 tons were exported in May alone and 797 tons during the first half of 2013. That means gold is being exported at a annualized run rate of 17x the 92 tons exported for all of 2012. That’s insane. Moreover, it seems a lot of that gold is being sent to Switzerland so that the 400oz bars can be melted down into different sizes that are more amenable to Asian sensibilities.

Liquidated ETF gold holdings are being shipped from the U.K to Switzerland for refining into smaller one kilogramme gold bars, Australian bank Macquarie wrote in a note yesterday. These were then sent to Asia and bought by Asian investors. The note  confirmed, what has been known anecdotally for some weeks.

The week ahead will be relatively quiet with few major data releases. The main focus will be on the Flash PMIs in the Eurozone and China as well as the FOMC minutes and Jackson Hole. In the US the relatively new Preliminary PMI has been found useful by our US team in forecasting the ISM. Existing and new home sales are additional data points of interest in the US.  The key focus this week will be on central bank action. Minutes from the FOMC and the RBA will be followed by rate decisions in Thailand and Turkey. Finally, on Thursday starts the annual Jackson Hole conference with lots of Fed speakers, including Yellen next weekend. Chairman Bernanke, whose term ends in January, will not attend.

If you are a stock picker, then it’s basically now or never for whatever investment discipline you might follow.  Asset class and industry correlations have taken a surprising nosedive in recent weeks, which - as ConvergEx's Nick Colas notes. should allow your strategy/blend of magic to (hopefully) shine versus the benchmarks.  Average industry sector correlations to the S&P 500 have dropped to 69.9%, by far the lowest observation for over two years.  High yield bonds now show just 16% correlation to U.S. stocks, and the numbers for Emerging Markets (58%), EAFE stocks (76%), and currencies like the Australian dollar (11%) are also plumbing new lows.  Why the sudden return to a ‘Normal’ world? Expectations that the Federal Reserve will begin to ‘Taper’ its bond buying help, to be sure.  As do actual inflows (some $8 billion last month) into actively managed mutual funds.  We’ll have to wait and see if current trends continue, but for now we welcome the return of the ‘Stock picker’s market’.  Let the dart-throwing begin...

How would America ever survive without the central planners in the Obama administration and at the Federal Reserve?  What in the world would we do if there was no income tax and no IRS?  Could the U.S. economy possibly keep from collapsing under such circumstances?  The mainstream media would have us believe that unless we have someone "to pull the levers" our economy would descend into utter chaos, but the truth is that the best period of economic growth in U.S. history occurred during a time when there was no income tax and no Federal Reserve. We never needed a central bank, we never needed the IRS and we never needed an income tax.  America would be doing just fine without any of them. But instead, America chose to go down the path of collectivization and central planning, and now we are heading toward the biggest economic disaster in the history of mankind.

In May 22 testimony to the Joint Economic Committee of Congress, Fed Chairman Ben Bernanke issued another of many similar positive interpretations of central bank policy. Yet again, he continued to argue that quantitative easing has decreased long-term interest rates and produced other benefits. The Fed's polices have not produced the much-promised re-acceleration in economic growth. The standard of living - defined as median household income - has fallen back to the level of 1995. The best approach would be for the Fed to recognize the failure of QE and end the program immediately, thereby allowing price distortions in the markets to correct themselves. By ending the illusion that the Fed can take constructive actions, this might even serve to force federal government leaders to deal with the growing fiscal policy imbalances. Otherwise, debt levels will continue to build and serve to further limit the potential for economic growth.

Foreign companies react; at the expense of already revenue-challenged US tech companies

After a slow start in the week, there is a substantial pick up with announcements from the FOMC, ECB and BOE (as well as monetary policy updates from the RBI, RBA, Israel, and Czech Republic) with the possibility, if not probability, of a Fed update on tapering expectations. On Wednesday we get the much expected wholesale GDP revision which will boost "growth data" all the way back to 1929 and is expected to push current GDP as much as 3% higher, and on Friday is the "most important NFP payroll number" (at least since the last one, and before the next one), where the consensus expects a +183K print, and 7.5% unemployment. All this while earnings season comes to a close.

Only a decade ago, drones were the purview of the military, but today we are realizing the commercial potential of this technology and the numerous cost-cutting applications for the oil and gas industry in the future. For everything from exploration and pipeline leak detection to oil spill clean-up assistance, drones are poised to become a necessity rather than luxury. First, let’s just clarify: Drone is just another name for robot, but what we’re talking about here is the Predator-style, unmanned aerial vehicle—maybe a bit smaller, and certainly not weaponized. It turns out that drones have a number of applications that don’t involve annoying Pakistan by launching bombing raids from across the border in Afghanistan, or sending them out to spy in Iranian airspace (and sometimes getting caught).

While Edward Snowden can perhaps breathe a sigh of relief at being abale to avoid the humdrum beat of airport food for a while, he will be stepping out into the 2nd most expensive city in the world. Based on a survey of over 200 items, Moscow ranks 2nd in the world (with $8 cups of coffee and $4,600 average apartment rental costs), and Tokyo 3rd (with $5 newspapers and $7 coffees). But the most expensive city in the world will come as a surprise to most and likely create the need for a Google Maps search. With 40.5% of the population of this nation living in property and the average monthly rent a sky-high $6,500, this southern African country's capital is the most expensive city in the world (it would seem the Chinese arrival in resource-rich African nations - N'Djamena, Chad is 4th - has had its hot-money inflationary effects).