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RANsquawk - Week Ahead - 23rd June 2014





 
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US Releases Redacted "Due Process Need Not Blink" Memo Justifying Drone Strikes On US Citizens





With the number of drone failures rising domestically and the likelihood of an exponential rise in drone strikes in Iraq imminent; the US federal court has decided now is the time to release the redacted memo justifying the use of unmanned drone strikes on US citizens. ...also recognized that "the realities of combat" render certain uses of force "necessary and appropriate," including against U.S. citizens who have become part of enemy forces-and that "due process analysis need not blink at those realities."

 
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Don't Buy Dubai - From IPO Bubble To Bear Market In 2 Months





Less than 2 months ago we highlighted the effervescence of Dubai's equity markets when a "shell" of a company with no actual operations (but big plans) was 36x oversubscribed. We asked at the time if investors would ever learn... and it seems just weeks later, that a few are getting the joke. Dubai's General Financial Market Index is down 20.3% - a bear market - since just after that exuberant IPO hit the market. Is Dubai another leading indicator on the world's slowly rolling dissatisfaction with various asset classes?

 
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Despite YoY Existing Home Sales Dropping 7th Month In A Row, Realtors Declare Sales Decline Is Over





Existing Home Sales beat expectations by the most in 11 months at 4.89 million annualized. This headline print is being greeted with exuberance as NAR declares "the sale decline is over." However, this is the 7th month in a row of year-over-year declines and the gains are anything but broad-based with the Midwest and South being the biggest driver as the West stagnates. The percent share of first-time buyers continued to underperform, representing less than one- third of all buyers at 27% in May, down from 29% in April (hovering near record lows). Not exactly the organic, non-flip-dat-house wealth building transmission mechanism the Fed is hoping to build the US 'recovery' on.

 
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US Manufacturing PMI Surges To Highest Since May 2010





Comfortably beating expectations, and in Markit's words, USA is "booming again... as data suggests that GDP should be set to rise by at least 3.0% after the 1.0% decline in the first quarter," US Manufacturing PMI printed 57.5, its highest since May 2010. Despite the "booming" economy, employment rose only very marginally and new export orders growth dropped as prices rose once again. The Fed's "you don't need QE anymore, the economy is doing great on its own" meme is confirmed. The market seems disappointed at the 'good news' and did not react at all.

 
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Airline Inflation Takes Off: Air Fare Prices Soar At 97% Annualized Rate, Highest Since 1999





The May surge in airfare prices was so dramatic and unexpected, that on a compounded annualized basis (CAGR), the May surge in airline fares was a whopping 97%: the highest since 1999, and the third highest ever.
So, sorry America: you are stuck where you are, eating food that has rarely if ever cost more, fueling up with gas that is approaching it all time high summery prices. Enjoy Yellen's "noise."

 
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Polish PM Slams "Organized Criminal Eavesdropping" For "Destabilizing EU" Amid Ukraine Crisis





First it was US' Victoria Nuland's "fuck Europe" leaked recording; then Turkey's Erdogan faced embarrassing details of a false-flag war with Syria from leaked recordings; then last week's Polish central bank was exposed (by leaked recordings) as offering support for the government in return for favors (crashing any faith in central bank independence); and then this weekend, Poland's foreign minister had some rather colorful language and perspective exposed (by leaked recordings). The Polish Zloty has been hammered lower in the last few days since the events broke (though clear CB intervention has rescued it today) and the Polish Prime Minister is fuming: the "criminal group" that taped public officials has the sole aim of destabilizing Poland during “key moment” as EU reshapes itself amid Ukraine crisis, Tusk blasted, adding (rather pointedly), "people who have organized criminal eavesdropping will not dictate to Poland who governs the country and which ministers are to be dismissed." One wonders who he is talking about; who has the technical know-how and organization to arrange such mass eavesdropping?

 
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Key Events In The Coming Week





This week brings PMIs (US and Euro area ‘flash’) and inflation (US PCE, CPI in Germany, Spain, and Japan). Among other releases, next week in DMs includes [on Monday] PMIs in US (June P), Euro Area Composite (expect 52.8, a touch below previous) and Japan; [on Tuesday] US home prices (FHFA and S&P/Case Shiller) and Consumer Confidence (expect 83.5, same as consensus), Germany IFO; [on Wednesday] US Durable Goods Orders (expect -0.50%, at touch below consensus) and real GDP 1Q anniversary. 3rd (expect -2.0%) and Personal Consumption 1Q (expect 2.0%), and confidence indicators in Germany, France and Italy; [on Thursday] US PCE price index (expect 0.20%), Personal Income and Spending, and GS Analyst Index; and [on Friday] Reuters/U. Michigan Confidence (expect slight improvement to 82, same as consensus), GDP 1Q in France and UK (expect 0.8% and 0.9% yoy, respectively), and CPI in Germany, Italy, Spain and Japan.

 
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Social Media Advertising A Dud: 62% Of Americans Say "Social" Ads Have No Impact On Purchasing Decisions





One of the great "paradigms" of the New Normal tech bubble that supposedly differentiated it from dot com bubble 1.0 was that this time it was different, at least when it came to advertising revenues. The mantra went that unlike traditional web-based banner advertising which has been in secular decline over the past decade, social media ad spending - which the bulk of new tech company stalwarts swear is the source of virtually unlimited upside growth - was far more engaging, and generated far greater returns and better results for those spending billions in ad bucks on the new "social-networked" generation. Sadly, this time was not different after all, and this "paradigm" has also turned out to be one big pipe dream. According to the WSJ, citing Gallup, "62% of the more than 18,000 U.S. consumers it polled said social media had no influence on their buying decisions.

 
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Iraq Update: Kerry Arrives In Baghdad





Following our comprehensive update yesterday, there is not as much to report, but for all those following the Iraq situation closer than the surgeon general recommends, here are the latest updates.

 
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Frontrunning: June 23





  • The Man Who Broke the Middle East (Politico)
  • Kerry presses Maliki as Iraq loses control of Syrian, Jordanian borders (Reuters)
  • Hank Paulson takes on global warming next: The Coming Climate Crash - Lessons for Climate Change in the 2008 Recession (NYT)
  • In Yellen We Trust Is Bond Mantra as Inflation Threats Dismissed (BBG)
  • After port fraud, China's vast warehouse sector under scrutiny (Reuters)
  • Draghi Says Unlimited Cash Through 2016 Is Rate Signal (BBG)
  • Tapes Said to Reveal Polish Minister Disparaging U.S. Ties (NYT)
  • CDC reassigns director of lab behind anthrax blunder (Reuters)
  • BNP set to receive ban to transact in USD as part of $9 billion settlement (WSJ)
  • GE Clears Last French Hurdle to Clinch Alstom Deal (BBG)
  • Al Jazeera journalists jailed in Egypt, supporters stunned (Reuters)
  • ISDA Asked to Rule If Argentina Credit-Default Swaps Triggered (BBG)
 
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Futures Exuberance On China PMI Fades After Eurozone Composite Drops To 6 Month Lows





Following last night's laughable (in light of the slow motion housing train wreck that is taking place, not to mention the concurrent capex spending halt and of course the unwinding rehypothecation scandal) Chinese PMI release by HSBC/Markit (one wonders how much of an allocation Beijing got in the Markit IPO) which obviously sent US equity futures surging to new record highs, it was almost inevitable that the subsequent manufacturing index, that of Europe, would be a disappointment around the board (since it would be less than "optical" to have a manufacturing slowdown everywhere in the world but the US). Sure enough, first France (Mfg PMI 47.8, Exp. 49.5, 49.6; and Services PMI 48.2, Exp. 49.4, Last 49.3) and then Germany (Mfg PMI 52.4, Exp. 52.5, Last 52.2; Services 54.8, Exp. 55.7, Last 56.0), missed soundly, leading to a broad decline in the Eurozone PMIs (Mfg 51.9, Exp. 52.2, Last 52.2; Services 52.8, 53.3, Last 53.2), which meant that the composite PMI tumbled from 53.2 to 52.8: the lowest in 6 months.

 
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Judge Who Sentenced Saddam Hussein To Death Has Been Executed By ISIS, Local Media Reports





Back in 2006, after the second US invasion of Iraq culminated if not with the discovery of the WMDs (which were the pretext for the invasion in the first place), but the unearthing (literally) and kangaroo court trial of Saddam Hussein, the US was quick to announce "mission accomplished." Recent events have made a mockery of that claim, however what is truly the straw that broke the back of poetic justice, to mix metaphors, are reports from local media that as part of its blitzcampaign to take over northern Iraq, ISIS found and the promptly executed Rauf Rashid Abd al-Rahman, the judge who sentenced Saddam to death: a death which to many was the crowning moment of the second US invasion of Iraq, and the confirmation of successful US foreign policy.

 
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What The $1+ Trillion Student Debt Bubble Is Being Spent On





By now everyone knows there is an unprecedented student debt bubble, amounting to well over $1 trillion and rising at a rate of nearly $200 billion per year. However, what is far less known, is what all these hundreds of billions in government loan proceeds are being spent on. The following two charts should shed some light on this all important matter just how Government money goes from Point A to Point B, using indebted to the hilt students as a pass-thru.

 
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How A Country Dies





A country dies slowly. Those living during the decline of Rome were likely unaware that anything was happening. The decline took over a couple of hundred years. Anyone living during the decline only saw a small part of what was happening and likely never noticed it as anything other than ordinary. Countries don’t have genetically determined life spans. Nor do they die quickly, unless the cataclysm of some great war does them in. Even in such extreme cases, there are usually warning signs, which are more obvious in hindsight than at the time. Few citizens of a dying nation recognize the signs. Most are too busy trying to live their lives, sometimes not an easy task. Most cannot conceive of the death of a nation. But signs or symptoms precede death for a country often as they do for a person...

 
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