While the unemployment rate has been falling, currently at 7.3%, it has not been because of a strongly increasing workforce. Rather it has been a function of people leaving the workforce. This, of course, brings up the obvious question of how these people are live if they aren't working. A recent trip to Walmart answered that question...
Despite PIMCO, DoubleLine, and pretty much every other major mortgage bondholder in the world litigating the actions, Richmond, California's leaders approved this morning a plan for the city to become the first in the nation to acquire mortgages with negative equity in a bid to keep local residents in their homes. Richmond's city council voted 4 to 3 to use the power of 'eminent domain' (as we discussed here most recently) to seize underwater mortgages and refinance them. City council members opposed to the plan countered that using eminent domain would put Richmond at risk of expensive lawsuits that could destroy the city's finances; and sure enough, Richmond had no takers last month when the successor to its redevelopment agency put $34 million of bonds up for sale to refinance previous debt. As Reuters reports, investors holding the mortgages targeted by Richmond dispute altruism motivates the plan and are set to meet in court for the first time tomorrow.
Israel's richest person Beny Steinmetz, who amassed his $7.4 billion net worth beginning in the diamond trade, has seen his Geneva home raided by Swiss police following a request from the Government of Guinea. The West African country, as Bloomberg reports, approached Swiss prosecutors following an investigation into claims that bribes (shock, horror) were paid for mining licenses by Steinmetz's mining company BSG Resources. This follows raids of London-based Onyx Financial (run by a director of BSG) and the arrest of a BSG employee on charges he interfered with the U.S. grand jury probe (witness tampering, obstructing a criminal investigation and destruction of evidence in a federal investigation). He has pleaded not guilty. All sounds above board we are sure... just ask Eike Batista...
The definition of what makes an “enemy” may vary from person to person. But we would say that, generally, an enemy is one who has an active ability to do irreparable harm to you or your essential values. He is motivated by destruction, the destruction of all that you hold dear. He is capable and unrelenting. He is a legitimate threat. He will not compromise. He will not waver. He will do anything to wound you. He will not stop. He is possessed. Americans have spent the better part of a century being told who their enemies are with very little explanation or substantiation. We have blindly rallied around our patriotic prerogative without knowing the root cause of the conflict or the nature of the target we are told to annihilate. We have been suckered into war after war, conjured by international interests in order to lure us into accepting greater centralization and concentrated globalism. As a culture, we're sorry to say, we have been used. We are a tool of unmitigated doom. We are the loaded gun in the hand of the devil. When one applies the above definition of “the enemy” to Syria, one comes away with very little satisfaction. So, the question arises: If Syria is not the real enemy, who is?
Moments ago The Hill reported that the Executive Council of the AFL-CIO, the largest federation of unions in the US and one of Obama's staunchest supporters, is expected to consider a resolution, "subject to fierce internal debate, that will call for changes to the Affordable Care Act (ACA) — setting up a potential floor vote this Wednesday before the convention closes." In other words, the one constituency that was supposed to be among the biggest benefactors from Obamacare is about to launch a formal criticism of Obamacare as "frustration has grown within labor as the Obama administration has failed to offer a fix to temper union worries over the law."
But at least "they passed it."
VIX futures positioning hit another all-time record short just two weeks ago after collapsing to 12-month high levels as "Taper" concerns increased. From the start of July to the 3rd week of August VIX futures were sold in epic proportions providing the fuel to lift a plateaued stock market from taper-anxiety to new all-time highs (as nothing changed). Over 100 million contracts were sold in the 7-week period - a totally unprecedented amount of complacency. However, in the past 3 weeks, there has been an inflection; is this the end of selling, or are we about to pull VIX even lower with a concerted reflexive selling of even more shorts? As SocGen warns, this historic level of non-commercial short positions (read speculative) implies any market correction - or VIX-related spike - would increase short-covering and exaggerate the fall dramatically. With today's exuberant spurt lower in VIX, vol has caught back with stocks once again.
Policy officials believe that growth and inflation would fix the problem of large debts, but growth fueled by public spending that is financed by debt or central banks is not sustainable. Like most Ponzi schemes, it doesn’t end well. Reducing total debt was always a better solution, but it would have resulted in even slower economic activity and lower living standards. However, in the long run, the system would have been purged of unsustainable excesses. ‘Short term pain’ for ‘long term gain’ is often shunned for fear of electoral defeat and lobby group pressure. Now, we are stuck with financial repression. Investment is being directed toward funding the public sector. Policy rewards debtors over creditors. Such policy cannot go on forever. In reality, “unlimited” rarely means unlimited, because imbalances become too great. The Fed’s current quagmire has aspects resembling the Triffin Dilemma. The recent adverse spillover from Fed policies in emerging market economies and currencies may be the first hint of cracks in the global monetary system. At a minimum, foreign central banks have deviated from good policy in order to prevent sharp destabilizing fluctuations in the value of their currencies and to arrest volatile inflows and outflows of capital.
"Not only was it a civil war, an effort by a people who had for years been seeking their liberation from any colonial influence whatsoever, but also we found that the Vietnamese whom we had enthusiastically molded after our own image were hard put to take up the fight against the threat we were supposedly saving them from. We found most people didn't even know the difference between communism and democracy. They only wanted to work in rice paddies without helicopters strafing them and bombs with napalm burning their villages and tearing their country apart. They wanted everything to do with the war, particularly with this foreign presence of the United States of America, to leave them alone in peace..."
AAPL's demise was shrugged off by a broader market as VIX was slammed lower once again to 14.00% stirring the S&P to its 7th green day in a row and best run in 2 months. The Dow outperformed on the day (absent the AAPL drag) but stocks tyraded amid very low volumes once again and weakened into the close. Treasuries were well bid (along with stocks) as a very healthy 10Y auction and some negative chatter over Syria saw a modest safety bid. The USD was monkey-hammered against all the majors - EUR most notably but JPY strength was entirely ignored by stocks (as we point out once again - it was VIX that drove us). So bonds bid, stocks bid, USD offered, oil and gold modestly bid, and VIX offered - smells a lot like a market that is absolutely not pricing in a Taper. It appears that VIX 'war-hedges' have now been fully unwound - where's the ammo for the next leg higher?
"I estimate the US fiscal gap at US$200 tn, 17 times the reported US$12 tn in official debt in the hands of the public.... Our country is broke. It’s not broke in 50 years or 30 years or 10 years. It’s broke today. Six decades of take as you go has led us to a precipice. That’s why almost the entire economics profession is talking as one at www.theinformact.org. Economists from all political persuasions are collectively sending our government a warning about what is, effectively, a nuclear economic bomb. I’ve been around economics for a long time. I’ve never seen such a strong response to a proposed Congressional bill. This is the profession sending a statement to the President and Congress that’s not unlike the warning physicists sent via Einstein to Roosevelt about the bomb." Larry Kotlikoff
Perhaps Obama's 'Pause' in Syria is to give the US enough time to raise the required 'war' start-up funds... here is the "kickstarter" pitch... from "The Americans for Whatever Barack Obama Wants, did you know he's friends with Jay-Z?" society...
10 years ago last month, Detroit (along with most of the North-East) suffered a major blackout. It seems, in an awkward anniversary remembrance, two main electrical lines have failed in downtown Detroit. As WXYZ reports, some of Detroit’s municipal buildings as well as downtown traffic lights and the People Mover are without power. Parts of the Wayne State University campus in midtown also have no electricity. Power went out just after 1:00 p.m. Only a few more hours until dark... just beware the packs of rabid dogs...
While the Syria conflict appears headed into the sunset, the state department reminds once again that it wants more:
- U.S., RUSSIA AGREE END GOAL FOR SYRIA IS POLITICAL ACCORD:PSAKI
- RUSSIA PLAN FOR SYRIA MORE 'IDEAS' THAN 'LENGTHY PACKET': PSAKI
- U.S. HAS LARGER SYRIA STRATGY BEYOND CHEMICAL ARMS: PSAKI
And the punchline:
- WE STILL FEEL ASSAD NEEDS TO BE REMOVED FROM POWER: PSAKI