With all eyes squarely focused on Syria, attention spans have drifted from Iraq but as Stratfor explains, things are once again going from bad to worse in that 'stable democratic' nation. Coordinated, high-casualty attacks have become common in Iraq since the withdrawal of U.S. forces from the country at the end of 2011. The geographic focus of the attacks indicates that the reach of militants is limited to areas in which they can routinely operate freely, typically where the Shiite, Sunni and Kurdish spheres of influence intersect.
Where does one even start with this one. Six months ago we discussed the plight of Revel - New Jersey's "state of the art" casino - which filed for bankruptcy less than a year after opening its doors, despite numerous sunk incentives an millions of dollars in an "economic development incentive" by the financially troubled state. A few months later, following a prepackaged debt-for-equity, the casino has emerged from bankruptcy with $1.2 billion of its pre-petition $1.5 billion in debt converted into equity. While it is unclear if the casino will ever turn a profit even with the much streamlined balance sheet one thing is clear: it is trying. So hard, in fact, that as the AP reports Local 54, Atlantic City's main casino workers' union, is complaining to state labor and political officials about Revel Casino Hotel's use of part-timers. Is the irony here becoming apparent?
If there is any one strikingly obvious feature of the U.S. economy in the past 15 years, it's the serial asset bubbles, one after another. So who benefits from serial bubbles? The financial sector and the central government...
Amid the G-20 headlines ("nobody mention the war"), leaders are proudly commenting on the global co-ordination on growth and tackling joblessness (and group hugs), but it was President Obama's comments that raised a few eyebrows:
*OBAMA TOLD G-20 STIMULUS WILL BE WITHDRAWN GRADUALLY: RUSSIA
It would seem, the President has decided the decision to taper - gradually - will be his, which is odd, because - as if one needed reminding - the decision is not his to make (unless he decided to nominate himself for Fed chair?).
Russia’s only aircraft carrier will visit Moscow’s small naval base in Syria later this year, BBC Monitoring reported citing a newspaper published by the Russian government. Earlier this year a Russian naval officer told Interfax that the Navy had decided to end the Admiral Kuznetsov’s scheduled maintenance early and deploy it on a mission that would include a stopover in the Mediterranean Sea, where Russia has established a permanent naval task force in response to the hostilities in the Middle East. That report did not specify whether it deployed to the Tartus military base in Syria, although speculation abounded.
We are sure this is just a 'transitory' storm-in-a-teacup, but for those who 'use' energy, the price of the most important raw material in the world has never been higher on this day of the year than it is today... must be all this growth?
War-weary 'real' Americans appear to have the ear of their representatives (for once). Message such as "you don't stop a war by getting involved and shooting more," and "once you start launching missiles, anything can happen," appear to have moved both the staunchest tea-party Republican and the most anti-war Democrats to shun the position of Boehner and Pelosi. As Bloomberg reports, only about 20 members (or 5%) of the House is publicly supporting a military strike. Against this, 68 lawmakers (an uncomfrtable alliance of Dems and Reps) are actively opposed to a strike. 350 House members are 'undecided', with 217 required to make or break the vote. With 60 votes required in the Senate, Obama can currently only count on 20 'confirmed' yesses. Obama's problem arises from the fact that whipping the members in line is tough with a number of different strains of thought resisting Obama's urgings.
If you know you are adding more fuel to the latest and greatest credit bubble - that of student loans - and the blended return will be zero at best, why do it? That's precisely the question JPM appears to have asked itself, and when taking into consideration the persistently rising debt rates and thus the even lower probability of repayment, came to the only logical conclusion possible:
- JPMORGAN CHASE TO STOP MAKING STUDENT LOANS -MEMO - RTRS
- JPMORGAN CHASE WILL STOP ACCEPTING APPLICATION FOR STUDENT LOANS ON OCTOBER 12
- "We just don't see this as a market that we can significantly grow," said Thasunda Duckett, chief executive for auto and student loans at Chase
Which means that the government, that one lender that can't and won't pull out from the student loan bubble until it finally blows up, will be even more on the hook, and require yet another bailout of this latest $1+ trillion debt house of cards.
Pouring forth from all of the nations on the Continent, like a Preacher with the "Good News," is the notion that Europe is over the recession, that every country is doing just fine and that all problems have been solved. This, in our opinion, could not be further from the truth. It is the spiel of the day and reality will be found in the footnotes of tomorrow as long as tomorrow is after September 22... Even Draghi was forced to admit that thing smay have got a little ahead of themselves...
*DRAGHI SAYS CAN'T SHARE ENTHUSIASM ABOUT RECOVERY
As a reminder, September 22 is the date for the German Elections. All of Europe and the IMF are keeping their heads down, playing nice and saying very little until this date comes and goes.
While US equities remain immune, bonds, bullion, and the greenback are moving in a very "Taper-On" mode. Gold and Silver have been slammed hard this morning for the fourth time in the last four regional openings. 10Y interest rates on US Treasury yields are spiking to 2.98% (and 5Y is up 20bps this week alone); and the USD is well bid, up nearly 0.7% today alone as EUR and CHF crumble. It seems the great rotation from Fed-Kool-Aid trades is beginning... can stocks really withstand such liquidity conditions?
The data is getting painfully laughable: on one hand Gallup says unemployment is soaring to two year highs, on the other, the ISM non-manufacturing report just printed at 58.6: for those keeping track, and who enjoy laying along, this was the highest since December 2005, and the 2nd largest two month increase in the index on record. Of course, this means unless NFP tomorro comes at -1,000,000, the Taper is a done deal as the 10 year, which just printed 2.969% and surging, indicate. Stocks continue to do their own thing, blissfully ignorant of the debalce that will take place once the 3.00% yield stops are hit. The good news for bond bulls: this index can only go down from these ridiculous levels.
With US 10Y yields pressing up towards 3.00% and the curve bear-flattening, it seems Draghi did nothing to contain the market's aversion to all things 'fixed income'. Wherever you look in Europe, bond yields (thanks to Bund prices dumping) and spreads (risk-aversion as Draghi "doesn't share the market's enthusiasm about the recovery") are blowing out. Equity indices are weakening too in Europe as EURUSD drops. Of course, US equities don't care...
Still believe that China's PMI is above 50 and suggesting a global growth expansion? Still believe in Santa and the Tooth Fairy? Well, none other than China's own National Bureau of Statistics has been forced to admit that at least one of its major provinces has dramatically overstated industrial output. As Sina reports, according to a NBS report, the government in China's Yunnan province had coerced local companies to report inflated industrial output value, resulting in artificially high economic figures. With government leadership promotions driven by the performance of economic numbers in each province, it should hardly be surprising but the scale of the fraud is remarkable. In 2012, one county in Yunnan province reported CNY6.34 billion in output while audits showed only CNY 2.82 billion and in the first half of 2013, Yunnan published CNY 2.75 billion in output while audits showed a mere CNY1.06 billion! The province was also found to have faked investment data.
With ADP out of the way, and providing no guidance to an extreme NFP print one way or another, we once again turn to Gallup. As a reminder, a few days ago we showed that things are bad and getting worse for America's job prospects following direct polling land as relates to unemployment on a seasonally unadjusted basis. Today, the polling group has released its seasonally adjusted unemployment number and how it compares to the BLS' own estimation of the labor market. In a word: it is not pretty (which, again, is good for those who are hoping and praying St. Ben will keep the monetary Kool Aid running for a little bit longer): at 8.6% it is over 1% higher than the BLS' reported print, and is the highest since the end of 2011.