Obama Administration

Watching Phil LeBlow providing Ford with a reacharound this morning reminded us of the total farce that is both the forest and the trees of the US auto industry. We have discussed the FUBAR channel-stuffing and the subprime-lending SNAFU but now, as Reuters reports, we see the ugly truth about GM's little baby "the Volt is over-engineered and over-priced". Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds. Furthermore, there are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce. Of course, with seemingly unlimited Government backing the hope can continue, funded by the US taxpayer, as GM's Volt development chief admits "It's true, we're not making money yet," but the Volt will "eventually will make money. As the volume comes up and we get into the Gen 2 car, we're going to turn (the losses) around." Estimates on the cost to build a Volt range from $76,000 to $88,000, according to four industry consultants contacted by Reuters with one concluding: "I don't see how General Motors will ever get its money back on that vehicle."

There was a time when the NSA would not know the content of this sentence minutes (or depending on the speed of typing, hours) ahead of our general readership. Those days are now gone, primarily thanks to the Patriot Act, which however merely accelerated the inevitable Orwellian destination to which American society was otherwise headed and which made constant "supervision" and "vigilance" of every US citizen a necessity (for some eyewatering details read “We Are This Far From A Turnkey Totalitarian State" - Big Brother Goes Live September 2013). There was, however, one aspect of society over which the US government did not have Chinese-type "firewall" supreme authority: the Internet. Now, as a result of an Executive Order being quietly drafted, the president of this once great country, together with the Department of Homeland Security formed in response to the events of September 11, is about to grasp supreme control over this last bastion of New Normal expression and content dissemination, naturally under the guise of protecting the people. Because as Bloomberg reports, President Obama’s administration is drafting an executive order that would create a program protecting vital computer networks from cyber attacks.

Have you heard the news? Auto sales are booming. Total sales for the month of August were 1,285,202 vehicles, according to Autodata Corp, the highest monthly sales figure for any August since 2007, when 1.47 million autos were sold in the United States. Year to date auto sales have totaled 9.7 million and are on track to reach 14.5 million. Between 2006 and 2007, auto sales ranged between 16 million and 18 million. They crashed below 10 million in 2009. The Keynesians running our government have pulled out all the stops to restart this engine of consumer spending. First they wasted $3 billion of taxpayer funds on the Cash for Clunkers debacle. Almost 700,000 perfectly good cars were destroyed in order to keep union workers happy.  This Keynesian brain fart distorted the used car market for two years, raising prices for cars needed by the working poor. After that miserable failure, they realized the true secret to selling vehicles is to give them away to anyone that can scratch an X on a loan document, with 0% interest for 60 months, financed by Federal government controlled banking interests. Add in some massive channel stuffing and presto!!! – You’ve got an auto sales boom.... This is America, land of the delusional and home of the vain. The appearance of success is more important than actual success.

The heightening tension between the United States government and Iran’s is based off of the fallacious notion that nuclear weapons have a legitimate purpose outside of killing enormous amounts of people.  Yet they have no other real purpose in the end.  Governments possess nuclear weaponry because there is little recourse for state-sanctioned murder.  The millions of innocent lives that stand to be vanquished off the face of the Earth have little meaning to the power-tripping political elite.  So while the Iranian government’s pursuance of nuclear weapons should be condemned, the United States government, the Israeli government, and others capable of waging nuclear war are in no place to criticize.

Following a series of bad economic news (Eurozone unemployment, rising inflation, plunging retail sales in Germany, Spain and Greece) out of Europe, and the usual sound and fury out of the ECB signifying nothing (was there finally news that Weidmann and/or the Buba are endorsing anything Draghi is doing - instead of seeking to potentially quit his post leaving the ECB in limbo? No? Then stop flashing red headlines which are completely irrelevant), the EURUSD has decided to go on its usual countersensical stop hunt higher in hopes an algo or two will push it even higher on nothing but momentum, with has one purpose only: to allow the pair enough of a buffer so that when it does fall after the J-Hole disappointment, it has more room to drop. And as European newsflow fades into the periphery, everyone is once again focusing on Wyoming where Bernanke is now broadly expected to do absolutely nothing. What else are market participants focusing on? Here is the full ist courtesy of Bloomberg daybook.

• Hurricane Isaac Whips Storm Surge on Path to New Orleans (Bloomberg)
• Republicans Vow to Transform Obama’s U.S. With Low Tax, Freedom (Bloomberg)
• Little-known Ryan to take center-stage at Republican convention (Reuters)
• An $800 billion stimulus tempest in a teapot: China State Researcher: Local Govt Investment Plans Largely Symbolic (WSJ)
• China Says Payment Delays, Defaults May Worsen (Dow Jones)
• G-7 Countries Call for Increased Oil Output to Meet Demand (Bloomberg)
• Creeping Socialism: Clegg calls for emergency tax on rich (FT)
• United Airlines computer problem delays 200 flights (Chicago Sun Times)
• Paulson, Investors Avoid Fireworks Despite Brutal Run (Bloomberg)
• Occupy Sets Wall Street Tie-Up as Protesters Face Burnout (Bloomberg)
• The nostalgic grass is always greener: Serbia Joblessness Swells as Milosevic-Era Leaders Return (Bloomberg)

Certified Conspiracy-Free

Color us unsurprised; but the UK's Independent is reporting that American officials are worried that if the Troika decides Greece has not done enough to meet its deficit targets, it will withhold the money - triggering Greece's exit from the eurozone weeks before the presidential election. British government sources have suggested the Obama administration is urging eurozone Governments to hold off from taking any drastic action before then - fearing the resulting market destabilization could damage President Obama's re-election prospects. The Troika are expected to report in time for an 8 October meeting of eurozone finance ministers which will decide on whether to disburse Greece's next EUR31bn aid tranche, promised under the terms of the bailout for the country. European leaders are thought to be sympathetic to the Obama lobbying, fearing that, under pressure from his party in Congress, Mitt Romney would be a more isolationist president than Mr Obama. So once again GRExit is assured economically; but it is an entirely political decision.

As the 2012 presidential candidates prepare their closing arguments to America’s middle class, they are courting a group that has endured a lost decade for economic well-being. Since 2000, the middle class has shrunk in size, fallen backward in income and wealth, and shed some—but by no means all—of its characteristic faith in the future. These stark assessments are based on findings from a new nationally representative Pew Research Center "Fewer, Poorer, Gloomier" study and we present the only two charts that matter now.

The biggest geostrategic change of the past decade overlooked by Washington policy wonks in their fixation on their self-proclaimed “war on terror” is that Latin America has been throwing off the shackles of the Monroe Doctrine. These ignored developments may well soon refocus Washington’s attention on the Southern Hemisphere, as Venezuela’s President Hugo Chavez reorients his country’s to China. So, where does Washington go from here? If it wants to preserve its increasingly tenuous foothold in a nation with the world’s largest oil reserves, it might begin by engaging in some honest diplomacy.

• Australian minister says resources boom is over (Reuters)
• China dismisses reports of lost gold reserves (China Daily) - so China really did lose 80 tons of gold.
• Inconceivable: Former JPM CEO and Chairman William B Harrison Jr come out "In Defense Of Big Banks"
• Qantas Cancels 787 Order After Posting Annual Net Loss (Bloomberg)
• EU Official Says Crisis is Eroding Influence (WSJ)
• Greece Faces New Pressure on Cuts (WSJ)
• Philippines' black market is China's golden connection (Reuters)
• Hollande government responds to criticism (FT)
• LG Display Starts Touch Screens Output Before New IPhone (Bloomberg)
• Greek Crisis Evasion to Fore as Merkel Hosts Hollande in Berlin (Bloomberg)
• Stakes rise as US warned of double-dip (FT)
• Brazil’s Richest Woman Unmasked With $13 Billion Fortune (Bloomberg)

• Merkel's Dilemma: Risk Euro Zone or Her Government (WSJ)... as first suggest by ZH 2 months ago, with only one resolution: referendum
• Russia warns West over Syria after Obama threats (Reuters)
• Consider keeping Bernanke, Romney adviser Glenn Hubbard says (Reuters)... Glenn Hubbard is the star of the movie Inside Job
• Spain Deficit Goals at Risk as Cuts Consensus Fades (Bloomberg)
• Czech Austerity Revolt Threatens Cabinet as Slump Bites (Bloomberg)
• Greek cuts to be deeper than trailed (FT)
• Akin rebuffs Romney, Republican calls to quit Senate race (Reuters)
• Obama Leads Romney in Poll Showing Disdain for Congress (Bloomberg)
• Greece needs more time to reform, PM Samaras tells paper (Reuters)
• UK banks face scandal over toxic insurance products (Reuters)
• Iceland Shelves Monetary Tightening as Krona Seen Appreciating (Bloomberg)
• India Considers $35 Billion Debt Revamp After Biggest Blackout (Bloomberg)

India’s recent series of power blackouts, in which 600 million people lost electricity for several days, reminds us of the torrid pace at which populations in the developing world have moved onto the powergrid. Unfortunately, this great transition has been so rapid that infrastructure has mostly been unable to meet demand. India itself has failed to meets its own power capacity addition targets every year since 1951. This has left roughly one quarter of the country’s population without any (legal) access to electricity. That’s 300 million people out of a population of 1.2 billion. Indeed, it is the daily attempt of the underserved to access power that may have led to India’s recent grid crash. But the story of India’s inadequate infrastructure is only one part of the difficult, global transition away from liquid fossil fuels. Over the past decade, the majority of new energy demand has been met not through global oil, but through growth in electrical power. Frankly, this should be no surprise. After all, global production of oil started to flatten more than seven years ago, in 2005. And the developing world, which garners headlines for its increased demand for oil, is running mainly on coal-fired electrical power. There is no question that the non-OECD countries are leading the way as liquid-based transport – automobiles and airlines – have entered longterm decline. Why, therefore, do policy makers in both the developing and developed world continue to invest in automobile infrastructure?

• Caterpillar warns on global uncertainty (FT)
• Only 3 years behind the curve as usual: Moody’s warns on California city defaults (FT)
• Monti Says ‘Tragedy’ If Euro Became a Factor of Disruption (Bloomberg) - the same Monti whose disruptive comments recently enraged Germany?
• China Home Prices Climb in More Cities Prompting Policy Concerns (Bloomberg)
• China's Big Four boost new bank loans in Aug first half (Reuters)
• EU Leaders Plan Shuttle Talks to Bolster Greece (Bloomberg)
• US rule set to slash cars’ fuel use (FT)
• Spain Seeks Commitment From Central Bank on Bond Buys (WSJ)... and preferably completely unconditional
• Finnish Euro Doubts Hide Business Plea to Commit to Currency (Bloomberg)