The current US air strikes in Iraq are unlikely to have a significant impact on defense spending or oil prices, Goldman Sachs writes, unless the scale of the conflict changes considerably. Evidence from past US conflicts that were similar in scale also suggests little impact on confidence and at most mixed evidence of a flight-to-safety effect in financial markets. The exchange of sanctions with Russia - a relatively minor US trading partner - is also likely to have only a modest impact on the US economy. Of course, Goldman caveats, both situations are highly unpredictable; as they expect little reaction to recent events from Fed officials, who have generally not discussed conflicts of this magnitude unless accompanied by other economic concerns, such as a large rise in oil prices.
Futures Continue Levitation On More "Deescalation" Hopes Despite UK Warning Russia Of "Serious Consequences"Submitted by Tyler Durden on 08/15/2014 07:05 -0400
There were headlines for everyone this morning, but especially for fans of what is increasingly known as Russia's "Schrodinger Invasion" of East Ukraine: one which may or may not be happening depending on i) one's point of view and ii) how one is observing it.
If You Believe The Oil Bull Market Is Over, This Is How To Monetize Your Perspective With Up To 4x LeverageSubmitted by Reggie Middleton on 08/14/2014 13:08 -0400
Ways for retail investors, and institutions small and large, to monetize a fundamental or economic outlook that the muppet masters will never tell you!
- Police fire tear gas, stun grenades at Missouri protesters (Reuters)
- Putin’s Pipeline Bypassing Ukraine at Risk Amid Conflict (BBG)
- Russia's Largest Oil Company Seeks $42 billion to Weather Sanctions (WSJ)
- Shells hit central Donetsk, Russian aid convoy heads towards border (Reuters)
- U.S. Tightens Sanctions, Putting More Russian Companies at Risk (BBG)
- How to Blindly Score 43% Profit Overnight in China Stocks (BBG)
- Tears guaranteed: San Diego Pension Dials Up the Risk to Combat a Shortfall (WSJ)
- Euro Recovery Halts as Germany Shrinks, France Stagnates (BBG)
- Billionaire Found in Middle of Bribery Case Avoids U.S. Probe (BBG)
- Hillary Clinton, Barack Obama 'Hug It Out' on Martha's Vineyard (WSJ)
The stories make you want to take all of your money out of the stock market and put it in your mattress!
Interestingly, the FT also reports that there may be significant buying of silver in the coming days: “Indeed, there are already rumours in the market place that some big silver producers and consumers are preparing to pepper the market with orders.” This creates the possibility of the short squeeze that many market participants and silver analysts have been expecting for some time.
Bubble Market Stunner: Revenueless Biotech Goes Public, Drops, Trades For Six Days, Then Voids Entire IPOSubmitted by Tyler Durden on 08/12/2014 11:49 -0400
In what is certainly a historic, and quite stunning, market first, not to mention prima facie evidence that Janet Yellen was right about the biotech (and not only) bubble, last week the equity markets experienced something that has not happened in decades: a biotech firm went public, traded for six days, only to announce Friday that it would void its IPO and won't issue shares after all, thanks to a key investor's failure to follow through on a commitment to buy stock. In other words, days after going public, yet another darling of the momo bubble mania du jour, decided to undo everything, and went back to being private (and soon: bankrupt).
According to yesterday’s Wall Street Journal, the bailed out financial criminals at Goldman Sachs are set to launch the latest and greatest toxic derivative product directly into the portfolios of willing muppets the world over... and it all starts this September. Yes, it’s called the “Fixed Income Global Structured Covered Obligation,” (ironically close to the acronym FIASCO) and no, you will not have a clue what’s in it. No seriously, you won’t have a clue.
- Pope Francis calls for action as Iraqi Christians forced to flee (Reuters)
- Richest Russians Deprived of Luxury Foods by Putin’s Ban (BBG)
- Exxon Drilling Russian Arctic Shows Sanction Lack Bite (BBG)
- Israeli Jets Strike Gaza Targets After Rockets Shatter Truce (BBG)
- U.S. starts aid airdrops in Iraq but no strikes yet (Reuters)
- Banks Said to Be Arranging Argentine Debt Buyer Group (BBG)
- Siberia Flight-Ban Threat Forces Airlines to Mull Options (BBG)
- Malaysia Airlines to Be Delisted in $429 Million Buyout (BBG)
- Erdogan poised to win Turkey's first popular presidential vote (Reuters)
- African Bank Fights Collapse in Espirito Santo-Like Drama (BBG)
- China to build lighthouses on five isles in defiance of U.S. call (Reuters)
Ten years ago, when Europe was successfully pretending it is solvent for the benefit of German exports and Greece was happily masking its budget deficit disaster with Goldman Sachs currency swaps, the Olympic flame was about to light up the Athenian night sky. As BBC reports, the return of the Games to the Olympics' spiritual home was widely hailed as a success at the time. Now, not so much and most Greeks view the Athens Olympics with anger as a contributing factor to the country's economic catastrophe. The Games cost almost twice their projected budget, with organisers not opting to use any temporary, collapsible venues, as other host cities have done.
In the first seven months of 2014, Goldman notes that equity, fixed income, and FX markets were most intently focused on the labor market with a number of the largest moves occurring due to employment reports and jobless claims. The equity market responded to a mix of economic, monetary policy, and geopolitical news. The fixed income market focused on employment reports, although other factors also resulted in large one-day moves. The dollar, although less volatile than usual, did move on both US economic developments and news out of Europe.
- So that's what Obama meant by "costs" - Italy Recession, German Orders Signal Euro-Area Struggle (BBG)
- Russia worries, weak German data weigh on Europe (Reuters)
- Hedge Funds Betting Against Banco Espírito Santo in Line for Big Gains (WSJ)
- Bankers Called Up for Ukraine War as Rolls-Royce for Sale (BBG)
- Double Punch for 'Inversion' Deals (WSJ)
- Statist Strongmen Putin-Xi See History’s Capitalism Clash (BBG)
- China bans beards, veils from Xinjiang city's buses (Reuters)
- BATS to Settle High-Speed Trading Case (WSJ)
- Second Ebola patient wheeled into Atlanta hospital for treatment (Reuters)
Fed officials have repeatedly emphasized the importance of financial stability for monetary policy. But, as Goldman Sachs points out, knowing which financial and macroeconomic imbalances to monitor is challenging, not least because of the limited number of past crisis episodes in the US. To help The Fed, Goldman surveys a large economic literature that studies the effectiveness of "Early Warning Systems" (EWS) in detecting banking crises, costly asset price busts, and currency crises across a broad range of countries. While they suggest subtlely that the Fed is clueless with regard what to look for, they note that credit markets and asset-price run-ups (especially when they occur together) provide a statistically clear warning signal... and as we know, both are flashing red currently.
Greek 10Y yields, up 6 days in a row, have surged in the last few days to 2-month highs (bond price lows). The significant shift in sentiment appears related to two main factors. First, The Independent reports that Europe is considering pulling Troika (its economic oversight committee) - which has been likened to German Nazi occupation - out of Greece, forcing local politicians to come up with their own reforms by the start of 2015 (which clearly the market is not believing). Perhaps even more concerning is Goldman Sachs shift to neutral on European peripheral bonds, warning that "at current spread levels we think there is not enough of a buffer for investors to take credit risk in intermediate and long-dated peripheral sovereign bonds." Time for some more 'whatever it takes' we think.
- Second Ebola patient to arrive in U.S. on Tuesday (Reuters)
- Ebola Drug Made From Tobacco Plant Saves U.S. Aid Workers (BBG)
- Egypt plans to dig new Suez Canal costing $4 billion (Reuters)
- Apple Buybacks Pay Most Ever as CEOs Spend $211 Billion (BBG)
- DeMark Says Sell China Stocks Now After World’s Best Gain (BBG)
- Investors Stung by Losses After Exiting Struggling Property Fund in China (WSJ)
- B.A. in BTFD: MIT May Consider Granting Degrees in Less Than Four Years (BBG)
- Too late, money's already been spent: GPIF Needs Overhaul Before Asset Changes, Shiozaki Says (BBG)
- Oh look, another "truce": Israel withdraws troops, 72-hour Gaza truce begins (Reuters)