Las Vegas

The reasons why interest is so incredibly low in buying gold and silver among the general masses when they are screaming bargains, and why the general populace’s interest in PMs only perk up after prices have moved much higher, or worse yet, never at all, is a testament to the disinformation campaign waged by the bankers against the people.

Paint is drying, so what is the best way to break the monotony? Why with renewed Iran war speculation of course. Sure enough, here comes Saudi Arabia to the rescue. From Reuters: "Saudi Arabia has ordered its citizens to leave Lebanon “immediately”, the state news agency reported in an SMS alert on Wednesday. “The Saudi Arabian embassy in Lebanon calls all Saudi citizens to leave Lebanon immediately,” the alert said, without elaborating." Making an imminent Iran attack far less likely, however, is an article in Bloomberg titled "Israel Plans Iran Strike; Citizens Say Government Serious." Of course anyone expecting Israel to launch a strike with every paper in the world blasting the above title as a headline may as well buy some Las Vegas 10,000 square foot haciendas because housing has "bottomed." For now however Brent is leaning on the side of caution, and is back to all time highs in EUR terms.

• World’s Oldest Shipping Company Closes In Industry Slide (Bloomberg)
• Japan Growth May Slow to Half Previous Pace as Exports Wane (Bloomberg)
• China Export Growth Slides As World Recovery Slows (Bloomberg)
• Weidmann tries to muffle not spike Draghi's ECB guns (Reuters)
• Draghi lays out toolkit to save eurozone (FT)
• Concerns grow over prospects for sterling (FT)
• RIM Said To Draw Interest From IBM On Enterprise Services (Bloomberg)
• UN urges US to cut ethanol production (FT)
• Goldman Sachs Leads Split With Obama, As GE Jilts Him Too (Bloomberg)
• New apartments boost US building sector (FT)

Imagine you are driving to work this morning in Las Vegas (yes, you are one of the select few locals who has a job that does not involve relying on the strip's ever declining gambling revenues or flipping a house to John Paulson in the second, and far shorter, coming of the regional housing bubble, with poppage imminent), and you observe what appears to be a man who hung himself below a billboard saying "Dying for Work." Confused, you continue, only to drive by another billboard with what seem to be a man hanging off, this one saying "Hope you're happy Wall St." Slowly it all clicks: the man is not real, and this is not a suicide done in protest by some depressed unemployed person, instead it is merely a mannequin all part of some attempt at a statement. Would this be considered shocking, and will the thousands of commuters who saw this feel any worse or better toward Wall Street and its employees - America's bankers - having seen this, or will they merely continue with their lives? What if the dummy was a real person? And is this merely a foreshadowing of things to come in a country in which class warfare has never been as violent, and in which the divide between the haves and the have nots has never been as wide? And what happens when the next such stunt is a real person? More importantly, what happens if a depressed jobless person takes their life but first takes out some of those he thinks are responsible for his plight - say Wall Streeters?

While markets await details on the next round of quantitative easing (QE) -- whether refreshed bond buying from the Fed or sovereign debt buying from the European Central Bank (ECB) -- it's important to ask, What can we expect from further heroic attempts to reflate the OECD economies? The 2009 and 2010 QE programs from the Fed, and the 2011 operations from the ECB, were intended as shock treatment to hopefully set economies on a more typical, post-recession, recovery pathway. Here in 2012, QE was supposed to be well behind us. Instead, parts of Southern Europe are in outright depression, the United Kingdom is in double-dip recession, and the US is sweltering through its weakest “recovery” since the Great Depression. QE is a poor transmission mechanism for creating jobs. It wasn’t supposed to be this way.

Prayer, courtesy of central banks, may still be a "valid" investing strategy, but "growth" no longer is: for all the euphoria over the stock market outperformance in the last few days on the heels of one after another rumor of ECB intervention in the peripheral bond market (now largely denied by Germany's finance minister) one would think that managers of all funds would be delighted at the sudden reprieve they have gotten courtesy of the European central bank. One would be wrong: as GS' David Kostin calculates, at the end of June, 52% large-cap growth funds had underperformed the Russell 1000 growth fund, aka their benchmark index. Three weeks later, this number has soared to 68%, a 30% increase in underperformers, which means that despite the headline S&P print, the bulk of active stock pickers once again face that most dreaded of Wall Street possibilities: career risk. Said otherwise, while those positioned to outperform in an environment of global slowdown are celebrating, everyone else is again polishing their resume, as the following chart confirms.

Visitor volume to Las Vegas is the highest since 2007, despite rising hotel rates, but gaming revenues are near flat.  Online gambling is popular with Europeans – the Brits and Greeks in particular – yet it has slowed over the past 3 months. ConvergEx's latest off-the-beaten-path economic indicator – gambling – shows an increasing global reluctance to leave household finances at the whims of blackjack and poker tables, be they in actual casinos or online betting parlors. Discretionary spending behavior is reliant on consumer sentiment and economic outlook; gambling is the ultimate “luxury item” because there’s absolutely no guaranteed return, so gambling behavior is a near real-time indicator of changes in consumer confidence.  Our gambling indicators, both domestic and abroad, show what feels a lot like recessionary behavior and point to another leg down in the latter half of 2012.

Corporations may or may not be people, but money has always talked, and the wealthy certainly do have a lot of excess cash lying around which they would rather prefer spending in hopes of generating the highest IRR possible by influencing the outcome of the presidential race. Below is a look of the uber-rich who have contributed at least $1 million to the major PACs as disclosed to the Federal Election Commission.

During an economic boom, exuberance finds itself lodged in all types of industries.  When profits soar, so does the public’s disregard for prudence.  And as tax revenues rise, politicians can’t help but give in to their bread and butter of buying votes.  In the case of a credit-expansion boom fueled primarily by fractional reserve banking and interest rate manipulation through a central bank, the boom conditions are destined toward bust.  Liquidation then becomes necessary as the bust gets underway and malinvestments come to light. What the city of Scranton has in common with San Bernardino, Detroit, et al. is that its dire fiscal condition is due to one thing and one thing only: benefits promised to unionized workers, and, it appears, "the salad days of the government employee are coming to an end, as they have already in Greece, Italy and Spain." To those sick and tired of the tax-eater mentality that is destroying the very core of society’s productive capacity and moral base, those days can’t come soon enough.

In a finding that many have subliminally known about for years, but never been actually proven, yet is still quite shocking, the WSJ is reporting that tourism portal Orbitz "has found that people who use Apple Inc.'s Mac computers spend as much as 30% more a night on hotels, so the online travel agency is starting to show them different, and sometimes costlier, travel options than Windows visitors see." Which is not really surprising: after all Mac users tend to "see" far pricier computers too, not to mention "buy." As a result, Orbitz has decided to automatically redirect Mac users: aka the rich, but gullible ones, to seeing hotel offers that are more expensive than those seen by PC users by on average $20-$30. Call it OS screening, and call it perfectly acceptable: because it appears, empirically, that Mac users are perfectly ok with spending more than they have to for virtually anything.

Someday, it will go down in history as the first trial of the modern American mafia. Of course, you won't hear the recent financial corruption case, United States of America v. Carollo, Goldberg and Grimm, called anything like that. If you heard about it at all, you're probably either in the municipal bond business or married to an antitrust lawyer. Even then, all you probably heard was that a threesome of bit players on Wall Street got convicted of obscure antitrust violations in one of the most inscrutable, jargon-packed legal snoozefests since the government's massive case against Microsoft in the Nineties – not exactly the thrilling courtroom drama offered by the famed trials of old-school mobsters like Al Capone or Anthony "Tony Ducks" Corallo. But this just-completed trial in downtown New York against three faceless financial executives really was historic. Over 10 years in the making, the case allowed federal prosecutors to make public for the first time the astonishing inner workings of the reigning American crime syndicate, which now operates not out of Little Italy and Las Vegas, but out of Wall Street.

The real estate industry announces the housing recovery is finally underway every year. 2012 is no different from previous years: various positive data points are duly cherry-picked (multiple offers are back in West Hollywood, sales are up year-over-year in Las Vegas, inventory is down, etc.) to back up the claim the "bottom is in" and the recovery in sales and prices is rock-solid. We understand the industry's extreme self-interest in attempting to re-inflate housing, but let's begin with the obvious question: what's the housing recovery based on? The standard answer is of course "super-low mortgage rates, courtesy of the Federal Reserve."  But people need a sufficient income to qualify to own a house, regardless of rates, so let's look at income by age, and focus on the key homebuying ages of 25 to 44. The only age group whose incomes continued rising during the past five years is the over 65 cohort--the very group who is "downsizing" or selling their homes to live in assisted living. The key homebuying cohorts have seen their incomes plummet since the housing bubble popped.

As we witness the riotous dissolution of corrupted capitalism, we need not wait for the history books to identify the mile markers of self-destruction. If we are to rebuild capitalism, even as it is tearing itself down, then we will need to become street-smart detectives in analyzing the current economic murder-suicide in progress. Every fall has its tell-tale confirmations and corrupt capitalism is no exception. There arrive key points where a system’s own contradictions become so evident and self-damaging, where motive, means, and opportunity become so clear, that one can mount an informed, effective counter-offensive.

 What is going on with the housing market?

The housing market is sending mixed signals in 2012.