As we previously commented, when scientists start using phrases such as "the worst drought" and "as bad as you can imagine" to describe what is going on in the western half of the country, you know that things are bad. However, in recent weeks the dreadful situation in California has gone from bad to catastrophic as the U.S. Drought Monitor reported that more than half of the state is now in experiencing 'exceptional' drought, the most severe category available. And most of the state – 81% – currently has one of the two most intense levels of drought.
If yesterday's selloff catalysts were largely obvious, if long overdue, in the form of the record collapse of Espirito Santo coupled with the Argentina default, German companies warning vocally about Russian exposure, the ongoing geopolitical escalations, and topped off by a labor costs rising and concerns this can accelerate a hiking cycle, overnight's latest dump, which started in Europe and has carried over into US futures is less easily explained although yet another weak European PMI print across the board probably didn't help. However, one can hardly blame largely unreliable "soft data" for what is rapidly becoming the biggest selloff in months and in reality what the market may be worried about is today's payroll number, due out in 90 minutes, which could lead to big Treasury jitters if it comes above the 230K expected: in fact, today is one of those days when horrible news would surely be great news for the momentum algos. Still, with futures down 0.6% at last check, it is worth noting that Treasurys are barely changed, as the great unrotation from stocks into bonds picks up and hence the great irony of any rate initiated sell off: should rates spike on growth/inflation concern, the concurrent equity selloff will once again push rates lower, and so on ad inf. Ain't central planning grand?
Why are so many plagues hitting the United States all of a sudden? Yes, one can always point out bad stuff that is happening somewhere in the country, but right now we are facing a nightmarish combination of crippling drought, devastating wildfires, disastrous viruses, dying crops and superbugs that scientists don’t know how to kill.
A recent study from Cornell University finds a probable link between drilling activity and an increased frequency of earthquakes in Oklahoma. Published in the journal Science, the study indicates that the practice of injecting millions of gallons of wastewater underground after a well is hydraulically fractured may increase the occurrence of earthquakes. Between 1967 and 2000, there was an average of 21 earthquakes of a magnitude greater than 3.0 – considered strong enough to be noticed - in Oklahoma. Last year there were over a hundred, and this year there have been more than 200.
Risk assets have started the week off on a slightly softer footing but overall volumes are fairly low given the quiet Friday session last week and with the lack of any major weekend headlines. Equity bourses are down between 25-50bp on the day paced by the Nikkei (-0.4%). In China, a number of railway construction stocks are up 3-4% after reports that China Railway Corp will buy around 300 sets of high speed trains and may potentially launch 14 news railway construction projects soon as part of national investment plans.
- Must be an early winter: Housing Falters as Forecasters See U.S. Sales Dropping (BBG)
- China Property Failures Seen as $33 Billion in Trusts Due (BBG)
- Polish Prime Minister Says Recording Scandal May Trigger Early Election (WSJ)
- Iraqi forces ready push after Obama offers advisers (Reuters)
- Priorities: U.S. cuts aid to Uganda, cancels military exercise over anti-gay law (Reuters)
- Kurds' Takeover of Iraqi City of Kirkuk Strengthens Their Hand (WSJ)
- U.S. says government lab workers possibly exposed to anthrax (Reuters)
- Netflix Up 21% With Tesla: The best U.S. stocks this month are ones that just a few months ago were the biggest losers (BBG)
- Architects of Iraq Invasion Return to Blame Obama (BBG)
- Nato claims Moscow funding anti-fracking groups (FT)
- Lawmakers Skeptical GM Bosses Were Unaware of Defect (WSJ)
- Corinthian Colleges Warns of Possible Shutdown (WSJ)
- Taiwan's Quanta to start mass production of Apple's smartwatch in July (Reuters)
The slaughterhouse that Iraq has become in the past week is the stuff that nightmares are made of. And this is just the beginning. Here's why...
"When an activist movement holds the moral high ground against a repressive establishment power structure, the establishment’s primary recourse is to target the character of its principles. The secondary recourse is direct confrontation. If a dissenting organization is not mindlessly vicious in its methods, then simply make it 'appear' vicious. If it is not hateful in its rhetoric, then artificially tie it to people who are. And if a government really needs to kick-start a crackdown, it can engineer its own man-made calamities and blame the groups that most threaten its authority."
It’s been obvious for quite some time that the so-called “war on terror” is nothing more than a fear-mongering induced power grab; a convenient excuse to strip the citizenry of its civil liberties and humanity. Many commentators, including myself, have predicted for years that the entire counter-terror juggernaut that has been constructed post-9/11 would be ultimately redirected upon the domestic population. Snowden’s heroic whistleblowing has already proven without a doubt that the government spy apparatus (along with tech company complicity) has been zeroed in on the domestic population for quite some time, but is the situation about to escalate? Are the feds so fearful of their own people, they are about to focus all their counter-terror energy on U.S. citizens? It appears so.
When American explorers first traveled through north Texas, Oklahoma and Kansas, they referred to it as "the Great American Desert" and they doubted that anyone would ever be able to farm it. But as history has shown, when that area gets plenty of precipitation the farming is actually quite good. Unfortunately, the region is now in the midst of a devastating multi-year drought which never seems to end. Right now, 56 percent of Texas, 64 percent of Oklahoma and 80 percent of Kansas are experiencing "severe drought", and the long range forecast for this upcoming summer is not good. In fact, some areas in the region are already drier than they were during the worst times of the 1930s.
The New Normal In One Sentence: "In The US Equity Market, The Worse A Company’s Finances, The Better It’s Doing"Submitted by Tyler Durden on 05/27/2014 11:00 -0400
It was just last Friday when we updated our list of the most hated, i.e., most shorted, stocks which are so critical in the New Normal because as we have reported constantly since 2012, going long the most shorted names remains the best alpha-generating strategy, outperforming the broader market by orders of magnitude. Today, it is Bloomberg's turn to recap just how broken the market is with an article that highlights the "balance sheet bombs" rallying by 94%. The lede: "In the U.S. equity market, the worse a company’s finances, the better it’s doing." Because there is nothing like rewarding failure and capital misallocation to promote economic growth and employment recovery.
soaring food prices are not only already here but are set to surge even more, especially for those who rather eat real meat than mystery meat dispensed with largesse at your favorite $0.99 fast food. So what are food processors to do facing soaring meat input costs and unwilling to suffer bottom line hits? Why, return to that old staple of unknown origin of course.
Here comes Pink Slime... again.
While out cat fishing...
Overnight, RealtyTrac released its latest home-flipping report. What it found is that while the latest housing bubble may have indeed popped, manifesting itself not only in a decline in flipping prices but also a tumble in flipping activity across the US as a percentage of all sales from 6.5% a year ago to just 3.7% in Q1, and down from 4.1% last quarter, flipping, where a home is purchased and subsequently sold again within six months, can still be massively profitable, leading to returns that would make the pimpliest 25-year-old, math PhD HFT-firm owner green with envy. Among the core findings was that the average sales price of single family homes flipped in the first quarter was $55,574 higher than the average original purchase price. That gross profit provided flippers with an unadjusted ROI (return on investment) of 30 percent of the average original purchase price averaged out across the US. The average gross profit per flip a year ago was $51,805 for an unadjusted ROI of 28 percent. However, it is the range that is notable: the flip ROI ranged from -8%, or a loss of $10k on the property, to a gain of 80%, a whopping $144K!
Whenever the beltway bandits run low on excuses to run-up the national debt they trot out florid tales of crumbling infrastructure - that is, dilapidated roads, collapsing bridges, failing water and sewer systems, inadequate rail and public transit and the rest. This is variously alleged to represent a national disgrace, an impediment to economic growth and a sensible opportunity for fiscal “stimulus”. But most especially it presents a swell opportunity for Washington to create millions of “jobs”. One thing is clear. There is no case for adding to our staggering $17 trillion national debt in order to replace the bridges of Madison county; or to fix state and local highways or build white elephant high speed rail systems; or to relieve air travelers of paying user fees to upgrade local airports or local taxpayers of their obligation to pay fees and taxes to maintain their water and sewer systems. At the end of the day, the ballyhooed national infrastructure crisis is a beltway racket of the first order. It has been for decades.