New Zealand

Following the FOMC surprise, no less than twelve Fed speeches will provide some "clarifications" on where the Fed now stands. It is very likely that this subject will continue to dominate the discussions of market participants. At the same time, US data will get scrutinized after the recent weakening and to see how warranted the Fed's concerns were. Two US consumer sentiment surveys, durable goods orders, and the third reading of Q2 GDP are important. In addition, monthly consumption and income data for August provide more information on the third quarter and of course there will be interest in the latest weekly claims numbers after some distortions in recent readings.

It is very easy to begin taking the whole of the world terribly serious, and forget the legitimate absurdity inherent in our culture... look at it for a moment, and ask yourself, what in the hell, exactly, are we doing? We've always tried to maintain at least a moderate sense of humor in our writing, but even we are finding it more and more difficult to simply laugh.  Even in the worst of times, humor is precious.  It is an exceedingly valuable tool in waking up the masses, and sometimes a thousand verifiable facts might not have the same effect as a single enlightened joke.

If there’s one country in the world that you might not think would be at the top of the outsourcing list and the place to send orders to be fulfilled from the West, it would probably have to be North Korea. The world’s most closed economy, that Communist dictatorship.

"I estimate the US fiscal gap at US$200 tn, 17 times the reported US$12 tn in official debt in the hands of the public.... Our country is broke. It’s not broke in 50 years or 30 years or 10 years. It’s broke today. Six decades of take as you go has led us to a precipice. That’s why almost the entire economics profession is talking as one at www.theinformact.org. Economists from all political persuasions are collectively sending our government a warning about what is, effectively, a nuclear economic bomb. I’ve been around economics for a long time. I’ve never seen such a strong response to a proposed Congressional bill. This is the profession sending a statement to the President and Congress that’s not unlike the warning physicists sent via Einstein to Roosevelt about the bomb." Larry Kotlikoff

A dispassionate discussion of the weekend events and a look at the week ahead.  

WWhile there may have been a verbal attempt by the Obama administration to diffuse Syrian tensions in the aftermath of Thursday's shocker out of the House of Commons, the action on the ground so far is hardly conciliatory. Or rather water, because a sixth US warship has now anchored in proximity to Syria, joining the recently arrived fifth destroyer USS Stout, which joined the warships already "breathing down Assad's neck." From AP: "Five U.S. Navy destroyers - the USS Gravely, USS Mahan, USS Barry, the USS Stout and USS Ramage - are in the eastern Mediterranean Sea waiting for the order to launch. And the USS San Antonio, an amphibious assault ship has now joined them. The USS San Antonio, which is carrying helicopters and can carry up to 800 Marines, has no cruise missiles, so it is not expected to participate in the attack. Instead, the ship's long-planned transit across the Mediterranean was interrupted so that it could remain in the area to help if needed." So in addition to a cruise missile based force, the US is now bringing in the marines? The justification that they are there "just in case" seems a little shallow in context.

Last week it was the Nasdaq, today it was the Eurex Exchange, which broke down "due to technical issues" shortly after 2 am Eastern and which was offline for over an hour. Further keeping a lid on liquidity and upward momentum is today's UK market holiday which has resulted in a driftless move lower across European stocks, following a red close in the Nikkei225. It only means that the inevitable ramp up in the disconnected from all fundamentals and reality market will have to come only during US trading hours when the NY Fed trading desk steps up its POMO-aided levitation.

Quick, dispassionate overview of the fx market.

• Obamacare, tepid U.S. growth fuel part-time hiring (Reuters)
• Cameron was behind UK attempt to halt Snowden reports (Reuters), Britain defends detention of journalist's partner (Reuters)
• Goldman Options Error Shows Peril Persists One Year After Knight (BBG)
• China expresses 'shock' as Japan's nuclear crisis deepens  (Reuters)
• Inquiry into China insurance firm rattles industry (Caixin)
• Cheaper rivals eat into Apple’s China tablet share (FT)
• Exporting fast food: Subway Targets Europe With as Many as 1,000 New Outlets in 2014 (BBG)
• Reserve Bank of India boosts liquidity to ease pressure on banks (FT)
• Justice Department Plans New Crisis-Related Cases (WSJ) - Holder doing his cutest attempt to pretend the TBTProsecute aren't
• Syrian Opposition Alleges Gas Attack, Which Government Denies (WSJ)

• So no great rotation into EM? Capital Flows Back to U.S. as Markets Slump Across Asia (BBG)
• Muslim Brotherhood leader arrested in Egypt (Reuters)
• Allies Thwart America in Egypt: Israel, Saudis and U.A.E. Support Military Moves (WSJ)
• Dear Bloomberg: when you buy the loans of a distressed retailer, you are not betting on a rebound, you are betting on being the fulcrum security in a bankruptcy: Kyle Bass Said to Bet on J.C. Penney Comeback With Loan Purchase (BBG)
• Bubbles Bloom Anew in Desert as Buyers Wager on Las Vegas (BBG)
• Britain rejects Spanish request for Gibraltar talks (Reuters)
• U.K. Mortgage Lending Rises to Highest Since Lehman Collapse (BBG)
• Pension Funds Dispute Math in Detroit Bankruptcy (WSJ)
• Christie Says Gayness Inborn as He Signs Therapy Measure (BBG)

In a session that has been painfully boring so far (yet which should pick up with CPI, jobless claims, industrial production and the NY Empire Fed on deck, as well as Wal-Mart earnings which will no doubt reflect the continuing disappointing retail plight) perhaps the only notable news was that Japan - the nation that brought you "Fukushima is contained" - was caught in yet another lie. Recall that the upside catalyst (and source of Yen weakness) two days ago was what we classified then as "paradoxical news" that Japan would cut corporate taxes in a move that somehow would offset the upcoming consumption tax hike. Turns out that, as our gut sense indicated, this was merely yet another BS trial balloon out of Japan, which admitted overnight that the entire report was a lie.

TRQ stock price is 80% lower today than it was a few years ago, yet the OT project is further along and now shipping concentrate..?

The amusing news overnight was that following slightly better than expected Q2 GDP data out of Germany (0.7% vs 0.6% expected and up from 0.0%) and France (0.5% vs 0.2% expected and up from -0.2%), driven by consumer spending and industrial output, although investment dropped again, which meant that the Eurozone which posted a 0.3% growth in the quarter has "emerged" from its double dip recession. The most amusing thing is that on an annualized basis both Germany and France grew faster than the US in Q2. And they didn't even need to add iTunes song sales and underfunded liabilities to their GDP calculation - truly a miracle! Or perhaps to grow faster the US just needs higher taxes after all? Of course, with the all important loan creation to the private sector still at a record low, and with the ECB not injecting unsterilized credit, the European depression continues and this is merely an exercise in optics and an attempt to boost consumer confidence.

A massive 1,131 individuals renounced their US citizenship last quarter, according to data that has yet to be officially released (though we were able to procure an advanced copy). This is a huge jump. Compared to the same quarter last year in which 188 people renounced their US citizenship, this year’s number is over six times higher. Not to mention, it's 66.5% higher than last quarter's 679 renunciations. This brings the total number of renunciations so far this year to 1,810. While still embryonic, it’s difficult to ignore this trend– more and more people are starting to renounce their US citizenship.

It seems I arrived in New Zealand just in time to see the country implode over a bit of botulism and bad PR. Good thing I haven't converted all my dollars into kiwis just yet!