UK’s Cameron Goes Full Scaremonger: “We Will Be Fighting ISIS For Decades”

Following his nation’s elevated terror threat level, UK Prime Minister David Cameron went full scaremonger:

“We are in the middle of a generational struggle against a poisonous extremist ideology that I believe we will be fighting for years and probably decades.”

Warning that “ISIS represents a greater threat than anything before,” (even Hitler?) he plans to introduce new laws to “make it easier to take people’s passports away.”

We are reminded of Brandon Smith’s warnings of government commentary in coming weeks:

…the goal will be to terrify you and those around you into seeking out a more powerful, more centralized government authority to protect your security, to provide cover for the continued planned collapse of American society into third world status, and out of these ashes, the centralization of the political and financial foundations of our world into the hands of an elite few.




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Here Come The Q3 GDP Downgrades…

Following the significantly weaker-than-expected spending data, the sell-side has begun its inglorious downgrades of the exuberant hockey-stick growth expectations they all extrapolated off Q1 lows… Goldman cut from +3.3% to +3.1% and Barclays slashed Q3 GDP expectations from +2.7% to a mere +2.2%.

 

Via Goldman,

BOTTOM LINE: The July personal spending numbers were softer than expected, while personal income and the PCE price index were close to expectations. We reduced our Q3 GDP tracking estimate by two-tenths to +3.1%.

 

MAIN POINTS:

 

1. Personal income rose 0.2% in July (vs. consensus +0.3%). The core wages and salaries component increased 0.2% as well. Personal spending was considerably weaker than expected, falling 0.1% (vs. consensus +0.2%). Real spending declined 0.2% on the month. Softness was fairly broad based, evident in durable goods (-0.6%), nondurable goods (-0.2%), and services (-0.1%). Real electricity and gas utilities spending fell 7%, subtracting about a tenth off of the headline, likely due to unseasonably cool summer weather. As a result of income growing more quickly than spending, the personal saving rate moved up three-tenths to 5.7%, the highest level since late 2012. Both the headline and core PCE price index rose 0.1% on a rounded basis, in line with consensus expectations. Over the past year, the headline PCE price index increased 1.6% and the core PCE price index increased 1.5%, a still-subdued pace relative to the Fed’s 2.0% target.

 

2. We reduced our Q3 GDP tracking estimate by two-tenths to +3.1%.

Via Barclays,

U.S. 3Q Tracking GDP Lowered to 2.2% From 2.7% at Barclays

 

Data on July consumer spending suggests “much softer start” to 3Q, Michael Gapen, economist at Barclays, writes in note.
Adjusted for inflation, spending last month below 2Q average

*  *  *

So much for 2% GDP growth this year…




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Legalize It, but Don’t Advertise It: High Times Fights Colorado’s Restrictions on Marijuana-Related Speech

The 40th-anniversary issue of
High Times, which hits newsstands next week, includes ads
for two Colorado-based marijuana businesses. As I explain in my
latest Forbes column, those ads may violate
Colorado’s onerous restrictions on pot-related speech, which the
magazine is challenging in federal court. Here is how the piece
begins:

High Times, the flagship publication of a cannabis
counterculture that is rapidly going mainstream, celebrates
its 40th anniversary this year. “We have been steadfast soldiers in
this so-called War on Drugs,” writes Editor in Chief Chris Simunek
in a special issue that will appear on newsstands next week, “with
truth as our sword and the First Amendment as our shield.”

The First Amendment has protected High Times,
and High Timeshas tried to return the favor. Last
year the magazine was the lead plaintiff in
a lawsuit challenging a Colorado law that required
merchants to keep marijuana-focused publications behind the
counter. The sponsor of that provision, a Republican representative
from Colorado Springs named Bob Gardner, likened such periodicals
to pornography. The law was so clearly unconstitutional that
Colorado Attorney General John Suthers decided not to
enforce it. Now High Times is seeking to
overturn Colorado’s onerous restrictions on marijuana
advertising, which ostensibly are aimed at protecting
impressionable children but probably have more to do with
protecting disapproving adults.


Read the whole thing
.

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Calif. Plastic Bag Ban Survives After All (As Do Other Bad Bills)

Tim Gunn does not approve of this outfit.After failing to get enough
votes in the Assembly
earlier in the week
, California’s plastic bag ban has managed
to survive and
pass a second vote
. It doesn’t appear that anybody actually
made a better case for banning bags (probably because there

really isn’t a good reason for it
). Rather, it appears the
union that represents grocery workers dropped its resistance to the
bill after
some sort of deal
with Safeway. Unions had resistant to the
bill because the 10 cent fee for paper bags went to the grocery
companies to do with as they choose (and presumably, not to the
union members). There’s no indication of what the deal is, but the
United Food and Commercial Workers Union now supports the bill, and
it passed the Assembly, 44-29. It still needs to pass the Senate
before heading for Gov. Jerry Brown’s signature.

In other state legislation, the California State Senate has
passed the
college “affirmative consent” law
that requires colleges to
implement a policy of requiring students to seek “affirmative,
conscious, and voluntary agreement to engage in sexual activity” if
they want their government money. Time explains:

There is some disagreement in higher education about whether the
affirmative consent standard is the best practice. Though many
colleges have adopted it, Harvard recently rewrote its sexual
assault policy without adopting an affirmative consent standard, to
the dismay of women’s advocates. Harvard’s Title IX Officer, Mia
Karvonides, said the school rejected such a policy because there is
no “standard definition of affirmative consent,” according to the
student newspaper The Crimson. Critics of affirmative
consent policies often point to an unrealistic set of standards set
in 1991 by Antioch University in Ohio, which required verbal
consent (excluding “moans”) for “each new level” of sexual
activity—a standard that doesn’t reflect the real interactions
between human beings during sex.

The California bill stops short of Antioch’s standard.The bill’s
language clarifies the definition of consent by stating what it is
not. “Lack of protest or resistance does not mean consent, nor does
silence mean consent,” it reads. “Affirmative consent must be
ongoing throughout a sexual activity and can be revoked at any
time. The existence of a dating relationship between the persons
involved, or the fact of past sexual relations between them, should
never by itself be assumed to be an indicator of consent.”

Reason Contributing Editor Cathy Young examined the problems
with this kind of sexual nannyism
here
.

And finally (at least for this blog post—no doubt there will be
future bad bills originating from California’s legislature), the
state is tripling the funding for the state’s film tax credit
program to $330 million a year. Is the state also cutting spending
by $330 million to make up for it? Don’t be silly. The Tax
Foundation offers a simple primer as to why film tax credits
don’t
really work as advertised
:

In the last decade, state governments have enacted numerous
movie production incentives (MPIs), including tax credits for film
production. MPIs are popular with state officials and many of their
constituents but often escape routine oversight about benefits,
costs and activities. Based on fanciful estimates of economic
activity and tax revenue, states invest in movie production
projects with small returns and take unnecessary risks with
taxpayer dollars.

MPIs fail to live up to their promises to encourage economic
growth overall and to raise tax revenue. States claim MPIs create
jobs, but the jobs created are mostly temporary positions—often
transplanted from other states—with limited options for upward
mobility. Furthermore, the competition among states transfers a
large portion of potential gains to the movie industry, not to
local businesses or state coffers.

In this case, California has been losing jobs to other states,
so the tax credits are just a flat out bribe for industries to stay
here. With this new money, the state is also eliminating its
lottery system of distribution and will instead determine who gets
tax credits based on how many jobs each production will create,
which seems like it will heavily favor the major studios. The
Los Angeles Times
has more information
here
.

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UMich Consumer Confidence Rises On Surge in “Hope”

While the government Conference Board confidence measure remains the most exuberant, University of Michigan Consumer Confidence continues to tread water. August final print rose to 82.5 from the preliminary data (79.2) driven by a surge in “hope” from 66.2 to 71.3 mid-month. Short-term inflation expectations fell on the month. Despite exuberant all-time highs in stocks, UMich has been flat for the entire year and is now at the least exuberant relative to Conference board data in almost 7 years.

 

A beat but flat-line all year

 

Conference Board exuberance is near a 7 year high vs UMich…

 

Charts: Bloomberg




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Expect Another Strong Employment Report Next Week

By EconMatters

 

 

Sleepy August Closes Out

 

Lost in what is one of the lowest trading volume weeks of the year, and a really sleepy August month in general where many folks are getting to use some vacation time before markets start getting serious again in September after the Labor Day Holiday was another week of better than average economic data. 

 

 

Initial Jobless Claims

 

I will avoid the minor revisions, and stick with the reported numbers but Jobless claims had a stellar month of August. First on 8/7 we had 289k Initial jobless claims, then on 8/14 we had 311k jobless claims, and on 8/21 we had 298k, and we close out the month with another 298k Initial jobless claims. The 4-week average is 299,750 for the month of August.

 

 

 

The underlying fundamentals in the job market keep getting better each month, and the manufacturing reports and other economic surveys all showed strong employment components which likewise support the strong showing this month for Initial Jobless claims.


Read More >>> Stellar Econ Data This Week

 

ADP Employment Report

 

We will get a first look at private payrolls next Wednesday with the ADP Employment Report which will set the tone for next Friday`s Employment report, and the jobless claims data for August suggests another plus 200k employment gain for the month, but just how robust is the question.

 

While much of the market focus for the month was on Fed Policy and Geo-Politics, the economic data has been coming in better than expected for the entire month; shoot even housing data on the whole has been coming in better than expected, so I am leaning towards a 250k plus Employment Report for next Friday.

Important FOMC Forecast Meeting in 3 Weeks

 

If we get another strong employment report next Friday, this will really up the ante for the rest of the September economic data moving into the all-important Wednesday September 17th Quarterly FOMC Meeting Announcement, FOMC Forecasts and Chair Press Conference where many market participants have noted will potentially be when Janet Yellen signals to financial markets the Rate Hiking Timeline.

Ergo expect participants coming back from vacation to watch the ADP Employment Report real carefully, and early positioning to begin ahead of the Friday Employment Report, and if we get another strong employment report next Friday, expect some major positioning in front of the critical quarterly Fed Meeting on the 17th, with all hell breaking loose from a portfolio reallocation standpoint for the fourth quarter if Janet Yellen signals the Rate Hike Timeline for financial markets, and it is sooner than currently priced into financial markets. 

 

Moreover, even though the mid-summer timeline for the first rate hike is theoretically priced into financial markets, in actuality as JamesBullard has stated several times, the market is severely complacent with actually positioning itself for even this mid-summer rate hike, procrastination at its finest! And if the Timeline gets moved up to March, or hinted at in the FOMC Meeting, Forecast or Press Conference this will trigger the start gun for some serious ‘portfolio rebalancing’ in many asset classes.

September Fireworks

 

Therefore, September is not going to be nearly as sleepy as August from a trading standpoint, and probably everything that worked in August will get “taken out to the woodshed” in September. Expect a ramp up in volatility (for real this month), and traders better bring their seatbelts this month as I expect major market moves in many asset classes like currencies, precious metals, credit markets, stocks and bonds as the economic data is just too good for the Fed not to move the first rate hike up to March of 2015. It all gets started next Friday with the highly anticipated Employment Report for August!

 

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Chicago PMI Explodes To Biggest Beat In 10 Months, Employment Drops Further

Having collapsed to 13-month lows in July – with the biggest miss on record – Chicago’s PMI rebounded the way only US macro ‘soft-survey’ data can. After plunging from 62.6 in June to 52.6 in July, August printed a magnificent 64.3 – its highest since May – showing up this data’s noisy nature as entirely useless. From worst miss on record (and 13-month lows) to best beat in 10 months and 5 month highs… brilliant. It would seem ISM has entirely given up on any credibility at all… However, given this exuberance (in production and new orders), the employment sub-index dropped yet again.

 

“we’re gonna need a better seasonal adjustment”

 

Charts: Bloomberg




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JPMorgan Warns Military Escalation In Ukraine “May Lead To A Lehman-Style Shock”

The sudden military escalation in Ukraine in recent days has, according to JPMorgan’s Alex Kantarovich, reduced the earlier hopes that the high level meeting in Minsk on 26 August would help to defuse the conflict. As Kantarovich warns, the markets are now bracing for the US/EU responses. In the worst case scenario, now appearing more likely, severe pressure on stocks may extend. As he concludes, “we believe that with the significant deterioration in the Ukrainian situation, markets may treat this as a Lehman-style shock.”

Via JPMorgan Cazenove,

Lehman moment. We believe that with the significant deterioration in the Ukrainian situation, markets may treat this as a Lehman-style shock. We note there are substantial fundamental differences between the current situation and the 2008/09 crisis; the oil price is now holding up relatively well and the economic contraction may not be that deep. On the other hand, for traded stocks, the challenges and risks to investability presented by sanctions could be practically open-ended. We demonstrate that revisiting the post-Lehman lows would imply downside of 50% from an index perspective, and ~40% from the forward P/E perspective (Fig. 1 and 2).

Poor visibility. With several false dawns since the start of the conflict, the markets may no longer assume a quick and easy resolution of the conflict and ‘worse before better’ seems a likely sequence to us; we thus recommend reducing exposure to Russia and differentiating carefully among the sectors and names.

Exposure and defenses. We see Financials as particularly badly exposed – both from the sanctions perspective and from the macro perspective. We also highlight the acute pressure on economically sensitive consumers, exposed to the escalating trade wars. We again stress that the best defensive trade comprises exporters with no unwanted political affiliations as these also benefit fundamentally from the weaker ruble. The sell-off on 28 August provides a good illustration of the phenomenon (Fig. 3 and 4).

*  *  *
So Buy US Stocks… because nothing says ‘global growth’ like a contagious collapse in a major nations markets…




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The Secret of Riot Cops’ Confidence?

It’s the province of riot cops, marching
bands, and Hitler youth, not to mention a few millenia of
militaries. And its effects—perhaps not so surprisingly—extend far
beyond organization or pomp and circumstance. According to a new
study from the University of California Los Angeles (UCLA),
marching
in unison could
actually shape men’s estimations of their own
and others’ physical prowess. 

“We have found that when men are walking in step with other men,
they think that a potential foe is smaller and less physically
formidable and less intimidating than when they’re just walking in
no particularly coordinated manner with other men,” said
anthropology professor and lead study author Daniel Fessler. “That
calculation appears to make men who march with other men feel less
vulnerable and more powerful and their potential foe more easily
vanquished.” 

“Simply walking in sync may make men more likely to think,
‘Yeah, we could take that guy!'” Fessler said. 

For their experiment, Fessler and co-author Colin Holbrook—whose
findings are published online in the journal Biology
Letters
—recruited 96 undergraduate men at UCLA. Half were
instructed to walk in lockstep with a partner, while another half
were asked to walk alongside a partner but without moving
uniformly. Afterward, the students took several tests, “most of
them to disguise the real purpose of the study” and one that
involved looking at a photo of a man with an angry expression.
Participants were asked to estimate the angry man’s height and pick
his build from a roster of six silhouettes of various heights and
muscularity. 

Young men who had walked in unison with their partners wound up
judging the man as significantly shorter and smaller than those who
had walked normally. On average, they guessed him to be about an
inch shorter than the other group of participants did. The
researchers note that while the difference in perception was
relatively small, the association was consistent enough that
there’s only a 0.01 chance of it being a fluke. 

Fessler and Holbrook suggest that humans evolved, quite
logically, to view moving in unison as a sign of group strength.
“The ability to move in unison indicates that one is part of an
effective fighting alliance,” said Fessler. “That’s no accident. In
order for individuals to be synchronized, they have to be motivated
to coordinate their behavior—they have to be paying attention to
what one another are doing, and they have to be skilled and
competent. A deep part of our brain registers this
connection.” 

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The Deep Roots of Obama’s “We Don’t Have a Strategy Yet” Problem – and What to Do Next.

Like a lot of
people, I was perplexed by President Obama’s decision to talk to
the press yesterday. He really had nothing to say, which he made
perfectly clear, especially when it came to talking about ISIL and
the situation in
Iraq and Syria
:

“The options that I’m asking for from the Joint Chiefs focuses
primarily on making sure that ISIL is not overrunning Iraq,” Obama
said using another acronym for the militant Islamic group ISIS.

“We don’t have a strategy yet. We’re seeing some news reports
suggesting we are further ahead than we are,” he said.

WTF, really? Just a week ago, he was talking about “rooting out
a cancer like ISIL,” right? 

Folks on the right are saying this is because Obama is a
foreign-policy wimp who is at best a reluctant warrior. Such a
reaction may work politically, at least in the short term.
According to a new USA Today/Pew poll, Americans

are increasingly saying
the U.S. is doing “too little” to
fix the world. A plurality still (wisely, IMO) believes that we’re
“doing too much,” but the numbers are shifting compared to a year
ago. Something on the order of 54 percent say Obama is “not tough
enough” when it comes to foreign policy and national
security.

Yet the idea that Obama is slow to military
action or willing to go over the top in the name of national
security is clearly at odds with his record as president. He
tripled troop strength in Afghanistan and only reluctantly pulled
out of Iraq in 2011 (according to the schedule originally put in
place by George W. Bush). Then Defense Secretary Leon Panetta was
promising up until the end that a large U.S. military presence was
going to stick around for the foreseeable future. However
constitutionally dubious U.S. action in Libya was, it happened, and
it seemed clear Obama was gung-ho to start bombing Syria to
dislodge the Assad regime until public and political opinion
fomented by Sen. Rand Paul and others made that too costly. When it
comes to surveillance (legal and otherwise) and abrogating civil
rights (including claiming he has the right to unilaterally execute
American citizens), Obama has taken a back seat to no
president.

The problem, then, isn’t that the president isn’t hawkish
enough. It’s that he really doesn’t have a plan for figuring out
if, how, and when to use force effectively in the pursuit of U.S.
goals. In this, he is yet again extending the legacy of George W.
Bush, who mired the country in two long wars that quickly became
aimless.

In the wake of what can only be considered a disastrous
appearance yesterday, the Obama administration is already scurrying
to do damage control.
From the Hill
:

State Department spokeswoman Jen Psaki appeared shortly after
Earnest on the network, also looking to clean up the president’s
remarks.

“I think it’s important to note here that the president has
already begun implementing his strategy to defeat [ISIL],” Psaki
said, noting that the administration was working toward “building
international coalitions” to combat the terror group.

This sort of response is just sad. When Jen Psaki—who
famously provoked laughter
from the press earlier this year
when she complained that Obama doesn’t get enough credit for all
his foreign policy achievements—is contradicting her boss, you know
the wheels have totally gone off the bus. Or maybe that there isn’t
even a bus.

Over at The Daily Beast, Eli Lake and Josh Rogin have an
exhaustive piece up about the failure of the Obama administration
to come up with a policy and it’s about what you would expect from
a bunch of people that include John Kerry.
Read the whole thing
 and shudder at what comes next.

A politically weak president who heads a party that since George
McGovern has worried about looking weak on defense (and who has
been called out as weak by his own former secretary of state). A
crap economy at home, disastrous midterms looming. Russia invading
Ukraine. The odds of a poorly planned intervention that escalates
U.S. involvement in the Middle East are getting better every
minute.

From
Lake and Rogin’s article
:

“The whole international community should act against ISIS in
Iraq and Syria at the same time. Their advance inside Syria needs
to be halted and the only way to do that is to conduct airstrikes
against their forces,” Hadi AlBahra, the President of the Syrian
National Coalition, told The Daily Beast in an interview. “The
political process is in a coma…”

Obama, too, is in a coma. Waking up would entail actually
building an international coalition to deal with the situation in
Iraq and Syria (the idea of the United States unilaterally going
into Syria during its civil war would surely rank as one of our
country’s great strategic blunders; it would either simply
strenghten Assad’s regime, thus leading to expanded set of problems
down the road, or create absolute chaos throughout the region,
causing more problems immediately and in the future). And Obama
also needs to lead on putting together a coherent, effective, and
defensible policy for the war on terror—one that he can sell to
Republicans, allies, and especially the American people who he has
treated as an afterthought in all this. Despite the claims of hawks
and ISIL itself, the terrorist group is hardly an existential
threat to the West any more than al Qaeda was. It can and should be
contained and squeezed down everywhere as much as possible (this is
not something that mandates either an interventionist foreign
policy or expansive security state at home).

It’s way late in a presidency not to have a strategy yet but
that doesn’t mean Obama is off the hook for, you know, actually
doing his job.

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