Eric Holder Hospitalized After “Feeling Faint, Short Of Breath”

Is the groundwork for the “transitioning out” of the US Attorney General being laid? From Reuters:

U.S. Attorney General Eric Holder was taken to a Washington, D.C., hospital as a precaution on Thursday after he felt faint and was short of breath during a morning meeting with his staff, his office said in a statement.

 

“He is currently resting comfortably and in good condition. He is alert and conversing with his doctors,” according to the statement.

Please get well soon Eric: how else will this nation sleep easy at night knowing there are still so many “Too Big To Prosecute” banks out there whose wrists you still have to slap?


    



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The Reality Behind The New Home Sales Number

Yesterday’s “better than expected” New Home sales served as the “good news” pre-market boost to send futures ramping higher once again, if not enough to cause a fresh all time high.

Here is what really happened when one spreads the numbers, courtesy of Mark Hanson’s housing blog.

This New Home Sales data are virtually worthless due to what I call “the laws of small numbers”.
 
That is, unlike Existing Sales that averages about 400k a month, New Home Sales averages under 35k, with the off-season winter months when the seasonal adjustments are the greatest in the high 20k’s.  In fact, as a percentage of total US house sales they have never been lower at about 7%.
 
This presents a problem when the Census Bureau counts ‘sales’, as  it rounds up to the nearest thousand.
 
Bottom line, in the CB data below, last month it says a rounded-up 34k houses sold. Last Jan they say 32k sold.  With an 8% RSA, this is flat YoY at best.   Also note, the volatile South was responsible for all the 2k gain plus another 2k. 

Rounding up…  See data below.  If all of the 4 regions were in this morning’s New Home Sales print were rounded down to the nearest thousand by the Census Bureau vs up, it would subtract 4k sales, or about 12%.  Even with the massive January seasonal adjustments, this would result in a SAAR headline print of 428k, or flat YoY vs the up 10% reported.   If only the South was flat YoY like the other regions, the same thing would occur. 
 
This is a shame, because New Home Sales have always been a great way to track “end-user” demand, as this segment isn’t driven by investors like the Existing resale market.  This leaves the only real way to gauge the true, fundamental health of the “end-user” housing market NAR’s existing sales and the first-time buyer cohort.    
 
1)  Census Bureau New Home Sales NSA beat last year by 2k houses with ALL FOUR regions rounded up to the nearest thousand.

In other words, with an 8% RSA, there is no change YoY.  Moreover, if the volatile Southern region was flat or lower YoY like the other regions, the headline 10% YoY gain would have been flat YoY. 
 
2)  I am exiting my long builder trade reco before Existing Home Sales was released last week into this squeeze…that 10% was too easy, I am a chicken, and housing far too volatile in here to fall in love.  


    



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Bank of America: “No Evidence Of A Strong Rebound In Spending As The Weather Improved”

Maybe because, gasp, it wasn’t the weather?

From BofA’s Hans Mikkelsen, most humorously known for his insightful missive from December 26, 2013 titled, “Hello economy, goodbye QE.” We for one, can’t wait for the title of his December 26, 2014 thesis.

Our internal BAC card (debit+credit) retail ex. gas spend data for the third week of February showed a very modest 1.1% increase over the same week last year, in line with the 1.2% increase from the prior week. Thus we see no evidence of a strong rebound in spending as the weather improved significantly during the third week of February – post Valentine’s Day (Feb 14th). This contrasts with comments made by Macy’s CFO Karen Hoguet during yesterday’s earnings conference call, where she noted improving sales across the board starting on Valentine’s Day (Situation Room: Valentine’s Day brings warmth 25 February 2014). Obviously company specific observations are very imprecise predictors for aggregate activity.

 

Shocking stuff.


    



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John Kerry: “The US Is Beginning To Act Like A Poor Nation”

The following remarks by John Kerry, borne out of his humiliation over the complete fiasco that was the US intervention in Syria last year and the even greater fiasco that was this year’s attempt to get all feuding parties on the table in Geneva, only to see that outcome obliterated as well, appear to be borne out of his disgust at the defunding of the US defense budget, which for Kerry, more than his gross incompetence, is the reason why the US now finds itself in a “new isolationism” leading him to conclude that the US is “beginning to act like a poor nation.” One wonders what tipped him off: the fact that the US debt just hit a record high $17,419,220,117,766.69 or that the biggest monetizers of US deficit spending are the Fed, China and just as insolvent Japan?

From Reuters:

Speaking to reporters, Kerry inveighed against what he sees as a tendency within the United States to retreat from the world even as he defended the Obama administration’s diplomatic efforts from Syria to the Israeli-Palestinian conflict. In comments tied to the budget that U.S. President Barack Obama is expected to present on Tuesday, Kerry suggested that tighter spending, in part at the behest of congressional Republicans, may limit U.S. clout around the world.

 

“There’s a new isolationism,” Kerry said during a nearly one-hour discussion with a small group of reporters.

 

“We are beginning to behave like a poor nation,” he added, saying some Americans do not perceive the connection between U.S. engagement abroad and the U.S. economy, their own jobs and wider U.S. interests.

Perhaps some other Americans are tired of America acting as Globocop, and as the world’s hypocritical superpower dispensing “justice” when it fits its national interests, and ignoring all other conflicts, specifically when Mid-East oil, or the growing Russian sphere of influence is not concerned?

Kerry made the case as Obama prepares to release a budget that will adhere to spending levels agreed to in a two-year bipartisan budget deal struck late last year, entailing some spending cuts the administration would have preferred to avoid.

 

The U.S. State Department budget will decline slightly in the president’s budget submission, Kerry said, saying this was a direct result of the bipartisan budget deal that cut funding further than Obama wanted.

 

“This is not a budget we want. It’s not a budget that does what we need,” he said, saying the budget deal entailed cuts demanded by the Republican-led House of Representatives. “It was the best the president could get. It’s not what he wanted.”

But hold on: wasn’t it Kerry’s own party that has been urging the defunding of the US defense budget at the expense of overfunding welfare and benefits? The people are confused.

Next, Kerry deflects his own personal failings as SecState, having had to be pulled from his yacht last summer, just as the Syrian conflict was reaching its climax:

In speaking of what he called the “new isolationism,” Kerry cited the limited support in the U.S. Congress to back Obama’s plan to launch an air strike against Syria last year because of its suspected use of chemical weapons against civilians.

 

Obama, in a decision criticized by some U.S. allies in the Gulf and elsewhere, asked Congress to vote on a strike. With limited congressional backing, he ultimately abandoned a strike and pursued a deal to get Syria to give up its chemical weapons.

 

“Look at our budget. Look at our efforts to get the president’s military force decision on Syria backed up on (Capitol Hill). Look at the House of Representatives with respect to the military and the budget,” Kerry said.

 

“All of those things diminish our ability to do things,” he added.

Those… and the people who are in charge. Hence: defensive mode – activate:

Kerry took particular aim at critics of his efforts to get the Syrian government and the opposition that has sought to oust Syrian President Bashar al-Assad for nearly a year to reach a peace agreement that would entail Assad’s departure.

 

A second round of peace talks in Geneva broke up on Saturday, with chief mediator Lakhdar Brahimi lamenting a failure to achieve much beyond agreement on an agenda for a third round.

 

“These people who say that it’s failed or that it’s a waste of time … Where is their sense of history?” Kerry said.

 

“How many years did the Vietnam talks take? How many years did Dayton take in Bosnia-Herzegovina?” he added. “These things don’t happen in one month. I mean it’s just asinine, frankly, to be making an argument that after three weeks it’s failed.”

What is most ironic about all of the above, is that hypocrisy aside, Kerry is absolutely correct: the US is starting to act like a poor nation…  because it is, and Americans indeed “do not perceive the connection between U.S. engagement abroad and the U.S. economy, their own jobs and wider U.S. interests” because all US foreign policy reflects is the interest of a select group of uber-wealthy oligrachs whose sole interests the US congress represents… and nobody else’s. As for everything else, we can’t wait to see how Kerry handles the current Ukrainian crisis. The popcorn is prepared.


    



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Meanwhile, More Russian Military Vehicles Amass In The Crimean

While the IMF is promising a massive bailout to the Ukraine, and NATO is using the harshest language it can possibly muster to halt Russia in its tracks, Putin is doing what he does best: employing brute force (as seen below), and using even harsher language, to wit: RUSSIA: WEST MUST STOP MAKING PROVOCATIVE STATEMENTS ON UKRAINE.

In photos:

 

And clips:

Source: Euronews


    



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Yellen Testifies Before The Senate: Live Stream

Two weeks ago, Janet Yellen’s testimony to the Senate, following her remarks to the House, were delayed due to inclement weather. Now that it is no longer snowing, she is back behind the mic at the Senate Banking Committee, where she will deliver the same identical prepared remarks as she did last time, but obviously with a different Q&A. Watch it live here.


    



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NATO Calls Ukraine Developments “Dangerous And Irresponsible”, Urges Russia Not To “Escalate Tension”

Russian tat. And now, NATO tit.

  • NATO CHIEF SAYS ACTIONS BY ARMED GROUP IN CRIMEA “DANGEROUS AND IRRESPONSIBLE”
  • NATO URGES RUSSIA NOT TO DO ANYTHING THAT WOULD “ESCALATE TENSION OR CREATE MISUNDERSTANDING”

And the lie of the day:

  • U.S., NATO HAVE NOT DRAWN UP ANY CONTINGENCY PLANS FOR HOW THEY WOULD RESPOND IF RUSSIA INTERVENED IN CRIMEA-NATO’S TOP MILITARY COMMANDER
  • THERE IS NO REASON FOR NATO AND RUSSIA TO COMPETE OVER THE FUTURE OF UKRAINE-NATO COMMANDER

Actually, there is, which is precisely why Putin will smile when reading the latest NATO pleadings.


    



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Spot The Adjustment To The Seasonal Adjustment

Recall how the prevailing excuse for all economic data missing in the past two months have been attributed to inclement weather which mysteriously has not been captured in seasonal adjustments? Well, something curious happened in today Durable Goods report.

As we noted previously, the reason why stocks posted a bounce when the report came out was the stronger than expected bounce in Durable Goods, and especially the Durable Goods ex transports print which rose 1.1% on expectations of a modest drop. It is here that a somewhat puzzling observation can be made. First, the Non-seasonally adjusted number in the series posted a $5 billion decline from December into January, in other words a 3.2% drop compared to the 1.1% seasonally adjusted change. But it is not the sequential data that is notable but the annual change which is where the seasonal adjustments are most obvious.

What happened in that set of data is that while the NSA Durables ex transport posted a tiny 0.4% increase, amounting to $533 million, the SA series showed a far more sizable $1.9 billion increase. This can be seen on the chart below.

Why is this curious? Because in all recent prior years, the year-over-year change was a lower increase in the SA data compared to the NSA.

 

And more to the point, here is the same chart showing just the difference between the two year over year data sets. Spot the outlier:

 

What does this mean? Simply, in January, the Department of Commerce decided to apply a far greater than historically applicable seasonal adjustment, boosting and skewing the data far more than history suggests it should, and giving the seasonally adjusted number the benefit of about $2.3 billion in extra “oomph” solely due to the discretion of the person applying a far stronger than deserve seasonal adjustment!

Sure enough, had an inline adjustment been applied, the Durable Goods ex Transports seasonally adjusted number would have been a decline sequentially, and in fact would have printed at -0.3%. Precisely in line with expectations. But that would hardly be enough to send the headline kneejerk algos into a momentum buying spree, which in a market that was threatening to drop on the overnight newsflow was not acceptable…

So much for seasonal adjustment not adjusting for the impact of the “harsh” January weather.


    



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Another Recessionary Print: Core CapEx Posts First Annual Decline Since 2012

Today’s durable goods report appears to have been liked by the momentum-igniting algos, because despite the prior month’s negative revision (nobody cares about those), the January Seasonally adjusted number posted a modest beat of expectations, with the headline number declining only -1.0% compared to the expected drop of -1.7%. This more than offsets last month’s revision from -4.3% to -5.3%, but again all that matters for kneejerk reactions is the current print. We will have more to say about this shortly.

For now the only number that matters is the capital goods orders nondefense aircraft, aka core capex. It is here that while the sequential print was a modest increase of of 1.7%, compared to expectations of a -0.2% decline, it is the annual number that is of interest. We focus on this, because as can be seen on the chart, the annual change just posted its first annual decline in a year: in the past any such decline would mark the start of a recession, except of course for in 2012 when the New Normal central planning, and the trillions in Fed liquidity injections, made the business cycle as we know it meaningless.

So much for that $1+ trillion in QE: it is good to know that it went to stock buybacks and dividends… if not so much to actually investing in future growth.

 

And some of the other “spotty” charts. First: Core Capex Shipments:

Then Durable Goods:

And Durable Goods ex transports.

We can only conclude that it has been snowing for a long time.


    



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