SAR #12257

Winning an election does not confer competence.

Running Scared: The Fed's QE programs - buying long-term securities in hopes that driving down interest rates and flooding Wall Street with cash - has so far been pretty much a flop. QE 1 and 2, to the tune of just over $1 trillion will be followed by another trillion called QE 3 - $40 billion a month in 'agency' MBS through the end of 2014 or 7% unemployment whichever comes first. And if that doesn't work look for QE 4 come 2015. Will it drive up the stock market? Yes. Will it drive up gold and oil and other assets? Yes. Will it re-inflate the housing bubble - ah, that's the goal... Will it put anyone back to work and spur demand? Probably not. But Bernanke has fallen for embraced the idea that promises are more important than achievements; understandable given his record. Does Bernanke sense something big and ugly under the bed?

Sequels: The Arab Fall isn't nearly as entertaining as the Arab Spring.

Crap: Fox shamelessly reported (sic) that President Obama had called Libyia's President to thank him for killing the US ambassador. It'll be hard to sink much lower, but they'll find a way.

Factors: The EIA says that, as of May, the world was producing 75.3 mbd of crude oil. Just crude oil – not natural gas liquids, biofuels, or any of the rest of the flim flam stuff. That's up abut a million barrels a day from last October, but that is just Libya coming back on line, not an increase. So we stay on the “undulating production plateau” predicted by the peak oil folks, as we have since 2005.

Sovereignty? What Sovereignty? If you liked NAFTA, you'll love TPP. And no, you don't get a say in it.

Keeping The Serfs In Line: Missouri's Republican lawmakers over-rode the Democratic Governor's veto and passed a bill that lets employers impose their religious beliefs on employees, denying them employer-provided health coverage that they find distasteful - birth control, for now, but the list is easily expanded to include coverage for AIDs, cancer, and other God-imposed punishments.

PPIng on the Parade: The August Producer Price Index jumped 1.7% m/m; unexpectedly, of course. This is the largest single-month bump since June, 2009. It was driven by rapid increases in food and petroleum prices, but Dr. Ben says they don't count. Economists must be on permanent diets and walk everwhere.

No Value Added: Europe (and Wall Street) are willingly suspending disbelief and embracing the idea that the new and improved euro-rescue plan is new and improved. It is not. It is the same old, bitter wine, with austerity as a precondition. Spain hopes to get away with “dynamic provisioning” which is simply a new term for cooking the books – which it really would like to get away with rather than fall under Berlin's iron boot. The IMF says Greece needs another bailout but can't have it until they do better at starving. Greece, having no more to give (even if they've only met about a quarter of the demanded cuts) says it does not need another helping of debt. Why adding debt to debt was supposed to solve the problem of too much debt must be a banker thing, for it makes no objective sense. And no one even talks about getting the Italians to embrace suffering – for them it's la dolce vita or nothing.

Roosting: One of the basic rules is that everything ends up somewhere. So it is hardly surprising that some of the flood of Bernanke dollars has found a home in petroleum, driving up the price. We're not the first, but we'd like to point out that every time US gasoline gets close to the magic $4.00 a gallon mark, the stock market (and the economy with it) has taken a dive. We point this out because gasoline prices are approaching $4 bucks and Bernanke just tossed another trillion onto the board.

Cause & Effect: Data suggests that over a million previously underwater US homeowners are at last back to a break-even point. Does this mean there will be a rush of people putting their houses on the market, finally convinced they can at least walk away whole and as a result drive prices back down? Or will the dreams of avarice arrive on schedule and a flurry of refinancing and equity withdrawal get underway? Ah, forget I asked.

The Parting Shot:

Drama Queen