Tag Archives: MOAB

04/17/17

Earnings, Consumer Confidence, Housing Prices and MOAB

By: Kent Engelke | Capitol Securities

Thursday, stronger than expected earnings from two mega sized financials helped boost shares of financial companies. The dollar was little changed and Treasury bonds lower in the wake of the President’s comments on currencies, interest rates and support for FRB Chair Yellen.

Consumer sentiment also rose to a three month high in April and optimism about their current financial situation and the economy reached the strongest point since November 2000, according to the University of Michigan sentiment survey.

What I think is significant in the Michigan data is the “favorable home buying attitude” index is now held by 82% of respondents, the most since 2005 and just below the record of 84% in 1999.

I think this is significant for a number of reasons. First, the 2008-09 crisis started in residential real estate and is perhaps now at its official end. Second, most people judge their net worth not by the value of their stock portfolio, but by the value of their homes, hence a strong rationalization for the highest level of “current financial situation” index since 2000. Finally, the odds now favor an increase in Owners’ Equivalent Rent (OER) or what someone thinks they can rent their homes for if it was indeed a rental.

OER is a major component of all inflationary indices and such has been essentially flat since 2009 after plunging in 2008. This flat lining is a major reason why inflationary expectations have remained “well anchored.” If OER rises, so does inflationary expectations.

Speaking of potential inflationary expectations, weekly jobless claims are the lowest since they reached a 44-year low in the week ended February 25. Wow!

However, during March there was a tempering of wholesale prices as such declined for the first time since August 2016. Seventy-five percent of the decrease in the March PPI however was due to a drop in final demand service (goods manufactured destined to the consumer — includes commodities as oil fell by 2.9% from the previous month).

Trading Friday was initially quiet, so was the conversation until MOAB. Like most, I believe this was dropped to garner the attention of North Korea. However it also lifted the spirits of many of whom I speak with daily, making all us feel like the country is doing something about the deteriorating geopolitical environment.

The US citizenry is not immune to historical precedence. We don’t like being pushed around and taken advantage of, feeling a sense of pride when our country attempts to right a wrong. Yes, some can find fault with this statement, but PC 101 was not offered when I went to college.

Brinkmanship was the cornerstone of American foreign policy for 70 years, a span where global conflagration did not occur (Note: WWII commenced 20 years after WWI… in the Great War, 18 million died… in WWII over 100 million died or about 3.2% of the world’s population was killed).

In my view, MAOB instilled a combination of fear and pride, an event that may boost sentiment further in the immediacy.

This week’s economic and earnings calendar is crowded. Economic releases include retail sales, CPI, manufacturing data, various housing statistics and the Beige Book.

Last night the foreign markets were down. London was down 0.29%, Paris was down 0.59% and Frankfurt was down 0.38%. China was down 0.74%, closed Japan was up 0.11% and Hang Sang closed for a holiday.

The Dow should open nervously lower amid heightened geopolitical unrest. The 10-year is up 6/32 to yield 2.21%.

04/14/17

Just Released Afghanistan MOAB Strike Video

By: Denise Simon | Founders Code

KABUL, Afghanistan (April 13, 2017) – A GBU-43/B Massive Ordnance Air Blast bomb strikes ISIS-K cave and tunnel systems in the Achin district of the Nangarhar Province in eastern Afghanistan at 7:32 p.m. local time Thursday. The strike was designed to minimize risk to Afghan and U.S. Forces conducting clearing operations in the area while maximizing the destruction of ISIS-K fighters and facilities and eliminate any perceived safe haven for ISIS-K in Afghanistan

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So what do those caves and tunnels look like that have been used by al Qaeda, bin Ladin and Islamic State?

Meanwhile, Russia and Iran are in meetings regarding Afghanistan. Russia is bragging too about their weapons being bigger than the U.S. MOAB.

The 21,600-pound MOAB was developed in 2003 as a weapon to attack against elite Republican Guard units during the invasion of Iraq. But the bomb, which replaced the Vietnam-era 15,000-pound BLU-82 Daisy Cutter, was not used in that conflict because of the rapidity of Saddam Hussein’s army.

Soon after the Pentagon announced the new weapon, Russia began working on a counterpart. In 2007, it successfully tested the massive thermobaric weapon.

The bomber-dropped bomb is designed to explode midair by ignition of a fuel-air mixture that produces massive blast effects comparable to small tactical nuclear weapons.

“All that is alive merely evaporates,” Gen. Alexander Rukshin, deputy chief of the Russian general staff, was quoted as saying at the time.

Thermobaric devices detonate in two stages, with an initial blast dispersing explosive materials in a cloud that is then ignited by a secondary charge. The explosion generates a much bigger pressure wave than conventional explosives, followed by a vacuum effect that compounds damage and injuries caused by the blast.

Russian sources have claimed their weapon has a power equivalent to 44 tons of TNT – or four times that of the MOAB – despite being somewhat lighter than the U.S. munition at 16,650 pounds. Because of its yield and the extremely high temperatures it generates, it is slated to replace smaller battlefield nukes currently in the Russian arsenal.

When the Russian air force began bombing rebel positions in Syria in September 2015, smaller thermobaric bombs were used against Islamic State positions, but the FOAB was never deployed. More here.