Run Silent, Run Deep

The NYT’s is reporting that the drug cartels are building submarines.

This is the new challenge faced by the United States and Latin American countries as narcotics organizations bankroll machine shops operating under cover of South America’s triple-canopy jungles to build diesel-powered submarines that would be the envy of all but a few nations.

This reminds me a bit of Medicare fraud. It’s a game of whack-a-mole. Here, however, it seems like we’re wasting resources. If you can not stop the demand isn’t it better to spend the time and resources on treating the fallout from a health perspective. Instead, we’ve got the Coast Guard chasing more and more capable and advanced semi-submersible crafts and submarines loaded with drugs.

In the movie, Run Silent Run Deep, an American Commander, portrayed by Clark Gable, puts his crew at risk because he is blinded by the need to avenge a lost sub. Here we seem incapable of considering other options, even when those conducting the anti-sub/trafficking operations all but admit defeat.

From the Times:

Even so, three-quarters of potential drug shipments identified by the task force are not interdicted, simply because there are not enough ships and aircraft available for the missions. “My staff watches multi-ton loads go by,” Admiral Michel said.

Morning Report 9/10/12

Vital Statistics:

  Last Change Percent
S&P Futures  1435.6 -2.6 -0.18%
Eurostoxx Index 2528.4 -10.2 -0.40%
Oil (WTI) 96.16 -0.3 -0.27%
LIBOR 0.404 -0.004 -0.86%
US Dollar Index (DXY) 80.35 0.100 0.12%
10 Year Govt Bond Yield 1.68% 0.01%  
RPX Composite Real Estate Index 192.9 0.0  

Markets are down slightly on no some disappointing economic data out of China. Treasury plans to sell $18 billion worth of shares in AIG. Bonds are down 1/2 a point, while MBS are flat.

In spite of the disappointing Chinese data, the Street is heavily long commodities. Chart:  GSCI Index:


Italian Prime Minister Mario Monti told CNBC over the weekend that he does not expect Italy to participate in the ECB’s bond buying program, at least initially.  Remember, the individual states have to request the ECB to purchase their debt. 

JP Morgan is out this morning with a note saying they expect the FOMC to extend the low rate guidance through 2015, and initiate a small asset purchase program (maybe $300b) primarily focused on MBS. The FOMC decision is scheduled to be released Thursday at 12:30 est.

The NAR is reporting that housing affordability continues to increase in spite of the fact that prices are up 9.4% YOY.  Decreasing mortgage rates are able to offset the price increases. 

SIFMA and others have provided a formal response to FHFA regarding the Eminent Domain issue in San Bernardino.  They provide a helpful table lining out the trade and who makes / loses money. Basically the winners are the hedge fund behind this and the borrower.  The table doesn’t break out what the state gets, but presumably they will get something out of this as well.  The lender gets slammed.




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