RANDOM READS

New Sanctions
http://www.cnbc.com/id/101620246

High Yield Bonds Still Above Waterline
http://www.bloomberg.com/news/2014-04-28/junk-bond-skeptics-squeezed-as-jpmorgan-sees-tears-in-15.html

Earnings Hit
http://www.usatoday.com/story/money/business/2014/04/27/american-companies-latin-america-currency/8166739/

Hubris? You Decide
http://blogs.marketwatch.com/thetell/2014/04/28/bull-market-wont-die-until-a-recession-hits-rbc/

Higher Beef Prices
http://www.theguardian.com/environment/2014/apr/28/california-drought-cattle-ranchers-water-beef

The Way The Brain Works
http://online.wsj.com/news/articles/SB10001424052702303725404579461722158151180?

SAY GOODBYE TO ROMA

The glory that was once Roma.

Italy is one of the European Union's periphery nations like Greece and Portugal. As one of the richest institutions in the world, the Catholic church, prepares to canonize two still very-much-with-us former popes in a gala festival, Roma and the rest of the nation continues to crumble. And the madness continues.

It's a canonization MSM worldwide will be all over, a morally-bankrupt media covering a bankrupt nation.

Read the full story.
http://www.spiegel.de/international/europe/new-mayor-in-rome-seeks-to-prevent-further-decline-in-city-a-965806.html

QUESTIONS?

Here's a story that should improve your confidence in the Fed and new Chair Janet Yellen.

Some no doubt will see it as a positive, an admission of what they don't know, not a bad human trait to have in most cases. Just not this one. Yellen is a new chairperson, not a new member of the inner circle. Nor is she new to the world of politics. She's a wonk. One could easily suggest so much for the value of experience.

If in truth she is correct and their econometric mumble-jumble is offbeat, what's that say for the policies they've been conducting for the past several years? It's just a question. It doesn't deserve an answer unless you're a serious investor.

If as she postulates their models fail to predict price moves, could they possibly be understating inflation? Just another question. Famed investor Michael Price once said, it's not so much the answers you get. It's the questions you ask.

http://www.bloomberg.com/news/2014-04-25/yellen-concerned-fed-model-fails-to-predict-price-moves.html

SO MUCH FOR PEACE DIVIDENDS

Federal Spending Per Household Is on the Rise

Federal spending per household is projected to grow by 22 percent over the next decade, after adjusting for inflation. Federal spending per household more than doubled from 1962 to 2003. Spending grew by 17 percent just over the past decade.

INFLATION-ADJUSTED DOLLARS (2013)

Back in 1989 when the Berlin Wall crumbled there was much talk about the peace dividend.

Industrialized nations would have more of the filthy lucre to spread around purportedly on so-called good things. After all, so the story went, the military-industrial complex soaked and sopped up huge chunks of GDP. In other words, government money.

It was viewed as a waste of good government money. And whatever the purpose, wasting good government money is always characterized as a no-no unless you're the government wasting it.

Well, like a lot of things in life, something went awry on the way to the savings. Those same governments--as they nearly always do--found other ways to waste the would-be windfall. And now that the Ukraine mess has captured the public spotlight, interest in new military weaponry for defense is perking up from some most unusual places.

We'd say go figure, but that would to be too..... 

 http://online.wsj.com/news/articles/SB10001424052702304788404579522843679136218?KEYWORDS=saab+news&mg=reno64-wsj

 http://online.wsj.com/news/articles/SB10001424052702303825604579516962265054526?KEYWORDS=saab+news&mg=reno64-wsj

WEEK PENDING

A lot on the coming week agenda. This is just a partial list of what we're paying attention to. If you find it helpful, fine. If not, we still wish you successful investing.

--March pending existing-home sales out
--The dragster, ECB President Mario Draghi, speaks in Germany
--Mr. Irrational Exuberance, Sir Alan Greenspan, commandeers the podium in New York
--The FOMC sans news conference announces its policy
--FOMC two-day interest-rate meeting begins
--A host of companies--Exxon, Kraft, Kellogg, to name a few,  roll out their earnings 
--March personal income numbers out
--April non-farm payrolls report on Friday
--Nationsl ISM manufacturing index the day before.

As always, keep your eye on what the punditry expects and what actually happens, knowing of course that these folks hold something we don't--a revisionist hole card.

A BIG ENERGY STORY

We have been long energy for some time. Coming into this year energy was supposed to be a no-show as far as many pundits were concerned.

Supply was plentiful, geopolitical turmoil and economic demand with concern about a China slowdown and EU deflation captured much of the MSM's attention. Meanwhile, some continue to believe energy is the big story.

And a big part of that big story, at least indirectly if not more so, is the Ukraine situation. Will it spread or be contained? Here's one view.

http://t.ritholtz.com/bigpicture/#!/entry/containing-ukraine,535ad6cb025312186cfd0dc9

YOU GOTTA LOVE 'EM

 
You gotta love Ron Insana, the CNBC financial commentator and author (Who among these television talking financial heads hasn't yet written a book about investing?).

The guy's insane. Could be all those bright lights.

He wants investors to accept another one of the Fed's cockeyed inflation indicators, the PCE, used to gauge inflation. Even the formal name should send doubts scurrying up your spinal cord--personal-consumption expenditure deflator.

At your next cocktail soiree we challenge you to take your drink, chime the glass a few times to get everyone's attention, then hold the tip of your tongue between your dominate hand index finger and thumb and repeat out loud as fast as you can three times: personal-consumption expenditure deflator. If that don't do it, we'll send you a prescription for some stronger medicine.

According to Insana--and don't get us wrong; he's probably a well-meaning, nice guy-- this indicator says current inflation is less than 1 percent. And, as he goes on, to get a fix on equity valuations you simply subtract the PCE ( less than 1 percent) from 20 to get a fair market value P/E. So here we go: 20 minus less slightly less than 1 equals 19 point something less than something less than 1. 

He then cites new Fed Chair Janet Yellen as on the record to hold her interest-rate-hiking trigger finger until unemployment settles somewhere between 5.2 and 5.6 percent. If the exactitude here scares you, just breathe deeply 100 times while sitting in the lotus position in your pajamas for five consecutive days while watching Good Morning America for its intellectual content.

His next bit centers on 2007 when the Fed hiked interest rates 17 times in 18 months. The implied assumption here--and we all make them--is the catalyst has to be same. It doesn't. 

The real question is how high were interest rates when the cranking started and how high did they have to go before reaching the tipping point? In short, what were the norms then and what are they now?

Nearly all agree that this has been an abnormal era of low interest rates and easy money. In 2007 the Fed titrated the rates like a bunch of mad chemists in a lab searching for the correct formula. And in the end they found it.  

A few years ago a business associate lost a seven-figure job for doing what everyone else had and was still doing. Personalities and individual likes and dislikes aside, he made an incorrect assumption. Investors make them all the time. If I buy the stock it's got to go up. 

Many of today's media mouths in one breath give lip service to the belief that history never exactly repeats itself and in the next breath roll out reams of linear data to buttress their point as why it won't or can't happen yet.  

So in Insana's linear world, though he would most likely deny it, it will take a similar wind to blow this stock market Humpty Dumpty off the wall.

Insana concludes by pointing out the common guy in the streets ain't in yet. Interpretation: MSM and Wall Street have much more shilling to do. 
http://www.cnbc.com/id/101614178

NEVER GET DISCOURAGED

It's the weekend.

Markets are closed, we're just coming off a big victory Friday evening in Ontario, California and the warm California sun is out after a rainy, windy night.

Never get discouraged. Normally we'd say something like: "Critics be damned!" But we promised our dear deceased mother never to take The Lord's name in vain.

Never get discouraged about being turned down or rejected. Let me give you just two examples from Film Land. Yea, we're talking about Hollywood, a place people love to love and love to hate at the same time.

The perennial Xmas classic starring Jimmy Stewart and Donna Reed, "It's a Wonderful Life, "was an unparalleled financial flop." How big a flop? Well, the studio never bothered to even hold onto its rights. And that's why for years it ran hundreds of times every Xmas season because nobody had to pay anything to screen it. The film lost money, lots of money and critics panned it for being too "sappy and overly sentimental."

The other classic now considered by many as the greatest film ever made is "Citizen Kane" starring Orson Wells, Joseph Cotten and Everett Sloan. Critics called it "too dour and overly long." Today it's viewed as a "stunning example of film making."

A little inflation side note, Sloan by the way, one of the better characters actors of the era, reportedly received 2,400 in 1941 dollars for shaving his head for his role.

So there you have it, the rest of the story as the late radio personality Paul Harvey use to say. Never get discouraged. And, for certain, don't take the so-called experts too seriously. Most are too dour and overly long.


as

FAIRNESS

We like to think of ourselves as even-handed as in that rare of rarest commodities today, fairness.

In the Good Book it recommends moderation in all things. That might be more than a stretch when it comes to today's Wall Street, bankers and politicians of all stripes. We'd like to say at least we gave it the old college try, but that's about as inflated as all those college GPAs.

So here's another take on the current economic situation fresh off the wire.

http://www.businessinsider.com/the-economic-growth-cycle-2014-4?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29

METAPHORS

If you like metaphors, here's one.

Part of the student loan mess that is now a big bubble searching for a spot to go snap, crackle and pop should show anyone who cares to check: A good thing gone too far can become a bad thing.

A recent article in a major journal noted an increase during the recession of people of all ages applying for and receiving student loans to live off not attend school. Some might call it fraud. We just call it hopeless, jobless and broke, three attributes one needs today to qualify for a student loan.

Like water easy money will find its own level and that level is not always a good or an intended one. Massive liquidity and zero interest rates, sound familiar?

MSM and the other apologists aside, growth is slowing despite the huge money infusion as evidenced by a flattening yield curve. The S word as in spreads becomes critical here. The real estate market's  drop in new mortgages and new housing starts, among numerous other indicators, should tell you something.

As economist David Stockman recently noted, "It  don't snow in San Jose." So forget all the Wall Street warbling about winter. It's the line with least resistance. And forget, too, crack cocaine and the big H, this is a global economy high on easy money and low interest rates.

It's a party hardly anyone wants to end. Show me someone who loathes retrenchment and I'll show you an elected official. Cold Turkey Day when it arrives is much like karma--a beach!

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