CONFIDENCE BUILDERS

 
 
Try these three reports on for confidence, one from the US, one from the EU and, just for good measure, one from the government.

Some might suggest these are positive signs. Maybe? We share a different take. Chaos reigns in the financial world. If you think not then you're not familiar with the fox and the hen house story. 
http://www.theguardian.com/world/2014/may/04/greece-debt-relief-creditors-eurozone-crisis

 http://soberlook.com/2014/05/kicking-pension-can-down-road.html

http://www.theguardian.com/money/us-money-blog/2014/may/04/bank-big-fail-stress-fed-america-economy

GREASY PALMS

 Palm oil and the old saying about grease my palm may share more than you imagine.

If you're a reader of labels like we are then you know about palm oil, also known as vegetable oil. It's been around for years. And if it were any more wide spread it'd be one of my old girl friend's waistline. Note here the emphasis on old.

Trails usually start out wide and get narrower as you go along. Like a lot of things in big finance, however, this one is just the reverse. But keep going you just might discover some big names. 

Hello, The World Bank and Deutsche Bank and Allianz, the owner of Pimco, the huge bond mutual fund run by Bill Gross, to name a few. Recall along the way Voltaire's comment about following a banker if he jumps out of a window 'cause there's mostly likely a profit in it.

Back to palm oil. Nearly one of every two products on your grocer's shelf contains palm oil. From cosmetics to food to household products, look carefully and you'll likely find some palm oil. It's even been mentioned as a possible bio-fuel to replace the fossil burning stuff. Much of it comes from Indonesia.

So that should tell you something about greasy palms.
http://www.spiegel.de/international/world/indonesian-villagers-driven-from-villages-in-palm-oil-land-theft-a-967198.html

THE BIG SQUEEZE

Could this be a warning sign? You'll have to decide for yourself. Sooner or later the punch bowl gets removed.

These things have a way of going on longer than many think. That's what makes timing so difficult. Few want to get out too late, but even fewer want to get out too soon. It's called seller's remorse. And the herd-driven MSM is one of the main accomplices. After all Joe Q. Public, via his and her retirement accounts, are just now transitioning to the equity party. And it's been a huge one.

The big squeeze is on. And the one thing the big squeezers have is patience. Got to give the tame rabbits time to get more than just their feet in the door. In the Elizabethan Era it was known as the art of coney catching.

Today: Same squeeze, different name.

Margin rates are to low interest rates as subprime is to defaults. There's more than enough burn room here to go around. So like the guy in the Dos Equis commercial always says: "Stay thirsty, my friends."

http://davidstockmanscontracorner.com/the-high-fliers-have-cratered-now-margin-debt-is-at-all-time-peakgdp-ratio-but-rolling-over/

EVERY WAY BUT LOOSE

Some might not see this post as having much to do about the market and that's fine. 

But there's been a sea change in Japan and we've written about it before, a mood change in the tiny once pacifist island country that held sway from 1945 until just recently.

It's like there's a new sheriff in town. With China and Russia sharing recent military operations and both countries' ties to Iran, the winds of change are in the air. 

Toss in Japan's historical relations with China, a bureaucratic emasculated EU, the current quagmire in the Ukraine, clueless US foreign policy and it's beginning to look a lot less like a kinder, gentler world. 

And by the way, did we mention North Korea?

Like it or not that's a world that can turn your investments every way but loose.
  http://www.businessweek.com/articles/2014-05-01/japan-prepares-to-enter-the-arms-market#r=rss

 http://www.reuters.com/article/2014/04/29/us-ukraine-crisis-russia-japan-idUSBREA3S0E420140429

GREAT GRAPHIC

More on the Ukraine. One should not forget there's an economic cost for Russia deploying all these resources that can't be helping their economy.
http://econbrowser.com/archives/2014/05/deployment-of-forces-ukraine

NO LIVE AND LET LIVE HERE

As the Ukraine situation seems to take daily turns for the worst, the man at the center remains Vladimir Putin.

Some say he's enigmatic. We say he's pretty easy to read if you care to read enough. 

And here's another view. Though there's much here we would differ with--e.g., Putin's alleged war against material superficiality--according to what we've read he has billions of material superficialities floating around his various financial accounts.

And there's that "fight against the feminization and effeminacy of society." We all know what that means. We're sure most woman will laud that one, especially those who protest that their femininity is being jeopardized just for being feminine.

Fascism isn't, as many misperceive, about equal opportunities. It's about equal outcomes.  

http://www.spiegel.de/international/world/speeches-by-russian-president-putin-betray-fascist-inspiration-a-967283.html

RANDOM READS

What's Up With The ECB?
http://www.fxstreet.com/analysis/be-ready/2014/05/02/

Over Confident?
http://money.cnn.com/2014/05/01/pf/bull-market.moneymag/index.html?iid=HP_LN

Industrials: What's Up With Them?
http://online.barrons.com/news/articles/SB50001424053111903843804579529790056170528?mod=BOL_hp_highlight_4

Why
http://m.thefiscaltimes.com/fiscaltimes/#!/entry/why-the-us-and-europe-cant-stop-putin-in-ukraine,5363e6e1025312186c00d3b9

The Crutch
http://www.reuters.com/article/2014/05/02/us-usa-pennsylvania-municipals-idUSBREA410AK20140502

TABLE OF CONSEQUENCES

If you can find the interesting part of this chart you're pretty sharp.

Earlier this year we took some profits in our energy positions. One of the reasons we took them is because they were at five year highs. The other reason is in this chart. You could call it the German Problem.

Germany gets much of its oil and gas from Russia, not a position we'd much want to be in.Three of the companies in the chart we've owned, we continue to own and we will be buying more on any reasonable weakness.

With the Ukraine mess Germany finds itself being pushed and pulled--pushed by the US and some its allies to impose more sanctions and pulled by Russia to lighten up. Given what we know about the commerce and amount of money changing hands between the two which way do you think Germany's going to go?

Owning energy companies that depend for a large slice of their business on foreign governments can be risky, to say the least, a fact Germany is learning the hard way. There is and has been anti-US sentiment in Germany and other countries. This is hardly new. What is new is it's growing.

The current administration is one of the weakest, least competent to occupy the Oval Office in foreign policy for some time. But there have been plenty of others. It's been an on-going drought in modern America. And as Robert Louis Stevenson noted long ago: "Everyone, sooner or later, takes a seat at the table of consequences." 

To comply with full disclosure we and our clients own three of the stocks in the chart.

IR

To many investors the mention of IR brings to mind interest rates.

And that's logical since interest rates play such a big role in one's life. But there's another IR, one made famous by former Fed Chair Sir Alan Greenspan.

Greenspan popularized the term with the fawning MSM's help during the dot.com bubble, a bubble he did nothing about albeit he's still denying his pivotal role as recently as this week. It's, ok Alan, those who lived it know the truth.

Now the folks at GMO, a huge money management firm led by the noted Jeremy Grantham, are exhuming the term again, most likely something Sir Alan probably won't much care for.

Greenspan first uttered the term in a December 1996 speech by the same name, Irrational Exuberance, a term rumor has it he copped from Yale economist Robert Shiller during a conversation the two had the day before.

http://www.businessinsider.com/gmo-stock-market-irrational-exuberance-2014-5#!Hpgyb

UNEMPLOYMENT LOWEST LEVEL IN SIX YEARS

 

Now that's an eye-catching headline for you, one the current administration will certainly like.

Toss in the wonks at the Fed and main stream members of the Fourth Estate and, as country singer Jerry Jeff Walker noted in one of his songs: "We got a party going.'"

But as one of television's college football talking heads is noted for saying: "Not so fast!" This is a premature quantity over quality celebration by mostly choir members. One of the constant props for the bulls is Joe Q. Public hasn't pried open his wallet yet in this market.

Time again for another "Not so fast!"  According to today's Wall Street Journal http://online.wsj.com/search/term.html?KEYWORDS=retirement+investors&mod=DNH_S retirement investors are flocking back to the equity abattoir:

Retirement investors are putting more money into stocks than they have since markets were slammed by the financial crisis six years ago...Stocks account for 67% of employees' new contributions in March.....That is the highest percent since March 2008, when stocks were teetering under the weight of mounting mortgage defaults, and compares with 56% in March 2009, when the market hit bottom.....

A client of ours, a lady with more money and MSM television watching time on her hands than anyone should probably have, called us back then and insisted on selling everything. It took much time, effort and persuasion to get her to add to rather than sell some of her best holdings.

A while back when the S&P 500 nudged its new high she called again, not to thank or praise us, but to say she knew it all the time. That's human nature. Use it, trade it, but whatever you do, make money off of it. Behind all the companies and the numbers and talk are humans. Unpredictable humans.

Now this is hardly a siren song not to invest. It's a siren song to do your homework. The Fed  has already exploded one bubble and they got their eye on the next. 

Recall all those old westerns where the bad guy and the good guy at some point end up facing each other. The inflection point usual came with the bad guy saying something like: "Fill your hand." Well, here's it's your lap. Make sure its full otherwise those boys and girls will fill it with something you won't particularly like.



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