EXPOSURE TO RUSSIA

This is an excellent post. A couple of things here that are important. Usually there's more than meets the eye and you can't tell the players without looking. Sometimes that means digging.
 http://www.marctomarket.com/2014/05/great-graphic-bank-exposures-to-russia.html

RELATIONSHIPS

 Assumptions sometimes have an unpleasant way of guaranteeing one the wrong answers.

One of the big assumptions that trip up many of us is that relationships always hold. It's easy to fall into, after all once a body gets in motion it tends to stay there.

Traders in the carry trade sooner or later learn this. Gold after a 12 year run-up one day just stopped.

Years ago performer Garth Brooks had a song with a line about his significant other saying she may be in California but her heart's in Oklahoma only one day to return home from work to discover she's gone. There were lots of signs along the way. There usually is. 
http://www.businessinsider.com/citi-equities-no-longer-follow-earnings-2014-5?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A%20businessinsider%20%28Business%20Insider%29#!JALaO

That's what this chart is about, a once relied-upon relationship that somehow changed. For more proof read Paul Tudor Jones' recent comments at a New York conference peopled by market heavyweights. Jones is a legendary macro trader. Here are two quotes from his talk.

Summing up this year so far:
"Macro trading has probably been as difficult as I have ever seen it in my career."

And: "What's obvious in macro is obviously wrong."

 Read more: http://www.businessinsider.com/sohn-conference-live-blog-2014-5#ixzz30xHEGTOi

  

JAPAN'S MILITARY

 
As regional tensions seem to be on the upswing around the world more nations appear increasingly proactive about protecting their borders. In light of the Ukraine flare-up, as we previously mentioned, Sweden along with some others recently announced a need to increase defense spending and protect its borders. 

Japan is ramping up its defense sector. 

http://www.businessinsider.com/japans-smaller-military-could-match-china-2014-5?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A%20businessinsider%20%28Business%20Insider%29#!Jnxo8

SHIVERING IN THE EU

 

We've written before about the paucity of leadership in the EU in what could easily be described as a modern-day rest home for brain-dead, incompetent bureaucrats.

This is not the first time nor will it most likely be the last when Russia has either closed or threaten to close the valves. Nero supposedly fiddled while Rome burned, but EU bureaucrats took what they thought would be cheap gas forever and confused politics with business mixed with a huge slice of corruption as the side dish over economic and energy independence.

It's a common bureaucrat malady. No wonder the EU is trembling over its bank accounts. With any luck there will be a lot more shivering come next winter.
http://www.isaintel.com/

NOT EVERYONE IS BUYING

Market guru says home builders over cooked, young people aren't buying and shares set for pullback in prices.
http/://blogs.marketwatch.com/thetell/2014/05/05/jeffrey-gundlach-shorts-home-builders-as-young-buyers-shun-mortgages/

Meanwhile, mortgage origination applications took big hit in 1Q from one year ago for same period at 10 largest banks. Can't blame it all on frigid winter.
http://m.thefiscaltimes.com/fiscaltimes/#!/entry/housing-slowdown-hits-large-banks,5367eed5025312186c02072f

HOT MONEY

http://en.wikipedia.org/wiki/1997_Asian_financial_crisis

To many it was a long time ago, 1997 in fact, when the Asian Tigers, as they were known, took the count. Though the reasons were legion, one of them was so-called hot money. 

We're not suggesting there is any sort of parallelism here. What we are saying is hot money can be defined in many ways and it can show up in some of the strangest places, like your friendly regional or neighborhood bank.

Have stranger things happened, you bet. Being long on greed and short on history is usually not a good idea. But as they say: Time will tell.

 http://www.minyanville.com/business-news/the-economy/articles/Peter-Atwater253A-The-Next-Banking-Crisis/5/5/2014/id/54848

THE YIELD CHASE

The chase for yield continues. 

It's hard to see how this will not somehow end badly. Central bankers have created another kind of bubble, what we call in this instance a reverse bubble that bursts when rates go up more rapidly than investors expect.

Too many of these yield chasers will be left holding the bag, burned again in part by their own greed and by putting any trust in these clueless bureaucrats.

It might sound harsh but that's often the nature of reality.
 http://soberlook.com

AROUND THE WEB

1. SWISS FREEZE.
http://www.reuters.com/article/2014/05/04/us-ukraine-crisis-switzerland-idUSBREA4307N20140504

2. GDP GROWTH CHART



3. IT"S ABOUT READING
 

    Trinity College Library Dublin

4.The S&P 500 gained 1.9% in the first four months, the smallest move in either direction since 1994.
                                                                   Ben Levisohn, Barron's
5.Too Soon For Rate Hike
http://www.marketwatch.com/story/feds-fisher-too-soon-for-talk-of-rate-hikes-2014-05-04-131032417

6. Deflation Versus Inflation

 http://online.wsj.com/news/articles/SB10001424052702304831304579541592785029998?KEYWORDS=simon+nixon&mg=reno64-wsj

7. April ended on a fairly positive note with all of the major US average up about 1% for the week. That comes as we head into what has been - at least over the last 5 years - the worst month of the year for the S&P 500.  Courtesy of our Seasonality charting tool, here is the phrase "Sell in May and go away" pictured in one chart:
 
ChartWatchers, the StockCharts.com Newsletter

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