WEEKEND READS

In our recent post "Long Overdue ECB," we expressed our doubts about Mario Draghi and his merry band of ECB bankers doing much if anything come June, their next so-called flash point for action or inaction. Here's a quote from Marc Chandler of Marc to Market. It seems we're not alone in our assessment.

We have yet to be persuaded that the real drivers of demand for the euro are going to be addressed by ECB action in early June. The demand for euro is coming from the large regional current account surplus, the strong foreign demand for euro area bonds, and continued deleveraging and capital raising by euro banks, including the sale of portfolios of distressed loans to foreign (largely US) investors.

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The week ahead is full of possible pitfalls for a market that's acting more schizophrenic weekly. The DJIA closed Friday at its second all-time record high this year while the former darlings in the small caps sector took another hit. For those who pay attention to 50-day and  200-day moving averages it hasn't been pretty for the smaller guys lately.
http://www.cnbc.com/id/101660140
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 Forget the rain and the plain. Some are saying stocks in Spain are looking pretty cheap. At least that's the take from a recent investment conference in Madrid.
http://blogs.marketwatch.com/thetell/2014/05/09/spain-and-its-dirt-cheap-stocks-are-coming-back-in-style/
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 William Browder is an American businessman. The television show 60 Minutes did a piece on him earlier this year. Some know Browder as the man who stood up to Russian President Vladimir Putin. Browder owing to business complication he had in Russia went from being one of that country's biggest boosters to its harshest critics.
http://online.wsj.com/news/articles
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There are many takes on inflation and when it will start spiraling up. Here's another one. As always read and decide for yourself.  http://www.economicpolicyjournal.com/2014/05/why-next-acceleration-in-price.html
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Horace Mann advised folks to go West. We don't know if Russian President Vladimir Putin ever heard of Mann, but Putin's looking East to China to help buoy what some are saying is an already flagging Russian economy owing to sanctions.
http://www.bloomberg.com/news/2014-05-08/putin-said-to-seek-chinese-money-with-limits-on-platinum-gold.html
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The US is planning on becoming a much bigger player in exporting natural gas to the EU by the end of the decade. Is this just a knee jerk bureaucratic reaction? Is it truly in the public's  interest? One thing remains clear; this is not an issue the public should fall to sleep on. http://oilprice.com/Latest-Energy-News/World-News/U.S.-To-Move-LNG-to-Help-Europe.html
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THE PILE GROWS

Ever been to one of those meetings or church services where they ask you to turn to your left, your right, your rear and in front of you and greet someone?

Well, we'd like to challenge you a bit more, sort of up the ante a notch. Next time you get a chance turn to your left, to your right, to your rear and then to your front and ask each person if he or she ever head of OER.

It should be a bit of fun and we think you'll fine the responses quite interesting. For the record here's what OER is:

OER is a Washington made economic delusion if there ever was one. For example, more than $1 trillion of our $17 trillion GDP consists of OER according to the Commerce Department. Yet not a single human being has ever paid or even seen an OER. Instead, its an “imputation” made-up by government statisticians based on a survey questionnaire that is even more fantastical.

The above quote is an excerpt from economist David Stockman's recent blog, STOCKMAN'S CORNER The “Un-Flation” Watch: Rents Up 4.5% Y/Y, But OER Far Below

If you sniff a boondoggle or a white elephant here your eighth cranial nerve's working just fine. Now you don't have to like Stockman. Maybe he's too far right or too much of an ex-wonk or whatever. But there are plenty of others, agenda-less people, who recognize a farce when it comes dressed up in economic bureaucratic BS.

No, using the BS term is neither mean-spirited nor crass. It's pure, unvarnished truth, something that's rarer today than a Brasher doubloon gold coin.

For more about this Washington-centered bureaucratic BS. http://davidstockmanscontracorner.com/the-un-flation-watch-rents-up-4-5-yy-but-oer-far-below/?utm_source=wysija&ut

AROUND THE WEB

Great Moderation
http://www.cnbc.com/id/101659883

Lurking Inflation
 http://www.moneynews.com/newswidget/inflation-Fed-banks-money/2014/05/09/id/570487/?promo_code=13538-1&utm_source=13538The_fiscal_times_finance_feed&utm_medium=nmwidget&utm_campaign=widgetphase1

Sovereign Hot Money?
http://www.institutionalinvestor.com/Article/3335591/As-the-Fed-Tapers-Its-Treasury-Purchases-Other-Central-Banks-Step-In.html#.U21Jfnav-kw

Geo-economic Warfare
http://www.isaintel.com/

Up Coming Egypt Election
http://www.reuters.com/article/2014/05/09/us-egypt-sisi-religion-idUSBREA480G820140509

All Hail Kale
http://www.businessinsider.com/kale-consumption-has-exploded-in-the-us-2014-5?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29

Summing Up Week
http://www.ritholtz.com/blog/

Research Like A Pro
http://www.seeitmarket.com/5-ways-interpret-research-like-pro-13595/

How Much?
 http://freebeacon.com/national-security/report-pentagon-paid-150-per-gallon-for-green-jet-fuel/

Liquidity Trouble Ahead?
 http://soberlook.com/

BUBBLES ON THE RIGHT, BUBBLES ON THE LEFT

Another bubble is the belief that the Federal quantitative easing policy is sufficient, by itself, to generate a self-sustaining recovery in the domestic economy.

“If you think about it, the shoulders of responsibility of catalyzing domestic growth have been on the federal reserve, because our political leaders in Washington D.C. are incompetent, inert and partisan,” Kass said.

The above is an excerpt from today's post at http://www.testosteronepit.com/ from an interview with Doug Kass, President of Seabreeze Partners Management, a long/short fund. Kass discusses what he thinks are the current bubbles, note emphasis on plural not singular, bubbles floating out there now.

NEED VERSUS WANT

You can't always get what you want. But if you try sometimes you might find that you get what you need.   The Rolling Stones

 
There's a huge difference between what people want and what they need. As this excellent chart from 
http://www.minyanville.com/special-features/from-the-buzz-banter/articles/Buzz-on-the-Street253A-What-Traders/5/9/2014/id/54914?refresh=1 shows, if you're trying to get what you need today it's going to cost a whole lot more.

And if you think the government, central bankers and their shills, MSM, don't want you to buy into the no-inflation nonsense, it don't smell in the nation's capitol when Congress is in session.

LONG OVERDUE ECB

The market in the U.S. is long overdue for a pullback.

Problem is who gets to define long overdue, central bankers, MSM or my old girlfriend. A friend told me some time ago he was long overdue to dump his girlfriend. But he waited so long she ended up dumping him.

If this sounds like a group of wait, watch and plan central bankers who're running this charade, you might be onto to something. Be thankful you don't have to sit through those ECB meetings surrounded by 24 central banker bureaucrats. Talk about grim; that could probably make a vicar at a wedding wail.

There's probably more hedging going on in two hours there than most hedge funds do in a year of Sundays. The dragster, ECB President Mario Draghi, parsed some choice words as is the style of central bankers the world over.

In not so plain English, Draghi said the committee settled on more of the same; in other words, they were going to sit tight until his in-house economists update their forecast for inflation early next month.

Afterwards Draghi told a press conference: "I would say that the governing council is comfortable with acting next time but before we want to see the staff projections that will come out in early June."

Now if you like bureaucrat double speak here's another quote: "There is consensus about being dissatisfied with the projected path of inflation. So there is a consensus with not being resigned to expecting this," he said. "We have a consensus about action, but after seeing the staff projections in early June."

Consensus is just another term for paralysis. In the market if you wait to get a consensus before you place a trade, you going to miss most if not all of the move assuming there is one. 


   

AROUND THE WEB

1. Question: When was the last time the US Federal Reserve hiked interest rates?
 Answer:   As to the last time the Federal Reserve lifted interest rates — that was June 29, 2006, when the Fed lifted the base rate to 5.25% from 5%

Question: When was the last time the Bank of England hiked interest rates?
Answer:   The last time the Bank of England raised their interest rates was July 5, 2007, when the folks on Threadneedle Street lifted the base rate to 5.75% from 5.5%.
 http://blogs.marketwatch.com/capitolreport/2014/05/08/no-you-probably-havent-seen-a-rate-hike-via-twitter/

2. For a couple of interesting charts on bulls and bears click on link below.
\http://www.bespokeinvest.com/thinkbig/2014/5/8/fewer-bulls-than-bears.html

3. Inflation Slows in China
http://www.bloomberg.com/news/2014-05-09/china-s-inflation-slows.html

4. Nationalistic Surge Could Affect EU Elections
http://www.reuters.com/article/2014/05/08/us-sweden-primeminister-idUSBREA4712620140508

5. More From Yellen
http://www.thefiscaltimes.com/Articles/2014/05/08/Minimum-Wage-Hike-May-Hurt-Jobs-Yellen-Says

6. Big Drug Money Big Banks
http://www.ritholtz.com/blog/

DO YOU HEAR WHAT I HEAR?

It's trite but true: They don't ring a bell just before markets go south.

And sure many folks toss around a lot of verbiage about foretelling indicators, but in reality how many actually hear or see them before the fact. You can probably count them on the hand of a one-armed-three-fingered paper hanger.

Still, it's fun, entertaining and sometimes instructive to read about all those supposed indicators.
http://finance.yahoo.com/blogs/the-exchange/what-kills-bull-markets-150159636.html

EXPECTATIONS

 
Mortgage rates hit new 2014 low as 30-years fixed rates dropped to 4.21% from 4.29%. Last time rates were this low was last November when the 30-years rate hit 4.16%.

Concerns about deflation worldwide along with a move to the so-called safe harbor have helped keep rates on US Treasury bonds low. But investors need to be asking themselves: Could this be the quiet before the storm?

Most started the year expecting rates to rise and bond prices to fall as the Fed rolled out its tapering program. A lot of investors got caught on the wrong side and just may get caught again if rates go up faster than expected. As we noted in a quote from macro trader Paul Tudor Jones recently the obvious isn't always obvious.

Many investors have been expecting a pullback in this market for a while. It hasn't happened yet. Few thought energy and utility sectors would hold up this well.  In late December last year Forbes ran an article, '3 Standout Sectors for 2014." http://www.forbes.com/sites/tomaspray/2013/12/26/3-standout-sectors-for-2014/  Energy and utilities didn't make the list. Technology was one of the sectors that did make the list.

Much of the volatility investors expected  in 2014 also hasn't shown up yet. And how many anticipated the turn around in bond prices for those EU periphery countries like Greece and Portugal? Anyone really believe they've found economic religion?

How many expected ECB Pesident Mario Draghi, the dragster, to wait so long to depreciate the euro still trading near $1.39. Draghi's done much talking but showed little action. Now he's waving the month of  June in investors' faces. Maybe we need to change his sobriquet from dragster to muddler as it seems he keeps hoping this thing will cure itself.

 In the meantime, we expect to see the euro closer to its true value $1.20
http://money.cnn.com/2014/05/08/news/economy/europe-ecb/index.html?iid=SF_BN_River 

A BIGGER PROBLEM THAN MANY REALIZE

The Ukraine has been a particular problem with respect to natural gas exports for Russia, because it has used a significant share of Russia’s natural gas exports, without paying market price for them (Figure 4). In fact, some of the time, it didn’t even pay the below-market price the Ukraine had contracted for, for natural gas exports–the reason for the Ukraine’s debt to Russia.

The above is an excerpt from "Russia and the Ukraine--The Worrisome Connection to World Oil and Gas Problems."  Here's the link to the full report. http://ourfiniteworld.com/2014/05/07/russia-and-the-ukraine-the-worrisome-connection-to-world-oil-and-gas-problems/#more-3895