Here's what we'll call a recent central bank round up.
You might have already read our post on what Pimco's Bill Gross had to say about interest rates, bonds and his new neutral, a 2 percent yield on 10-year Treasuries.
--The Fed noted US rates will most likely stay low irrespective of jobs and inflation data.
--The Bank of England ruled out an interest rate hike for now, again despite improving jobs and manufacturing reports.
--The Mario Daghi-led ECB has been titillating investors for a while now without any simple follow up or action.
It reminds of the old joke about the city of Houston's horrid summer humidity. A couple park their top-down convertible in Lover's Lane late one night and start getting intimate. When the guy reaches for the button to put the top up for more privacy, he accidentally switches on the air conditioner full blast.
The shock of cool air blows the lady's dress up around her neck to which she replies: "That's great! But doesn't anyone do anything by hand any more."
--In Japan it's Abernomics City where consumers have been on a spending spree to escape an onerous consumption tax. If bond yields there--already below those on US bonds--get any lower they will turn into a politician and run for public office.
So here's a simple question. Will these falling yields at some future date turn into the proverbial falling knife? And if so who gets burned and how much?
Use to be an old saying: Cooking with gas. Not only is gas abundant today, it's a clean burner. So when in doubt or you need to obfuscate, try a little stealth.
If you like the prospect of modest economic growth over the next few years, you'll like Pimco Chief Bill Gross' characterization new-neutral.
Back in 2009 Gross concocted the term new normal, a period of low inflation or even deflation. Technology was killing jobs faster than a politician's speech on a warm summer evening puts people to sleep. The great immigration was on loosing more labor into the open market and the financial crisis canceled the retirement plans of a pack of baby boomers.
Too many workers, too few jobs. Consumers were tapped out but didn't know it yet. Like most in life they need to be told. And they finally were.
New neutral suggests the global economy is transitioning from the financial crisis recovery period to what could be called for want of a better term, just plain boring. In short, it foretells a low Fed lending rate. Low here means below what many consider normal. According to Gross, the Middle America transplant, it's around 2%.
Now that's an interesting proposition. What is considered normal in anything? We appreciate Gross and his fellow word smithers and their cuteness. But it's really dangerous to depend on a band of so-called bankers to determine or define anything let alone below normal. (See Mario Draghi and the ECB.)
One could ask how many of these people are in fact normal? And by whose definition?
The whole thing smells of an economic scam to keep the eyes of working folks off inflation and declining purchasing power. In some circles it's referred to as highway robbery by stealth.
After all, restive masses are not a good thing for markets, bankers, money runners or politicians.
Call it a dual of the 3s with the S&P 500 up 3% and the Russell 2000 down 3% so far on the year.
How that dual plays out is anyone's guess. But for now the big question is does it represent a true rotation away from last year's fast growers to this years bigger, perceive-to-be safer companies.
It's a question on many investor minds these days. It's also part of the schizophrenia of this market. For many small caps are a proxy for the US economy since most do very little beyond US borders. Just maybe last year, the year of small caps, wasn't predicting bigger, better economic times ahead for this year. Thus reality sets in.
With very little effort you'll find strong opinions on both sides, a brief respite before small caps get their second wind or the lull before the storm. On a valuation plane small caps appear expensive. The Russell 2000 changes hands around 18 times forward earnings. For the last 35 or so years that average has been mid-way between 15 and 16 times earnings.
Another possible negative is small caps offer little in the way a storm port since, unlike their big brethren large caps, most pay little if any dividends. And like it or not dividends have held center stage for a long while now.
So the vigil continues.
Is this just a war of words or a new phase of protectionism?
Based on some of the rhetoric and France's proposed new law to limit if not interdict takeovers or buyouts by foreigners protectionism appears on the rise. With the French it's nothing new.
Not too long ago the French government had a hissy fit about one of it's largest pharmaceutical firms closing down a research lab. There was some anti-foreigner talk then.
One thing is certain a new wave of protectionism will hardly be nourishing for global markets.
http://www.cnbc.com/id/101674536
Far be it from us to ever defend anyone or anything connected to the PC NYT.
We have few doubts, however, that an hypocritical, scum rag outfit like the Times would stoop to such and try to mask it some way or another.
"Meaningful difference" tells the tale. So much for the rest of the story.
We don't know any of the participants nor do we care to. What we do know is a skunk when we smell one.
We don't normally take sides. In fact, we strive very hard not to. But in the semi-free, English-speaking world it's extremely difficult to find a more agenda-driven outfit. Maybe the Washington Post.
Paying a female less than a male doing the same job is so New York Times no further comment is necessary.
In recent years there's been a lot of stuff, most of it nasty, written bout the earth's second most abundant source of energy.
It's no stretch of the imagination that more than a few see it as a nasty-burning, hydrocarbon-producing four lettered word, coal. As the article linked below points out, much energy has gone into putting the dirty-burning stuff out to energy pasture once and for all to be seen, smelled and breathed no more.
Not however with much success. "Coal generates about 40 percent of the world’s electricity and is poised to dethrone crude oil as the largest energy source by 2020." Not only is coal abundant, it's cheap, "cheaper than other energy sources because it’s accessible, easy to transport and simple to store."
Beyond that the black tarry stuff has a humanitarian history to it most of the warming climate crowd choose to ignore. In this age of rich versus poor, haves against have-nots: "The power and warmth it generates has helped lift millions out of poverty and misery in China, India and other emerging nations." How many climate-warming freaks can claim that?
How much coal is there? Well, according to some based on 2012 production, there's enough to keep global skies cloudy and gray for about another 130 years. By some estimates China consumes as much coal as those bad boys and girls in the US consume oil. What oil does for the United States coal does for China, "nourishing economic growth and choking cities."
The future of coal as an energy source is uncertain. The climate change crowd is larded with if-we-don't-want-it-you-can't-have-it either people. Yet as the recent Ukraine situation and Japan's horrific earthquake reminded, abundant cheap energy is hardly a given. Coal in many quarters has been getting a second look.
The chunky black stuff has been down for a long time, but it's still a long way from being out. We'll know more come the next frigid winter, something those climate-warming worry warts should openly embrace.
http://www.bloomberg.com/quicktake/confronting-coal/
Call it what you will it's a schizophrenic stock market much different from 2013.
With yields on 30-Treasury bonds down more than most at the beginning of the year expected, share prices on the DJIA and S&P 500 hitting new highs while on the Nasdaq and Russell 2000 investors seem to be leaving the party before it gets out of hand.
There's an old bromide about which is the more painful of the two, plunging off a cliff or getting bitten to death by a duck. Not all bear markets are the same. Back in 1973-74 it was a steady, almost daily drubbing with little respite for air. More recently they have played the plunging off the cliff game.
In today's Financial Times columnist Martin Wolf once again took on the Dragster, ECB President Mario Draghi and his bankers for being, if they ever do something, too little and "vastly too late."
Draghi slid one by the market in 2012 with his "within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough." That was then. This is now. It's highly unlikely the market will settle for such bureaucratic jawboning this time around. Draghi's and his band of bankers' put-up moment draws nigh.
Confirmation is a wonderful thing, especially when one get it. But as we quoted the rolling Stones before, you don't always get what you want, but with a little luck and some hard work you might get what you need.
Instead of the Land of the Rising Sun under Abernomics it's become the House of Falling Cards looking for a convenient spot. If Japan's debt to GDP ratio were any higher it's be a street drug. Assuming anything can be dangerous. Assuming a little economic reform sprinkled with some lukewarm austerity will correct the troubles in these EU peripheries is plain dumb.
Ireland, Italy, Spain, Portugal and Greece all have debt to GDP ratios that would send a tee totaling vicar searching for the nearest pub. Bureaucrats and bond-buying investors are acting too much like the best is yet to come.
And that's the confirmation to pull this whole thing off they need. But like the song says you don't always get what you want.
The can't protect our borders but when it comes to keeping "an endangered species of mouse from being trampled by cattle," you get the idea.
Commissioners in Otero County voted 2-0 on Monday
night to authorize Sheriff Benny House to open a gate allowing nearly
200 head of cattle into the 23-acre area despite Forest Service
restrictions. A third commissioner was out of town for the vote.
We are reacting to the infringement of the U.S.
Forest Service on the water rights of our land-allotment owners," Otero
County Commissioner Tommie Herrell told Reuters. "People have been
grazing there since 1956."
http://www.reuters.com/article/2014/05/13/us-usa-newmexico-cattle-idUSBREA4C0XV20140513?feedType=RSS&feedName=domesticNews
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When housing prices before the subprime-led crash were running amok many claimed it was only a bicoastal thing with California, Nevada, Florida and parts of the east coast. Turned out to be more national than many thought.
Those who've been ballyhooing the most recent recovery in home prices are trying to sell a different tune this time along the lines that the rising tide has lifted all houseboats. Well, maybe. But there are some signs it ain't so.
http://www.marketwatch.com/story/7-places-where-property-prices-are-falling-2014-05-13
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French President Francois Hollande appeared yesterday to be grabbing a page from a fellow EU bureacrat, ECB President Mario Draghi, suggesting that the country was on the road to recovery. According to one report, Hollande's intent was to allay fears about tax hikes and spending cuts two sore spots with union members.
If the French recovery, as Hollande says, is any where at hand no one has seen it yet. So we have Draghi searching the horizon far and wide any signs of inflation and Hollande on the lookout for recovery.
Elected two years ago among some high hopes for change, Hollonde's popularity ratings recently hit an all-time low with just 18 percent of voters approving his performance as France still has a record 3 million-plus out of work. This is just one of the reasons the French are hardly interested in any provisions that smack of German economic probity and a strong euro.
Nobody likes austerity policies less than unions.
http://www.bloomberg.com/news/2014-05-13/hollande-economic-recovery-elusive-as-french-face-taxes-cuts.html
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That's the title of this report from CNBC.
One wonders if these traders of late have been talking to ECB President Mario Draghi, the EU dragster. Draghi and his crew of ECB bankers have been looking for that elusive sucker so long it reminds of a popular song in the early1980s, "Looking For Love in All The Wrong Places."
According to the report: "The PPI is expected to increase by 0.2 percent on the headline and by the same amount, when excluding food and energy. PPI rose 0.5 percent last month."
We hate to bring up food and energy and so do those bureaucrats who supposedly track the price of such things. But oh well. Here it goes. This is from http://www.zerohedge.com/news
Bloomberg notes,
consumers in the U.S. will probably pay the most ever for meat this grilling season as costs for pork and beef surge,
according to the American Farm Bureau Federation.
We can't say much about those traders, but we doubt they're going to find much in the PPI on Wednesday or the CPI on Thursday. Take a tip from that old song. Those are the wrong places.
Here's what we'll call a recent central bank round up.
