STORY HAS IT

 

Story has it the Greek philosopher Diogenes one day picked up his lantern and went traipsing around the countryside looking of an honest soul.

And somewhere along the way he grabbed a space on a  vessel, sailed across the Atlantic, landing in New York where, after quickly wolfing down two Nathan hotdogs at Coney Island, he hitched a ride on a Greyhound bus to Washington, D.C.

After about two weeks of dogged searching, and we only have this on hear-say, so a little slack might be indicated, he pulled up weary and worn near the Washington Monument where he reportedly said: "Screw it!" And tossed his lantern away.

In a recent Wall Street Journal/NBC News/Annenberg survey 49% of Americans said Washington has no responsibility to assist the Iraqi government in protecting it from insurgents attempting to overthrow the government there.

Want to guess why Republicans are in such poor stead these days?  We aren't sure you do, but here's one of the reasons anyway. Pennsylvania Republican Governor Ton Corbett, facing a $1.5 billion budget gap and an re-election bid he's trailing in, is considering slapping on a severance tax drillers would pay for gas gathered from wells.

Pennsylvania is one of several drill-boom states profiting form the shale boom where in 2012 gas production grew by 72% over 2011. So reckless politicians, past and present, are salivating like a big dog watching someone eat a juicy steak dinner.

Pennsylvania drillers already pay a hefty politically-correct levy called an impact tax that in 2013 totaled $225 million, some of which gets spread to counties where most of the drilling takes place. Now for your next guess, where do you think they want to waste some of the funds if the bill passes? It's a difficult seven letter word but we'll give you a hint, schools.

It looks like we Americans are getting about as happy as a bunch of hog in a huge slop pen. According to one report, consumer confidence just hit a six-year high, the highest level since 2008. So the report states consumer confidence in June registered 85.2, up from 82.2 in May. Consumers apparently are also more upbeat about jobs with those positive about jobs prospects in June registering in at 14.7 versus 14.2 in May.

Until the next time, that's the way the story has it.

OUR VIEW

A recent Financial Times editorial (6/25/14) on global warming, "Common Sense On Climate Change," should've been titled "A Leaky Faucet" because if it had any more leaky points it would be labeled such.

Let's start at the bottom first.

American politics has been polarized since day one, not any different from the editorial writer's apparently beloved UK. The only place in politics that bipartisanship ever prevailed is in the dank, foggy misguided minds of do-gooders and editorial writers.

If those pathetic, incompetent Republicans via some miracle gain the White House and Congress, a feat that would put the Immaculate Conception in third place in the Guinness Book of Records, one can only hope they would find the testosterone--certainly not a given with this crowd--to roll back all the damage this administration had done. A consummation devoutly to be prayed for, religious or secular.

Now when it comes to Mayor Bloomberg the editorial writer and I both know deep down inside he really believes climate change is caused by over-sized, 16 ounce sugary drinks in all those plastic cups. If the wacky, schizophrenic Bloomberg were anything but a spoiled billionaire, he'd have the influence of  a toothless chip monk. Money buys its privileges.

Next, the writer comes up with this cutie-pie "....with the aim of moving past the reflexive partisanship that too often defines the debate in America."  One can only suppose the writer suffers from the shallow belief he and his fellow Brits have cornered the market on studying British economic and political history. Such understated condescension is truly British.

Then there's a few of the main characters in the drama, Henry Paulson, Robert Rubin and others, all along with Oil Can Harry excellent choices for villainous roles in a decent Shakespearean yarn. Most are former Goldman Sachs hacks with an axe to grind that has nothing to do with putting money in your pocket and everything to taking it out. 

Along with the anti-gluten hysteria, it's our belief that climate change or global warming, take your pick this week, will turn out to be one of the biggest scams of the 21st Century. We'd give it top billing but, alas, that most likely will come from one of two unique American places, Washington, D.C. or Wall Street. 

Meanwhile, here's another view about the fallacy of climate change.

http://www.dailyspeculations.com/wordpress/?p=9459

That's our view. We hope you know yours.
 

YOUR GUESS

It's early morning on another seemingly monotonous weekday as the members of the board of governors, still half-awake, mechanically file in and take their seats around the huge mahogany table in the center of the dreary room. All were awakened from their slumber hours earlier to attend an emergency meeting.

Something has gone terribly wrong. Unexpectedly wrong, according to the message.

First the big central banks flood the world with unprecedented easy money and then, owing their third-rate abilities as economic fortune tellers, they've had to crank up rates faster and higher than anyone thought with debt in the developed world  much greater than before the whole financial mess started.  It's a portrait more dreary than the big room.

Without much imagination this could be the setting for an opening scene in economic blockbuster that's coming to a playhouse near you.

Inflation is stable so the gurus say. And there's a new normal on the interest rate horizon. Likewise for employment. Wages are flat with only the weakest of chances they'll rise significantly anytime soon. The typical boom has unsurprisingly led to the typical bust. As interest rates fell debt accumulation strolled the upward path. It's an easy equation.

Like most ointments, however, more than a few flies usually find their way there. Neither in the U. S. nor in Europe has much, if anything, been done to repair structural weaknesses. Leaders as they have in the past opt for the business as usual road. In the U.S. that's anemic savings and media-urged excessive consumption.

In the stock market front-running is supposed to be illegal. But apparently nobody has informed MSM yet. Choose your cheerleaders carefully .

Americans will consume almost anything, especially if its edible. It's the American disease and not content with it ownership, many are now trying to export it to far flung places like China. Concern about inflation in the U.S. recently took a hit when Fed Chair Janet Yellen fluffed off the risk of rising prices as just so much "noise." Still others believe that there is not enough inflation premium in U.S. bonds.

The seas are currently calm. Complacency seems to be spreading faster than a bad case of  tina pedis in July.  Bears are growling, bulls howling about the possibility of a long-term ride with some even suggesting an S & P 500 that could hit 4,200 in 10 years. Both sides daily roll out reams of  data to support their case. Meanwhile, with few exceptions, just about every investment from bonds to commodities to equities to gold are so far up on the year.

To date foreigners have expressed a huge hunger for  U.S. Treasury bonds, partly owing to the safe haven aura. If  the Chinese catch the American disease that could lessen their appetite for that widely hawked American dish.

So who is correct? Who is to say? But one things remain sure: You're guess is just about as good as the next guy's.

To the see what the next act entails, however, most of us will just have to exercise another attribute not very common in America, patience. 

In the meantime, we'd love to know your guess.



  

OUR VIEW

 

A blurb in today's Financial Times notes, "France is seeking help from its European partners as it seeks to limit US punishment of BNP," the big French bank caught up in financial irregularities. 

The U.S. has been on the warpath, taking to task and levying fines against other banks such as HSBC, ING, JP Morgan and is about to punch Citigroup where it hurts most, the wallet. Now France is France and it will try to weasel out of whatever it can weasel out of. That's a given and not the point here.

Maybe France and Argentina ought to get together and form their own union and we could all watch to see which one evaporates first. Maybe some Chinese free enterprising sucker could even make it into a successful video game. U.S. consumers will consume almost anything, especially if it's edible.

The strong arm policy and money grab of U.S. regulators leaks over into foreign policy, a fact that apparently never dawns on these bureaucrats. A few short weeks ago this administration was asking for foreigners to help sanction Mr. Putin during another one of his passive-aggressive moods.

Shareholders of Citigroup are calling for the bank's leaders to suddenly grow a pair and take the matter to court, owing to the excessive amount of the fines and harsh sanctions the U.S. government has been ladling out. Has anyone asked where that money goes? And even more important does anyone ever get an accurate report.? Before that happens you could probably commandeer the keys to Fort Knox and discover all the gold that isn't there.

If the former Bush administration had it feet held to the flames for its black-and-white, you're-either-with-us-or-against us attitude--and it did--this administration from the Justice Department to the IRS to Benghazi has taken intransigence to whole new level.

The message has been clear: Disagree with us at your own peril. For an administration that will most likely go down in history as one of the most corrupt in history to hold the office, it's not surprising. Bill Gross may have his New Normal or New Neutral, but these people are the New Neocons. The only difference is these guys and gals are from the left.

That's our view. We hope you know yours.

THIS DIMENSION

   
Of late it seems more people are talking about inflation and it's possibly putting in a Phoenix-like performance soon.

Economist Irwin Kellner writers on MarketWatch: "For the moment, it’s all good. After veering dangerously close to deflation, the rate of inflation has picked up and has now reached 2% — the fastest pace in 20 months. As recently as eight months ago, the 12-month change in consumer prices was only 1%."

As we've said many times before inflation is a function of who's measuring and how they measure it. And it's one of the safest bets you'll ever make in this dimension that bureaucrats measure to their advantage not yours.

So even though the numbers Kellner tosses around, 1% and 2%, are bogus, it's the underlying message or trend one needs to unriddle.  Kellner goes on to say "...the change in the index that the Fed prefers is only 1.6%." Whether he realizes it or otherwise, Kellner makes our point. 

Wouldn't it be nice to use the index we prefer, one the rest of us are forced to use daily, one that includes the price of food and energy?  Ain't going to happen. Though they won't admit it, keeping the threat of deflation front and center is actually an oblique form of inflation. 

In short, it's a verbal form of price controls. And even most economists laboring away in their dank and dark economic cellars know what happens when price controls get lifted. Wanting to recover lost ground is part of the human genetic code.

If you don't think so just ask all those yield-starved hordes out there or the COLA-dependent crowd. One of this administration's first acts during its first term was, among other things, freezing COLAs for two years.  Also, keep in mind the deflationary threat put the kibosh on any possibility for wage increases over that time.

"Meanwhile," Kellner writes, "let us not overlook what higher inflation has already done to workers, savers and seniors. After taking inflation into account, workers’ real wages fell 0.2% in May and are down 0.1% over the past 12 months. Seniors and others on fixed incomes have found that the buying power of the funds they already have is down as well."

Kellner's conclusion is he expects the Fed to continue doing what its been doing until unemployment numbers improve. And that's the whole point. It puts more and more pressure on these bureaucrats to get things just right.

So here's the second safest bet you can make in this dimension. They won't.  Adjust your investing accordingly.

 

                                                                  

AROUND THE WEB

Big Oil Cashes In
http://oilprice.com/Energy/Energy-General/Big-Oil-Is-Cashing-In-On-Iraq-Violence.html

Silver Head Fake?
http://www.acting-man.com/?p=31304#more-31304

Big Drought Trouble
http://m.ibtimes.com/california-summer-will-be-states-hottest-driest-record-national-climate-scientists-say-1608914

Sand Mining Boom
http://insideclimatenews.org/news/20131105/frac-sand-mining-boom-health-hazard-feared-lawmakers-aim-ease-regulation

Risky Game Says Oliver
http://www.theglobeandmail.com/news/world/investors-playing-risky-game-in-search-for-returns-oliver-warns/article19300150/

Emerging Market Banks
http://www.ey.com/GL/en/Industries/Financial-Services/Banking---Capital-Markets/Banking-in-emerging-markets-2014

Investing in Climate Change
http://www.bloombergview.com/articles/2014-06-23/the-losing-bet-on-climate-change

Estonia's Oil
http://www.csmonitor.com/World/Europe/2014/0621/Could-Estonia-s-oil-shale-bolster-Europe-s-energy-security

THE EU POLITICAL CIRCUS

They were once allies through two world wars.

Now there's disagreement about who should be anointed the next European Commission president. Disagreements over fiscal probity will do that. This is not a World Cup soccer match albeit it could be.

Italy's newly elected Prime Minister Matteo Renzi is trying to kick a goal for what one scribe has called "a fundamental rethink of fiscal rules in the eurozone." We don't know about you but that sounds like something that just rolled off the lips of Argentina's president, Cristina Fernandez.

On the other side, staunchly defending her goal of financial rectitude, is Germany's Angela Merkel. What's at stake here is something most governments don't like, fiscal responsibility. We said it before and we'll repeat it. Fiscal probity is not in the DNA of most governments. And if history is any guide never will be.

Renzi's pushing what some are calling his unilateral attempt to dilute what has already been diluted by half with the recent bailouts of Greece, Portugal and the rest of the usual suspects. He wants  more lax official fiscal rules, a jointly funded investment program and a change in the binding debt-reduction rule.

In short, he wants to put everyone on the hook for any bailouts, buy more time for members to meet their debt-reduction quotas and water down what has already been watered down, the original rules of the game. Sounds entirely reasonable for nearly everyone unless you're a German or anyone who believes people and countries ought to exist within their means.

For all of Renzi's new-kid-on-the-block enthusiasm, the term credibility seems to be miraculously absent from his lexicon. There are only a few ways to get investors to cough up capital for your sovereign debt. Create what we now have, a yield-starved environment, make the yield so juicy investors will swallow hard and take the plunge anyway or provide a solid, safe haven devoid of Mr. Renzi's political hijinks.

For now, as they say, the circus must go on.                                                          

IT"S WHINING TIME AGAIN

 
Someone once noted that half truths have two parts. Just make sure you end up with the correct one.

When Mohammed El-Erain left Pimco under somewhat less than ideal conditions, according to press reports, stories circulated about one outburst that erupted between El-Erain and Pimco Chief Bill Gross quoting El-Erain saying in a heated exchange that he was weary of "cleaning up your shit."

You know who the your was in that statement.

El-Erain had previously returned to Pimco from a stint at running the mighty Harvard's endowment fund. Now fast forward to the recent announced resignation of El Erain's replacement to run the fund, Jane Medillo.  Medillo spent five years running things at Harvard, coughing up what many perceived as mediocre returns apparently not acceptable for the mighty Harvard folks.

Medillo is due to step down at the end of the year. When she took over the job rumors had it she inherited from Mr. El-Erain, to paraphrase his term to Gross, a lot of  "s..t" to clean up that contributed to one of her worse years early on.

Now a columnist for Bloomberg, Mr. El-Erain in his latest article offers his take about what to do when governments default. His advice is such that we all should take it with a huge grain of salt. We'd use the other four-letter word that begins with the letter S, but we like to keeps things clean.

Just one quick point. Writing about Argentina's recent Supreme Court setback, he says:  When a sovereign faces severe payment difficulties, the best option for the collective good is to find an orderly way to reduce debt and put the country on the path to economic recovery.

How many times has Argentina been allowed to reduce it's debt and been put "on a path to economic recovery?" Here's a quote from a national publication in 2013. "...Argentina has been playing games with many holders of the nation’s defaulted bonds ever since 2001, when the country defaulted on a record $95 billion debt. Under Presidents Eduardo Duhalde, the late Néstor Kirchner, and now his widow Cristina, successive Argentine governments have been going back and forth trying to settle with (or string along, depending on your perspective) holders of repudiated bonds."

El-Erain then invokes the mighty IMF, one of the globe's great strongholds of bumbling bureaucrats, suggesting what is needed, among other changes, one of the great abstractions of our time, crisis prevention, and ways "to verify and enforce compliance among all those involved, creditors and debtors?"

One thing we do know verifying and enforcing compliance will sell well in Germany. But if history's any guide, that's most likely the only place. Fiscal responsibility is not part of most government's DNA.

Argentina's bond yields are high for a reason. The only sovereign bonds that yield more are Cyprus. So once again it's crying time again in Argentina. Some call it whining time. Or as one bond wag we know recently put it: "Would you like some cheese with your whining?"

http://www.bloombergview.com/articles/2014-06-20/what-to-do-when-governments-default

AROUND THE WEB

 We start off this round of Around The Web with a quote from Mark Twain: "One of the surest ways to convey misinformation is to tell the strictest truth."

Often the surest way to convey misinformation is to tell the strict truth. (Mark Twain) - See more at: http://whowhatwhy.com/2014/06/20/the-art-and-science-of-lies-liars-and-lying/#sthash.UDZZCciP.dpuf "Often the surest way to convey misinformation is to tell the strictest truth."

The Art Of Lying

Often the surest way to convey misinformation is to tell the strict truth. (Mark Twain) - See more at: http://whowhatwhy.com/2014/06/20/the-art-and-science-of-lies-liars-and-lying/#sthash.UDZZCciP.dpuf

Often the surest way to convey misinformation is to tell the strict truth. (Mark Twain) - See more at: http://whowhatwhy.com/2014/06/20/the-art-and-science-of-lies-liars-and-lying/#sthash.UDZZCciP.dpTheThe Art of Lying

http://whowhatwhy.com/2014/06/20/the-art-and-science-of-lies-liars-and-lying/

Wage Inflation
 http://online.wsj.com/articles/america-inc-wakes-up-to-wage-inflation-heard-on-the-street-1403296457

Higher Oil Prices And Emerging Asian Countries
http://www.marctomarket.com/2014/06/great-graphic-higher-oil-prices-and.html

More On Human Nature Research
http://www.theglobeandmail.com/life/health-and-fitness/health/how-canadian-researchers-have-gained-greater-insight-into-human-nature/article19273969/?page=all

Let's Hear It For Gratitude http://www.spring.org.uk/2014/06/the-emotion-that-boosts-self-control-and-saves-you-money.php

Oil Prices Going Forward
http://www.reuters.com/article/2014/06/22/us-economy-global-idUSKBN0EX0C320140622

Once The Hog Butcher Of The World
 http://oilprice.com/Energy/Energy-General/Rail-Companies-Ordered-to-Reveal-Details-of-Oil-Shipments.html

Stocks Versus Bonds
http://blogs.marketwatch.com/thetell/2014/06/21/stocks-make-more-sense-than-bonds-or-cash-jpmorgan-funds/

WEEK UPCOMING

Here's a breakdown of what's up next week from Minyanville, one of the better market websites. Now they hardly need our approbation, but honest attribution--despite what many think--still has a place in today's world.

And by way of full disclosure we own ConAgra.

Monday, June 23

US Economics (Time Zone: EST)

08:30 Chicago Fed Nat Activity Index, May, exp. 0.2, prior -0.32
09:45 Markit US Manufacturing PMI, June prelim., exp. 56.0, prior, 56.4
10:00 Existing Home Sales, May, exp. 4.74m, prior 4.65m
11:00 Fed to purchase $1.5b-$2b notes in 6-7 year range
11:30 Treasury to sell $25b 3-month bills and $23b 6-month bills

Global Economics (Time Zone: GMT)

01:35 JPY Manufacturing PMI (JUN P)
01:45 CNY HSBC Manufacturing PMI
07:00 EUR France Manufacturing & Services PMI (JUN P)
07:30 EUR Germany Manufacturing & Services PMI (JUN P)
08:00 EUR Euro-zone Manufacturing & Services PMI (JUN P)

Earnings

After:
Micron Technology (MU)

Tuesday, June 24

US Economics (Time Zone: EST)

09:00 FHFA House Price Index, Apr., exp. 0.6%, prior 0.7%
09:00 S&P/Case-Shiller 20 City Composite MoM, Apr., exp. 0.8%, prior 1.24%
09:00 S&P/CS YoY, Apr, exp 11.50%, prior 12.37%
10:00 Consumer Confidence Index, June, exp. 83.5, prior 83
10:00 New Home Sales, May, exp. 440k, prior 433k
10:00 Richmond Fed, Jun, exp 6, prior 7
11:00 Fed to purchase $850m-$1.1b bonds in 22-30 year range
11:30 Treasury to sell $25b 52-week bills, 4-week bills
1:00 Treasury to sell $30b 2-year notes

Fedspeak:

08:05 Plosser to speak in New York
18:30 Williams to speak in Stanford, CA

Global Economics (Time Zone: GMT)

08:00 EUR Germany IFO Business Climate (JUN)
08:00 EUR Germany IFO Current Assessment (JUN)
08:00 EUR Germany IFO Expectations (JUN)

Earnings

Before:
Walgreen (WAG)

Carnival (CCL)

Wednesday, June 25

US Economics (Time Zone: EST)

07:00 MBA Mortgage Apps
08:30 Durable Goods Orders, May, exp. -0.2%, prior 0.8%
08:30 Durable Goods ex-Transports, May, exp 0.3%, prior 0.1%
08:30 GDP Annualized, 1Q, exp. -1.8%, prior -1%
08:30 Personal Consumption, exp 2.5%, prior 3.1%
08:30 GDP Price Index, exp 1.3%, prior 1.3%
08:30 Core PCE QoQ, exp 1.2%, prior 1.2%
11:00 Fed to purchase $2.25b-$2.75b notes in 7-10 year range
11:30 Treasury to sell $13b 2-year floating-rate notes
13:00 Treasury to sell $35b 5-year notes

Global Economics (Time Zone: GMT)

No major reports

Earnings

Before:
General Mills (GIS)
Barnes & Noble (BKS)
Apollo Education (APO)
Monsanto (MON)

After:
Bed Bath & Beyond (BBBY)

Thursday, June 26

US Economics (Time Zone: EST)

08:30 Initial Jobless Claims, June 21, exp. 311k, prior 312k
08:30 Personal Income, May, exp. 0.4%, prior 0.3%
08:30 Personal Spending, May, exp 0.4%, prior -0.1%
08:30 PCE Deflator YoY, May, exp 1.8%, prior 1.6%
08:30 PCE Core YoY, May, exp 1.5%, prior 1.4%
11:00 Kansas City Fed Manufacturing Activity, June, exp. 9, prior 10
11:00 Fed to purchase $850m-$1.1b bonds in 22 to 30 year range
13:00 Treasury to sell $29b 7-year notes

Fedspeak:

08:30 Lacker speaks in Lynchburg, VA
13:05 Bullard speaks in New York

Global Economics (Time Zone: GMT)

12:30 CAD Average Weekly Earnings (APR)
16:00 EUR France Total Jobseekers (MAY)
22:45 NZD Trade Balance (MAY)

Earnings

Before:
Lennar (LEN)
ConAgra Foods (CAG)

After:
Nike (NKE)

Friday, June 27

US Economics (Time Zone: EST)

07:55 UofMich Consumer Sentiment, June F, exp. 82, prior 81.2

Global Economics (Time Zone: GMT)

JPY Jobless Rate (MAY)
JPY Household Spending (MAY)
JPY National CPI (MAY)
JPY Tokyo CPI (JUN)
JPY Retail Trade (MAY)
01:30 CNY Industrial Profits (MAY)
06:45 EUR France GDP (1Q F)
08:30 GBP Lloyds Business Barometer (JUN)
08:30 GBP Current Account (1Q)
08:30 GBP GDP (1Q F)
08:30 GBP Index of Services (APR)
08:30 GBP Total Business Investment (1Q F)
09:00 EUR Euro-zone Economic Confidence (JUN)
12:00 EUR Germany CPI (JUN P)

Earnings

No major reports

Twitter: @MichaelSedacca

Read more: http://www.minyanville.com/business-news/markets/articles/economic-data-earnings-reports-earnings-economics/6/20/2014/id/55358#ixzz35JjAXPNr