AROUND THE WEB

 Fiddling Versus Statue Building
http://www.washingtonpost.com/blogs/worldviews/wp/2014/07/10/indias-new-budget-includes-33-million-to-build-the-worlds-tallest-statue-not-everyone-is-happy/

 Crude Oil
http://www.seeitmarket.com/crude-oil-back-on-investors-radars-13671/

Looking For A Reason?
http://www.bloomberg.com/news/2014-07-10/leuthold-selling-stocks-on-concern-s-p-500-may-tumble-8-.html

Where Did The US Dollar Go?
http://www.peakprosperity.com/podcast/86044/mike-maloney-dollar-we-know-will-gone-within-6-years

One More Sign?
http://www.marketwatch.com/story/another-sign-the-bull-market-is-nearing-its-end-2014-07-09?dist=lbeforebell

Market Closes Down For Day
http://worldpress.org/link.cfm?http://feeds.reuters.com/~r/reuters/businessNews/~3/6Ezes-xH2-s/story01.htm

Food Fight Or Political Jockeying?
http://www.csmonitor.com/USA/Education/2014/0710/Are-nutrition-standards-for-school-meals-too-tough-Congress-considers-tweaks

Just How Crazy Are The French?
http://globaleconomicanalysis.blogspot.com/

Portugal May Be Joining Argentina?
http://www.cnbc.com/id/101826369

ONCE UPON SOME BOND OFFERINGS

 
 t. man hatter
Once upon a time there were several peripheral countries in the European Union that witnessed some awful days when their economic Humpty Dumpty lost its balance and crashed.

But things got better, so investors were told, as interest rates dropped and from Greece to Ireland to Portugal to Spain any more economic help from their big brothers in Frankfurt and Brussels wasn't needed. To prove their case a couple of them came to the international market after a long absence and sold sovereign bonds.

The ratings on these bonds were like their yield, lower than a duck's belly after lunch. But no matter. Hungry is as hungry does. And investors lined up like the yield-starved lemmings they are, thanks in part to a global group of trusty central bank Svengali.

The end of the tale remains to be unraveled. But some might suggest this was a clear violation of one of the free market's lessor known rubrics, the Cockroach Theory: If you see one, there's bound to be more. 

And that looks like the story today with the big Portugal bank, Banco Espirito Santo, and some apparently irregularities or what is better played down in the crime world as suspect of interest.

All this sparked concerns over another part of the conglomerate – and Portugal's leading bank -- Banco Espirito Santo, with investors speculating that it could be ready to default on its debt. Shares in Banco Espirito Santo were down 19 percent before being suspended by market regulators and Espirito Santo Financial Group dropped 8 percent before also being suspended. 

These concerns rolled over into the wider European equity markets, triggering a sell-off across the rest of Europe. In the debt markets, Banco Espirito Santo bonds continue to underperform, with the knock-on effect on Portuguese government bonds, with the yield on its 10-year sovereign debt moving higher throughout Thursday. Still shuddering at the memory of the euro zone financial crisis, investors sent the yields for other euro zone "peripheral" countries – Greece, Italy and Spain -- higher during the morning session.

To borrow the words of a popular song some time back: "Things got bad, things got worse and I  guess you know the tune, stuck in Lodi again."

Who might get stuck here is one of those who knows. 

Worse case: Though some pundits may claim otherwise, Portugal may be joining Argentina.

http://www.cnbc.com/id/

OIL UPDATE

 

                                           t. man hatter
                                         
A while back we wrote an update on energy, specifically oil, and we suggested there would be a pullback creating opportunity.

At the time oil was trading near its recent highs. Given all the global turmoil--Iraq, Gaza, Ukraine, Nigeria, the South China Sea, to name a few, one would expect the opposite. True, the Iraqi situation seems to have cooled a bit as oil from there continues to flow while the Ukraine appears set for a showdown and Libya cranked up it pumps again.

None of this means the globe's bad actors have exited the scene. Europe will have a tough time weening itself off of Russian energy. And Mr. Putin's still trying to work his black magic in several other former Soviet possessions. 

In today's Around The Web we posted a story about gas prices in 11 U.S. states falling as demand seems to be down so far this driving season. Brent crude (Aug. 14) hit its 52-week high of $115.18 on 6/19/14. In today's early trading it hit a low of $107.76.

Here's a quote today from Reuters. 
Brent inches down toward $108 on weak U.S. gasoline demand

Brent crude had fallen 20 cents to near $108 a barrel, down for a ninth straight session and matching a similar losing run in May 2010. U.S. crude is down for a tenth consecutive session under $102 a barrel, 60 cents below Wednesday's close. The front-month price is on track to post its longest stretch of losses since July 1984.

A steeper fall in West Texas Intermediate has widened its spread with Brent to more than $6 a barrel after touching the narrowest in nearly a month on Wednesday.

We wrote then and it's still our story now and we're sticking with it. You want to own oil. Keep some powder dry for big pullback and choose wisely.
 
Here's another point of view about the death of oil. We have argued for some time there are no heroes without villains. Part of the rancor about oil is about vilifying it by blaming it for creating more damage than it actually does.

This is a tried and true tactic globalists and the climate change crowd roll out every chance they get. Hydrocarbons are the dirty word of the decade.
http://www.thedailybell.com/news-analysis/35467/Dont-Fall-for-the-Energy-Hype/

Mr. Warren Buffet is pretty tight with the Obama and Hilary clans. Last time we looked he was also pretty rich. So it appears the "Omaha Scold" is quite happy making lots of money transporting the nasty--and now apparently explosive stuff--out of North Dakota.

FOOTNOTE

                                      t. man hatter

In case you haven't been paying attention metals have started to stir. Here's a quote from today's Barron's.

When the Dow Jones Industrial Average stalled in June just shy of the exalted 17,000 level, something very interesting changed beneath the surface. It was not the sexy momentum stocks but rather the opposite -- industrial metals -- that suddenly started to outperform the market. And the charts point to still higher prices ahead.

This sector comprises commodity producers at the very bottom of the economic food chain, including copper miners and steel producers. It is easy to overlook them in a Google-dominated market, so it took a new high last week in miner Freeport-McMoRan Copper & Gold (ticker: FCX ) to put these stocks on anyone's front burner.

We wrote about the sector and, in particular, two of these puppies, FCX and NEM, months ago when much of the market talk centered on China's economic weakeness and the global slow down.

Freeport McMoran had some trouble in Indonesia which now looks as if its resolved. Newmont was earlier in consolidation talks with Barrick Gold (ABX), but both sides couldn't get it done. Now it appears as if those talks may start up again.

Make no mistake the pessimistic crew is still around. Jabbering about these two being two medium-sized bad companies will beget one bigger really bad company if they unite is the stuff we like to see.

Some folks look for happiness. We look for pessimism. Pessimism usually precedes hope as hope does happiness. So we like our chances, if for no other reason than they're ours.

Copper so the story  goes was first mined around 10 centuries ago. Its uses are numerous, construction and electrical wiring, to mention a few. It's the metal many refer to because of it widespread uses as the Ph'd metal.

Freeport just hit a 52-week high $39.30, well off from its high in early 2011 around $60. Analysts at HSBC recently initiated coverage with an overweight rating and a target price of $44. The stock is up over 40% in the last year while the S&P 500 gained close to 19%.

Now we don't put much stock in analyst reports, buy, sell or hold. Hold is actually a sell from these boys and girls. But biases being what they are, we do like our own research.

AROUND THE WEB

Where Are The Ladies?
http://blogs.wsj.com/brussels/2014/07/10/where-junckers-ladies-at/?mod=wsj_nview_latestright

Metals Up
http://online.barrons.com/news/articles/

Gas Prices Down
http://247wallst.com/author/247wallst/

More Spying Uproar
http://www.csmonitor.com/World/Europe/2014/0709/Another-spy-Germany-fumes-as-US-espionage-scandal-worsens.-video

Chinese Cash Buying California Real Estate
http://globaleconomicanalysis.blogspot.com/2014/07/22-billion-in-california-homes-sold-to.html

Fed Independence Questioned
http://www.reuters.com/article/2014/07/10/us-usa-fed-politics-idUSKBN0FF0C420140710

More Sanctions
http://m.ibtimes.com/eu-extends-sanctions-against-11-more-ukrainian-separatists-russians-1624086

MOM, MARKETS AND FLASHLIGHTS

t. man hatter

My mother was an RN. So it was pretty hard to wake up on a rainy, wintry school morning and feign illness. If you said you felt warm, had a fever, she'd take your temperature. A sore throat, she would get a flashlight and check.

Who knew what she knew or what she saw when she looked in there? It was a lot like one of those days that starts out cloudy and keeps getting clearer and clearer. To fool mom I was going to have to up my game--a lot. And believe me my brother and I tried.

Think of the market as mom. And don't be fooled by the term fool. The market's been there a long time, doing what markets do. Occasionally a newcomer pulls off a stunner or two. Economists, as they do for nearly everything, have a term for that, outlier.

Most of us are hardly outliers. Now don't get your undies all twisted in a bunch. That's neither bad nor good. Just is. Most of us are basic block-and-tacklers, to use a football idiom. We get better with repetition if we keep at it. It's a basic rule of life: Whatever you focus on expands.

A lot of people probably see Warren Buffett as a genius and that doesn't disturb me. Another way to see it, however, is he's a brilliant block and tackler, a real Mr. Fundamentals. He's put in the time, he's consistent and the chances are way better than good he's gotten better at it.

Several years ago I shared an office with an options trader, a pretty good one. One gray November morning when things were particularly slow, he told about his early market experiences. When he got out of college, clutching his freshly, new-minted business degree, he started trading options, something he'd only dabbled at but enjoyed a modicum of success in school.

Curious is as curious does, so I asked him how it went.

He told me terrible at first, just awful, as I recall. So I offered the usual assumption, laced with a trace of empathy such occasions often require:

"Had some big losers, huh.?"

"Oh, no !" he said, laughing. "They were all big winners. My first 8 or 10 trades went like Swiss clockwork. I thought I was a genius, knew everything.  And then...."

It's the "and thens" we all need to be mindful of that usually come without a warning, like mom with her flashlight.

ADDENDUM

Here's an addendum to our earlier post.

It's from davidstockmanscontracorner.com and it highlights what's wrong with the Fed, too much not more micro management, a clear interference with market forces that will not allow, if left untrammeled, for bureaucrats to repair broken furniture whether it belongs to Wall Street or GM.

That's was free markets do.

http://davidstockmanscontracorner.com/the-complete-idiocy-of-professor-john-taylor-statist-economics-in-conservative-garb

ABOUT TO FIND OUT

How quickly things change.

How often have you heard that? A lot of us fail to recognize that it's one of those portmanteau sayings with another meaning: How short memories are.

A year and a half ago things in Greece were so bad someone stole Plato's tree. We wrote a blog piece about it,  Plato's Tree Is Missing (February, 2013). Unemployment was 27%, pensions had been cut or suspended, street demonstrations were happening almost daily. To put it mildly peoples' mood was anything but copacetic.

Well, here's a blurb from today's Wall Street Breakfast.

After ruling out a need for a 3rd bailout, Greece is now looking to issue its second sovereign bond since April. The new offering further marks Greece's return to the financial markets after a four-year shut out, although the country still faces about a $16B funding gap in 2015. The bond will likely be a three-year issuance with a possible interest rate of just under 3% to raise €2.5-3B.

If the Federal Reserve has transferred risk from it friends, the big banks, to the paper asset market, and they have, there's another transfer that took place via the Fed's so-called more transparency policies and it's continual reassurance talk. 

Most call it complacency. Announcing the date you expect something to end, QE, and setting a possible date for interest rates to rise is designed to probe the water temperature and settle mood. It's like saying one has until such and such a time to prepare. But worry not because we got you covered. 

And basing those announcements on questionable economic data that are constantly revised upwards and downwards is something only government bureaucrats could get away with.When one door get closed usually another gets opened.

The major question is here is: How good of an indicator is complacency? Some say we are about to find out.

Along those lines, as MSM waits for the release of the Fed's June minutes to pour over and scratch for signs, here's another view from an ex-White House economist. http://www.marketwatch.com/story/5-questions-with-alan-krueger-on-long-term-joblessness-2014-04-03?pagenumber=2

OUR VIEW

 

For those who follow such things, 47 U.S. corporations have relocated overseas via the so-called tax inversion in the last 10 years.

That's more than in the last 20 years, itself a clear-cut message, not that anyone in those not-so hallowed Halls of Gridlock is listening. Now Rep. Sander Levin (D., Mich.) wants to, typically, put an end to it by making it more difficult for theses companies to relocate by pushing legislation that would make it harder to move to such countries as Ireland and the UK.

As the failed Pfizer-Astra deal pointed up most do so by merging with another company already domiciled overseas. Mr. Levin has clearly missed his calling and he should immediately seek a transfer to the French parliament. There's surely a welcome place for him there.

As one report noted, nearly all other developed countries, excluding, of course, the U.S., still tax there multinationals on their domestic not global earnings. The U.S. rate is the highest in the developed world. Now we understand that's a sore point that it's difficult for people like Mr. Levin to understand.

Maybe the excessive cold last winter has something to do with it. But if you value anything about the free market system and companies and people having free, unshackled, non-spied upon free movement, you'll let people like Mr. Levin know how you feel.

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

AROUND THE WSJ WEB

 

The Wall Street Journal celebrates its 125th anniversary today. First published on July 8,1889, today an issue goes for $2. Back then an annual subscription cost $5.00 and advertisements 20 cents a line. The first edition had four pages.

So as a long time reader and in tribute to their longevity, we'll do an around-the-web solely dedicated today to the WSJ.

--We've been talking about the demise of cash for some time now and here's a piece from today's WSJ.
http://online.wsj.com/articles/james-gorman-on-the-future-of-finance-big-banks-will-get-bigger-1404762062. Make no mistake no matter how they spin it, removing cash has much more sinister leanings than the convenience excuse and the advance of technology behind it. 

As Voltaire reportedly said: "If you see a banker leap of out of a window, it's probably a good idea to follow because there's probably a profit in it."

--Yesterday we wrote about the big banks, american-dream-wall-street-style, and their quest to claw their way back to profitability. 

 The six largest U.S. banks have cut about 7.5% of their staffs, or 88,110 positions, since 2011, according to regulatory filings. The cuts have been spurred partly by the slowdown in mortgage refinancing, which hit banks’ revenue last year and continues to be a headwind this year. The slow trading environment has also raised the prospects for additional job cuts, according to analysts.

Count these survivors out at your own investing peril. 

--Here's a buyback quote from Ahead of the Tape column.

 

A big one is buybacks, which hit their highest since 2005 in the first quarter, boosting per-share earnings by 3.3%. The S&P 500's earnings wouldn't have grown without those repurchases.

Not only are buybacks' bang for the buck diminishing, the amount has slipped. Announced buybacks by all listed companies slid to nearly a two-year low in the second quarter, according to TrimTabs Investment Research. That could mean companies are now more optimistic, finding investments for that extra cash.

--If there's a spy in the ointment it just might be the U.S. http://online.wsj.com/articles/new-u-s-spying-claim-prompts-german-outrage-1404727787

--Is there anything those psychiatrists won't do to a make a buck? Hoarding, extreme, what ever the hell that is and who gets to define it, is now a psychiatric disorder.

http://online.wsj.com/articles/the-psychology-of-clutter-

So that's it. Happy 125th WSJ.