OUR VIEW

As we skirt around the web reading various and sundry articles it becomes increasingly clear nearly everyone has a pick to bone. Yea, we know that's a play on an old cliche' and we're not embarrassed in the least.
 

Take the recent job numbers MSM sought to rave about as did many economists and the administration. 

The more one learns about economists, the more one realizes how straight out, goofy benighted most are. But we'll get to that on another occasion.

Mort Zuckerman is a billionaire. He's a liberal and he's a prominent editor. He is also a graduate of the University of Pennsylvania and Harvard Law School and a Canadian born, American business tycoon.

Here's a quote from a Washington Post story about him late last year.

Mortimer Zuckerman, 76, is known for being a regular on the political talk show “The McLaughlin Group”and for owning such media properties as the New York Daily News, U.S. News & World Report and the Atlantic Monthly, the last of which he sold to Washington businessman David Bradley for about $10 million in 1999.

But he made his fortune, estimated at more than $2 billion, buying and constructing office buildings. He is the founder and chairman of Boston Properties, a publicly traded real estate investment trust with 138 properties, many of them in the Washington market. His is one of the most respected minds in the real estate business.

To assume Zuckerman is not well-connected enough to get a better scoop on the jobs numbers is to assume that New York City officials love Walmart. In case you don't know, they don't. Recently, Zuckerman penned an article for the Wall Street Journal questioning those fine figures, raising the question MSM loves to dodge at every turn, of why so much ado about what is essentially a bogus report getting bogus kudos.

Here's a quote from Zuckerman's article.

The Obama administration and much of the media trumpeting the figure overlooked that the government numbers didn't distinguish between new part-time and full-time jobs. Full-time jobs last month plunged by 523,000, according to the Bureau of Labor Statistics. What has increased are part-time jobs. They soared by about 800,000 to more than 28 million. Just think of all those Americans working part time, no doubt glad to have the work but also contending with lower pay, diminished benefits and little job security.

On July 2 President Obama boasted that the jobs report "showed the sixth straight month of job growth" in the private economy. "Make no mistake," he said. "We are headed in the right direction." What he failed to mention is that only 47.7% of adults in the U.S. are working full time. Yes, the percentage of unemployed has fallen, but that's worth barely a Bronx cheer. It reflects the bleak fact that 2.4 million Americans have become discouraged and dropped out of the workforce. You might as well say that the unemployment rate would be zero if everyone quit looking for work.

This may seem a bit petty and if MSM and their apologists for this administration had their way, that's how it would get dealt with. But there's more to it here, particularly if you're an investor who invests his capital seeking some kind of return.

Government figures you can't trust is a government you can't trust. And that, my thirsty friends, applies to governments left, right or straight ahead down the middle..  

That's our view. We hope you know yours.
t. man hatter

http://online.wsj.com/articles/mortimer-zuckerman-the-full-time-scandal-of-part-time-america-1405291652

FULLY WIPE THE SLEEPERS FROM YOUR EYES

I never thought that anything was irksome if it helped me to trade more intelligently.
                 JesseLivermore 

Everyone gets good ideas.

Ideas are like viral colds. Nobody's immune. Some just get more than others.

I get some of my better ones out walking Taylor, my four-year-old,13-pound multi-phooh.  I learn a lot from him, especially when it comes to investing and trading.

And judging from the conversations with my significant other it's mutual. She learns a lot from him too, though she doesn't trade or play the market outside of her retirement planning.

To begin with, he's a lot smarter than I am. He doesn't care much for walking in the rain. He always skirts around or jumps small puddles. He'll get his feet wet, but only on his terms. That's the way I like to view entering the market. If it isn't on my terms I probably don't have any business being in there. Some might call this timing.

He always does his homework, particularly when it comes time to relieve himself. On cool mornings and chilly nights it can get a little frustrating. But he refuses to rush. He's got to find just the right spot. Sort of like knowing the right time to enter or exit a trade or the market.

He's got the patience of 10 people. Sometimes when I am slaving away on the computer, he'll come to the doorway of my office and just stand there, staring at me like a statue in utter stillness. I never know if it's one of those bigger-fool stares or what.

Other times if you don't acknowledge him he'll sit up like dogs do when they want some of your food. It can be a real attention getter, a real killer, sort of like those gut market feelings we get from time to time but often fail to heed. 

Especially when they turn out to be correct and we didn't make the trade. I think it means we all get weary and need a break, some fun. So come on, man, lighten up. It's time to play.

Taylor is extremely curious. And alert. No smell is an old smell. Because he's so small his survival instincts are keen. He gets engrossed but not so much that he loses his awareness, another good point for surviving in markets. Just when you think he's not paying attention, he'll pick his head up and look around.

In our neighborhood from dust to dawn coyotes often prowl. Sometimes at night he sees and hears things I don't hear and can't see. They're out there and he smells it. Good smellers, dogs and traders, sounds like a decent title for a good country tune about markets.

He never holds grudges. And he has no ego.

Around the house he doesn't miss much either, whether it's a faint noise outside or you're putting a coat or sweater on to go somewhere. In the car, short or long ride, he knows when you start to slow down it's close to getting-out time. I like to think about that when volume is starting to dry up and prices flatten.

For him the car is exciting to get in, but just as exciting and important to get out. You could say he has an exit strategy. When the movement stops it's time to move on. We humans call it a trend. He hasn't told me yet what he calls it. But I'd love to know.

As far as I've been able to tell, Taylor has only one bad habit. Every morning though he tries, he fails to fully wipe the sleepers out of his eyes.

But even there I learned something.                         

AROUND THE WEB

Fossil Fuel Industry Job Numbers
http://oilprice.com/Energy/Energy-General/The-Fossil-Fuel-Industry-May-Not-Help-the-Planet-But-It-Employs-Millions.html

Different Views
http://www.bloomberg.com/news/2014-07-11/plosser-says-rate-increase-closer-thank-many-people-think.html

Fed Tools For Wthdrawal
http://www.reuters.com/article/2014/07/11/us-usa-fed-exit-idUSKBN0FG2B120140711

Rich Actually Pay More Taxes
http://news.investors.com/ibd-editorials-brain-trust/071114-708479-thomas-pikettys-idea-to-tax-the-rich-would-make-us-all-poorer.htm?p=full

Wage Growth And Inflation
http://blogs.cfr.org/geographics/

Pimco Changes
http://www.bloomberg.com/news/2014-07-10/pimco-s-gross-cuts-u-s-government-related-debt-holdings-in-june.html

Energy Wars
http://oilprice.com/Energy/Energy-General/Twenty-First-Century-Energy-Wars.html

DON'T NEED YOUR WELL-THOUGHT-OUT ADVICE

Are we the only ones who think it vaguely odd that people who believe and invest in gold are called "goldbugs" by MSM.

So far with all the flight to paper assets we haven't yet seen any references to equity-hogs or bond-heads. And given the announced new direction of the Federal Reserve we as yet haven't espied the term  macroprudential prudes crop up.

Maybe that's coming later at a theater near all of us.

After soaring to $800 an ounce in the late 1980s followed by nearly two decades of snoring in ignominious silence, an oxymoron we know literary pundits will love, the yellow metal rampaged for more than a decade to $1,800 an ounce before it's recent slumber.

So at the risk of insulting entomologist everywhere including those chained to their research dungeon walls and risking being labeled a goldbug, we'll take a shot here at MSM, one of our favorite members of the pathetic lemming colony.

Besides the opprobrium of MSM, gold's subject to several bits of nastiness, bear markets, inflation, geopolitics and, yes, complacency.  Strangely, that somehow has a faintly familiar paper asset quality to it. Oh well, what's important is gold and it's orphan status. Not just the metal, but the mining shares.

If you want to know more about it, don't read us. We have a  research dungeon we have to get back to before the lights go dim. But here's a link that might help. Just one word of caution, leave your logic behind before you click on it.

To borrow the words of an old Don Williams tune:

I don't want to hear another word
Don't need your well thought out advice
Though I thank you all for being kind
I can make mistakes myself just fine

Problem here is, MSM ain't even apologetic about their misinformation.
t. man hatter

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

COMPLACENCY BY ANY OTHER NAME

                                           C. C. Chance 
A lot of what gets written recently about the the stock and bond markets centers on the risk of investor complacency.

But with a little imagintion and illogic--we prefer both in our assessments--the most complacent of all just might be Fed officials. In a nutshell here's their take on things.

1. QE unwinding will go smoothly because we have carefully planned for it.
2. We have spent numerous hours planning--see comments by a Fed member at Jackson Hole--devisng a scheme that ensures such.
3. We know better than anyone else just when to crank up the interest rate pump.
4. We are "noise" experts
5. And even if things do go a bit awry, we have the tools for correcitng it.
6. Just trust us and let us do our job.
7. We're bureaucrats and we're here to make things better.

Flasback now to the speech Fed Chair Yellen recently gave to the IMF about what's needed and this quote:

"...a regulatory umbrella wide enough to cover previous gaps in the regulation and supervision of  systemically important firms, and markets can help prevent risks from migrating to areas where they are difficult to detect or address."

Now it's a sure bet whether Yellen or whoever wrote or helped write the above felt puffed up with pride after proof readng that puppy. If we didn't know better we'd suspect she was addressing a convention of bird watchers seeking better protection from sun damage.

Yellen then rolled out what's becoming a favorite term of central bankers thoughout the intergalactic solitary universe, macroprudential. Macroprudential is one of those abstract terms that belongs more in an art dealer's studio than in the real push and shove economic world. 

But oh well. We better stop. We're starting to sound a bit....well, complacent.

UP COMING WEEK

If you've heard of Humphrey, then you probably heard of Hawkins. And no they're not distant cousins of yin and yang

It's about the Federal Reserve Bank Chairperson traipsing up Capitol Hill to fill the lads and lassies in on what's up with the economy. 

Several finance firms are on the docket along with some techies to release earnings reports. And a relative biggie June retails sales numbers.

Monday, July 14

US Economics (Time Zone: EST)

No major reports scheduled
11:00 Fed to purchase $1b-$1.25b bonds in 22-30 year range
11:30 Treasury to sell $25b 3-month bills and $23b 6-month bills

Fedspeak:

1:10pm Williams to speak in Sun Valley, Idaho

Global Economics (Time Zone: GMT)

CNY Foreign Direct Investment
09:00 EUR Eurozone Industrial Production

16:30 Draghi speaks to EU Parliament Committee

Earnings

Before:
Citigroup (C)

Tuesday, July 15

US Economics (Time Zone: EST)

08:30 Advance Retail Sales (June) - expected 0.6%, prior 0.3%
08:30 Retail Sales Ex-Auto - exp 0.5%, prior 0.1%
08:30 Retail Sales Ex-Auto & Gas - exp 0.5%, prior 0.0%
08:30 Import Price YoY - exp 1.1%, prior 0.4%
08:30 Empire Manufacturing (July) - exp 17, prior 19.28
10:00 Business Inventories (May) - exp 0.6%, prior 0.6%
11:00 Treasury to sell 4-week bills

Fedspeak

10:00am Yellen (dove, chair) to give semi-annual Humphrey Hawkins testimony to Senate Committee

Global Economics (Time Zone: GMT)

BoJ Monetary Policy Statement
01:30 AUD Minutes of RBA July Meeting
08:30 GBP CPI & PPI
09:00 EUR German ZEW Survey - Current Situation, Expectations
13:00 CAD Existing Home Sales

9:00am Carney to testify to House of Commons Treasury Committee

Earnings

Before:
JPMorgan (JPM)
Goldman Sachs (GS)

After:
CSX (CSX)
Intel (INTC)
Yahoo! (YHOO)
Johnson & Johnson (JNJ)

Wednesday, July 16

US Economics (Time Zone: EST)

07:00 MBA Mortgage Apps
08:30 PPI Final Demand YoY (June) - expected 1.8%, prior 2.0%
08:30 PPI Ex Food & Energy YoY - exp 1.7%, prior 2.0%
09:00 Net Long-term TIC Flows (May) - exp $25B, prior -$24.2B
09:00 Total Net TIC Flows - prior $136.8B
09:15 Industrial Production (June) - exp 0.4%, prior 0.6%
09:15 Capacity Utilization - exp 79.3%, prior 79.1%
10:00 NAHB Housing Market Index (Jul) - exp 50, prior 49
2:00 Fed's Beige Book

Fedspeak:

10:00am Yellen (dove, chair) to give semi-annual testimony to House Committee
12:00pm Fisher (hawk, voter) speaks in Los Angeles

Global Economics (Time Zone: GMT)

02:00 CNY Fixed Asset Investment
02:00 CNY Retail Sales
02:00 CNY Industrial Production
02:00 CNY GDP
08:30 GBP ILO 3M Unemployment Rate (May)
14:00 CAD BoC Rate Decision

Earnings

Before:
Abbott Labs (ABT)
US Bancorp (USB)
Blackrock (BLK)
Bank of America (BAC)
St Jude Medical (STTJ)

After:
Sandisk (SNDK)
Yum! Brands (YUM)
eBay (EBAY)
Las Vegas Sands (LVS)
Kinder Morgan (KMI)

Charles Schwab (SCHW)
PNC Financial (PNC)

Thursday, July 17

US Economics (Time Zone: EST)

08:30 Initial Jobless Claims, June 28, exp. 310k, prior 304k
08:30 Continuing Claims - exp 2583K, prior 2854k
08:30 Housing Starts (June) - exp 1025K, prior 1001K
08:30 Building Permits - exp 1042K, prior 991K
10:00 Philly Fed - exp 16.0, prior 17.8
11:00 Fed to purchase $1.75b-$2.25b notes in 4 to 5-year range

Fedspeak

1:35pm Bullard (hawk, nonvoter) speaks in Kentucky

Global Economics (Time Zone: GMT)

Japan Investors Purchases of Foreign Stocks/Bonds
09:00 EUR Eurozone CPI

Earnings

Before:
Baker Hughes (BHI)
Sherwin-Williams (SHW)
Keycorp (KEY)
UnitedHealth (UNH)
Mattel (MAT)
Fifth Third Bancorp (FITB)
Philip Morris (PM)
Morgan Stanley (MS)
WW Grainger (GWW)

After:
Capital One Financial (COF)
IBM (IBM)
Schlumberger (SLB)
Skyworks (SWKS)
Google (GOOG)

Advanced Micro Devices (AMD)
Blackstone (BX)

Friday, July 18

US Economics (Time Zone: EST)

09:55 University of Michigan Consumer Confidence (July prelim) - expected 83.0, prior 82.5
10:00 Leading Index (June) - exp 0.5%, prior 0.5%

Global Economics (Time Zone: GMT)

01:30 CNY June Property Prices
12:30 CAD CPI

Earnings

General Electric (GE)
Kansas City Southern (KSU)
Bank of NY Mellon (BNY)
Honeywell (HON)

As noted below this data is from the website Minyanville, one of the better sites we follow.

Twitter: @MichaelSedacca

Read more: http://www.minyanville.com/business-news/markets/articles/bank-earnings-earnings-report-china-gdp/7/11/2014/id/55531#ixzz37E5YlSZo

AN OPPORTUNITY READ

Read this quote and read it carefully.

Then read the article.

"By partially replacing term funding in the form of more expensive bank bonds, the [redacted] can create a scarcity of investible assets, which will result in lower yields and easier market funding conditions even for banks that have not taken part in the operations."

It's from today's issue of Minyanville. Here is the link. 
http://www.minyanville.com/special-features/from-the-buzz-banter/articles/Who-Said-It-Public-Official-Behind/

Anyone who appreciates clear, concise English, anyone who ever  read George Orwell's article about debasing a language, anyone who even faintly claims to care about good communication, ought to read this.

But there's a bigger point as the article rightly points out. Buried in here is an opportunity mixed, to be sure, with a bit or mirth. Or should we just call it what it is, central bank humor.
t. man hatter

LOGICAL ILLOGIC

The argument will never be settled.

But just for the drill we'll leap in to see how comfortable the water is.



Pundits of all strips, firms, levels of money under management and data banks have different definitions of over-valued, richly valued or whatever is the latest term making the economic or talk-show rounds. Shakespeare might of said: "To error is human, to forgive divine," but neither of those apply to anyone in the securities business

This is hardly a logical business even though many believe in logic. One could easily make a cogent case that any business that involves humans isn't logical. Can't be. Think politicians and bureaucrats here.

In 1930 a guy named Fred C. Kelley wrote a pretty good book, Why You Win or Lose, about the stock market. In Chapter Five Kelley talked about where being illogical is wisdom. Now as a quick aside, if Kelley were around today we might want to debate his statement when it comes to politician and bureaucrats, but when it comes to investors and the market, we think he's correct.

The bond market this year with all it's yield-chasing investors as was the first half run-up in energy pretty illogical. Toss in utilities and consumer staples stocks leading for the first half and you're getting warmer. And don't forget all that easy money central banks, like in Japan, hoped commercial banks would use to make consumer and business loans.

What happened with that?

Kelley states that speculation gets a bad rap because it is assumed that speculators make their money absent sweat and tears. But everyone is a speculator, Kelley argues, even "every conservative, successful manufacturer is a speculator. He has to be. If he doesn't buy raw materials when they are cheap--at least part of the time, he'll go bankrupt."

Kelley goes on "even buying a home is speculative." How many folks discovered that one during the last Fed-incited real estate bubble?

The bottom line here is you have to decide for yourself--something global leaders hope you'll never, ever get around to--what is rational and what is irrational.

It's a big task but don't let anyone get in your way.
c.c. chance

http://www.marketwatch.com/story/us-stocks-will-be-very-disappointing-for-10-years-2014-07-11

BONDS FOR SALE

t. man hatter

A headline on a story in the Financial Times today, "Corporate bond sales at five-year high," discusses how corporations worldwide, exploiting low rates and investor demand, flocked to the market in the first half of this year, making it the highest sales in the first half of a year since 2009.

The list of sellers reads like a who's-who of corporate royalty: Verizon, Walmart, Cisco and big banks like Wells Fargo, Bank of America and BNP Paribas. One can understand BNP's coming to market. They obviously want to recoup some of that big fine money French politicians are so upset about.

So far $1.8 trillion has been sold with financial firms doing the bulk of the selling, $1 trillion, while non-financial firms sold roughly $836 billion, according to Standard and Poor, the big bond rating agency. 

Most of the bonds had investment-grade ratings, but junk borrowers managed to squeeze in $290 billion. Europe got in its share, issuing around $800 billion, according to the report. 

Corporate default rates remain low, 1.8 percent, for the first half of 2014, giving the yield-starved a further boost of confidence or, as some might say, complacency. So far total returns for dollar denominated bonds, 5.6% to date, for long-dated bonds, those maturing in 10 or more years, add to their attractiveness

By comparison junk bonds have returned 5.5% and U.S. Treasuries 2.5%, again pushing yield-conscious but premium-risk-deaf investors further into what could turned out to be really ugly terrain when interest rates rise.

The huge much-disdained and much-shopped giant, Walmart, floated a $1 billion, 30-year puppy. This was Walmart's first such deal in several years. Though we don't have the coupon rate, one can only assume, given current rates, that in 20 years its holders will most unlikely be unable purchase even the firm's cheapest trinket with the annual interest payment.    

IRRESPONSIBLE?

                                            t. man hatter 
We have to confess we might need a little help here.

But let's see if we can just get this right. Fed chair Janet Yellen from what we've been able to read admitted that her bank's policies have created two things--low volatility and paper asset price appreciation.

We'd say stocks here, but for this exercise we want to try to think in the foggy, stilted language economists are noted for. Those two things in themselves are not too puzzling. What's puzzling is, to use an economic term, the lack of correlation.

Simply put, Fed policies caused the run-up in stock prices, but to hear Ms Yellen those higher stock prices --some would suggest bloated prices--are not the Fed's concern. Seems like a disconnect somewhere here to us.

Now we don't know about you, but if you've ever practiced any kind of serious medicine, what they used to teach in the old days is never treat a lab number. That's a metaphor for: Never make your diagnosis in the lab. In short, treat the patient not the data.

But when one is schooled his or her whole life to worship at the Alter of Data, it's probably unrealistic to expect anything else.

From what we can gather, it's Ms Yellen's position that the lab number here, employment, a proxy for steady, continuous growth, is the more important notwithstanding the role she and her merry central banking friends played in creating what many believe is a paper asset bubble.

Sounds like a good gig if one can get it. We're not responsible. Maybe that should be stated a bit differently. You're not responsible.You're irresponsible.