DON"T SLEEP ON ENERGY

                                           t. man hatter
We've written about energy before. Back when it started  its recent run to $115 a barrel we said then that there would be a pullback and we've been getting one.

We also said then that hydrocarbons should be a permanent part of your portfolio. 

This is an energy market running on what some might call a full tank of confidence. Others an empty tank of fear. At present global oil supplies are plentiful, demand owing to economic concerns about the EU, Japan and China, to name a few, looks anemic and market participants for the most part have blown off the risk of geopolitical supply disruptions for now.

In our last "AROUND THE WEB" we posted a link to a Citigroup report essentially predicting the demise of the hydrocarbon world, another feature we like to see.

These should strike you as all the ingredients one looks for to be taking the other side of that trade. We know that Buffett just sold off a chunk of his energy holding and we say so what. Maybe he's just taking a chunk of big profits? For years he's claimed he's not a macro guy. He also owns Burlington Northern railway, a backdoor play on energy anyway you look at it.

Some would suggest its a monopoly to the North Dakota fracking boon, but Buffett has friends in high places, no surprise either. He's also an opponent of the Canadian pipeline that would run through Cornhusker Land.

Deflation fears are so much in the air one could call it the economic land of the the blind, a place as the parable goes where the one-eyed rule. In another link in that same post we listed another, "WHY YOU SHOULD NEVER TRUST ECONOMISTS," that quotes a Nobel Prize winning economist saying: "Anyone who believes in inflation is stupid." 

There are few things more dangerous to one's financial well being than Nobel Prize winning economists. If you haven't learned that by now, well, we again wish you well in your delusions.

Snooze on bureaucrats, politicians and Nobel Prize winning economists. But don't go to sleep on the possibilities to make money in energy.

AROUND THE WEB

1. MORE ON WELFARE THAN WORKING
http://globaleconomicanalysis.blogspot.com/2014/08/40-of-country-on-welfare-obamacare.html

2. A COMPLICATED OIL TALE
http://blogs.platts.com/2014/08/21/texas-oil-drilling/#more

3. SO MUCH FOR HUMANS
http://www.businessinsider.com/robots-as-bosses-2014-8?

4.  KOOKY ECONOMICS
http://www.zerohedge.com/news/2014-08-24/krugmans-keynesian-crackpottery-wasteful-spending

5. FRANCE BEING FRENCH
http://www.reuters.com/article/2014/08/24/us-france-austerity-id

6. BIG G AIDS BIG B
http://www.fee.org/the_freeman/detail/19-big-government-is-a-check-on-big-business

7. WHY YOU SHOULD NEVER TRUST ECONOMISTS
http://www.theguardian.com/business/economics-blog/2014/aug/24/nobel-winning-economists-challenge-conventional-thinking

8. THE SOLAR SIDE
http://oilprice.com/Latest-Energy-News/World-News/Citigroup-Report-Spells-Trouble-For-Oil-Further-Growth-For-Renewables.html

GOLD FROM HERE

Today's there's much talk about wealth transferring.

When it comes to the subject here's one you might not have of thought about and a quote you should read. It could impact your future more than you'll ever know.

“So much gold has already gone from Western vaults to the Far East – China, India – and the Middle East going back to the 1970s’. We probably don’t understand that this is one of the greatest wealth transfers in history. Relative to the amount of fiat currency in circulation, gold is probably as cheap as it was in 2000 or 2001 – incredibly cheap.”
http://www.mining.com/web/if-china-russia-succeed-in-ditching-the-dollar/

We brought up before how back when gold traded in the $300-$500 range Western central banks were unloading the yellow stuff because one of the reasons at the time it wasn't yielding anything. That's exactly what fiat currencies are yielding today, nothing.

Now the fiat money crowd will most likely toss some juicy epithets your way. They could as they usually do when they get desperate even call you something really ugly like unpatriotic, the way they do those corporations that want to take advantage of legal tax inversions deals.

But patriotism is like love, both give me some thrills, but neither one pays my bills. And neither at some point will fiat money when it packs up and leaves town the way bureaucrats and politicians always do. And by the way, these folks ain't going to pay your bills either.

One of the things the above quote tells you is "incredibly cheap" means fiat money is incredibly expensive. On a purchasing power basis it buys you exactly just about what it's worth, next to nothing.

The Fed understands quite well that the U.S. Treasury and Congress need low rates to finance the country's huge debt burden. Higher interest rates are these folks worst nightmare. So the canard for keeping rate so low for so long has been about recovery.

The Fed's worse nightmare is if it has to push interest rate higher than they want, the federal debt burden will explode and what many don't get is coming off these lows, it wouldn't seemingly take much to double that debt burden.

Last week there was a blurb about all popular Russian websites had to officially register with the Russian government. Gold is a competitor with fiat money. Both yield nothing. In fact, if you figure in inflation and taxes on your CD's, checking and cash you're getting negative returns on your paper. 

So what do you think could happen if gold becomes a serious threat to fiat money? And there's another threat to the U.S. dollar most don't want to talk about and when it does come up gets pooh poohed by MSM, the dollar as the currency of international trade.

Forces are at work to change all that. And if and when that happens--and it appears inevitable--things will get really ugly for  the U.S. currency.

The vested interest crowd and the naysayers are everywhere.

Listen to them at your own peril.
t. man hatter

SHOOTOUT AT ECCLES

European Central Bank President Mario Draghi and his band of European Union central bankers are not the only ones feeling pressure to do something.

The news from Jackson Hole's recent conference where Fed Chair Janet Yellen put her mincing words act on display again, according to some sources, there's mounting pressure on the Fed to clarify part of the language they've used to describe their potential rate-hike program.

The Fed meets again next month on September 16-17. One of the terms under question by market participants is the use of  "significant" to describe the amount of slack in the labor market, a description that the Fed has been tossing around for over a month.

Another term bothering investors is the assertion rates will remain low, near zero, for a "considerable time." But even so-called little terminology tweaks now could be dangerous as, in our view, the Fed has painted itself into an increasingly uncomfortable corner.

And we are not alone in that. According to news reports a while ago, Philadelphia Fed President Charles Plosser, a noted hawk, raised the issue at a Fed meeting in July. "The language puts us in a box that I think is not a good box to be in,"  he reportedly told Reuters this week at Jackson Hole.

The objection here is timelines and calendar dates, both of which can created disappointing expectations because no one for sure knows what will happen in the interim. In the quote we read, Plosser mentioned that he preferred "simple data-dependent" guidance.

That's a bit shocking coming from anyone at the Fed, but we'll take it for now. The point is the doves and the hawks are gearing up for what could be a shootout at the old Eccles Corral. 

At this point any tweaking of the language could send shudders into investor portfolios and cause some volatility many of them won't necessarily enjoy. 
t. man hatter

WILL SOMEONE MAKE A MOTION?

t. man hatter

Few want a market that gets ahead of itself since that could put an end to the party these same people are enjoying.

Yet that seems to be the harbinger for what the Janet Yellen-led Federal Reserve is trying to gauge. To use a time-worn analogy, it's sort of like boiling the frog. You start with cool water and gradually keep increasing the temperature. By the time the frog suspects anything it's too late.

Consumption is now 70% of the U.S. economy. But the savings rate is also at the highest its been since this time last year. Predictions for the S&P 500, closing yesterday at 1,988, for 2250 to 2300 by the end of this year are beginning to pop up like spring flowers.

We're not saying it can't happen. There's never a shortage of wishful thinking. Given the contrariness of this market so far it's probably a decent bet. But we are not too concerned with the rest of 2013. At 2,300 before the clock ticks in a new year would most likely cause to us sell without looking into the rear view mirror.

After perusing Yellen's comments yesterday, one thing remains certain. If and when she decides to leave the Fed, she could have a decent future at hedge fund work given all the hedging she did yesterday.  Catchy names like Yellen's Mincing Words Fund keep coming to mind.

Yellen's latest screed revealed the Fed is counting the dots on 19 indicators or LMCI, the labor market conditions index. You gotta love this one. It's something only a bunch of academic economists could conceive.

If 19 indicators doesn't sound like a huge conference table to you, well, we wish you well in your delusions. Conference tables and their members are about as far removed from keeping things simple as it gets. And if history has any value, it's even worse when those seated there are a bunch of academic economists.

Next there's  ECB President Mario Draghi, a presenter at this years conference. It's important to recall these folks don't vegetate in a vacuum. Draghi has an MIT connection that has its own set of academic tentacles.

With unemployment conservatively estimated at 11.5% across the EU, Draghi and his 23 member band of central bankers are in a world of hurt otherwise known as pressure to do something. Apparently, Draghi's never heard the old military stratagem, when one is getting one's butt kicked:

Move forward or backward. Don't just sit or stand there. Do something.

But they probably don't teach that at MIT. Having worked a number of years with professional fighters from the lowest to the higher levels of competition, we've yet to come across one who doesn't understand this simple principle.

Yet elitist view these people as dumb.

Oh well! Just know this, like the ring you're in this on your own. The ring teaches vital lessons. Every time you lose your concentration you up the odds of getting hurt. And whenever you make a mistake there's no delay in the punishment, something that bureaucrats and politicians with all their damage control nonsense never have to deal with.

WEEK UPCOMING

The oracles at Jackson Hole have spoken not leaving much for the entrails scavengers to feed on and so we move to next week, a busy one with durable goods orders for July on Tuesday, some home prices and other home sales data for June gets released, consumer confidence and what could turnout to be some interesting numbers from Germany. Earnings reports take a backseat this week going into the Labor Day weekend.


Monday, August 25

US Economics (Time Zone: EST)

10:00 New Home Sales (July) - expected 428K, prior 406K
10:30 Dallas Fed - exp 13.0, prior 12.7
11:30 Treasury to sell $29b 3-month bills and $25b 6-month bills

Global Economics (Time Zone: GMT)

08:00 EUR German IFO Current Assessment, Expectations

Earnings

After:
Prospect Capital (PSEC)

Tuesday, August 26

US Economics (Time Zone: EST)

08:30 Durable Goods Orders (July) - expected 7.6%, prior 0.7%
08:30 Durable Goods ex Transporation - exp 0.5%, prior 0.8%
08:30 Cap Goods Shipments Nondef Ex Air - exp 0.5%, prior -1.0%
08:30 Cap Goods Orders Nondef Ex Air - exp 0.2%, prior 1.4%
09:00 FHFA Home Price Index (June) - exp 0.3%, prior 0.4%
09:00 S&P/Case Shiller 20 City MoM (June) - exp -0.1%, prior -0.31%
09:00 S&P/CS YoY - exp 8.22%, prior 9.34%
10:00 Consumer Confidence Index (August) - exp 88.5, prior 90.9
10:00 Richmond Fed - exp 6, prior 7
11:00 Fed to purchase $2b-$2.5b notes in 11-19 year range
11:30 Treasury to sell 4-week bills
1:00 Treasuty to sell $29b 2-year notes

Global Economics (Time Zone: GMT)

NZD Trade Balance
02:00 CNY July Leading Economic Indexeda

Earnings

Before:
Best Buy (BBY)

After:
Bob Evans Farms (BOBE)
Sanderson Farms (SAFM)

Wednesday, August 27

US Economics (Time Zone: EST)

07:00 MBA Mortgage Apps
11:00 Fed to purchase $950m-$1.15b bonds in 22 to 30-year range
11:30 Treasury to sell $13b 2-year FRN (reopening)
1:00 Treasury selling $35b 5-year notes

Global Economics (Time Zone: GMT)

06:00 EUR German GfK Consumer Confidence

Earnings

Before:
Express (EXPR)
Michaels Co (MIK)

After:
Lannett (LCI)
Workday (WDAY)

Tiffany's (TIF)

Thursday, August 28

US Economics (Time Zone: EST)

08:30 Initial Jobless Claims - exp. 300k, prior 298k
08:30 Continuing Claims - exp 2500k, prior 2500k
08:30 GDP Annualized QoQ (2Q second estimate) - exp 3.9%, prior 4.0%
08;30 Personal Consumption - exp 2.4%, prior 2.5%
08:30 GDP Price Index - exp 2.0%, prior 2.0%
08:30 Core PCE QoQ - exp 2.0%, prior 2.0%
10:00 Pending Home Sales MoM (July) - exp 0.5%, prior -1.1%
11:00 Kansas City Fed - exp 9, prior 9
1:00 Treasury selling $29b 7-year notes

Global Economics (Time Zone: GMT)

Japan Investors Purchases of Foreign Stocks/Bonds
01:00 AUD New Home Sales
01:30 CNY Industrial Profits
07:55 EUR German Unemployment Change
12:00 EUR German Consumer Price Index (Aug prelim)
12:30 CAD Current Account Balance

Earnings

Before:
Abercrombie & Fitch (ANF)

After:
Omnvision (OVTI)
Splunk (SPLK)

Dollar General (DG)

Friday, August 29

US Economics (Time Zone: EST)

08:30 Personal Income (July) - expected 0.3%, prior 0.4%
08:30 Personal Spending - exp 0.1%, prior 0.4%
08:30 PCE Deflator MoM - exp 0.1%, prior 0.2%
08:30 PCE Deflator YoY - exp 1.6%, prior 1.6%
08:30 PCE Core MoM - exp 0.1%, prior 0.1%
08:30 PCE Core YoY - exp 1.5%, prior 1.5%
09:00 ISM Milwaukee (Aug) - exp 60.00, prior 63.87
09:45 Chicago PMI (Aug) - exp 56.5, prior 52.6
09:55 University of Michigan Confidence (August final) - exp 80.2, prior  79.2

Global Economics (Time Zone: GMT)

JPY Employment Data
JPY National CPI (July)
JPY Tokyo CPI (Aug)
JPY Retail Sales
JPY Industrial Production (Jul prelim)
05:00 JPY Housing Starts
08:00 CHF Unemployment Rate (Jul prelim)
09:00 EUR CPI (Aug advance)
12:30 CAD 2Q GDP

Earnings

No major earnings scheduled

Twitter: @MichaelSedaccaRead more: http://www.minyanville.com/business-news/markets/articles/economic-data-earnings-

WHERE'S THE NEXT BULGE

If you like flashes there's plenty to go around.

The flash purchasing managers' report for China recently came in lower than expected and the flash PMI for the Eurozone block of currencies in July dropped to 52.8 from 53.8, not a sign good for EU manufacturing. 

Still above the benchmark 50 level that tell if an expansion is still in progress, it's a subdued number given all the other issues floating around today. these are the kind of concerns that will put further pressure on the ECB to get more aggressive in its monetary policy.

Bond investors showed their hand in this call by pushing yield on many bonds to record lows. the Spanish 10-year bond yield fell to a record euro-era low of 2.37 percent.

Much of the gloom is now fostering talk about the EU going into a Japanese-style lost decade, hardly soothing to ECB bankers as the pressure on them mounts for what would be in the eyes of many QE to the rescue too late.

Meanwhile, on a broader scale, here's a headline from today's Financial Times, "Geopolitical threats knock executives' confidence." 

The proportion of executives who believed the global environment would worsen over the next six months has nearly doubled to 18 per cent, nearly one in five respondents, from just 9 per cent at the end of last year, according to the Times.

One of the fears it seems is the growing concern abut a Russia-West trade war and now growing worries about Brazil, one of the BRIC nations, and South America's largest economy. Brazil's friendliness meter seems to have taken a turn for the worse, many executives believe. this slide in confidence has happened over the past two years. 

So the water filled balloon is going to get pushed one way or the other. It's going to be fun seeing where it bulges next.  
t. man hatter

EU UNDERDOGS

  
A while back we suggested putting some cash to work in Europe. There's some value there despite all the concern about deflation or the absence of inflation. 

We briefly mentioned it in "Money Made Here."  Now some hedge fund managers also known as activists, according to today's Financial Times, are starting to snoop around for opportunities. European market valuations have trailed those in the U.S. and, per the Times, some companies there have been hit hard "by the continent's debt crisis, are more open to radical shake ups of their businesses than ever before." 

This is not new and if history is any indication not the easiest road to activate.The important point for regular investors is the valuation part. One can play this if there is a recovery, and there will be one at some point, by looking for individual solid companies, sector funds and specific country funds.

In another report, also in today's Times, "Institutional Investors' top 10 asset classes" for the next six to 12 months, European Union equities are far down the list at seven, even behind emerging market and high yield debt. At the top spot are Emerging market equities, followed by US and Global equities. 

We like the underdog flavor of that list given how often Wall Street pundits turn out wrong.
t. man hatter


   

AROUND THE WEB

1. Brazil Election Impact
http://www.marctomarket.com/2014/08/is-marina-new-modi.

2. Tears and Tear Gas
http://www.blacklistednews.com/Tear_Gas_Is_A_Banned_Chemical_Weapon%2C_But_US_Lobbying_Made_It_Okay_For_Domestic_Use...

3. Happiness Is What?
http://resourceinsights.blogspot.com/2014/08/id-be-happier-if-i-didnt-write-this.html

4. There's An Old Joke: What's The Difference Between A Barroom And An Elephant's Fart?
http://www.zerohedge.com/news/2014-08-19/summing-fed-policy-2-words-vroom-crash

5. Money And Mary Jane
http://www.theguardian.com/world/2014/aug/19/colorado-cannabis-marijuana-black-market

6. Energy Roadblocks Ahead?
http://energytomorrow.org/blog/2014/aug/stricter-ozone-rule-nonattainment-for-kentucky

7. Watch The US Consumer
http://www.marketwatch.com/story/dont-count-on-us-consumer-to-save-economy-2014-08-19

8. One Of The Few Articles That Tells Truth About Phony EU Austerity
http://www.bloombergview.com/articles/2014-08-19/european-austerity-is-a-myth

LOVE THOSE LEGISLATORS.

Californians and those in the nation's capitol should love this chart and their legislators, too.