BUT YOU FIRST

Who loves the International Monetary Fund?

That's really not meant to be a question, but here's the answer. The only people who love the IMF are fools, naves and poseurs.

One of their recent gems is buried in this quote.

Banks should consider paying bonuses in the form of debt and giving their creditors a greater voice in boardrooms in an effort to keep risk taking under control. 

One of this international collection of geniuses recent suggestions is what they called "a better mix of incentives" for banking executives, "including long-term illiquid bank debt as part of top employees' compensation, potentially with a long vesting period."

How long is long? If the word never comes to mind, give yourself an A-plus.  Executive bankers might want to respond with an: "OK. But you first."

Once upon a time capital equipment could be depreciated over five years. But that, according our illustrious elected officials, turned out to be too good a deal for those who purchase capital equipment and not so good a deal for government.

So our elected officials in their bottomless ignorance changed it. You could call it, if you want, a longer vesting period or less liquid.  Illiquid might also work.

A friend use to say life is a terminal illness. Markets are about risk taking. Take out the risk and they aren't markets anymore.

But you must hand to the IMF. God bless their generous little bureaucratic hearts.
t. man hatter

MISSED CALLING: PULPITS AND PLAYGROUNDS

Scare mongering is one of the tried and faithful techniques of any agenda crowd.

It worked well in the recent Scottish N0-vote victory. And it's a favorite of the climate-change group.

If you like Poland--and we're not Polish--you're probably Polish or you're a non-believer in the climate-change madness.

Martin Wolf, one of  the Financial Times political blowhards, recently wrote another article about one of his favorite subjects, climate change, "Clean growth is a safe bet in the climate casino."

All but  the most obdurate skeptics must recognize that the probability of irreversible climate change is much greater than zero. (How much greater Wolf doesn't risk postulating!). But the cost of buying insurance against that risk also matters. Fortunately, these costs might be quite low and , in some respects, even negative: eliminating reliance on coal-generated electricity, for example, would produce health benefits. So would building more compact cities.

If Wolf did any more parsing or hedging of his words in that paragraph, he'd quit his day job and trade commodities on the floor of the Chicago commodities exchange. Wolf then cites another one of those interminable studies from "the high level Global Commission on the Economy and Climate."

First off, any title with the term "Commission" in it should send up one's skeptic antenna. For the most part "Commissions" are how we got here. But we will leave that for another time. Forget love for now, what the globe needs now is one less commission.

Wolf then rolls out the obligatory scaremonger charts citing mortality ratios from outdoor pollution and the costs in  percent of GDP 2010 for various countries. Next come a trademark staple, his Keynesian love for government support, as if the the world isn't already garroted nearly breathless from GS. 

Yet the crucial point is that a low-carbon future need not be one of perpetual misery. With the right support from government (Who gets to define right?), the market culd deliver both greater prosperity and a far lower risk of a destabilised climate. It is unnecessary to persist in making massive unhedged bet in the climate casino. (How's that for some,dramatic verbiage?). It is possible instead to combine growth with a less environmentally risky future. Continuing with business as usual is irrational. But the changes we must make should come now.Later will be too late.

Now back to Poland and its newly elected prime minister, Ewa Kopacz, God bless her.  In her first speech to parliament, according to the Financial Times, since last month she "promised she would not allow Poland's energy costs to rise."

She went on to say that during next month's European Council meeting her government would oppose provisions "which will increase  costs and prices of energy." Go for it, girl. Earlier this year the bureaucrats at the European Commission (There's that word again.) urged the EU's 28 members to reduce carbon emissions by 40 percent from 1990 levels by the end of the next decade.

The big boys like the UK and Germany support the proposal but eastern European countries  claim the costs are prohibitive. According to some sources, Poland relies on coal for about 85 percent of its power needs though many of it facilities and mines are outdated.

Again, according to the Times, her speech  came one day after Poland, the Czech Republic, Hungary Slovakia and Bulgaria released an announcement skeptical of the 2030 EU deadline.

The whole thing sounds like the making a good prize fight. And we say, to quote a former famous American referee who is no longer with us, "Let's get it on!"

Forget pulpits and playgrounds. Today, the bullies are everywhere.

OTHER EMERGING MARKETS

Emerging markets have been much in the news of late, especially since the Fed's threatening to soon remove the net from its monetary high wire act.

Capital flight or the fear thereof now seems to be the name of the EM game. Asia and China are expected to slow down and some are suggesting that the last thing China needs with all its empty buildings and empty towns is more easy money.

China already has a still rising 230 percent credit to GDP ratio. To these observers the China problem owes its existence to easy money, not the other way around.

Suddenly Argentina's equity market is capturing investor attention. We wrote about this earlier mentioning billionaire George Soros and his recently purchased big chunk of oil company YPF.

As previously noted, an election is set for next year and as the old bromide goes, here it's more hope than reality at this point, a new broom sweeps clean. Money managers, as is their ilk, try to get in ahead of any on coming rush from the retail crowd.http://www.marctomarket.com/2014/10/emerging-markets-what-has-changed.

But Asia and Latin America are not the only emerging markets. In our view central and eastern Europe offer some interesting opportunities if a meteorite doesn't strike the planet anytime soon. 

There are prblems to be sure, but there are also good universities, an entrepreneurial spirit and, most important, a gaggle of young people who get it.

Here's just one source. If you look you'll find many more.

http://www.ft.com/intl/cms/s/0/5b2ed4c0-cf9a-11e3-bec6-00144feabdc0.html#axzz3F1z73X2h

t. man hatter

OUR VIEW

For a long time people who warned of elitist efforts to create a one world government got slammed by MSM and their apologists.

And to be exact, it's still going on. But for those who care to look the evidence is more than clear. Here's just one example from 2012 http://www.thedailybell.com/news-analysis/3629/EUs-Prodi-Admits-Leaders-Knew-Euro-Would-Cause-Ruin-but-Hoped-Political-Union-Would-Follow/.

It's almost impossible today even reading what most read, MSM palaver, not to see it. As they say, the bold get bolder. For a while MSM tried the subtle approach, but that didn't take fast enough, so  hand picked, "Yes.Sir!" politicians like Bush and Obama get shuffled to the fore.

Part of the MSM lore is to make voters believe there's a difference. There isn't. Collusion is a fact of like. The recent evidence that the Federal Reserve and Goldman Sachs are really Siamese twins in drag should come to mind.

That Congress in the late 1950s outlawed insider trading but omitted, you guessed it, members of Congress or more recently the Obama grand health insurance hoax that likewise omitted members of Congress and there staffs is some more evidence for those who need it.

And we're not even scratching the exterior here. That MSM's latest efforts to convince the rabble that U.S. debt has meaningfully declined since the stock market rally is another case of popular hoodwinking from the likes of the entrenched.

Global debt levels are exploding and even stodgy media shills like the IMF know it. Today Blackrock Chief Larry Fink blasted bureaucrats, central bankers and regulators for flapping their mouths without taking any of the responsibility for what they've created.

"Actually, if you look at the behavior of central banks, they've rewarded the debtors and crushed the savers."

Blackrock has more than $4 trillion under management. Implied in Fink's comments was the elitist attitude of these people with they constant scolding of markets as if they alone are above it all. Fink singled out low interest rates and tight regulations as part of the problem.

He concluded that he expects it will take longer to turn the EU mess around than most think and that interest rates will stay low longer than many believe.

Couple that with Chicago Fed President Charles Evans' call today for "patience on" raising interest rates, calling it "...a really challenging issue."

What most of this is telling you is the odds of the Fed's--despite all the concerns to the contrary--staying too long at the party grow daily.

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

DECISION TIME

DOW JONES INDUSTRIAL AVERAGE CLOSE

Decision time draws near. 

Investors headed for higher, safer ground yesterday as news was not as good as expected for many. One of the few positive sectors was the so-called safer, stodgy utilities and of course that old time favorite bonds. 
  
Stocks hitting 52-week lows exceed those hitting 52-week highs and volume traded in stocks going down on a daily basis is higher than the volume for stocks moving up. 

After yesterday's triple digit drop in the DOW, here are some overnight actions in Asia.

Here are the latest trading levels for Asia's major stock markets: Tokyo (Nikkei Average) down 2% ; Hong Kong (Hang Seng Index) closed for holiday ; Shanghai (Shanghai Composite Index) closed for holiday ; Sydney (S&P/ASX 200) down 0.7% ; Seoul (Kospi) down 0.9% ; Mumbai (Sensex) closed for holiday Taipei (Taiex) down 0.(Market Watch)

Japanese stocks were knocked hard on Thursday as weak global manufacturing activity and an Ebola health scare in the United States spooked world markets, sending investors scurrying to the safety of U.S. bonds, the yen and gold.


Investors warmed to the yen after a slew of surveys showed German factory activity shrank for the first time in 15 months, China's manufacturing sector barely grew, while the United States slowed more than expected.

Japanese equities led the selloff in Asia, with the backdrop of concerns over global growth and a sputtering domestic economy pushing Tokyo's Nikkei down a sharp 2.1 percent to three-week lows. (Reuters)
 
In the other news of interest for today is the ECB's plan for what it will do next. Patience continue to grow thinner and pressure mounts on ECB President's claim about "Whatever It Takes" and will whatever it is be enough to lead the EU out from its long-running economic doldrums.

At 7:45 a.m. ET on Thursday, the European Central Bank (ECB) will announce its latest decision on rates and monetary policy, with ECB president Mario Draghi taking press questions 45 minutes later. 
 http://www.businessinsider.com/what-to-expecte-at-the-october-ecb-meeting-2014-10#ixzz3Ey3SHBd2

Here's a chart about crude oil's recent weakness from http://www.crossingwallstreet.com/ that was posted yesterday.



 Over night crude stayed calm.

Crude-oil futures remained subdued in Asian hours Thursday after dropping for two consecutive trading sessions and settling at their lowest level this year. 

On the New York Mercantile Exchange, light, sweet crude futures for delivery in November CLX4, -0.61%  traded at $90.65 a barrel at last check, down $0.08 in the Globex electronic session. November Brent crude on London’s ICE Futures exchange LCOX4, -0.62%  fell $0.07 to $94.09 a barrel. 

Nymex WTI crude is down around 8% year-to-date and ICE Brent crude is down over 15% year-to-date in a bearish market, driven by weak demand, strong supply and a strong U.S. dollar.

Under the what's new category here's a story from today's WSJ about France's hate affair with austerity. You can bet ECB President Mario Draghi loves this one.

It is crunch time for the eurozone again. France's budget for 2015 pushes out yet further its efforts to reduce its deficit to below 3% of gross domestic product. "We refuse austerity," says French Finance Minister Michel Sapin. 

That is a challenge to the European Commission, which must decide this month if France's tax and spending plans comply with eurozone fiscal rules.

http://online.wsj.com/articles/frances-budget-tests-eurozone-tolerance-heard-on-the-street-1412173663 

MORE FROM OIL PATCH

 Here's more from the oil patch.

We welcome this news and so should you if you want to make any serious money from this sector over the the next economic up turn. And there will be one.

Moreover, we've been talking about it for some time. We're looking out beyond next year to 2016-17 and we like our chances.

Every day that passes we like the oil patch more and more. 
http://www.marketwatch.com/story/oil-stays-rangebound-brent-wti-spread-narrows-further-2014-09-30-21034059?dist=afterbell

Quotes like this one and others about slowing homes sales and falling consumer confidence make us relatively certain the Yellen-led Fed will overstay the soft money party and have to play meaningful catch-up.
  
"Internal pressure within the Federal Reserve on Janet Yellen to increase interest rates will recede in the wake of the surprisingly weak August job report," one economist said.

“There are some voices at the end of the[Fed]  table that feel as if there is sufficient progress in the labor market to think about raising interest rates, but Yellen feels there is still a bit more work to do,” said Carl Tannenbaum, chief economist at Northern Trust.
“This report will make is easier for Yellen to find consensus at September,” Tannenbaum said.
Hiring slowed in August to just 142,000 jobs, the smallest gain since December.

http://blogs.marketwatch.com/capitolreport/2014/09/05/pressure-for-early-fed-rate-hike-to-recede-after-august-job-report/

The November Brent contract ended Tuesday down $2.53, or 2.6%.

Crude markets opened flat and moved little through the early part of the session. Analysts said a production survey by Reuters seemed to have tipped the market into a midmorning swoon. The survey said supplies from the Organization of the Petroleum Exporting Countries hit their highest level in two years in September, thanks to higher output from Saudi Arabia and Libya. With supply of nearly 31 million barrels, the output exceeded OPEC's demand forecast for its own crude of 29.2 million barrels.

OPEC output has become a key focus in the oil market, as production from the U.S., Libya, Iraq and other countries swamp the market. There have been calls for the cartel to curb production, but it has shown little inclination to do so. As a result, prices have tumbled since mid-June as the world has become more adequately supplied.

http://online.wsj.com/articles/crude-oil-rebounds-from-near-two-year-low-1412069887

 The cure for too much supply is too much supply.

OH WELL NOW!

Does this look like a chart to get all excited about?

The idea that markets re not manipulated is a joke. 

What do you call central banks pumping trillions of fiat money into the global system? Feel good or at least feel better money is what we call it.  A headline on a Market Watch story today--"Consumer spending jumps in August"--is all  part of the manipulation.

Food is another example. One wag recently wrote about what he called the sudden stop in rising food prices. It's a stop anyone who visits his or her local market daily will have difficulty finding on the shelves or at the meat counter.

More and more are coming to understand the manipulation, much of it perpetuated by MSM. The recent threat of Scotland secession is a classic example. The scaremongers even attacked one of Scotland's historic products and exports, whiskey, arguing it would suffer if the Yes crowd won.

Given all that, nearly 45 percent of voters there marked their ballots for secession. Much of the same scaremonger tactics punctuate the climate change debate. At some point, however, as usually happens, the manipulation becomes a problem for the master manipulators.

The recent downturn in pump prices for gasoline should come to mind. In one southeastern state, pump prices threatened to drop below three dollars a gallon. States in particular and the Feds rely heavily on gasoline taxes.

According to a Forbes 2013 article, http://www.forbes.com/sites/kellyphillipserb/2013/04/29/which-state-pays-most-in-gas-taxes/, here are the ten states that pay the most in state gas taxes:

1. New York 50.6
2. California 48.7
3. Hawaii 47.1
4. Connecticut 45.0
5. Illinois 39.1
6. Michigan 38.7
7. Indiana 38.0
8. North Carolina 37.8
9. Washington 37.5
10. Florida 35.5

Tack on another 18.4 percent for the Fed. Here's a later survey. from July of this year. We'll use only California.

3. California >Price per gallon: $4.09 >Number of refineries: 17 (3rd highest) >Tax per gallon: 49.8 cents (2nd highest)
High levels of oil production and refining activity have not led to low gas prices in California. Last year, California was the nation’s third largest producer of oil, behind only Texas and North Dakota. The state also has the third highest refining capacity in the nation. Despite these factors, a gallon of gas in California costs $4.09, versus $3.60 per gallon nationwide. One reason for the high prices is state and local taxes, which average nearly 50 cents per gallon, or more than in any other state except New York. Additionally, California refineries operate at near-capacity due to demand and the state’s strict environmental standards, the EIA notes. These factors make gasoline prices in California especially volatile

Read more: States With the Highest Gasoline Prices in Summer 2014: Hawaii, Alaska, California - 24/7 Wall St. http://247wallst.com/special-report/2014/07/22/states-with-the-highest-gas-prices-2/#ixzz3EjklWMga
Follow us: @247wallst on Twitter | 247wallst on Facebook

From what we read of late, whether owing to more fuel efficient vehicles or other causes, drivers are consuming less fuel these days. Eventually that will show up in state tax coffers.

Today's Financial Times, quoting a study from the 16th Geneva Report "commissioned by the International Centre for Monetary and Banking Studies and written by senior economists, including three former central bankers," claims interest rate will stay low for longer than  most expect. 

The reason: Time for "households, companies and governments to service their debts and avoid another crash." Calling current conditions "a 'poisonous combination' of record debt and lower growth,"  the report warns the global economy may be headed for another crisis.

Rest assured that local,state and federal governments worldwide has done little if anything to correct structural problems. China and Italy are just two cases in point. China's apparent postponement of financial reform should come to mind. And when it comes to Italy what can anyone say except: "Oh well Now!"
t. man hatter

BUY RIGHT

After all, it isn’t the job of the media to be accurate. It’s the job of the media to get ratings, and it usually does that by telling a story.

The above quote is from Brett Arends http://www.marketwatch.com/story/bp-has-the-stock-market-overreacted-2014-09-25?.

We don't know Arends. But we know a thing or two about BP. We own it. So there. That's our disclosure. We have owned it since the first few weeks of the announced Gulf spill. Though our entry price was not the bottom it was much lower than today's price.

Then we purchased some more. The dividend got cut then restored. We bought more. We also know a thing or two about MSM. And Arends' statement is one of those that make the crooked places straight. Accuracy is not primary in the MSM world.

When one is little kid one's parents usually warn about telling stories. But it's a lesson the little kids of big media never learned, a truth tattoo that never took. We've said it before and we'll say it again: Without villains, there's no need for heroes.

Sure BP still faces some headwinds with legal matters. But just like the U.S. government going after all these so-called banking miscreants, at some point enough is enough.

And we're close for this round of official stick-ups. You hear much talk these days about risk on, risk off. Think cycle on, cycle off.

There are always lots of caveats.That's why you do your homework. Cash in your short-term view of the energy sector and adopt a more mid-term one if you want to make some serious money. The BP drama is in particular overdone as is in general the sector.

Buy right and sit tight.

WE LIKE THE ODDS

The king has finally left the building.

No, we're not talking about Elvis if you're old enough to recall. We're talking bond guru Bill Gross who suddenly jumped ship to Janus Capital this week after 43 mostly upside years at Pimco, the firm he help found all those many moons ago.

Enough has been written already about Gross' scrapes with management and his former CEO Mohamed El-Erian and the current SEC rumblings about possible improprieties at Pimco's ETF fund that was created to mimic the original Gross-managed high flier, Pimco Total Return Fund.

So we'll spare you any rehash. Our interest is should you follow Gross to his new home at Janus Capital. We say yes. The reasons are too many to go into here. Suffice it to use one important word, motivation.

And if you like a cuter play try becoming a spreader, spreading some of your investments between Gross and the new but not so new guy left in charge after Gross' departure, Dan Ivascyn, a pretty good investor himself.

Though it's true top people are difficult to replace. A pretty good investor named Jeff Vinik replaced legendary Peter Lynch at Fidelity. And if you want to get right down to it Buffett superseded one of his famous mentors Benjamin Graham in the value world. And there have been many more.

Truth be told, Gross along with many others were the beneficiaries of the most propitious falling interest rate market in perhaps the history of bond trading, one that most likely won't come around again any time soon.

In fact, we just might be in for a reversal of unknown proportions going the other way if the global economy throws any significance head fakes. Despite what those economists will tell you, there's a lot paper fiat cash afloat in the world.

In our view, the rap about Janus being an equity outfit is over done along with their history of getting seriously burned during the dot-com bubble. They were hardly alone. Gross is also joining a former Pimco guy there.

Gross will set-up shop in Newport Beach and given his reputation he will cajole, wheedle and pay talented, hungry, savvy souls most likely to join him. Moreover, he will probably have less administrative fish to fry.

We like the odds.