TITANS AND TYRANTS

There's an old saying about you can't fight city hall.

City hall is symbolic for Titan. Every now and then a Titan gets brought to terra firma, but it's rare. And not without good reasons. Titans not only represent money and power, they have aura going for them, a huge but influential intangible most of us can only daydream about. They also have a platform.

Warren Buffett, the Omaha Scold, is such a Titan. We call him the Omaha Hypocrite. Buffett was, as is his won't and whim, on CNBC recently peddling his views, as one obviously enthraller blogger noted, on "everything." Titans and tyrants share much common DNA. The go together like pizza and delivery.

Titans are not only full of themselves, they're full of opinions. He once owned a house in a tony SoCal seaside community he rarely visited. He claimed he paid more taxes on his Omaha digs than that exclusive home and opined the state should raise taxes on real estate, just what all the non-billionaires in life want: a guy who really doesn't live in your community dictating how you should live there. At the time and we still do now think this is sterling advice, particularly from a guy who once boasted his secretary pays more annual taxes than he does.

Buffett's empire is wrapped in fiat money assets, make no mistake about it. Like any good Titan or, for that matter, economist, he isn't beneath massaging his data. In fact, he's quite skillful and cunning. He is after all really in the insurance business. We're not taking on here the skinny guy who got sand kicked in his face at the sea shore.

So read the linked article and make up your own mind. mishtalk.com/2016/02/29/buffets-math-trumped-by-gold/

OVERNIGHT

Fears of an economic slowdown are apparently over-exaggerated at least that seems to be the opinion of Asian investors overnight who pushed shares across the region higher Wednesday based on a gaggle of good economic news.

Led by Hapan and Hong Kong, the Nikkei was up 4% and the Hang Seng rallied 2.6% apparently bolstered by reports that U.S. manufacturing was better last month, higher for the second month in a row. Constructing spending improved in the U.S. And that good news was added to some good numbers from Australia and Canada, Reuters reported.

The WSJ reported: The Shanghai Composite Index was up 2.3% by the local midday break, despite starting roughly flat. The gains added to its 1.7% jump on Tuesday in the wake of easing measures from China’s central bank earlier in the week.

The region’s recovery was gaining steam after a rally in oil prices overnight and upbeat economic data out of the U.S., which helped calm fears of a global slowdown. A rally had also started to form the previous session as a move by Beijing to lower the amount of reserves banks need to hold came into effect. Investors largely brushed off disappointing Chinese factory activity figures.

In the oil market, Brent crude futures hit eight-week high of $37.25 per barrel, up more than $10, or 37.5 percent, from a 12-year low of $27.10 hit in January.

U.S. crude futures also hit a one-month high of $34.76 per barrel although gains were cut in post-settlement trade on Tuesday after data suggesting a huge build in U.S. crude stockpiles already at record high levels.

Naturally, with all the good news safe haven investments suffered as government bonds sold off

PUSH MEETS SHOVE IN OIL PATCH

 
Remember when oil was over $100 a barrel and fracking, particularly in the U.S., was all the rage for most except the climate change gang?

Then the bottom started falling out of prices and over-production and supply became a MSM major theme. Soon the drop in oil prices started to take a turn with serious ramifications for the economy. And banks. Loss of thousands of high-paying jobs, hardly the phony lower strata ones government officials paraded in the news as a sign their pathetic monetary policy was the much needed elixir of the day, to name just one.

This is what we call push-shove or push-pull. In economics it's called supply and demand. In basic Judo you push and we pull. In a recent interview we read on the Interner JP Morgan Head Honcho Jamie Dimon claimed markets are amoral, banks moral. Beside his comment being a good candidate for being among our silly quotes of the month column, it tells you a lot about the banking world and it's perspective.

Webster's defines amoral as "not to be judged by criteria of morality; neither moral or immoral; without moral sense of principles; incapable of distinguishing between right and wrong." Like a lot of definitions that covers a lot of ground.

Neither moral nor immoral suggests an old Yen saying, neither bad nor good, just is. Markets if left free enough from politicians, bureaucrats and misguided regulators solve things much the way nature does. The old, infirm, weak, over bloated and corrupt disappear first. Dimon would have us believe that the banking industry despite its long history of greed and usury is moral so long as it doesn't damage it's customers in making its profits.

Dimon is a globalist who claims he disdains the term universal bank. In his mind apparently it's too specific. He's a lot like the climate-change gang. Global warming proved too specific a threat to their agenda. Thus roll out a name change. In the universal pharmaceutical industry it's the same game--change the parameters to increase your market share.

Hire some scientists to produce some studies. You're going to need validation. Flex your marketing muscles, massage the data and another 20 or 30 million need a statin to control their lipids. It's great gig, but one with Warren Buffet's favorite criterion for owning a company--a huge moat around it. It's the golf country club of the 1950s. Rich whites only need apply. The rest of you duffers check your local municipal course if there's one near you.

Well, those fracking companies, according to a WSJ piece today, are finally starting to cut production. And is there anyone out there who thinks Exxon Mobile's huge $12 billion dollar bond offering Monday could be a prelude to later drilling for oil on the Street?

Some of America’s biggest shale producers are beginning to ratchet back oil and gas production for the first time in years, bending to the reality that a global glut will keep prices depressed.
The production cuts, announced as shale companies reported dismal earnings in recent days, stand in stark contrast to the past year, when many U.S. drillers kept the taps turned on even as oil prices plunged from nearly $100 a barrel to about $30. American oil satisfies 10% of the world’s daily needs, putting U.S. production on par with output from Russia and Saudi Arabia.

One way companies are trying to put a lid on production this year is by waiting to pump wells they have already drilled. That trend is creating a large inventory of oil and gas wells that will be ready to turn on when crude prices finally do rebound. 

Today another attempt to curtail production was announced, though hardly new:

NEW YORK—Oil markets rose to a two-month high Tuesday as traders focused on the possibility of an output agreement among large producers.

Russia’s energy minister said Tuesday that a “critical mass” of oil-producing countries had agreed to freeze oil production, and that a final decision on such a measure would be taken this month, state news agency TASS reported.

Also on Tuesday, the United Arab Emirates’ energy minister said “everyone should move toward freezing production whether they like it or not,” due to current low oil prices.


Though there is one caveat in the fracking world the Journal notes, if cutbacks cause prices to move up some companies might go back to the wells too soon and reopen the spigots, a turn that could again push prices lower. But anyone who has been around commodities for a while will tell you the cure for high prices is high prices and the cure for low prices is low prices.

They might also, to be safe, insert a qualifier in there, like eventually. But most eventualities only become eventually because of the presence of regulators, bureaucrats and politicians.

OVERNIGHT

New York Federal Reserve Bank President, Bill Dudley, speaking Tuesday in China toned down his outlook somewhat for the U.S. economy saying he still expected it to grow at 2% in 2016, but that he sees "downside risk to his U.S. economic outlook."

Such talk from a high ranking Fed official could be construed by many as a signaling a delay between what others believed would be the next rate hike. The Fed raised rates 25 basis points in December and at the time projected three or four more later this year. For Fed tea leave readers that now looks less and less likely, some say.

Mesnwhile, Chinese factories lost jobs at the fastest rate in February in seven years as the PMI forFebruary  clocked in at 48.0, lower than expected and lower than last month's 48.4. Concerns mounted after the report helping to push regional shares lower. Faith in the government's ability to cut industrial overcapacity without increasing unemployment continues to dwindle among many investors. Complicating matters is the pick up in yen strength as it gained back much of its earlier loss on Monday. The Shanghai Composite Index was down in early trading before turning slightly positive later in the trading session.

In other markets, the WSJ reported: Markets elsewhere in Asia were mixed. Japan’s Nikkei Stock Average  was last down 0.8% after Japanese corporate profits booked their first drop in four years last October to December. An unofficial gauge also showed Japan manufacturing growth slowed to the worst pace in eight months.

Meanwhile, Hong Kong’s Hang Seng Index  was up 0.6%. In Australia, the S&P/ASX 200  was slightly up ahead of an interest-rate decision from the Reserve Bank of Australia, which was expected to hold rates at 2%. Korean markets were closed for Independence Movement Day.

Brent crude oil prices were last down 0.6% at $36.37 per barrel.

  

OVERNIGHT

The Nikkei was up by mid-morning trading slightly higher at 16,285.49. That was down from earlier strength when the index rallied 1.7%. The drop in Shanghai's composite of more than 4% apparently some traders claimed sent a few ripples through the market.

The data on foreign investment coming this week should shed further light on how investors feel. Meanwhile, Friday's U.S. Numbers on consumer spending showed a strong January. And inflation wrenched up the most in four years, a move that could cause the Fed to move more aggressively back to its earlier stance about three or four rate hikes this year.

After the G20 meetings over the weekend where Chinese officials stated there would be no devaluation of the yuan, Chinese shares took a holiday as central bank officials there pushed the yuan to its lowest level in 21 d-days. In other markets, the Korean KOSPI was flat, the Hang Seng feathered 1%, Australians shares rallied slightly despite what many might think, the pall of negative interest rates continue to hang over these markets because the represent unchartered territory in the minds of many. The bank of Japan the ECB and several smaller European banks sport negative rates

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OVERNIGHT

Well, the G20 bureaucrats came, they talked and they left. There was much Mario Draghi verbiage but little substance. The usual jawboning effect resulted as Asian shares bounced up a bit, but who knows how long the little euphoria will remain.

As expected one theme centered on China and how much ammo central bankers there had left to help their economy.Zhou Xiaochuan, China's central bank head honcho, reassured those present that China was not out of firepower to stimulate their economy.

The WSJ filed this report:

SHANGHAI—China’s top central banker sought to reassure China’s trading partners that Beijing won’t drastically weaken the Chinese currency and that Beijing has sufficient tools to support the economy.

“China won’t use competitive devaluation to enhance export competitiveness,” said Zhou Xiaochuan, governor of the People’s Bank of China at a news conference ahead of Friday evening’s meeting of finance chiefs from the Group of 20 major economies.

“Currently, China’s overall exports remain strong,” he added.

It's a time worn fact that central bankers claim they won't debase their currency often times just before they do. We're not saying that is the case here, but it's a real possibility one wants to keep in mind. Zhou also tried to allay investors fears, saying China's capital flight concern is overdone. 
As expected Germany rejected the idea pushed by the U.S. and others that more fiscal spending was needed.

. There was much 

ROTTEN APPLES

In our Overnight post yesterday we mentioned an upcoming G20 meeting set for tomorrow. As the
blog listed below cites, fiscal policy will most likely take center stage in the discussions. Monetary policies are about as worn thin as an unsuccessful traveling salesmen's trousers.

Indirectly, though many will deny it, this is a panic button designed to let what has mostly been pathetic central banking ploys and their perpetrators pass the blame, saying: "Well, we did all we could!" Yes, you did and now all that is missing are the unintended consequences.

Proximity triumphs all other concerns. The author here claims Chinese capital outflows have been overstated. We doubt that. We also doubt that G20 counties really believe markets should set exchange rates especially when fears of global recessions threaten their home front. After all, we're talking politicians and bureaucrats here.

Another common fallacy here is that something has to match previous negative conditions to trigger a similar performance, notwithstanding a favorite line often used in these situations, things are different this time. Panics, stampedes, call them whatever you want, don't take the time to calculate such whenever they happen. That's why they're called panics.

But as we always say: Read and decide for yourself. After nearly a decade now very little except for a few more obstructive regulations to free markets has changed. In fact, there might now be more rotten apples in the barrel than before this all began.

marctomarket.com/2016/02/g20-meeting-is-no-jedi-council

OTHER VOICES

Whether you believe in market timers or otherwise, here's one who thinks trouble looms just around the market calendar.

The worst isn’t over for Wall Street stocks. That is at least how respected chart-watcher Tom DeMark sees things possibly unfolding as investors get ready to close the book on February and head into March.

DeMark, who founded his eponymously named data analytics firm in Scottsdale, Ariz., is predicting that stocks are in for a big fall.

That’s highlighted in his view of the S&P 500 SPX, +1.13% which he sees dropping 8% to 10% from current level to around 1,786. The broad stock-market benchmark could tumble to 1,733, if things get really ugly, he said. His gloomy call was briefly highlighted by MarketWatch’s Victor Reklaitis on Wednesday.

DeMark is a chartist and here are a few of them. marketwatch.com/story/why-tom-demark-is-predicting-an-ugly-fall-for-the-sp-500-in-march-2016-02-25

MUST READS

We didn't think we'd be posting another Must Read item this quickly, but as we've been saying for oh so long, MSM and it's cheerleaders are not giving people what they really want--the Truth.

This round of shrinking Wall Street bonuses must be abrading some of those folks based on this post from ZeroHedge. Almost since it's inception the Internet has been a huge arrow in the shield of MSM. Dominant for years about what the masses received, like any other dictator who finds his control under siege, they hate the competition.

Central banking in this country with their manicured numbers is just one example and how they get reported. If the connection between big banks like Citi, Goldman Sachs, Morgan and the Fed were any more obvious they'd be a wart on Jamie Dimon's forehead. Another is some managing editor and a publisher decide what gets said right down to the tone of the headline.

So let's hear it for all the alternative, good or bad, forms of news.
zerohedge.com/news/2016-02-25/citi-confused-why-people-read-bearish-stories

OVERNIGHT

The market is topsy-turvy, up and down, much of it based on the correlation between the price of oil and equities since around late November. Just yesterday the market digested peak-oil supply numbers only to face Wednesday an increase in gasoline demand. Couple that with fear about economic growth and you have a recipe for the topsy-turvy action of late.

The S&P 500 ended Wednesday up 2% above it session low. The DJIA was up 53.21 to close at 16,484.99. In Europe it was just the opposite as markets there faded, weighed down, some analysts said, by commodity and energy sectors. If you're looking for a range bound investment, try gold. It seems stuck in the $1200-1300 range for a while now as it rallied in Asia overnight.

The Wall Street Journal reported: Gold prices climbed in Asia trade, continuing to draw strength from its safe haven appeal. Prices of the precious metal are trading in a range that’s above the psychological mark of $1,200 per ounce but below $1,300/oz. “The sharp rally in gold prices towards $1,300/oz has lost steam in line with our expectations. Nonetheless, a dovish recalibration of expectations for the global monetary policy trajectory by investors and additional equity market turmoil will put a floor under gold prices in the coming months,” says BMI Research in a report. Spot gold rose to $1,235.09/oz, up from the previous close of $1,228.73/oz.

 A group of 20 meeting comes around this week as investors continue to take a dim view over China's lack of growth. The Shanghai Composite Index slid during Thursday morning’s trading session, last off 3.6% at 2823.06.  The Shenzhen Composite Index dropped 4.76% and in Hong Kong shares were down 1.2% while Korea's KOSPI and Australia's markets remained flat. The Nikkei eked out a slight 0.6% gain. So to many investors it resembled more of the same uncertainty.