LACK OF CONFIDENCE GROWS

We recently wrote about those low rates and the damages they're doing to the COLA-dependent and retirees in general.

 And we noted that bureaucratic monster called the IMF and how their love for negative zero rates and its phony stimulus affect has on the global recovery made no mention of the pain such inflicts on the above. Now, guess what, those money-grubbing, fees-loading big banks are wailing the low-interest rate blues, too.

A WSJ headline,"Banks' Outlook Suffers As Rates Remain Low," tells the story. It turns out financial stocks which as 2016 was starting in what was suppose to be a good time isn't. Hello, Jamie Dimon. Toss in the recently released "Panama Papers" and you have some idea why this year's U.S. presidential election is going to be a most entertaining one. Standup comics, as we've said before, pay attention. There's going to be some hot material here. And for free.

It is also why--though MSM and its minions will never admit it--Trump-traction and the Vermont Socialist are climbing in the races. According to reports, Bernie spent his honeymoon in the old Soviet Union. That's seems like an important qualification for occupying the White Shack.

Bottom line, banks are apparently victims of bureaucratic unintended consequences. First quarter earnings on the big boys start this week. Key is net interest margins, since trading profits are nil or worse owing to regulatory fears and wrist-slapping. Where utilities were the surprised leaders in the first three months, banks have been the market's laggers. Both are interest rates sensitive, but for different reasons.

Banks are suppose to be"fundamental" to the economy. The same can be said for utilities.This is all the more reason to suspect the recent so-called positive data Yellen and her crew celebrated about the U.S. recovery and used it to hold back on raising rates. There are other clouds also hanging over the industry.

European banks and their known troubles are one thing, but markets are now leery of those unknown things owing to the lack of forthrightness afoot today seemingly everywhere. A recent example is those secret IMF documents that were leaked about Greece. There is a danger here and it's a big one.

If this whole bureaucratic-driven financial ball of wax comes unglued, you can bet you won't find any of these over-compensated, benighted bureaucrats pounding their chests for recognition in public after it goes down. By now most probably have those lucrative speaking fees buried somewhere other than Panama. Probably in gold.

A lack of confidence is their worst nightmare. If you think not, just turn your gaze east toward China.

TENTATIVELY MEANINGFUL BUT PROBABLY USELESS

If you're looking for a good reason to know why the International Monetary Fund is dangerous to your financial health and future here it is. The IMF is a bureaucratic mess that symbolizes globalism and everything you should fear about globalism.

It's clear they are flying by the seat of your pants not theirs because you will be the ones to suffer as they work their destruction. It's should also be clear they have not a clue at this stage of what will and what will not work. This is a cold, indifferent, secretive clutch of bureaucrats with way too much power that should be disbanded.

Though they admit having little experience with negative interest rates, they "tentatively conclude that overall they help deliver additional monetary stimulus and easier financial conditions." Note too the phrase "probably supported stronger economic growth."

Tentatively and probably are two of the best hedge or CYA  terms in the entire lexicon of bureaucratic gobbledygook.You should also question the timing of this nonsense just before this big circus rolls into Washington this week and MSM will fall all over itself to spread their gospel.

We have a suggestion. Maybe these bureaucratic wonders should tentatively pick up their paychecks every payday, but probably never cash them.

Washington (AFP) - The IMF on Sunday defended negative interest rates set by central banks, given "significant risks" of slow growth, while acknowledging potential for dangerous boom-and-bust cycles.

Six central banks, notably the European Central Bank and the Bank of Japan, have taken the unprecedented measure, aimed at loosening the reins on credit to help spur consumer spending and investment.

"Although the experience with negative nominal interest rates is limited, we tentatively conclude that overall they help deliver additional monetary stimulus and easier financial conditions," three top officials at the International Monetary Fund wrote in a blog. 

It comes ahead of the IMF's annual Spring Meetings this week in Washington.

In mid-March, IMF Managing Director Christine Lagarde said that the unorthodox negative short-term rates, in which commercial banks pay central banks to hold their money, had probably supported stronger economic growth.

While in theory the concept should work, economists are closely studying what happens in Europe and Japan amid worries that negative rates could actually provoke businesses and consumers to be more cautious about spending.

The three IMF officials also had words of caution.

"Negative interest rates may induce boom and bust cycles in asset prices. These potential risks require close monitoring and supervisory scrutiny," they said.

IT'S THE MARKETS, JAKE!

What is Asia's best performing currency? The answer is the same one up 11% through last week  against the U.S. dollar--the Japanese yen.

Like a lot of things, that wasn't suppose to happen. To paraphrase a line from a classic film, some might conclude: "It's the markets, Jake!" Japanese officials--Abernomics, in short--have been twisting their monetary spigot open for so long with such force their hands should be fatigued if not their resolve.

Don't get confused, the markets get moved by what some call external factors. But Japanese officials have not been reluctant to intervene to soften the yen. And the recent and surprising reversal of the Federal Reserve's posture hasn't helped Japanese officials. In fact, it's more of a clear sign central bankers are focused on China and it's problems.

Meanwhile, investors and market pundits are being forced to refocus on they're expectations for the yen in 2016. The European bank situation isn't helping either. Higher U.S. rates would've provided some cushion for the yen, relieving some of it's pressure as a safe haven stop for concerned investors.
That could still happen, but perception often trumps an actual dose of reality down the road.

And that raises another question: What if any validity does negative interest rates strategy have left with investors?  Covenants in the trans-Pacific trade agreement reportedly forbid a nation from weakening its currency to improve its trade. Though agreements hardly are written in stone at meetings like the recent G20 when officials return home, industrial and developing nations at the recent gathering in February agreed not to start a currency war if growth slows further.

If we had to guess, we think the yen's rise might go through a brief head fake owing to the above before going higher. Maybe even much higher. Like we said above: "It's the markets, Jake," And it wasn't suppose to happen.

OVERNIGHT

Dollar down, yen up.

If that sounds like a parlor game, it isn't. As noted last week the U.S. dollar fell to a 17 month low against the yen and Japanese stocks took their early Monday cue from the currency markets.

Meanwhile, the WSJ reported: China shares jumped Monday amid expectations that soft inflation leaves room for authorities to stimulate the economy through further monetary easing.

The Shanghai Composite Index was up 1.8% at 3038.78.

But in Japan, where the yen touched a fresh high against the U.S. dollar, the Nikkei Stock Average fell by 1.3%.

Shares in China and Japan have diverged markedly in performance over the past one-month period, as the People’s Bank of China and Bank of Japan face starkly different challenges.

Investors and analysts believe that China’s central bank has ample tools to ease policy, including potentially cutting interest rates, but that Japanese officials are running short of options, after already moving to negative interest rates earlier this year.

Data Monday showed Chinese consumer inflation rising 2.3% in March from a year earlier, the same as February’s tally and remaining below the government’s target ceiling.

Other data released Monday showed Japan's core machinery orders dropped 9.2% in February from the previous month adding to concerns about the lack of recovery in the light of Japanese official attempts to stimulate growth. The prospect of a stronger yen also weighs heavy on Japanese exports.

The next unknown is when or if the BOJ will take any further action to offset the rising yen, unlike in China where investors seem to think officials there have further room to tackle their situation.

THE BOND GURU

It's nice of bond guru Bill Gross to finally come out and say that ultra low interest rates are killing folks. Most likely after he's made tons of money off them.

It's nice of the Butler Creek boy to say what others have been saying for some time now. Who are these others? Mostly the voiceless. But here's an example--anyone on a COLA. Like maybe your 87-year-old grandmother those politicians who care so much about and want her vote this November.

And what savers? Is that term still in the lexicon of most people? It's been reported that Japanese investors are moving funds to the U.S. because they find the zero return rates on cash attractive. We know you do too. We also know that those rates are somewhat responsible for gold's recent upswing, zero yield.

In the land of the poor-sighted, the one-eyed guy is king. Who doesn't understand that zero  outperforms minus zero? Gross apparently has some Chuck Schumer lineage in him. Any opportunity for publicity is a good one, so he dons the cover of this week's Barron's. No, we're not knocking Gross' smarts. Like we said, he's smart enough to know when to keep quiet about an investment and when to open the flood gates.

He makes an interesting point about volatility, every retail investors'--including the February Japan and China sell off--worst fear. There's really three kinds--upside, downside and flat. All can be used to make money. He says volatility--at least right now--has the lowest risk relative to the return on the others such as credit., currency and liquidity. If you don't know and have some understanding of these, forget the market. Take up sports betting. The bookies will love you.

The average retail investor usually doesn't realize what he and she is buying and selling. It's not just a stock or bond or earnings or P/E or whatever. That's the financial gobbledygook they want you to buy into. It's buying and selling disappointment. If what he thinks will happen happens, someone else is disappointed. And just the reverse. Can credit ratings ever disappoint? Yes. How about liquidity?

We had this really attractive girlfriend recently who was a neurotic nightmare. We had to evict her to get rid of her. That can be a real illiquid situation .So you know the answer to liquidity, it can really disappoint. The same goes for earnings, analysts' reports, and here's an even more certain one, predictions of economists.

We apologize. We omitted another big one--promises of politicians.

What Gross is intelligently saying here is central bankers won't any time soon be adorning the face of your currency with inscription of: In Central Bankers We Trust. Now don't take our word for it.This is Bill Gross, the bond guru.

ASSUMING FREEDOM TO DO SO

What the Trump candidacy represents to many of his detractors is a form of protectionism, globalists' worst nightmare. At least that's what their argument to derail him is now.

Buried in that term is most of the other well-chosen epithets like xenophobe, racist, homophobe, hater and so on.

What Breixt, the upcoming UK election to go or stay in the EU, represents is a form of protectionism. As so does Grexit. Protectionism is also about sovereignty, preserving one's culture, one's currency, privacy and, in the eyes of many, liberty, all things globalists disdain. Some call it simply local rule.

So the elitists and their MSM lackeys paint it as all bad. But is it? It's a form of self-determination, what the phony right to vote is suppose to be about. In the U.S. you have two parties that say: "Here, go out and vote, pick from one of our candidates and everything will be fine."

And so it will until voters pick one candidate party aprachits don't like. And that brings us back to Trump and the perceived but false threat of protectionism and a brokered convention. It also tells us why this two party monopoly is broke.

The tremors you've been feeling are from a fault all right but not the geological kind. It's the major fault of these two bankrupt parties that for decades have been serving at best 10 percent of the people. You're enfranchised, to be sure, so long as you play by their rules.

Protectionism is like sunshine, a little bit can't be all bad. Who gets to define a little bit? Well, whose been deciding what candidates you get to vote for in these jokes called presidential primaries? The New York Times, The Wall Street Journal, CNN or Fox News? It certainly isn't you. Nor are brokered conventions or their threat new.

Local and any talk of it is a globalist's second worse nightmare. They despise terms like local, liberty, self-determination, soverignty, cultural, freedom of expression. And their disdain is all cloaked in their fake meme about revering and celebrating diversity. They don't. The term globalist itself is anti-diverse. It is also anti-language. So what's going to be the language of the globe, a Western or an Eastern one? And what happens to all the others? How free is a cashless society? Sounds pretty anti-diverse to us.

Who are the real xenophobes here, the real villains? You, me, them? That's something you'll have to decide for yourself, assuming you have any freedom left to do so when the time comes?

A CUTE PARTY

 
Ever go to a cute party?

Cute parties are always staged. And we just got treated to one that could not have been more staged. The hosts were hand selected, a couple of Democrats, a couple of Republicans, all economists, all former chief central bankers.

It was an economic play on good cop-bad cop with one slight twist: there was no really, really bad guy just another shill for their main theme who played the role of lighthouse keeper--things are fine but here's a reminder. There are some shoals out there. He's a Republican, but he's wizen and wise, two reassuring traits, to be sure, speaking the word of calm caution. That should soothe some frayed rabble nerves.

 The MSM, true to it charter, jumped on this fantasy like a gaggle of obese sports journalists during a half-time free spread at the Super Bowl. Free food? You mean there's more. Rumor has it most of them double their Metformin dose that day. You can bet a week's supply of your favorite anxiolytic stash big pharma loves it.

You wonder who thought up this obvious attempt to settle the masses down by parading four people with central bank experience, economically and gender PC, a sham if there ever was one. What it tells you, like the Trump unexpected, much parodied ascendancy, real or not, they're scared, threatened to the bone. There's trouble in paradise, not your or mine--theirs.

But let's examine a bit this cast of well-chosen characters rooted out at this particular inflection point. You have a couple of blasts from the past beginning with the guy who's credited in the early 1980s with breaking inflation's spine. You also have the long-too-long standing Mr. Irrational Exuberance, Sir Alan, who in a book about the Maestro Man by that Bob Woodward openly admitted he delighted in flummoxing the media.

More recently, the astute academician who in his spare time likes to fly helicopters. He's best remembered for staring the world in the kisser and reassuring us all the subprime miasma was "well contained." The was before it imploded. Nobody saw much of him after because reports have it he's too busy going around collecting hundreds of thousands for speeches and hobnobbing with the hedge fund crowd.

And last but not least, you have the current anointed bureaucrat who spends thirty seconds of every minute going backwards and thirty seconds of every minute going forward, a dove in dove's clothing.She's not really confused, just occasionally looks like it--all day everyday. She's been waiting for clearer signs longer than many playgoers have been waiting for Godot. If you don't smell the scent of a staged event, here's a message for you: You can't afford to buy the Brooklyn Bridge.

ARROGANCE AND CONTEMPT

People who write about the prospect of bad news are usually about as welcome as bad news at a wedding celebration.

And when a GOP card carrying WSJ columnist ends her long lament about the Trump train's traction with voters by referring to "these two great parties," you know the political seas are getting rough in political paradise.

The only thing great about these two political parties is how long they've managed to bamboozle a Rip Van Winkle public trying to carve its way into what was always an uphill and now nearly impossible struggle to find their place in the middle class. Some incorrectly call this the inequality gap.That's a huge misnomer. In truth, it's a pogrom.

Getting to the middle class was an accomplishment. It gave people a sense of belonging and direction. It was about improving the breed. If not them, maybe their children could go even higher. There was a gap alright, but one middle class people knew about, even upper middle class ones, and they knew how to deal with it.

Once you wipe them out, however, cut off all possibilities of working your way there, it's over and you have what's left now, a chasm not a gap. The number of immigrants who came here, many poorer than church rodents, worked hard to reach that middle class status and nearly everyone one of them earned it. That's people. You're always going to have members of the shortcut crowd, too. That's people.

They often wind up on Wall Street or as bureaucrats in political positions seeking political power so they can tell the rest us how we should live and carry ourselves. They have names, too. Republicans and Democrats, demagogues,tyrants and elitists, members of the self-perpetuating two party system that Journal writer so nostalgically adores and wants to preserve. She, too, is an elitist, perched on her self-serving but condescending editorial throne, ever ready to tell the rest of us how we should  tie our shoes every morning.

She knows what's best. And that's these two "great parties" that have not served more than 10 percent of the people for decades. These two great self-perpetuating parties that in reality are part of the so-called one percent. Show us a Congress person who been there more than two terms and we'll show you someone out of touch and rich.

The real truth is they're the same. A long time ago a guy once noted there's not a dimes worth of difference. Well, there's is. Notwithstanding what central bankers want to tell you, there's been inflation, a lot of it. Nobody wants a dime these days.That's the only difference. They need that and much more just to exist.

The Trumpster man, hate him or otherwise, stated when he got out of the the University of Pennsylvania's School of Finance in 1968, he was worth $200,000. Whether it was daddy's money or not isn't the point. Someone bothered to calculated that out a few years back and it was worth well over $1,200,000 in today's dollars.That's what your central bankers and bureaucrats and so-called elected officials have done for you.

Some call it purchasing power and the loss thereof. That's a kind term. Broad daylight stick-up of the people is a more accurate one.

Toss in the relentless stealth taxing and smothering regulations in 50 different ways of that-dream-to-make-it-to the middle class crowd and you're ready for the official requiem that never got held. That's what the two-party system that feels that garrote tightening around its status quo gullet is shaking in their Armani suits about. That's what these "two great parties" with their military-industrial complex and wasteful social program schemes have created for you. 

Their indifference to the once respectable goal of becoming middle class has been exceeded only by their arrogance and contempt. They love their place at an already over crowded public trough. What they despise, however, is your trying to get yours.

OVERNIGHT

The yen and the export disaster. Sounds like a good title for a fairy tale. But it's no fairy tale as the yen moved to  beak a multiple year and a half high against the dollar, putting the skids to Japan's exporters.

It wasn't supposed to happen, not in the negative interest rate environment Japanese officials pushed through in late January. It was really another indirect play on beggar thy neighbor in what most in the MSM fail to admit, a currency tussle. It was suppose to work. So far it hasn't. So far it's main effect has been to further depress investor confidence in central bankers in general and Abernonics in particular.

So if your name is Honda, Sony or Toyota you might start feeling pain soon. The effect on the Nikkei 225 has been pretty obvious, down more than eight percent in the past week.

Asian shares extended losses to three-week lows on Friday, while the yen soared to a 17-month high against the dollar as investors bet Japan would be hard pressed to drive down its currency in the face of widespread foreign opposition. MSCI's broadest index of Asia-Pacifc shares outside Japan dropped 0.5% off nearly 1% for the week, Reuters reported.

Nikkei .N225 pared earlier losses to near-two-month lows to trade 0.6 percent lower, with financials under pressure. It's on track for a decline of 3.1 percent for the week.

China's Shanghai Composite index .SSEC slid 0.9 percent, poised for a similar drop for the week. The CSI 300 .CSI300 was down 0.8 percent, set for a 1.2 percent weekly decline. Hong Kong's Hang Seng .HSI slipped 0.7 percent, headed for 1.9 percent loss for the week. 
Bank shares led losses in Europe and the U.S. markets on Thursday, amid talk of more layoffs and cutbacks planned by Europe's major lenders as they struggle with zero rates.

The U.S. S&P 500 Index .SPX lost 1.2 percent, with financial shares .SPSY falling 1.9 percent. In Europe, the FTSEurofirst 300 closed down 0.8 percent, hurt by a drop of more than 2 percent in financials.
 
The yen strengthened to 107.67 to the dollar on Thursday, its highest since October 2014, and last stood at 108.64, heading for a weekly gain of 2.6 percent.
The dollar index .DXY, which tracks the greenback against a basket of six rival currencies, was up about 0.1 percent at 94.583, poised for a flat weekly performance.
The euro EUR= also hit a six-month high of $1.1454 the previous day and last fetched $1.1361, set to end the week up 0.2 percent.

On the other hand, commodity-linked currencies and many emerging economy currencies stepped back from recent multi-month highs as risk-averse mood took hold on investors.
 
The Australian dollar traded at $0.7533 AUD=D4, having fallen 1.3 percent on Thursday.
In the commodities market, copper suffered its biggest fall in more than six months on Thursday, slumping 2.8 percent on the day and hitting a six-week low of $4,631 a tonne.

HERE'S THE FEAR

Here's the fear.

The Fed's March minutes were scanned and re-scanned Wednesday looking for clues--anything-- to reveal where, when and by how much interest rates are changing, if indeed they are changing.

The consensus seems to be the Fed will hold back until the global economy picks up. And that's the fear few want to face, especially the MSM myrmidons who constantly shill for the idea that central bankers know what they're doing. They don't.

What if questions are usually too scary, too unpalatable. Up to now they've perceived that at some point--tipping, inflection, magical or whatever--the global economy will hit it and things will turn around like its always done before. But if you start with a false premise and expect your conclusion to be anything but false, well, you get the idea.

The false premise is the Yellens, Draghis, Carneys of the central banking world know what they're doing. They don't. And neither does anyone else for that matter. The "like before" has never been anything magical, just the usual papering over effects just like now. The infrastructure's rotten to its core, but the curb appeal covers many of the blemishes.

On the Internet you will find more than one article these days about celebrities--mostly attractive women--swim suit models and the like showing what they really look like without the make-up. Few people realize let alone know what the real global economy looks like without all the phony make-up. Think Fox News analyst Megyn Kelly. Mean statement? No. Factual one? Yes.

Here's what they fear. China, an economy that's wearing a lot of phony government applied make-up. So the Fed cuts a deal at the February G20 meeting. It's a highly deceptive, arrogant  and dishonest deal. Suddenly, the Fed changes from its previously prideful announcements about never deviating from its two mandates, jobs and inflation. Keep in mind those are domestic jobs and inflation.

Forget transparency.That's never going to happen. Show me a transparent government and I'll show you a government no longer governing anything or anybody. One of the things those recently released "Panama Papers"proved is make-up, like a lot of things, comes in different packages.

Forget transparency. That's the emperor without make-up. And now you know the fear.