JOBS REPORT: YOU DECIDE

MSM never tires of trying to bolster public confidence and cover for the utter madness of U.S. monetary policy.

When they can't find anything concrete they turn to a convenient source, jobs numbers. In Friday's WSJ, "Job Market's Underappreciated Strength,"  Steven Russolillo wrote: "In the lackluster, slow growth economy, at least one thing isn't appreciated enough: the steadiness of monthly job gains."

He then covers his you know what and attempts to minimize any upcoming disappointment in the April number set to come out obviously after he filed his story by saying any negative surprise "....will be viewed as an aberration rather than the start of something more problematic."

He the noted it's important since it's the next to last such report before the Fed's June meeting where some think the Fed could surprise and hike rates. Well, the report is now out. Economists were expecting 205,000, a number in line with recent ones. Russolillo points out how favorable these reports have been the last six months averaging 246,000 jobs, the best six month rolling average since February 2015."

But as the man said, "Not so fast." Reuters said that the Labor Department showed the economy gained 160,000 jobs in April, "the fewest in seven months, and Americans dropped out of the labor force in droves, signs of weakness that cast doubts on whether the Fed will lift rates before the end of the year."

Gold immediately on the news rallied 1% before the Fed sent out one of it heavier hitters, New York Fed President William Dudley who told the New York Times that "two rate hikes in 2016 remain 'a reasonable expectation," causing gold to give back of its gains. Gold is a surrogate now for the direction of interest rates as long as this uncertainty continues, rallying on each Fed's delay and indirectly reflect a growing lack of confidence in central bankers.

Dudley's appearance itself was questionable. Was it spontaneous or just waiting in the wings if the number came in sour? Once the job numbers came public stock market around the globe faded and yields on Treasury paper fell. And perhaps less noticed silver and other metals also rallied earlier in the week.

THE END OF APRIL

What a difference a few short months makes.

If you've ever run a portfolio you know what we're talking about. And if you're one of those so-called political soothsayers who predict election outcomes you also are getting the idea.

Coming into this year the investment landscape looked straight forward enough. In December the mighty Fed had not only spoken, it actually acted, hiking interest rates 25 basis points and calmly projected at least four more well-spaced hikes ahead. The mighty emperor QE after a longer life expectancy than anyone but a government bureau could dream of was dead.

In the presidential primary festival that happens every four years many of the political pundits who live, breathe and spout off from their editorial caves poked fun and popped jokes about a well known, brash New York businessman with a strange blondish soufflé hairdo. He couldn't make a splash in a swimming from a ten meter board. And winning his party's nomination, well, that only happens in Hollywood. That's for some middle-aged, uneducated Caucasian Iowa tow truck drivers who butcher what's left, if anything, of decent grammar every time they speak.

The dollar was set so most believed to appreciate against the yen and the euro, the Fed would continue its tightening act and emerging markets should be avoided more than long john underwear in July. But then along came not a fellow named Jones but slower economic growth than most expected including those lovers of everything Chinese.

Bonds continued to rally and consumers either forgot or couldn't afford to spend their expected savings from cheaper gasoline, no doubt much of it siphoned off by soaring rents; and that magical 2% inflation number central bankers everywhere worship so much proved harder to find than a California virgin.

In currencies linear thinking took a drubbing when the Bank of Japan acted not to act. First quarter corporate earnings turned out more disappointing than our old girlfriend and that was with most still wearing their heavy Wall Street makeup. Goldman Sachs, the newest investment banking friend to every proletarian, presciently noted the soaring yen posed an "existential challenge" to the Bank of Japan.

All of this took us through just the end of April.

OVERNIGHT

Last night just after it was announced we discussed the Reserve Bank of Australia cutting its benchmark interest rate 25 basis points to 1.75 and investors need to keep an eye on market reactions.

Well, today we got one, according to the WSJ, as: Stocks and oil futures tumbled and Japan’s yen hit its highest intraday level against the dollar since October 2014, as investors struggled to reconcile recent market gains with unease over the pace of global growth.

The latest tumult erupted after the Reserve Bank of Australia on Tuesday cut its benchmark rate by one-quarter of a percentage point to 1.75%. The move reflects soft inflation and economic sluggishness driven in part by weak demand from China, the largest buyer of Australian exports. Adding to concerns were a drop in Chinese manufacturing and signals that eurozone growth is slowing more than previously forecast, traders said.

Tuesday’s developments reflect worries that have shadowed a surprising 2016 recovery in the prices of stocks and many commodities. Global growth has slowed this year, prompting major forecasters to cut their outlooks. Yet in recent months the decline of the U.S. dollar and easier policy from global central banks have helped fuel gains in many riskier assets, allowing the Dow industrials to recover from a decline of as much as 10% earlier this year.

In other markets the Hang Send was down 1.3%, the Australian S&P/ASX 200 shaved off 1.4% after the above-mention rate cut, the Korean Kospi edged 0.79% lower and the Shanghai Composite Index slipped 09.4%. Another problem hanging over area banks, though not much talked about, is the gap between loan loss reserves and bad loans should things get worse, estimated by some at around $60 billion should we return to 2008-like conditions. An estimated third of that gap is in one country, China.

SOARING RENTS

You can get caught up all you want in the different ways inflation gets measured. Much of that is just a form of intellectual masturbation: Economists writing for other economists, academics writing for other academics and so forth. In truth, the way the Fed measures inflation has over the years had more facelifts than a handful of aging Hollywood stars.

Real live everyday people have to have shelter and they have to have energy for a variety of reasons. Though we would take exception with some of what the author concludes here, this is an article you can read and decide for yourself. We seriously doubt that the government's data, as ugly as it is for renters, captures certain outlying areas like parts of Southern California  and San Francisco where rents have soared.

marctomarket.com/2016/05/great-graphic-us-rents-and-core.

IT'S ALREADY HERE

It isn't this bad in the U.S. yet, but with its love affair with PC it's getting close.

The intolerance of others' views and choices that rattled various campaign gatherings the past few weeks coupled with the barrage of editorial page articles trying to derail the Trump train are just two examples of where we really are as a people and a nation.

 More significantly, it's further evidence neither as a nation nor as a people are we in any condition to tell others around the globe how to conduct themselves. That's a good part of the push back in this election too many--particularly among the elitist crowd--don't get or don't want to get.

If you have any doubt that China's official economic data can't be trusted this should remove all questions. We have been saying for years they're doctoring those numbers even in the good times, but it's more essential to do so in bad times. And China is full of bad times.

There's plenty of other evidence coming out of China about people who criticize or disagree with the government being threatened, quieted or jailed. Don't think it is not happening here. Climate change is a classic example.  One particular U.S. senator has suggested bringing legal action against anyone,scientists or otherwise, who now questions climate change. MSM's persistent covering for an incompetent Fed and it's dangerous monetary policy is another.

That's just one more reason why this upcoming election will be one of the most contentious but important in the history of this nation. There is a strong move afoot to take the reins of controlling the government further out of the hands of the electorate by rewriting the Constitution and centralizing that power in Washington.

BEIJING—Chinese authorities are training their sights on a new set of targets: economists, analysts and business reporters with gloomy views on the country’s economy.
Securities regulators, media censors and other government officials have issued verbal warnings to commentators whose public remarks on the economy are out of step with the government’s upbeat statements, according to government officials and commentators with knowledge of the matter.

The stepped-up censorship, many inside and outside the ruling Communist Party say, represents an effort by China’s leadership to quell growing concerns about the country’s economic prospects as it experiences a prolonged slowdown in growth. As more citizens try to take money out of the country, officials say, regulators and censors are trying to foster an environment of what party officials have dubbed “zhengnengliang,” or “positive energy.”

In the past, Chinese authorities have targeted mainly political dissidents while commentary about the economy and reporting on business has been left relatively unfettered in China in a tacit acknowledgment that a freer flow of information serves economic vitality.

But Beijing has moved to reassert control of the country’s economic story line after policy stumbles that contributed to selloffs in China’s stock markets and its currency last year fed doubts among investors about the government’s ability to navigate the slowdown.

 

IT WON'T STOP

"When everyone is thinking the same thing nobody is thinking."

That insightful gem was tossed out by General Dwight D. Eisenhower who led the Normandy  invasion across a stormy Atlantic when nobody thought it was possible, when conventional thinking recommended waiting until the skies cleared. Later when he became the 42nd president, he gave us another gem. This time about following through.

As a former five star General and Commander in Chief, he was use to giving orders and he was even more use to seeing those orders carried out. After being in office awhile he quipped how much it surprised him hardly anyone in Washington carried out their orders. That was more than half a century ago.

If you think about a slightly expanded definition of orders you'll see that's what elections are suppose to be about, elections include every level, local, state and federal. In this case the orders of the people, like them or lump them. There are primarily three candidates vying in the upcoming November election. If you took the promises and themes of all of them only a third, if you're lucky, will turn out to be honest. And most likely fewer than half of them will ever see the light of action.

Politics gets passed off as the art of compromise. That's old-time BS purer than new born baby poop. The people don't take orders; they give them. It's called elections. What's going on now isn't new. In fact, it's old, really old and tiring. It goes by another name, Democrats and Republicans, the two-party system that's as socially insolvent as most Italian banks are financially. And it will never stop unless you stop it. If you're too lazy or indifferent, then forget about your dreams and aspirations, and those of your offspring too, just get in line to collect your chit and spend it every week at the company store.

Another way in our view of saying it, is when everyone is doing the same thing nobody is doing anything. Think central banks here and a host of others like pitiful management. Names like Puerto Rico, Detroit, Chicago, Atlantic City, Stockton, San Bernardino, to cite just a micro list.

It's in the genetic code of politicians and managers. They get hooked on streams of cash flow they think extend into perpetuity. Or at least until they've ridden into the sunset. They never see or don't want to see the huge hangover coming after the wild partying. Big corporations and whole market sectors like banking and energy and real estate should come to mind. And let's not forget one of the biggest of the Big Daddies, big pharmaceuticals. People rant and rail about corporatism, but the biggest corporation is global government.

The U.S. manufactures more MBAs a year than it does industrial products. It's its own industry. This nation for most of its existence has been run by those with Ivy League pedigrees. To put it kindly, their track record has been less than sterling. It won't stop unless you stop it. Goldman Sachs' new found interest in the proletariat is a case in point. If you see a Goldman Sachs employee approaching walking down the street, you'd be wise to cross over to the other side.

Recognize that globalization is your ticket to the company store. First a one-currency world then a cashless one. Every movement has a hidden meme or two. Convenience and justice are the public ones for a cashless society. More centralized control and less liberty the hidden ones. It won't stop unless you stop it.

A DEAL DONE

We mentioned in our last Overnight that the U.S. just made it harder for Japanese officials to intervene in the currency market to devaluate the yen.

Here's a piece from CNBC about gold and currency manipulation. Note Christine Legarde's comment. She heads the IMF. What do you think she's going to say: "Yes, you've finally caught us with our hands in the currency cookie jar."

Even if she's not jawboning, which we think she is, a deal could be cut without her knowledge. The only damage being done is to her ego.

So which is it: A deal done or a done deal?  What we know is if they're manipulating currencies, they're manipulating gold indirectly. Are they manipulating the price of gold? Deutsch Bank gave us that answer a short time ago.

cnbc.com/2016/05/02/jim-rickards-says-for-gold-prices-will-go-
higher-as-dollar-weaken.

OVERNIGHT

Forget risk on, risk off. The new meme is doubt in, faith out as the Japanese yen continued its climb against the U.S. dollar making a new18-month high Tuesday and investors lose confidence in central banks and their ability to create growth via monetary policy.

If you're a gold investor you see the handwriting clearly. If you're not don't wait too long to put a net under your purchasing power. The debasement of fiat currencies is on. Gold and silver have been two of the better investment in 2016 to date.

To add to the problem China's latest PMI number, minus any attempted MSM spin, continues what has been a bleak story for 14 long months as demand stagnated in April and further job losses mounted. The Caixen purchasing managers index dropped in April to 49.4, below the neutral 50 level indicating further global weakness since China represents the second largest global economy.

All of this wasn't lost on equity investors. Reuters reported that markets in Hong Kong and Taiwan led regional losers down after the report. One of the few bright spot was Australia where the market was up 0.8% ahead the the central bank meeting where economists were not expecting any rate changes. But should one happen it would further add to investor fears about global growth.

In breaking news, RBA cut it's rate 25 basis points to 1.75%. The fallout to investor confidence remains to be seen, but is one investors want to keep an eye on.

In a side bit, noted by Reuters, "The U.S. Treasury put Japan on a new currency monitoring list with four other countries that have large trade surpluses with the United States, seen making it harder for Tokyo to intervene in the markets to stem the yen's gains." Shades of a trade war.

SUPER-SIZED PARADOX

Paradoxes never end.

Former New York City Mayor Michael Bloomberg delivered the commencement speech at the University of Michigan recently where he singled out the importance of having an open mind.

So when is the billionaire going to get one? How about starting with super-sized soft drinks and peoples' right to choose? That might be an interesting place for you to start, Mr. Former Mayor. He then went on to talk about micro spaces, those little dens popping up on college campuses now like wild spring flowers.

They are exclusionary, a lot like high, thick walls that separate countries many young college-aged youth so much loathe today. As we said: paradoxes never end. Mind are just find; it's yours that are screwed up.

The fact that some university boards and administrations now bow to pressure and shield students from these ideas through ‘safe spaces,’ ‘code words,’ and ‘trigger warnings’ is, in my view, a terrible mistake,” he said, to some applause.

But it was his point about the above issue, micro spaces, that bought out some boos. “The whole purpose of college is to learn how to deal with difficult situations — not run away from them. A micro aggression is exactly that: micro,” he said amid a chorus of boos.

According to reports, some of the students hurled epithets are the former mayor as he continued:

“One of the most dangerous places on a college campus is a safe space because it creates the false impression that we can insulate ourselves from those who hold different views,” he said. “In the global economy, and in a democratic society, an open mind is the most valuable asset you can possess.”

We wonder if the good former mayor shared that thinking with all the columnists and reporters who worked for his news organization and have spent that last few months ripping and ranting about and hurling nasty epithets at all those Trump supporters?

As we said, paradoxes never end. Mine are just fine; it's yours that are really all screwed up.

ONLY ONE WAY

Gold for immediate delivery broke above $1,300 an ounce Monday as low interest rates and rumors floated through the market that the G3 agreed to take the dollar down. The last time gold traded there was 18 months ago.

That the Japanese yen crossed most investors and the BOJ officials up by rallying strongly against the dollar after bank officials decided to sit tight was a warning sign. The news is out. Not only is the dollar falling, so is central bank credibility. But that just goes to show the real surprise here is that they ever had any credibility if it weren't falsely hawked  by the Street and their lackeys in MSM.

As we noted before central bankers are caught in their own binary quandary, especially the Fed. Most of them are quivering in their frayed dot-plot suits, afraid at this point to do anything. In their idiotic, senseless chase for the illusive fantasy number, 2% inflation, these economic lemmings have done what central bankers with their data-driven madness do best--create messes.

A weaker dollar, artificially held down interest rates and higher gold prices equate with future inflation, otherwise known as further loss of buying power. They're the standard three legs of buy-on-the-rumor-not-the-fact stools. While the Fed dithers with data to be sure the jobs numbers confirm a demand for higher wages, higher wages won't wait.

The mood of the electorate in the upcoming election has been telling anyone who bothers to listen that for months. It ain't about Bernie or Hilary or Trump. They're just media created symbols for what's rumbling beneath the surface. Forcing down interest rates and holding them down is a form of global rent control. They'll be hell to pay when those controls get lifted. And that spells the fear investors globally are starting to smell emanating from the economic cellars of global bank bureaucrats and their comrades at the World Bank and the IMF.

Fear is to volatility as bureaucrats are to incompetence. Things now are such that just about anything these geniuses do can end up only one way--wrong.