JUST FOR OPENERS

It shouldn't surprise that MSM gloats over every tiny glimmering bit of economic data like recent existing home sales rising for the second straight month, trying to spin such in as positive light as they can.

We've said before and we'll say it again most of MSM are Keynesian shills for the Federal Reserve. We've said before and we'll repeated it: The Fed in particular and central bankers in general are clueless with the Fed given it recent warning about a June or July rate hike, looking for an exit. They need to CYA and rescue their friends in big banking.

Along with the spin about existing home sales or whatever, these purveyors of bureaucratic nonsense usually toss in a line or two about steady job growth and low interest rates. Well, here's something you might want to read about low interest rates and how effective they really are in revamping economic growth. businessinsider.com/the-world-economy-is-running-on-monetary-fumes-2016-5?

And here's a quote from the article to whet your reading appetite.

As our new Council on Foreign Relations Global Monetary Policy Tracker shows, a record 23 countries — accounting for a quarter of world GDP — now have central-bank policy rates of zero or less. A further six — including the United States — have policy rates of 1 percent or less. This means that the scope for monetary stimulus using conventional tools, such as policy-rate cuts towards zero, is — as the graphic below shows — nonexistent or limited in nations accounting for 60 percent of the global economy.

But what about unconventional tools?

Central banks in Europe and Japan have shown that monetary policy rates can go below zero, but there is a lower limit. This is because banks and individuals can switch to holding physical cash — which pays zero interest — instead of deposits earning negative interest. Holding cash is not costless, particularly large sums that need to be stored and insured, which is why slightly negative rates can potentially be effective.

Just in case you don't get it: Investments--yes, we said investments--like putting cash into zero interest rate holdings and the notoriously MSM maligned-pay-nothing yellow metal, gold, are the actual high yield investments here. 

Both are the worst nightmare for bureaucrats and central bankers everywhere who want nothing more than you to open your already strained wallets and spend more and take on more debt to bail their pathetic butts out. Unlike their banker friends, however, they won't be around to bail you out.

These people subscribe and want you too likewise to swallow the belief that there is no such law as the law of limits. With monetary stimulus already there, you're already hearing from the Keynesian crowd to roll out their last supposed big gun, fiscal stimulus. In short, pile more debt on the heads of already drowning taxpayers.

That's should remind of an old song, "Hard Hearted Hannah." She was last seen down at the seashore with a great big pan pouring water on the head of a drowning man.

The world is drowning in debt. Debt has a lot of different names, like a thousand trillion derivatives afloat out there. And that's, just for you poker players, for openers.

OVERNIGHT

Is it June or July, the next interest rate hike?

That's the message investors heard Thursday from New York Federal Reserve Bank President William Dudley pushing the DJIA and the S&P 500 to two month lows before rallying a bit. It was the third straight day the Dow finished lower.

The WSJ reported: The New York Fed's William Dudley, a permanent voting member of the central bank's rate-setting committee, said there was a strong sense among Fed officials that markets were underestimating the probability of policy tightening and that the bank was on track for a rate hike in June or July. Dudley said he was "quite pleased" investors had apparently increased bets that a rate hike would come soon.

Dudley's comments came a day after minutes of the Fed's April meeting revealed that most policymakers felt a rate increase might be appropriate as early as June.

Markets are pricing in a 32 percent chance of a rate hike in June, according to the CME FedWatch tool, up from 15 percent on Tuesday. A majority now expect a rate hike at the July meeting.

The Nikkei was up slightly ahead of the G7 meetings trading at 16,739.28, set to possibly gain 1.6% for the week. No doubt the G7 meeting will capture much focus and just what is in store for the yen as currencies are expected to be at the top of the discussion list Friday. The dollar was at 110.08 against the yen, down from its recent three-week high of 110.39.

Meanwhile, other Asian markets were up, the Korean Kospi 0.07%; ASX 200 0.57%; the Hang Send 1.20% and the Shanghai Composite 0.10%. Oil was up with Brent crude approaching the 450 a barrel mark, trading at $49.25. Gold overnight was trading at 1253.90.

There are those who believe that the Fed's sudden change in sentiment about rates is part of a currency deal cut last month a the G20 meeting to help rescue other flagging economies. By hiking rates the U.S. would be what many see as its role in the global slowdown, the consumers of last resort. 

FED FRIENDS

They know they've created a mess and now they are starting to panic looking for ways to undue their creation.

Who is they? The incompetents that run the Federal Reserve.

Jeffrey Gundlach, chief executive officer of $95 billion DoubleLine Capital, says the Federal Reserve has changed the conditions required for a potential interest-rate hike this year.

“The Fed has shifted from, ‘if the data pattern improves we will have the green light to hike,’ to ‘unless the data pattern weakens we have the green light to hike,’” Gundlach, 56, wrote in an e-mail Thursday.

The above quote captures the sense of their panic to get off the hot seat they created. It's more proof they know not what the hell they're doing. Incompetence, however, always has it's victims. And usually it's spelled the people. They want to exit this crisis before it goes down so they can say that they tried to warn everyone by doing their part, the right thing at the right time. But they wouldn't know either if they had 10 data-filled crystal balls to supplement their dot-plot board.

The ploy here is as simple as it's obvious. Goldman Sachs just did a sudden reversal on the price of oil and the no longer attractiveness of equities. They also set up savings account yields to ensnare the proletariat. So who do you think higher interest rates will profit? Here's a short list: Goldman Sachs and the big banking crowd. It pays to have friends at the Fed.

It turns out 1913 was an historical watershed moment in the nation's history.. Two behemoth, now out-of-control institutions detrimental to your future and to the financial health of that future, were birth that year--the IRS and the third Federal Reserve bank of the land. Both are in dire need of being revised, revamped and perhaps even being totally mothballed.

Trading profits vanished and the spread trade has been deader than Ted Cruise's presidential campaiSo who do you think will profit from higher interest rates? Here's short list: Goldman Sachs and the big banking crowd. It pays to have friends at the Fed.

OVERNIGHT

Asian stocks along with gold was down as investors started to digest the possibility of a June interest rate hike by the Fed while the dollar rallied Thursday. The prospect to higher interest rates is usually a negative for gold as is a stronger dollar.

The South Korean Kospi shed 0.5% and the Australian market joined in the downturn giving up 0.6% while the MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.8%. Gold isn't the only investment hurt by a stronger dollar as emerging markets have to go through the dollar for many of their transactions as many commodities go through the greenback one of which is oil also down.

The yen hit a three week low against the dollar given the outlook for a possible rate hike in June by the Fed partly on the basis of  the weaker yen only to later give some of its early gains back. According to a Reuters report here is what the Fed notes said:

The Fed minutes noted Fed officials said it would be appropriate to raise interest rates in June if economic data points to stronger second-quarter growth as well as firming inflation and employment. Up to this point many investors had discounted any such Fed action and were no doubt caught off guard.

China and its struggles continue to weigh on markets as it proved to be for years the big fat whale swimming past that everyone came to count on for their sustenance. The dollar index, DYX, stayed just below a a seven-week high of 95.27.  

The Wall Street Journal reported:

SINGAPORE—Expectations that the U.S. could increase interest rates in June drove the dollar sharply higher against major Asian currencies Thursday, with the Chinese yuan at its weakest level since February and the Japanese yen giving up much of its recent strength.
The U.S. dollar index rallied to a two-month high, as the market was caught off-guard by the hawkishness of the Federal Reserve, which concluded that a rate increase in June was a distinct possibility, according to minutes of their April policy meeting released in the U.S. on Wednesday.

Many traders had earlier discounted the possibility of an interest-rate increase in June, but the latest Fed minutes, along with a batch of strong economic data, have changed that view.
Asian currencies are falling to multi-month lows as traders adjusted positions to reflect the interest-rate expectations. The Indonesian rupiah hit a three-month low, as did Thailand’s baht, while the South Korea won, the Philippine peso and the Singapore dollar hit two-month troughs versus the U.S. unit.

High-yield currencies in emerging markets are likely to be vulnerable to further weakness, said Tareck Horchani, senior sales trader at Saxo Capital Markets in Singapore.



 

BUNKERS TO THE LEFT AND BUNKERS TO THE RIGHT

We've been questioning the Fed's--as well as that of other central bank lemmings--now way overdone quest for that magical two percent inflation number for months. It seems the whole globe's existence depended on it. How stunning, how convenient, how simple.

Data freaks love data. You have to know that. You also have to know the magic in data is often interpretation not necessarily the numbers. Some call it framing. Like the Federal Reserve, MSM is famous for framing. Some call it propaganda. Be careful, however, when you use that term.

How do you tell whistling past the cemetery when you hear it. Well, here's an example from our illustrative lame duck administration and it's leader noted on davidstockmanscontracorner.com/trumped-washingtons-fiscal-hypocrisy-is-too-rich-for-words.

“……(Trump has no) sense of the economic and historical importance of America maintaining an iron-clad commitment to stand by its word on our national debt……… U.S. Treasury obligations are the least risky financial asset on the planet and the benchmark against which the price of all other financial assets is set……(not).even the slightest awareness from Trump that he that he might be playing with economic fire because if Treasuries were seen as no longer risk-free that would shake to its very foundations literally the core assumption of global financial markets, meaning that the interest rate on every other financial asset—mortgages, car loans, credit for businesses large and small—could go up perhaps by a lot.

In case you don't get it, Trump recently hinted that the U.S. like most other countries have done throughout history should default on some of its debt. Like what the Fed and others are currently doing now with these bottom sucking interest rates.

What's conveniently left out here and these folks' great fear is another benchmark will take those Treasuries' place. It's known in some quarters as history and the fate of those who ignore it. What was once your benchmark--printing press--becomes that of another.

Exxon the big oil giant climate changers and Sandernistas love to hate lost its AAA credit rating a while back. And so did the U.S. The propagandists, like their idols at the Fed, would like you to believe these killer artificially-suppressed interest rates marched the economy from the precipices of another Great Depression kicking off their monetary madness in 2008. If so it's been a long march from a deep hole somebody helped dig. Can you spell aloud status quo, bureaucrats, neocons, climate freaks, lobbyists, unions, investment bankers and politicians of every stripe in the same breath?

Most of us like abbreviations, so we will offer one--Washington.

When the population finally awakens from their long and deep slumber to just how debt-ridden this nation already is and the next tsunami of inflation rolls in, those responsible will safely be ensconced in all their bunkers they're now building. Bunkers to the left and to the right. But none in your neighborhood.

OVERNIGHT

The dollar seemed to be the story in overnight trading coupled with stronger GDP numbers for Japan than many expected. After hitting an 18 month low at yen 105.55 May 3, the dollar has been range bound  between 108-109 since last week, a support level some traders view as solid.

While economists in a WSJ survey expected GDP growth of 0.3%, the first quarter number surprised, coming in at 1.7%. That compared with a revise fourth-quarter one of negative 1.7% on an annualized basis. The stronger number most likely delayed for now any further monetary easing from the Bank of Japan and lent further doubt about a proposed sales-tax increase planned for next year. A weaker number investors believe would put pressure on officials to hold off that plan. Meanwhile, despite the comments of two Federal Reserve presidents about the June meeting being open to interest rate hikes, the dollar failed to rise suggesting traders have a different view.

Japan's economy suffered slow wage growth that hurt private consumption last year while exports also suffered from sluggish emerging market demand and a strong yen. Prime Minister Abe in 2014 raised the sales tax to 8 percent from 5 percent which tipped the economy into recession. That led Abe to delay a second tax hike to 10 percent by 18 months. Japan like a lot of other countries faces social security and high debt problems. The Nikkei 225 at 16,644.69 was down slightly.

The WSJ reported: Across the region, stocks were hit by worries about the potential fallout of higher U.S. interest rates on riskier assets. Upbeat U.S. economic data and comments from U.S. Federal Reserve officials helped to heighten investor expectations that interest rates there will rise as early as June. Australia’s S&P ASX 200 fell 0.7% and South Korea’s Kospi was off 0.6%. Both the Thai bahtand South Korean won reached two-month lows against the U.S. dollar, while Indonesia’s rupiah was also weaker. Investor sentiment toward China is turning gloomy for a number of reasons. Several state and local media reports suggested Beijing is tightening its grip on financial markets, ranging from getting tougher on the amount of leverage investment products can take on, to clamping down on speculation surrounding backdoor listings and false buyout announcements among listed firms.

The Shenzhen Composite Index finished the day 2.7% lower, falling from the morning, after high-ranking Chinese official Zhang Dejiang failed to mention the launch of a trading link between the Hong Kong and Shenzhen stock markets, which traders hope will generate excitement about China equities. Hong Kong’s Hang Seng Index ended 1.5% lower and stocks in Shanghai fell 1.4%.

HEAVY BAGGAGE

 
In America there's supposed to be something called anti-trust laws. In fact, a fellow named Teddy Roosevelt enjoyed some fame so they say from such.

Now who gets to define the term is another matter. But we will get to that later. When it comes to Western media in the U.S. it turns out there are fewer than six big owners. Western media is a surrogate for globalization. They like it, they hawk it, they want it. And they most likely will stop at little to get it.

We've been saying for a while now Trump will win. That there are hordes of people out there feeling deeply disenfranchised who are too smart to reveal to pollsters or risk blurting it out at some spring soirée whom they're going to vote for. They will express their choice in the privacy of the voting booths. All pollsters, exit or otherwise, be damned.

We also believe the heavy baggage Hilary is increasingly carrying goes far beyond that around her eyes. Her recent ploy to appoint Bill in charge of revamping the economy is a case in point. Billy boy has some big baggage of his own. This is status quo at its worst.

You can try to claim you're not an insider on the one hand and tout as one of your strengths your experience there on the other. That might have worked in the past, but most likely not this time around. But there is more, much more.

Hilary might not even be the Democrat candidate. We are not alone in sensing the apparently growing concern among leftists about her weaknesses, i.e, her elect-ability. Here is a recent piece from The Daily Bell. Draw your own conclusions. Bill personally flaunted campaign laws by showing up at polls. And we personally know of a case where someone was seriously prosecuted for it, for doing much less than he did.
                                                                                                 
Despite what MSM portrays, in today's scene these incidents are not lost on voters who are fed up with the status quo and the Goldman Sachs of the globe.

http://thedailybell.com/news-analysis/dump-hillary-clinton-slammed-again-by-mainstream-media/

OVERNIGHT

Some call it a rift, others are taking a wait and see approach to an upcoming G7 financial meeting this weekend. Two of the participants--the U.S.and Japan--apparently have a difference about which way the yen should be going, up or down.

This is more of beggar-thy-neighbor tactics many in MSM want to deny because it reflects in one way just how bad the global economy is these days. Meanwhile, the Nikkei was up 0.9% to 16,607 in late morning trading, apparently gaining a boost from Wall Street's performance Monday led by billionaire Warren Buffett's note of taking a large stake in Apple by his Bershire Hathaway fund.

It might have had added significance owing to Buffett's long-claimed disdain for technology stocks or for buying only stocks he could understand. Yet Buffett has proved to be a hypocrit on many issues recently as it was revealed he uses arcane derivatives after firing heavy salvoes of criticism their way over the years. He and his octogenarian comrade Charlie Munger add to the public's growing distrust about Wall Street people saying one thing and doing another. The Omaha Hypocrit is hardly angelic.

Oil shares rallied on Wall Street Monday and the mood apparently carried over to Asian shares Tuesday with crude oil futures nearing a six-month high as attention began to shift to supply problems and the long term-bearish firm Goldman Sachs seems to be changing its tune, at least in the short term, issuing a bullish report. The U.S. dollar also rose to 109.70 against the yen.

In other markets, the Australia’s S&P/ASX 200 gained 0.5%, and Korea’s Kospi slipped 0.2%., the Shanghai Composite Index was off 0.6%, while Hong Kong’s Hang Seng Index was flat. Shippers were strong after the Baltic Dry Index, or freight charges, gained 2.2 percent overnight. 

 Reuters reported:

Japanese Finance Minister Taro Aso said on Tuesday that finance leaders from the Group of Seven rich nations will likely discuss currencies and that Japan will stress the need for stability in global foreign exchange market.G7 finance ministers and central bank heads will meet on May 20-21 in the northeastern Japanese city of Sendai.

Japan, which will host the G7 meeting, has signaled its readiness to intervene in the market to weaken its currency despite a recent U.S. Treasury report on currencies that appeared to warn against unilateral intervention.The yen hit an 18-month high against the dollar JPY= this month. "Currencies will be discussed as needed as part of fbroad debate on global 
economy," Aso told reporters after a cabinet meeting. "We think stability in currencies is the most important."

However, Aso noted it would be hard to persuade Germany and Britain to deploy fiscal spending as part of wider G7 efforts to rev up global growth through coordinated fiscal stimulus.

OTHER VOICES

We used to do a feature every so often called "Other Voices," not so much because we agreed with what was being said, but to permit a variety of viewpoints. We think it's healthy. Here's one we think is worth a read.

Closely-followed former global macro fund manager Raoul Pal gave a dark warning for the US stock market and the global economy.

Pal said that the structure of the market right now reminds him a lot of 2000. He pointed out that it’s been a complicated market that’s up sharply and down sharply in these short-term swings, but over longer periods of time it’s really done nothing. He added that this volatility has been scaring both the bulls and the bears. In other words, everyone is losing money.  

“And in the meantime, the economy, which at first wasn’t clear that it was weakening, now appears to be weakening," he said. "And that was a similar set up in 2000 where everyone started getting chopped around. Nobody knew what was happening. The leadership was getting lost— Apple and other firms have lost their leadership. Back in 2000 it was Microsoft—same kind of thing. It just feels like everyone is willing the market to go up, but something is going wrong in the overall underlying dynamics of the market.”

Pal has been expecting this recent stock market rally to peak out. He’s also looking out for a topping out of the economy. For this, Pal has been looking at the Institute of Supply Management's (ISM) manufacturing index as an indicator.

finance.yahoo.com/news/raoul-pal-warns-of-another-recession-

“I look at the business cycle and I look at the business cycle by the ISM survey,” Pal said, pointing that the ISM survey peaked in 2011 and has been gradually declining ever since.

“What you know is that cycle is pretty predictable. And so you know in due course, the economic cycle will weaken and we’ll get a recession. And if we look at the length, it looks like it’s coming, normally it would come either now or in the next twelve months. The probability is that a recession is coming. Then we look at what happens to stock markets in a recession, they tend to fall. I’m worried that the US economy is weak, the global economy is already weak, and that’s going to bring some stress on the stock market.”

As for investment ideas, Pal thinks there’s a big opportunity to be long bonds, specifically long the ten-year bond. He thinks that the yield will go down to 0.5%. He thinks there’s the probability of a rare situation where the US Dollar goes up and gold goes up. He also thinks the stock market is “potentially in for a rock road.”

In the late fall of 2014, Pal nailed the trade of 2015 when he predicted that oil would fall to $40 a barrel.

On Monday, WTI oil rose about $46 per barrel, a 6-month high. Pal expects oil prices to fall again.

“People spend a lot of time looking at oil prices and analyzing supply and demand and who said what in Iran. But really when you map it, it’s exactly the same as the dollar index. So really it’s the dollar because oil is priced in dollars. The dollar has fallen recently, it means the price of oil goes up, and vice-versa. I think the dollar potentially goes higher in due course, in which case the oil price will probably peter out somewhere around here.”

TPal, a Goldman Sachs alum, previously co-managed GLG's global macro fund, one of the largest in the world. He retired in 2004 at age 36.

He now authors a research letter, The Global Macro Investor, which is read by some of the most prolific hedge fund managers. Pal is also the co-founder of Real Vision Television, an online subscription financial-news service.

LEVEL PLAYING FIELDS

You've no doubt heard of alternative medicine. Well, the hot Wall Street topic today is alternative investments. Not that they're all that new. Like most things in life their they have their seasons and this is one of them.

With the stock and real estate markets, thanks to ZIRP  and NIRP, bubbling along, yields are getting harder to find than a California virgin.

If there's a more politically correct state than California it's probably Massachusetts or some place like that. Well, the California State Retirement fund, like many of it's brethren, is looking for yield. Liabilities keep rising while returns keep shrinking. So the fund recently announced it was considering investing in tobacco companies owing to their decent dividends.

Now this is the equivalent of all the WSJ editorial staff suddenly declaring they love Donald Trump and sang the praises of his qualifications to be president from the beginning. No state was and still is more PC when it comes to smoking than California and their band of Brownistas in Sacramento. Tobacco stocks are not illiquid, but they're about as alternative for the PC crowd as alternative gets.

And like we noted, those liabilities keep growing while yields keep shrinking. If that reminds any of you of something called the Social Security system you're cooking with that non-polluting, PC stuff, natural gas. To use a time-worn description, you're right on.

There is the old saw politicians, socialists and bureaucrats hate: the greater the risk the greater the possible return. With riskless returns now zero or even negative in places like the EU and Japan, you can see the problem pension funds and big insurance companies face, but it applies to nearly everyone. With wages flatter than a new airport runway for decades and the phony central bank memes about inflation's nowhere to be found, liabilities continue to climb while yield shrinks when it comes to purchasing power notwithstanding all the deflationary nonsense central bankers spew forth.

For pension funds and those big insurers that's a form of inflation, not enough yield to cover future costs. A funding crisis is just another name for a shortage of cash flow. And that brings us to those alternative investments. But alternative investments are not without risks. Illiquidity, for example, as in trapped. Not easy to exit. Having to sell at below market value or for less than you paid for them.

Now you can bet politicians, bureaucrats and those of the fix-it-at-all-costs crowd don't care about these things. At least not now. So one might ask oneself what's one of the downers of these brilliant central bankers with their zero or negative interest rates offering little or no yield? It forces those who have a need to look around. Needs usually begets a sense of urgency as in haste can leave its wake.

It also should focus your attention with what's going on in the EU, in this case the mortgage market where at least one member, Denmark, has for four years seen lenders pay interest to borrowers owing to negative interest rates. Why is this important? Easy, a similar movement is threatening to spread throughout the EU led by consumer groups in Spain and Portugal.

The gist of the issue is when is a contract not a contract? The answer if bankers there prevail is equally simple. A contract is a contract only when the banking crowd says it is. Maybe not in your vernacular or mine, but in the system as it is, that's called a level playing field.