Be Careful What

Central bankers rolled out zero and below zero interest rates like it was a cure all, the fix for all fixes to solve the global slowdown. Such so far has been anything but the case. Be careful what you wish for. Those uninteaded consequences can wreak more than you bargained for.

Yields on the 10-year government debt of Germany dipped below zero on Tuesday for the first time on record, in a dramatic sign of the outsize effect of central-bank policy and investors’ search for safe havens.

That search for safety accelerated on Tuesday as concerns that Britain could vote to leave the European Union next week continued to rattle global markets, pushing yields down on a range of government debt from Japan to the U.K.

The yield on the bund fell to minus 0.03% when European markets opened, from around 0.02% at Monday’s close, according to data from Tradeweb. With political risks around the world mounting, investors see room for yields to fall even further.

Government-bond yields have been falling for the past year across the developed world as investors look for safety and central banks push interest rates close to zero and into negative territory. The European Central Bank has contributed to the fall in bund yields through its massive bond-buying program, aimed at lowering financing costs across the eurozone.

More recently, the U.K. referendum has added to the flight to safety as opinion polls increasingly point to a so-called Brexit on June 23, spurring worries about a stretch of uncertainty that could hurt the global economy.

“The fact that Brexit is now perceived as a possibility is a total game-changer, and it’s very difficult to estimate the macroeconomic impact,” said Franck Dixmier, global head of fixed income at Allianz Global Investors.

hwsj.com/articles/german-10-year-government-bond-yields-dip-below-zero-for-first-time

Do Yourself A Favor

Here are some things you won't see or hear in MSM about the Orlando massacre. As we always say: Read, watch and decide for yourself.

“I mean, I’m pretty sure it was more than one person,” witness Janiel Gonzalez told a bevy of reporters. “Like I said, I heard two guns going off at the same time,” he continued, gesturing back and forth with his fingers indicating the gunfire emanated from separate directions.

Further, he explained, panicked clubgoers had difficulty locating exits during the shooting, which he estimated lasting eight minutes — plenty of time for the shooter(s) to reload multiple times. When Gonzalez and others finally found a door hidden behind a curtain,

“There was probably like 50 people trying to jump over each other just trying to exit the place, and there was a guy holding the door. The guy was holding the door and not letting us exit.”

When they asked why he was blocking their only way out — as the shooting seemed to be drawing near — Gonzalez said the man told them, “No, you guys have to stay inside. Stay inside.” Desperate, the group demanded he move to give them safe passage — but the man’s steadfast refusal to do so provoked a serious question.

blacklistednews.com/Media_Refusing_to_Cover_Numerous_Witness_Accounts_of_Multiple_Shooters_in_Orlando_Massacre

FBI Admits: 'Orlando Shooter May Not Have Worked Alone'
http://dailybail.com/home/fbi-...

5 Reasons To Question The Official Story Of The Orlando Shooting
http://www.blacklistednews.com...

Orlando Shootings: Terrorism or False Flag?
By Stephen Lendman
http://www.globalresearch.ca/o...

Terrorism and G4S: Was Orlando Another False Flag?
June 12, 2016 by Kevin Ryan
http://www.washingtonsblog.com...

Orlando nightclub shooting: Yet another false flag?
It sure walks, talks and quacks like one
By Kevin Barrett on June 12, 2016
http://www.veteranstoday.com/2...

The Orlando Nightclub Shooting & the Media-Government Alliance 
http://www.thetruthhound.com/t...

DHS, FBI, and others - somehow 'missed' a potential attack, by not properly connecting the dots.  This is an extremely unlikely scenario - the event happened 15 minutes from a local FBI field office, who has their "Pulse" on the local community.  Just last month, the FBI foiled a terror plot involving a man who wanted to apparently bomb a synagogue.  They monitor all electronic activity, are we to believe they didn't pick up any 'chatter' ?   We can't disprove a negative, there's no evidence supporting the incompetence theory - that it was a 'mistake.'  Many will say it was incompetence, because Omar was in contact with the FBI previously - and the thinking goes, they already 'knew' about his connections to Islam, and so - should have stopped him from buying guns at the first checkpoint, and at the second checkpoint - from any preliminary preparations that were made minutes leading into the event (such as communication with his Terrorist friends).  Not incompetence.

zerohedge.com/news/2016-06-13/false-flag-blow-back-or-incompetence-forex-look-orlando-shooting

Overnight

Japanese equities took another hit overnight, falling to two-month lows as concerns grow about Brexit. The Nikkei 225 fell 1.3% early after hitting a low that touched an early April low of 15,817.74. Some of the problem storms from a stronger yen, up 12% since January against the dollar as exporters feel the pain. Just yesterday it hit a six-week high of 105.735.

Global risk off trades have dropped replaced by risk on so investors look for safe havens.The Korean Kospi edged lower 0.4%, the Australian S&P/ASX 200 lost 1.8%, the Hang Seng Index fell 0.1% and the Shanghai Composite Index moved up 0.2%.

Japan’s Nikkei Stock Average was down 1.3%, Korea’s Kospi fell 0.4% and Australia’s S&P/ASX 200 lost 1.8%. The Hang Seng Index retreated 0.1%, while the Shanghai Composite Index rose 0.2%.

Chinese investors appear to be waiting on MSCI’s decision, to be announced Tuesday evening in New York, on whether to include Chinese stocks in its widely tracked Emerging Markets Index.

Amid the uncertainty leading up the U.K. referendum next week, investors are shedding riskier assets such as stocks and buying yen and gold. Gold rose overnight and was recently trading at $1,284.50 per troy ounce.

All Tears Have Salt In Them

Fifty-one people were just butchered in Orlando.

Another 50 were injured and those are the one we know about. Even among the lucky non-injured, how much damage was done? Anyone think that was an act of rationality? Anyone think gay lives are less important than, say, lives of African-Americans or Hispanics? We don't don't know the statistics but odds are great that horrible list of victims includes Caucasians, Hispanics and African-Americans.

Let's be clear here. We are not gay. There are news stories the FBI was focusing on homeless people not just in Florida but other places. There's a reason for that, one MSM denies and refuses to focus on. From Connecticut to Colorado, the shooter was a mentally ill person, one known with mental illness. In the Colorado case he even told his psychiatrist, according to reports, he had urges to kill lots of people. Given what we know so far from Connecticut to Colorado to San Bernardino to Orlando or those Twin Towers how many were done by the homeless?

For those who despise the obvious, there are two terms for this--pattern and profile.

Is the psychiatrist libel? Did he or she inform the authorities? We have a so-called President who is either unable or unwilling to call this what it is. One of the reasons should be fairly obvious. If he does he won't be welcome in any mosques anytime soon. You have a whole horde of people from the Beltway to Hollywood who want to take the easy path--focus on the weapons not the reasoning behind the massacres. Some things are just too unpalatable to stomach.

A lot of gay people--as should be their right-- voted for Mr. Obama and they most likely will step peacefully into polling booths this November and vote for Hilary. Yet the same rights should be afforded to those who will vote for her opponent whoever it is.  Much of what we have today is a byproduct of PC. The chicken late or soon finds it's way home to roost.

How long will it be before one of the victims in these human slaughters will be a loved one of a Congressperson who gets the toe tag? Brutal. Crass. Insensitive?

Tell that to the friends and loved ones of the Orlando slaughter.

All tears have salt in them.

Linear Paradoxes

Linear thinking is a paradox. That is to say it's paradoxical like many things in life. Things are not always what the seem, as Gilbert and Sullivan wrote: "Skim milk masquerading as whip cream." Or more recently a certain person masquerading as a President.

A+B = C is a process of linear thinking. It most certainly can work when A and B and C are numbers. Just as the reverse would be true: C-B = A. Numbers play a huge role in investing. But behind those numbers are people and despite what one might think, when A+ B = C are not numbers but Alfonso and Betty and Carl, linear thinking is nearly worthless.

Only cellar-dwelling economists with their econometric models think people behave rationally all the time. It's understandable. And it's comforting, like an evening glass of decent wine after a long, tedious day. But it's saddled with the same flaws as the Random Walk theory, humans can't outperform the numbers or averages. As a matter of fact they can and do, often outperforming the averages going up and going down. It's just that all humans can't do it and none can do it all the time, the worst nightmare of the PC tribe. No outliers allowed.

Despite all the nonsense of psychiatry and psychology studies we've had for years, they've yet figure out human behavior. One reason is they keep looking for ways to prove and they continue to assume humans in the main behave rationally, whatever that is. It makes them feel good and important when they have outliers whom they can label mentally sick or deranged. One can almost hear their sighs of relief. It's labeled employment. The so-call in-crowd, therefore, remaining folks, must be rational. What they fail to get is something called circumstances.

Here's a chart with a link to the rest of the article. One of the most obvious human acts of irrationality was inventing a 2,500 pound metal and fiber glass object that can go from 0-100 miles an hour in 10 or 20 seconds, putting a steering wheel behind it and then putting a human being behind the steering wheel.

Forget your religious preferences, if you have any. That's a real leap of faith. We could go on with cell phones, texting and GPS devices and what have you.The idea that people would use such rationally is probably buried somewhere in one of those economists' econometric models about the flood of high paying jobs the Fed has created since 2008.










After hanging around the investment world for more years than we care to recall, we can suggest (note the word, suggest) one piece of advice whether you're talking insurance company annuities or mutual funds or stocks and so forth that the author of this article captures in truth: The first major flaw in the plan is the “compounding” of annual returns over time which never happens. The second, and most important, is the future expectation of returns for individuals over the next 10-20 years.

These are all classic examples of linear thinking. Get sucked in with your own A +B = C thinking. Just be prepared to own it when you do.

davidstockmanscontracorner.com/why-the-next-decade-will-foil-financial-plans

Overnight

For Japan it's the same old same, same old with concern about weak consumer demand and flagging exports as the yen has appreciated 12% against the dollar so far this year. Then, too, many are waiting to see what if any results kick in from negative zero interest rates. Patience in some quarters are growing thinner.

On the other side of the globe the U.S. central bank meets this week as Asian investors keep a sharp watch out for will they or won't they hike rates. As of now the consensus appears they won't. Asian shares traded lower overnight with concerns about the U.S. central bank and the Bank of Japan on tap this week and Brexit to follow a week later. It's fairly safe call volatility will remain an issue until after the UK votes in or our.

The Nikkei dropped 2.6% as a stronger yen put stress on sharerices. Bond yiels in Korea dropped as Reuters reported: "The yield on South Korea's benchmark 10-year treasury bonds fell below the comparable U.S. yield on Thursday for the first time in nearly 10 years, reflecting their divergent monetary policy settings. South Korea's 10-year treasury bonds yielded as low as 2.463 percent, compared with 2.473 percent for the U.S. Treasury Bonds. It was the first time since October 2006."

The Kospi was off 1.6%, the Hang Seng index fell 2.41%, the Shanghai composite edged 0.71% lower and the Shenzhen composite gave up 0.88%, the ASX 200 down 0.92%. Oil traded struggled with the magical $50 a barrel level barely staying above it.

No Free Lunches

The truth is the U.S. and the EU are two examples of countries living beyond their means. And now China's being forced to confront that prospect.

Nothing has changed. What little austerity happened it was way too little and most probably way too late. So the same old beat goes on with nothing really corrected or changed. If anything it's not only more of the same but more of the same only worse. Here's just one side effect of these low and negative interest rates.



Bonds were once marketed as providing some downside protection from sinking equity prices owing to there dependable yields. Sure their prices go down with rising interest rates, but for some there was the possibility of higher yields and some upside when rates went back down again. It is called total return or rerun to maturity.

The psychological effects of holding negative yield sovereign debt that keeps dropping in value will be interesting to watch.

businessinsider.com/goldman-bonds-make-less-effective-hedges-2016-6

How About You?

How about you?

"All my rich friends are hoarding cash," Richard Fisher. Who is he? Here's who.

Fisher was president of the Federal Reserve Bank of Dallas and a voting member of the Federal Open Market Committee (FOMC) from 2005 to 2015. He was one of, perhaps the only, skeptic on the Fed board going into the great financial crisis, warning on numerous occasions about the upcoming crash only to be ignored by his wiser peers and certainly Alan Greenspan and Ben Bernanke. He was also ignored in the post-Lehman era by both Bernanke and Janet Yellen. 

Among his biggest concerns:

• Government Debt: he is worried about the $19 trillion US government debt (up $11 trillion since 2008) because the Fed has fired all its monetary bullets and can’t expand the balance sheet any further.
• China and social instability: he thinks communist leaders care about production but not efficiency. "They might produce more, but our products work," jokes Fisher. There are entire cities in China with nobody living in them, according to him. Fisher says the biggest problem in China is social stability. "I'm deeply worried about their ability to maintain social stability,” but... “It doesn’t affect us directly.” Another risk in China is that millions of people are pulling their money out of the country.
• Low interest rates don't work: "We had a long period of moderation and low interet rares, which did nothing to adjust." The online countries that adjusted were Poland and Mexico, according to Fisher.
• The failed Brazilian experiment: Fisher said Brazil is a symbol of what's wrong with emerging markets. They lived through the crisis but learned nothing from it.“Brazil has always been a country with potential, and it’s never been realized."
• Raising rates is long overdue: he made the point that raising interest rates won’t ruin the economy. "The debt rollover is what we should be worried about. Yet nobody is talking about it."
• It's all one big Ponzi scheme: “Our government has to borrow money just to pay interest.” Or as Minsky would say, this is the Ponzi finance stage, just before everything goes to hell. "We have a lot of unsound policy in place. It is agreeable, but in my view, it is unsound.”
• The death of the middle class: Fisher says the lowest income quartile has seen an increase in income. The highest quartile has also seen a massive increase in income. The two middle quartiles were flat over a period of many years. “This is why we have such support for people like Donald Trump and Bernie Sanders.”
• A ritalin monetary policy: “We have what I call a Ritalin based monetary policy.” Now Janet Yellen’s job is to wean it. “It has to do with taking the distortions out of the financial markets and letting the markets down easier.” “These are the lowest interest rates in 239 years of history.”

But as Sagami points out, Fisher’s most telling comment came during the Q&A session when he was asked how his personal portfolio was positioned. Fisher’s response: “In the fetal position.” Moreover, he also said that “all my very rich friends are hoarding cash.”  

As we've pointed out before there is a saying in surgery, "The solution to pollution is dilution."

Take the $13 trillion U.S. government debt as the pollution and the endless printing of money as the dilution and you have your end result.  Solution:You have inflated your way debt free.

zerohedge.com/news/2016-06-10/former-fed-president-all-my-very-rich-friends-are-hoarding-cash

With All Due Respect

With all due respect to Canada and it's data keepers, this is yet another example of government numbers being mostly of the Fly-by-the-seat-of-you-know-what kind. Hype and revision are government staples in the economic data collecting world. They usually require a big dose of Pepcid.

A cynic--if any are still welcome and we rather doubt it--might argue the upswing in workers over 55 and the decline in those 15 to 24 reflects something else. The millenials are too smart to take those burger-flipper jobs. businessinsider.com/canada-jobs-report-may-2016-6?

Canada's latest jobs report crushed it.

The Canadian labor market added 13,800 jobs in May, above expectations of 1,800.

The report noted that full-time employment surged by 61,000 last month, but this increase was offset by a decline of 47,000 in part-time work.

Employment increased for those aged 55 and older, but it dropped for people aged 15 to 24.

As for the unemployment rate, it unexpectedly fell to 6.9% - the lowest rate since July 2015.

Economists were expecting the unemployment rate to tick up to 7.2%.

The Canadian dollar strengthened by 0.4% at 1.2668 a US dollar right after the report.

Party Poopers

We all pay a price for what we are. And in the world of investing for perma-bears things are no different.

Albert Edwards, the in-house perma-bear at the big French bank Societe Generale, is well-known for his views in his weekly commentaries. His latest is no exception, according to Business Insider.

"The key to the Ice Age thesis is to sound CONDITION RED ALERT as each recession approaches, because the equity outcome then always proves much worse than anyone expects due to the additional phase of secular de-rating," the strategist wrote in a note to clients Friday.
Based on Edwards' reading of the latest data out of the US, it appears that it is time to sound the alarm. Here's Edwards (emphasis added):

In the aftermath of the latest, weaker than expected, nonfarm payroll data, economists are certainly more worried. The excellent folks at Advisor Perspectives highlight the Fed’s Labour Market Conditions Index as suggesting a recession is imminent (the cumulative peak is an average of 9 months ahead of the start of recession and we are now four months beyond a peak. For investors who think copper still has some predictive power, its recent move is disturbing.



As we said: We all pay a price for what we are. Here's Edwards' own words.

"We remain at the bearish extreme of the market," he wrote.
"It is not a pleasant place. It is cold, dark, and damp. People either don'’t speak to you or send you abusive emails. Members of your own family pretend not to know you. Actually, I made that last bit up."

Here's a link to the rest of the article. It's hard to be humble when you're perfect in every way go the words of an old song almost too long ago to remember.  And it's even harder to be a party-pooper even when one is needed.

businessinsider.com/condition-red-alert-recession-is-imminent-2016-6.