We All Love Elections

Elections have occupied investor minds for a while now. We've all heard the Brexit news and much of the world is watching the Clinton-Trump soap opera. But there is another election coming up in a week. Though this one is reputed to be minor, it could turn out like lots of seemingly insignificant things in life to have major implications.

Japan is an aging nation. We recall reading several years ago they had only about one million 18 year olds. Not many. They are now paying young couples to have children. It's boudoir not helicopter money. It's an idea that could catch on: pay people to have safe, non-reproductive sex. But in Japan they need the young guns. The reasons are as obvious as campaigning politicians who kiss babies. So it's government subsidized sex with a kid not a dream catcher.

Pensions are important to Japan's aging population. Very important. So might be that upcoming election. Abernomics hasn't been in the eyes of many the economic cat's meow it was groomed to be. Anything but in many ways. There's an added theme here, however, bureaucratic deception, something Japanese voters know well and denizens of the EU are now learning. Hello. We all love elections.

So Abenomics is facing its voters again. Few people on earth are as cynical about their elected officials as Japanese voters. Any remaining illusions have been wrung out of them years ago. In polls, voters have explained that they have not benefited from Abenomics. Yet, Prime Minister’s Shinzo Abe’s position remains strong, mainly because the opposition is so flimsy.

Here's more from wolfstreet.com/2016/07/03/after-plowing-into-stocks-japan-government-pension-investment-fund-gpif-50-billion-loss-secret-till-after-election.

The Rest Of The Story

Here's the title to this article, Kyle Bass Shares The "Stunning" Thing A Central Banker Once Told Him. We think you'll find it quite interesting and here's the link to read, as a famous radio host used to say everyday on the air...."the rest of the story." It will tell you something about central banks and the bankers who run them.zerohedge.com/news/2016-07-01/kyle-bass-shares-stunning-thing-central-banker-once-told-him.

If you ever wanted to get a look inside the mind of Kyle Bass, founder and CIO of Hayman Capital Management, here is your chance. In a wide-ranging discussion with Grant Williams, author of Things that Make You Go Hmm and co-founder of Real Vision TV, he shared his thoughts on position-sizing, China, the appeal of holding gold, central banking, interest rates – and much, much more.
Predictably, the one topic that got the most attention was China, where as widely known Bass has made his next "career" wager, expecting a substantial devaluation of the currency, a process which had stalled out in recent months but has once again picked up speed.
Looking at recent data, and specifically something we pointed out two weeks ago, Bass said the country’s $3 trillion corporate bond market is “freezing up” amid rising defaults and canceled debt sales. “We’re starting to see the beginning of the Chinese machine literally break down.” 

Bass reiterated that China’s lending binge in recent years is unsustainable and it is only a matter of time before this bubble, bigger than the US bubble of 2005/2006 which brought Bass fame and fortune, bursts. He expects bank losses of $3 trillion to trigger a bailout, with the central bank slashing reserve requirements, cutting the deposit rate to zero and expanding its balance sheet - all of which will weigh on the yuan, and lead to a dramatic devaluation.

Healthy As It Gets

One of the lessor understood in our view causes for all the anger underlying Bexit is political leaders who say one thing then do another. It's part of the phony political saying: Politics is the art of compromise. Compromise is what got us here. A whole segment of global society is sick of it.

It's been our experience over time voters seldom vote their convictions for politicians to go to Congress or Parliament to sell them out. That's the art of compromise and thanks to things like the Internet it is becoming more and more known and unacceptable. This is hardly limited to Brexit and the U.K. It's front and center in Trump traction and that of an out and out socialist from a tiny meaningless state like Bernie Sanders.

The idea that minuscule places like Vermont, Rhode Island and such still have two representatives in the Senate and places like California, Texas, Florida and New York have the same is a joke. Besides black flies, maple syrup and Bernie Sanders, what's Vermont's contribution to those millions who lives in those other states, in some cases half a continent or an entire continent away?

Now comes talk that those UK leaders who successfully led the rebellion may not invoke Article 50 of the Lisbon Treaty. Article 50 governs the process of how to get the exit ball rolling. And make no mistake, elitists, MSM apologists for the status quo and those who love to toss around sentences like as Barron's Ben Levisohn recently did (That alone could be reason to hope saner minds prevail.) will seek to exploit the delay. The reference to "saner minds" itself is a scare tactic. It also belittles all those who voted go. It's incarnate snobbishness and you should be offended.

Just this past week EU bureaucrats as is their style delivered another slap in the face to it's so-called members, secretly cutting a deal to bail out sagging Italian banks. They have also secretly cut similar deals with France to let them slide on rules others like the weaker southern members get no such pass. France and Italy behind Germany are the EU's second and third largest economies. Big dogs get the big bones.

Voters are sick of bureaucracy and they are sick of opacity, the only two things the EU excels at. And it's becoming more than crystal clear they're growing sicker of the EU. If you love your liberty, your privacy, your sovereignty and your local control, that's about as healthy as it gets.

The Golden Clue

There's always been a lot talk about silver linings and golden this and that. Despite their repeated denials central banks have focused on policies to deter investor interest in gold for years. Yet, ironically, it turns out much of  their policies is responsible for pushing gold and silver prices higher.

In what is it's biggest rise since February gold Friday traded higher after posting an 8.8% rise in June, it's fifth weekly move up as a weaker dollar and Furher Brexit fallout capture invesot attention. The weaker dollar stems pretty much the slow growth in the U.S. economy now complicated by the prospect if the Btish central bank cutting interest rates later the summer and the Bank ig Japan doing further monetary policy easing.

Gold closed Friday 1.2% higher at $1,336.01 after hitting a session high of $1,341.40 an ounce. The upswing gold didn't escape investor attraction yor it's sister precious metal, silver, which broke through $19 an ounce foe the first time in nearly two years. The metal is up 8% this week. Though gold garners most of the attention both are seen as safe investment havens in the eyes of many investors, especially in uncertain times like these. There's another meme here we think that is mostly overlooked or arrogantly discount with all this money printing is agricultural commodity inflation.

Asking where it's going to come from at this point is the wrong question. The right question is what are the unexpecteds?  A recent example for you is the Brexit vote.

The fallout tentacles from Brexit, as is often the case with unknowns, extend further it appears than  expected. Toss in the prospect of possible further easy money policy from central banks and the fact that even putting the Fed on temporary hold is seen by some as a form of easing and the upswing in prices for gold and silver make some sense. Measured against a basket of six currencies the dollar was down 0.4% Friday. With further cental bank easing by the Bank of England, the ECB and the Bank of Japan almost a given, gold and silver prices are discounting those future events now.

Meanwhile, the Fed gets to continue the only face-saving play it has left, guess when, if you can investors, we will hike rates again?  In the interim enjoy yourselves searching for clues.

Let Price Discovery Go

 So much has been going on some of you might have missed this.

There were two things recently in the stuff we read, one of them the announcement by the Fed that all the big banks--yea, those that are too big to fail anyway--passed their phony Fed-rigged stress tests. Who but a bunch of bureaucrats could conjure up bank stress tests? What they didn't tell us is whether they used the Bruce or the Balke protocol. In this case it was probably the Yellin-Bernanke protocol or that of the heavyweight bureaucrat who's charged with roping in the banks without a lasso.

The second thing, also a gift from the Fed, was permission for these same financial behemoths to raise dividends and to do buybacks. Recall not too long ago the same Fed folks forbid Citigroup from raising its dividend because its balance sheet appeared a bit peaked-looking.

For a much of this year now we've had what MSM has described as risk-on, risk-off investing--that is, when risk is high investors tend to go to safe, lower-yielding investments and just the opposite when risk is off.  The two events mentioned above in one way is a vote of confidence of sorts, some might say bravado by the Fed, that means in this yield-starved environment if banks kick their dividends higher investors may move money into their equities to capture that yield.

Just like nearly everything else, money is competitive and, all else equal, will move to the highest return. That could mean money will move out of sovereign bonds with their next to nothing yields and move into riskier assets.Whether bank stocks are cheap is moot, but they have certainly been laggards as a sector. Central bank bond buying is believed to be over.

One could say that was one end of the teeter totter to balance out risk. Not there anymore. So a net below the flying bond market has been removed. No net for the trapeze artist is akin to those swimming in the ocean naked when the tide is up.

The Fed has been in a personal power struggle with the stock market and savers for a long, long time. The damage at this point is incalculable. Calling it interventionism is a kind term. Screwing up markets and peoples' lives is more accurate and appropriate. Fed Chair Janet Yellen and her minions would be wise to take a hint from Moses and let price discovery go.

Pick Any Two

If you like charts the one below is an interesting one. David Stockman in a recent piece writes that the S&P has moved nowhere for 600 days. That’s right. The S&P 500 first crossed the 2060 threshold around mid-November of 2014, and has made upwards of 40 attempts to rally since then—-all of which have failed to be sustained.

In market jargon such action is usually called distribution and presages a bear market. In this case, given all easy money all these many years now, nearly a decade, a big  bear market. Why would it be anything less. Call it, if you want, the law of magnitude. A long way up usually corresponds with an even longer way down when you're talking markets.

Some believe this market is the third the Fed has created in the last 15 years. Other think there is actually about five bubbles around, stocks, bonds, student loan debt, real estate and even sum prime auto loans.

That reminds of a sign in front of a  popular eatery we espied one summer years ago in rural Alabama as we were driving through. "Great Food, Great Prices, Great Service. Pick Any Two."



davidstockmanscontracorner.com/the-curse-of-wealth-effects-central-banking 

Overnight

For the fifth day in a row the Nikkei drifted higher surprising many as Brexit concerns subsided Friday after Bank of England Governor Mark Carney signaled the possibility of a rate cut later this summer that investors believe would help support the UK economy after last week's vote to say hasta la vista to the EU.

Most Asian shares responded positively with the Nikkei up 0.7%, the Kospi higher 0.8% and the Australian S&P 200 rose 0.6%. The Shanghai Composite chipped in a 0.5% gain and New Zealand"s NZX bumped up 0.5%. Hong was closed for an administrative holiday. For the week the Nikkei is p 4.8%, trading mid-morning at 15,701.6. So far Japanese shares have retraced nearly half of their losses since the Brexit vote. Japanese exporters were also positive. The Japanese yen weakened to 102.86 against the dollar, compared with Thursday's levels near 102.48 in the afternoon local time.

The WSJ reported: The British pound was at 137.24 yen, weaker than late Thursday’ s Y137.36 in New York. The sterling was at $1.3343, compared with $1.3311 in late New York trading.
The Bank of Japan’s latest tankan poll, a quarterly survey of business confidence, showed Friday the sentiment among Japanese banks hit its lowest point in three-and-a-half years in the April-June quarter while manufacturers’ sentiment remained solid in the second quarter.

Oil prices advanced during Asian hours, with global benchmark Brent higher by 0.68 percent at $50.05 a barrel, and U.S. crude up 0.58 percent at $48.6 and gold prices were up 0.49 percent on Friday, hovering at $1,328.30 an ounce, compared with highs near $1,335 reached in the previous week amid volatility in markets following the Brexit vote

Too Much Water

Markets might have calmed, but the differences between great swaths of people on this planet has not. And, sad as it is, it won't anytime soon. Too much water has flowed under the bureaucratic bridge in too many places.

It's interesting that many of the Remain cry babies accuse the leaders of the Leave crowd of running a lies and fear campaign. This is one of their main excuses for what happened. The other one is almost too stupid and condescending to respond, but we will.  All 52% of those who voted for leaving are too benighted and too lower class to know when they're being duped.

President Obama's appearance with his overt threat that if Leave passed, the UK would have to go to the end of the line to negotiate sounded like a fear tactic to most people. It was hard to keep track of over the weeks leading up to Brexit of the number of sky-is-falling articles that appeared daily in MSM and from other prominent figures besides Mr. Obama. Most of them were so blatantly phony one got the impression they'd make good scripts for Hollywood horror movies.

We recently posted two articles--the faces of an American elitist and the face of a global elitist. Here is one sentence, the concluding one from one of those elites that should tell you all you need to know: "Did I say “ignorant”? Yes, I did. It is necessary to say that people are deluded and that the task of leadership is to un-delude them."

If that doesn't have the ring of force or else to you, we wish you luck. We only speak here for ourselves, the only one were qualified to speak for. And to that we say this: We accept heartily your elitist challenge, sir. Not to mention those of your elitist allies. And the sooner the better.

UK Prime Minister Cameron attended what will likely be his last EU Summit dinner.  Reports made it sound like he blamed the other officials for not making more concessions to the UK especially on free movement.  There seemed to be little recognition on Cameron's part that 1) calling a referendum was a mistake in the first place; 2) that such an important change maybe should not have been decided on a simple majority basis; and 3) that the Remain ran a poor campaign, based on fear, rather than a positive, constructive agenda. marctomarket.com/2016/06/fragile-calm-ahead-of-quarter-end.

Here is a picture of EU Commissioner President Jean-Claude Juncker, the man who told the world there are times when it's okay to lie to get what you want, trying to block a journalist from doing his job, taking a picture of Nigel Farage.

 
zerohedge.com/news/2016-06-30/caught-film-juncker-disappears-farage 

Overnight

It was an upbeat night for Asian stocks overnight as the fears about Brexit seem to be dissipating partly on the Wall Street rally earlier and the safe-haven yen for not rising.

The Nikkei 225 was up 0.8%, the MSCI broadest Asia-Pacific index outside Japan gained 1.3% after making a one-month low less than a week ago. Expectations that central banks will ease monetary policy is lending a helping hand some are saying to these rallies.

The weaker yen remained flat while the dollar was little changed at 102.650 yen JPY= after sliding to 99.00 on Friday, a trough last seen in November 2013. For the quarter, the greenback was headed for an 8 percent drop against the yen. A weaker dollar usually in this environment means stronger gold prices and that is what happened as precious metals with silver near and 1-1/2 year high made on Wednesday and platinum and palladium rallied 3% overnight. Gold was at $1320 per ounce. Crude rallied after a larger than expected drawdown in U.S. supplies and the concern about a Norway strike abated.

The WSJ reported: Most major Asian stock markets are on track to book monthly losses in June. Japan’s Nikkei is the region’s worst-performing stock benchmark, down 8.9% for the month. The Hang Seng Index fell 0.6% over the same period.
In China, however, the Shanghai Composite was headed for a tiny gain of 0.45%, a sign of its relative isolation from investors’ worries about last week’s Brexit vote.
Meanwhile, smaller stock markets in Southeast Asia also did well this month, with the  Philippine Stock Exchange ’s PSEi index up 6.45%.

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The Face of An Elite Globalist

 

Yesterday we posted, The Face of An American Elitist, but it's also the face of a global elitist.

Today, we post an article, zerohedge.com/news/2016-06-29/elites-called-arms-its-time-rise-against-ignorant-masses, for all of you ignoramuses to show, once again, what globalists and their elitist kin really think of you.

Here's a brief excerpt. It appears the powers that be just are not going to take it anymore. Having mistakenly allowed the people of Britain to exercise their free will, Foreign Policy's James Traub exclaims, "It's time for the elites to rise up against the ignorant masses."

 One of the most brazen features of the Brexit vote was the utter repudiation of the bankers and economists and Western heads of state who warned voters against the dangers of a split with the European Union. British Prime Minister David Cameron thought that voters would defer to the near-universal opinion of experts; that only shows how utterly he misjudged his own people.

The schism we see opening before us is not just about policies, but about reality. The Brexit forces won because cynical leaders were prepared to cater to voters’ paranoia, lying to them about the dangers of immigration and the costs of membership in the EU. Some of those leaders have already begun to admit that they were lying. Donald Trump has, of course, set a new standard for disingenuousness and catering to voters’ fears, whether over immigration or foreign trade or anything else he can think of. The Republican Party, already rife with science-deniers and economic reality-deniers, has thrown itself into the embrace of a man who fabricates realities that ignorant people like to inhabit.

Did I say “ignorant”? Yes, I did. It is necessary to say that people are deluded and that the task of leadership is to un-delude them.

Is that “elitist”? Maybe it is; maybe we have become so inclined to celebrate the authenticity of all personal conviction that it is now elitist to believe in reason, expertise, and the lessons of history. If so, the party of accepting reality must be prepared to take on the party of denying reality, and its enablers among those who know better. If that is the coming realignment, we should embrace it.