Overnight

Some might call it the end of summer doldrums, others investors waiting to see what Fed Chair Janet Yellen says on Friday and still others blame low interest rates pushing investors further out on the equity limb looking for yield.

The Nikkei rose 0.7% Wednesday helped by a weaker yen and a stronger dollar in a mixed market. Since the first of the year the Nikkei has lost 13% versus the S&P 500's 7% upswing, trailing most of its global peers in 2016. It always helps to get a little help from your friends and that's what happened earlier this week.
 
Reuters reported: On Monday and Tuesday, the BOJ bought 1.2 billion yen of exchange traded funds on each day focused on companies which support investment in physical and human capital. The central bank had bought 70.7 billion yen of ETFs on August 4 and 10, respectively.
"A level of more than 70 billion yen in buying can be as big as a launch of a mutual fund," said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "It's supporting the market, but the Nikkei could be trading 1,000-1,500 points lower than the current level when the currency market sees the 100-yen-per-dollar level."

In  other markets, Australia’s S&P/ASX 200 added 0.2%, while the South Korea Kospi was down 0.3%. Hong Kong’s Hang Seng Index fell 0.7%, with the Shanghai Composite Index flat.Trading volume was another issue, light over what some view as the end of summer holidays.The broader Topix gained 0.5 percent to 1,304.25 and the JPX-Nikkei Index 400 advanced 0.5 percent to 11,717.82. In the oil markets, the WSJ noted: oil prices were down in Asian trade early Wednesday, after the industry group American Petroleum Institute said that its data showed an increase of 4.5 million barrels in U.S. crude stockpiles last week. Still, prices rose in U.S. trade Tuesday on speculation that Iran might cooperate with other global exporters to keep oil prices from falling.

Official U.S. oil data by the Energy Information Administration will be released later Wednesday to shed more light on the state of U.S. stockpiles. West Texas Intermediate crude prices were recently down 53 cents at $47.57 a barrel in Asia trade, while Brent crude prices were down 41 cents at $49.55 a barrel.

Higher U.S. interest when and if the come will most likely pull money away from Asian markets giving American consumers a chance to fill up their garages with more cheap imported junk. Gold was down slightly at $1336.80

Overnight

Call it reluctance or maybe even directional hope, but investors seem somewhat frozen until Fed Chair Yellen unleashes her latest economic pablum Friday at Jackson Hole.

 Reuters reported: The whole world seems to have hushed ahead of comments from Fed Chair Janet Yellen at the central bank's annual meeting in Jackson Hole on Friday. Investors still doubt the stars will align for a hike anytime soon, so a hawkish tone from Yellen would challenge that equanimity.

"Ever so slowly, the market does seem to be reluctantly acknowledging the chorus of senior Fed speakers who have suggested recently that a 2016 rate hike is still quite probable and September is 'live'," wrote analysts at ANZ in a note.

Markets are still not pricing in full point rate hike until September 2017. The odds of a hike later next month are also less than convincing to many investors and the leaves the focus next on December. Wall Street had a weak day on Monday with low volume as investors show continued concern 
about the impact of weakening oil prices and the Fed's next move on interest rates in the coming months. False signals have become a staple of the Yellen-led Fed.

The Nikkei stock index was down 0.3 percent at 16,557.41 in late morning trade, dampened by the effects of a stronger currency, the Hang Seng off slightly at 22941.14, S&P ASX 200 up at 5555.1 and Shanghai positive narrowly at 3099.39. The dollar was down 0.1 percent at 100.22 yen, not far from levels under 100 yen touched last week. Gold traded at $1336. 80, down $1.80.

Know Who You're Watching

What is the definition of a paradox?

Here's one we have borrowed from noted gold bug and market bear, Jim Grant, editor of the longstanding Grant's Interest Rate Observer.

The new rules with respect to financial reform have absorbed not only forests worth of paper but also the time and attention of legions of lawyers. If you talk to a banking executive what you hear is that the banks have been overwhelmed by the need to hire compliance and regulatory people. This is especially bearing on the smaller banks. I think that’s part of the story of the lackluster recovery: Monetary policy has been radically open in the creation of new credit. But it has been radically restrictive with regard to risk taking in the private world.
zerohedge.com/news/2016-08-22/jim-grant-will-turn-out-very-bad-many-people 
 
The last part of the paragraph is an excellent example of a paradox and one that as Grant later explains captures the personalty and makeup of Fed Chair Janet Yellen.

Janet Yellen is by no means an impulsive person. According to the « Wall Street Journal», she arrives for a flight at the airport hours early – and that’s plural! So this is a most deliberative and risk averse person. Also, as a labor economist, she’s a most empathetic person. She believes what most interventionist minded economists believe: They have very little faith in the institution of markets and they don’t believe that the price mechanism is anything special. They want to normalize rates and yet they can always find an excuse for not doing so. We have been hearing for years now that the next time, the next quarter, the next fiscal year they will act. So I believe what I’m seeing: None of these days the Federal Funds Rate will go higher than 0.5%. I can’t see that happening.

Once upon a time before they started putting names on the back of uniforms at the ballpark you had to buy a program to tell the players. Know who you're watching if you really want to know what's going on is probably a pretty good rule. 

The Time

Are you ready for this?

Take a few deep breaths via your nasal passages and exhale them slowly through pursed lips. What will it do? Most likely not much. "Designing Resilient Monetary Policy Frameworks for the Future," that's the topic of the Fed's Jackson Hole confab this week.

That pathetic title, bereft of any semblance of creativity, one only a bunch of bureaucrats could conceive, tells you all you need to know about how pitifully lost these people are. The Fed needs to put its pitiful self and all the rest of us out of misery and just buy up everything including a neighbor's collection of gazelle statues on his front lawn. Japan is almost there and we all know how well Japan is doing.

Having painted themselves and the rest of us into a corner, the Fed is about to invoke the old what goes around comes around rule. In short, what this means is a portfolio of $4.2 trillion could soon be growing should another recession pop up.

"New realities pose significant challenges for the conduct of monetary policy," the WSJ quoted San Francisco Fed President John Williams who spoke last week about the shifting monetary policy. There are two things here, "new realities" and "shifting monetary policy" that should grab your attention. New realities is a euphemism for failed policies. It's a kinder, gentler way of saying: "We screwed up and don't really know what we're doing."

The new normal is actually more of the old stuff that didn't work in the first place. What this means is the Fed will most likely have to raise rates at least once, necessary or not, to preserve any shred of credibility inhabitants of Pluto still think it has. That gives them some tiny latitude to then cut rates in what could be called a crocodile tears gesture to sooth frayed public nerves.

One of the missing elements the Fed so desperately needs is productivity, a no-show this time around after enormously reckless monetary spending, still another sign Fed policy has been absent any snap or crackle. All that remains is the much feared pop. A while back MSM and Fed officials blamed lack of consumer partying. Now their new recreant is productivity. Without villains there is no need for heroes.

Fed Chair Janet Yellen was noted recently for offering this characteristic gem of hedging, "lower productivity could be curbing the economy's long-term growth potential and the central bank's ability to raise interest rates." Here's the real story. This central bank is like Brexit. All the predicted horrible consequences that pundits and scaremongers prophesied have not shown up. And they won't. Abolishing this central bank will rectify this mess quicker than one can find the hole in Jackson. And along with it all those terrible scaremongering warnings. It's the right thing--as was Brexit--to do and now is the right time.

Use Your Purchasing Power

Donald Trump may or may not fix his campaign, andHillary Clinton may or may not become the first female president. But something else happening before our eyes is almost as important: the complete collapse of American journalism as we know it.

The frenzy to bury Trump is not limited to the Clinton campaign and the Obama White House. They are working hand-in-hand with what was considered the cream of the nation’s news organizations.

The shameful display of naked partisanship by the elite media is unlike anything seen in modern America.

The largest broadcast networks — CBS, NBC and ABC — and major newspapers like The New York Times and Washington Post have jettisoned all pretense of fair play. Their fierce determination to keep Trump out of the Oval Office has no precedent.
nypost.com/2016/08/21/american-journalism-is-collapsing-before-our-eyes 

We have been writing for a long time, as have many others, about the phony objectivity in MSM. The above quote is just another piece of evidence. Early in the primary we were censored and warned by Google for writing material that in essence didn't meet their standards of acceptable material.

Someone supposedly complained. The article in question is related to the above quote. Our cardinal sin is we questioned a Los Angeles Times hatchet job during the Iowa primary that depicted a middle aged, Caucasian tow truck driver the Times reporter obviously picked to ride around with and interview.

Trump had little traction then, was still viewed as a joke by MSM and the media was determined to paint a picture he appealed only to white middle-aged uneducated xenophobes and gun nut ignoramuses. It was a pathetic, biased piece that was not even deserving the name of journalism. That the mighty Los Angeles Times felt the need to run such a story told you pretty much what you needed to know about the so-called elite press in this country.

The reporter even saw the need to make an issue of the tow truck driver's grammatical errors in an obvious mean-spirited display of elitism. The so-called editors at the Times signed off on the story. The  1960s cartoon character Pogo was wrong. We have met the enemy and it isn't us. It's MSM.

This isn't news. What is news is the press must be held responsible for their actions, accountable for their arrogant deception. A peaceful way is the boycott. Refuse to purchase from any company, large or small, that provides them with advertising revenue. Cancel subscriptions, boycott their websites. They had no compunction a about purposely lying, twisting and covering up facts.  Show them the real meaning of their first love, zero tolerance for anyone who happens to differ with them.

Join together and get a nation wide boycott started. Use your purchasing power. They might begin to hear you then, not that that will change them. Bankruptcy will be a far more telling experience. 

Overnight

It's Jackson Hole time again.

That's the annual central bank meeting in Wyoming begins Tuesday where where a bunch of bureaucratic blowhards gather to try to cover up their incompetence and toss the MSM a few economic data crumbs to digest about the future of the economy. It's the U.S. yearly late summer version of Davos.

Reuters reported that Asian shares were soft Monday as "the dollar pulled away from last week's lows on expectations that a signal might emerge from  a Federal Reserve gathering this week in Jackson Hole, Wyoming that the U.S. central bank is gearing up to hike interest rates.  Global central bankers will join the annual mountain retreat that opens on Thursday, with Fed Chair Janet Yellen due to speak the following day.'
 

"The DXY US dollar index already seemed to be looking ahead for some slightly more upbeat language on the U.S. economy coming out this week as it rallied 0.4 percent on Friday," he said.
The dollar index, which tracks the greenback against a basket of six major rivals, was up 0.2 percent in early trade at 94.722 .DXY, pulling away from last week's low of 94.077, which was its lowest since June 24"

 The big news is Fed Vice Chairman Stanley Fischer's announcement Sunday that the Fed, take the ear plugs out of your ears, finally has its data to crank up interest rates, noting 'the job market was close to full strength and still improving."  Humorist Mark Twain noted there "are lies, damn lies and then there are statistics" You'll have to decide which applies to those Fischer is so charmed by.


"We are close to our targets," Fischer said, but did not directly address when the U.S. central bank should next raise interest rates.

Earlier in the week another Fed honcho, New York President William Dudley, as is the Fed's latest preference, set the stage for Fischer's comments " a rate hike would be possible at the Fed's next
policy meeting in September, though interest rate future contracts indicate the market is pricing in about 50/50 odds of an increase in December."

Asian shares were led down by the Korean Kospi as it was off 0.54%, the Nikkei 225 edged up slightly 0.16%, the Australian ASX 200 remained flat at 5,523.20. In currencies, one agency reported,
"the dollar traded up against a basket of currencies, with the dollar index at 94.750, compared with levels near 94.100 late last week. The Japanese yen traded comparatively weaker against the greenback, at levels near 100.7. U.S. crude futures were down 0.56 percent at $48.25 a barrel on Monday early morning, while global benchmark Brent was off 0.86 percent to $50.44"

Feckless Fed

We had a friend who decided not to call a plumber. Though nothing in his history said he was one of those handy DIY guys nearly every woman hopes will betroth them, that's what he decided to do.

This is one of those unhappy ending stories waiting for a venue to be known. In a brief sentence, he made the problem worse. Lots worse. So another friend, once the news got out among the circle of friends, started calling Fred, the DIY plummer, Fed for short.

That's where we are with the Federal Reserve and their now nearly a decade of bumbling, stumbling monetary policy--worse. Much worse. Economic growth for the first half of the year came in about 1%. But the cheerleading-kick-the-can crowd, like a perennial losing football fan, roll out their wait until next season meme. In their eyes it's always just up the road. In this case the second half of 2016.

Well, we're nearly two full months into that second half and not only are things looking grim, but a growing number of billionaires, the latest  Paul Tudor Jones, are publicly waving the red flag. If they turn out to be correct and makes bushel baskets full of money one can only guess what epithets and opprobrium they will suffer.

The nonsense that the Fed's actions saved the global system from disaster is just another government big lie, a trait big government is noted for. Think $400 million here and Iran. Think the government's refusal to turn over certain e-mails and the medical history of a presidential candidate  for public consumption and the real opportunity to decide their fate that elections of this magnitude are suppose to be about. This semi-free nation, once a proud, plump healthy grape, is every day when it comes to freedom of choice and individual rights becoming like a half full box of 50 raisins.

That's the goal of big government, shrink your rights. The Fed is part of that plan. And so is a cashless society.

The Fed has not only failed to fix what's broken in the U.S. economy--it has actively made those problems worse.

The Federal Reserve claims its monetary interventions saved America from economic ruin in 2009, and have bolstered growth ever since. Don't hurt yourself patting your own backs, Fed governors past and present: it's bad enough that the Fed can't fix the economy's real problems--its policies actively make them worse.

After seven long years of politicos and the financial media glorifying the Federal Reserve's policies as god-like in their power and efficacy, let's take a quick look at the results of these vaunted policies: ZIRP (zero interest rates), (QE) quantitative easing, both of which are ways of shoving nearly-free money ( a.k.a. liquidity) into the banking sector, where all this free money is supposed to filter into the global economy, working miracles of prosperity.

The stated goal of the Fed's zero-interest rate policy (ZIRP) and quantitative easing (QE) was to make borrowing easier for both corporations and consumers, the idea being that companies would borrow to invest in new productive capacity and consumers would buy the new goods and services being produced with the Fed's cheap credit.

Here are a few charts the tell a different tale from that of MSM. For the full story zerohedge.com/news/2016-08-19/what-fed-hasnt-fixed-and-actually-made-worse.

Bearish

 
Bearish outlooks are not new and they are not necessarily in short supply today despite what MSM wants you to believe. One investor, billionaire Carl Icahn,  recently expressed his bearish view, net -149% market exposure, a record short bias in an interview with Bloomberg.

Part of Icahn's outlook is at least related to over government regulation and it's impact on capital investment. Here's an excerpt.

Shatter:  Why is it that the stock market is where it is?  That with valuations so high that I noticed in the letter that -- or at least in a statement that you made with your son, Bret, earlier this month, that you don't feel confident making any large investments?

ICAHN:  Aabsolutely, Erik.  I have hedges on, I'm more hedged than I ever was. I will tell you there's certainly good companies.[The market] is way overvalued at 20 times the S&P and I'll tell you why: a lot of it is a result of zero interest rates.  It's just what I said. You have zero interest and a lot of buybacks. Money is not going into capital.

So think of it as a rich family that just decides "we're just going to have a lot of fun, we're going to sit around in the pool, and we'll keep printing up IOUs to the town, we've got a good name." You keep  doing it until you go broke.  And this is what's happening in our economy.  Zero interest rates are building huge bubbles.  You have retirees that saved a million bucks, half a million bucks. 

I think the market is at literally very high levels because of zero interest rates, and if you really look at it, the dollar is pretty strong right now, which is going to hurt international earnings.  The S&P, they live on international earnings.  That's going to be hurt.  There's going to be a day of reckoning here.  I've seen it many times in my life.  When things look good, they look great.  You go into the sky.  But that's when you have to really pull down and really stop buying.  That being said, I'm not going to tell you it's going to happen tomorrow, next week, even next month, even next year possibly.  But it's going to happen, and you have to change the direction of our economy.  I can't say it plainer than that. 

* * *

[T]housands of CEOs understand the problem.  They say one day, a regulatory agency, EPA, waves its wand and we're bankrupt, or almost bankrupt.  We're losing a fortune.  Why the hell should I invest in more capital?  Why should I invest in more machinery?  Therefore, we can't compete, and therefore the middle class does not have manufacturing jobs and we now say, well, we're not a manufacturer, we're a service company 

 What could cause a crash:

Shatzker:  You say, Carl, that a day of reckoning will come for the stock market.  You can't say whether it's going to be this week, this month, even this year or next year.  Let's talk about the factors that you believe would precipitate such a correction.  What could cause stocks to fall?

ICAHN:  Erik, I think I've been talking about it to you this whole interview.  One of the things that's causing it to fall is happening right under your nose, that we have no capital spending.  Capital spending is going way down.  In a society like us, manufacturing is important. I don't care, sooner or later, you can't just keep tweeting to each other.  You can't text each other. 

We say we're a service economy, that's great, we're a service economy.  What does that mean?  That we text more to each other.  Sooner or later, everybody is going to send a text to each other and say isn't that wonderful, so why should anybody work?  Just sit there and text to each other or watch TV.  So I am saying to you, this is what is happening as we speak.  Capital spending is down, obviously. The last two years, I mean, it's just down four percent in the last quarter which is unheard of when you don't have a recession.  OK.  Productivity has not grown.  In fact, it's the lowest growing it's ever been as far as growth goes.  These are very important things in a capitalistic system.  Unless you have a dictatorship, you're going to go the way of Cuba.  Well, Cuba was a dictatorship but it still went that way.  But then you're going to go the way of Venezuela, Argentina.  You're going to be in a major problem.

He then turns to the economy and social tubulence, where he repeats "shocking" allegations made by Trump, namely that "unemployment numbers are not accurate":

 You see GDP is not going up, I could give you a lot of reasons.  But the most important is that the middle class worker is really, does not have good jobs.  This unemployment numbers are not accurate in one way, that a lot of these guys have left the work force, and two, these jobs aren't paying that well.

So I am saying that the middle class - that is why you saw this uprising for Bernie Sanders and you see it for Trump and you see Brexit and you see what's going on in Italy.  I think there's an undercurrent of great unrest in our global economies.  This "one percent", people resent it, and they resent government for allowing it to happen. 

An other  billionaire who is no stragner to the bear club is Paul Singer.

While there have been some very prominent recent entrants into the billionbear club, such as BIll Gross, Jeff Gundlach, Carl Icahn and George Soros, who only recently switched from being bullish on the market to predicting gloom, one name has been a staple when it comes to warnings about the disastrous consequences of the new normal's monetary policy: Elliott Management's Paul Singer. 

And, sure enough, in his latest letter he does not disappoint, dispensing with his usual dose of what Kate Kelly calls "bleakness", warning that the bond market is "broken", and when the unprecedented central bank actions of recent years can no longer prevent a market decline - which considering that both the BOJ and ECB are running out of monetizable bonds may be sooner than many expected - "the subsequent loss of confidence could be severe."

Both of these articles are at zerohedge.com.