HOUSE PAINTERS

Despite what we've all been repeatedly told, Federal Reserve policy has nothing to do with stimulating jobs or increasing or decreasing inflation. Not at all.

In reality the Fed is little more than of bunch of incompetent sunshine makers. And their motto is an old one, Make hay while the sun shines because it won't last.

After what is now nearly six years of ZIRP, the Fed is about out of rays and their sweaty palms are beginning to show. The recent less-than-10 percent market correction brought the verbal interventionists out quicker than you can spell, well, interventionists.

A pure act of fear, it was.

After blowing $4 trillion on what is essentially an external paint job, the old pathetic structure remains unchanged. In real estate it's called curb appeal. What you need to know is these masters of monetary curb appeal are more dangerous to your economic health than the Ebola virus federal officials are so confused about.

No less a monetary curb appeal specialist than retired Fed chairman Sir Alan Greenspan yesterday admitted as much.

Inflation is “dead in the water” because effective demand is “dead in the water,” he said.

But quantitative easing has been a “terrific success” in getting the real rate of return on long-term assets down, boosting all income-earning assets.

“It hasn’t been a success in the demand side,” he said, because banks are simply parking the reserves at the central bank.

“They just let it sit. Unless or until that happens, you don’t galvanize economic activity,” he said.

“When that starts, all things can happen - and not all of them are good,” he said.

Greenspan said monetary policy is in uncharted territory. He said he was worried the “real pressure” will come when the markets demand higher rates from the Fed to keep reserve balances where they are, he said.

The former Fed chairman said he still has doubts about the viability of the euro. He said that without full political integration in Europe, the euro zone would break up.

There is so much economic gobbledygook in these Greenspan statements that it's defies all common sense. Here are just a few. 

Sure, Mr. Greenspan, it boosted "all income-earning assets," but killed the income stream from those assets. You know, Mr. Greenspan, the ones the infirm, the old and the fixed-income crowd live off. 

Yet one of your Fed successors wants us to believe she's mightily concerned about income inequality, an inequality she and her band of house painters helped create.

Your compatriots at the ECB and its Keynesian-steeped backers are screaming for more American style QE. In short, they wish to emulate a program which you just acknowledged up to now has failed to do what it was touted to do, loosen the lending purse strings of bankers. And that's after nearly six years and $4 trillion has been toss its way. 

Greenspan is well-known for his "irrational exuberance" statement, a phrase reportedly he lifted from Yale economist Robert Shiller. 
Now that he's expressed his concern about "the viability of the euro," we're sure his European friends are duly thrilled also.

According to history, Adolph Hitler was a retired house painter. One wonders how long it will be before the public demands the retirement of another group of house painters?

THE NEXT MOVE

 Energy prices has been much in the news of late.

Gasoline prices in many areas of the U.S. have dropped below $3 a gallon, according to the Wall Street Journal "delivering a welcome lift to American consumers and retailers heading into the holiday season."

In the meantime, oil prices on Monday fell below $80 a barrel, a 25 percent decline since mid-June before recovering slightly. For four years the energy sector was one of the better performers owing in part to all the fracking that higher prices made feasible. 

Now concern grows almost daily about how low is low enough to roll back much of the drilling. There's been lots of guesses, with some saying $70 a barrel to others $50 a barrel, but truth is no one knows for sure.

The lower prices along with sanctions have hit Russia, not to mention other oil-exporting nations, particularly hard, putting downward pressure on the Russian ruble. And the recent Goldman Sachs report suggesting that the 25 percent drop in prices won't be turned around anytime soon didn't help much either.

Goldman Sachs, however, is hardly alone in this as other banks lowered their first quarter 2015 price expectations for oil. Wall Street is famous for its short-term views.

And the simple answer is: risk. The longer one goes out the more  room there is for error. To be sure trends are important. And they are also pretty safe in the world of predicting, as in more of the same.

So much of the money is now moving to firms that will benefit from lower prices as the gloom grows.

We don't know about anyone else, but we definitely like all this gloom. And here's why.

Let's take the much maligned British Petroleum. Notwithstanding its continuing legal problems connected with Gulf spill, it has, like Exxon Mobil, ties to Russia, not the most endearing thing with investors these days.
 
After announcing it earnings recently, here a quote covering that story.

BP can’t seem to catch a break.

As it struggles with the cost of the 2010 BP oil spill cleanup, it now must confront falling oil prices and declining profits from its stake in Rosneft.

Those challenges were apparent on Tuesday when BP BP announced its earnings, which fell about 18 percent to $3 billion in the third quarter, compared to $3.7 billion in the same period of 2013. Net income for the period dropped about 63 percent to $1.3 billion.

Still, the company put a positive spin on the quarter, emphasizing that it would increase its dividend by 5.3 percent from a year earlier, to 10 cents a share. That is expected to be paid out in December.

To begin with, we think much if not all the ugly Gulf spill news is in the price at this point and the British government has twice spoke to U.S. authorities about the harshness of the prospective fines. Low oil  prices are one thing, resolution of the matter another.

If one is long BP in particular and oil in general one is long the Russian ruble which has taken a huge hit. We think there's much money there once the sanctions get lifted and they will barring Armageddon.

Another big meme today is the lack of demand and the concerns about too much supply as if the market has never seen these things before.  Some are leasing big tankers and storing the stuff off shore. Fracking itself is not the most popular kid on the block and after the upcoming elections things could get riled up there.

The point is, the only thing certain is uncertainty and no one knows when or from where it will come. As former President Eisenhower once noted: "If everyone is thinking the same thing, then nobody's thinking."

The next move is yours.

 http://www.marketwatch.com/story/dumb-money-unloads-bullish-oil-bets-as-prices-pose-threat-to-stocks-2014-10-28?link=MW_popular

 http://finance.yahoo.com/tumblr/blog-smart-money-decreases-crude-oil-shorts-by-record-amount-125003462.html

IN THEIR GENETIC CODE

What a difference a day makes.

Yesterday much of the financial crowd was agog over the European Central Bank's report on stress testing 130 EU banks. After the initial news bank shares rallied only later to give most of those gains back.

At closer inspection investors apparently pulled their yin side and exercised their yang sentiments as the Euro Stoxx Bank Index closed down 1.7 percent for the day.

Twenty five of the 130 banks tested failed, most likely a soft number to keep the report as positive as possible and buoy investor confidence. It not an original tactic.

But what about, as the saying goes, the morning after? Well, according to today's Financial Times, "...bankers and analysts cast doubt on claims that the (stress tests) exercise would open the floodgates" of new lending.

"We are here to lend, but there is very little demand," one European banker noted. "This is the problem. Loans are a lagging indicator. People borrow after the economy turns around."

The article then quoted  ECB Vice President Victor Constancio who on Sunday said: The report would "guarantee that going forward, the economic recovery will not be hampered by credit supply restrictions."

Now we know you're smart enough to detect a contrast of opinions here. But again, according to the Times, though"the ECB health check was likely to reduce the European banking sector's 11 per cent implied cost of capital by 2016," the sector was hardly something to breakout the sweet-tasting drinks over.

Quoting a JP Morgan Chase analysts: "However, the sector is not of the woods yet, in our view. We expect 0.5 per cent lending growth for our banking universe in 2015 as banks continue to rebuild capital rather than lend in an uncertain regulatory environment."

What this should tell you is in the regulators' zeal to do good they create consequences they never think entirely through. It's in their genetic code.

IT SHOULD BE INTERESTING

Lowe's the big NYSE-traded Home Depot competitor in the do-it-yourself home fix-it business is set to introduce robotic shopping assistants next month in California, according to the Wall Street Journal

The first such robots in America, they bring to mind the old yin-yang principle in the increasing decline of employment importance of the human worker. Judge for yourself from the now nearly ubiquity of robot-guided menus one gets when calling companies these days.

And that leaving out for the moment drones, as the say in poker, is just for openers. It has all the earmarks of a genocide, a species annihilation.

Big-box stores once offered convenience with one-stop shopping. But with Amazon.com Inc. AMZN +1.92% and smartphones, customers can check stock and read reviews and details about products.

“Instead of seeming ultra-convenient, the big-box experience starts to look like it has a lot of friction,” said Doug Stephens, founder of advisory firm Retail Prophet. “If robots are a means of alleviating some of that friction, I’d expect to see a lot more robots,” he added.

As customers follow OSHbot to the correct aisle, they will see ads for in-store specials on its back screen as they pass various departments, communicated through in-store beacons. Customers who need help with, say, a specific type of plumbing project can initiate a video conference on OSHbot’s front screen with available experts at any Orchard store. 

OSHbot also can help customers match a certain-size nail or hinge with a 3D-scanner and determine immediately if the part is in stock. In the future, OSHbot may be able to create the part with a 3-D printer, said Marco Mascorro, CEO of Fellow Robots, based in Mountain View, Calif.

To navigate the Orchard store, OSHbot uses lasers to sense its surroundings, the same light detection and ranging system, also called Lidar, used by Google Inc. GOOGL +0.62% ’s autonomous cars. OSHbot creates a map of its surroundings using technology called simultaneous localization and mapping that it can refer to later. By matching the map it creates to the Orchard Supply map of where products are located in the store, it can lead a customer to a specific hinge or hammer.

I think we’re going to see a rush of companies wanting to be the first [in their industry] to have robots. ” —Andra Keay, managing director of Silicon Valley Robotics

 A rush of robots translates into more than likely a big rushing sound of humans beings ushered out the workplace door.

Now don't get us wrong because we get it. Robots bring many employer benefits to the workplace. As far as we now know, no lost maternity time, no mandatory 401K contributions, sick leave or social security matching for starters, not to mention fewer needed temps.

So the big octopi in places like Brussels and Washington who love to tax employers and now perhaps robots will have to conjure some new stuff. Mostly likely it will force them to actually do some work--that is, until the populace elects the first robot.

It should be interesting.

THE SWEDISH AFFAIR

Affairs for whatever reasons can go either way, bad or good.

The Swedish one doesn't appear to be a very happy one at this point as reported in the Financial Times today. 

Leading Swedish executive have decried what they see as anti-business rhetoric of Sweden's new centre-left government.

According to the report, several Swedish executives complained to the newspaper after the new one-month old coalition government floated several new proposals than included closing the Stockholm's city airport, capping profits on private companies running public services and the closing of several nuclear reactors.

One of the concerned, chief of Sweden's largest bank, Nordea, Christian Clausen, characterized the new proposals: "Of course it is a worry that their rhetoric is so negative."

The new government apparently intends to raise taxes and, as some of the concerned put it is "taking some steps against private ownership."

Brain drain is one thing, an entrepreneur drain, though closely related, another. What many apparently fail to realize, or just don't care so long as they get their way, is the global market race for growth and jobs given all the deflation concerns just kicked up several notches.

OUR VIEW

Of the 25 European banks that failed the so-called rigid financial stress test, nine were Italian.

Now most are familiar with Italy's long standing record on the lack of fiscal discipline, ask just about any German. But has anyone--and we're sure they have-- looked at the possible hidden message in the ECB's findings as a shot across the bow of  Italy's young, brash, newly elected leader Matteo Renzi?

Renzi along with some obstreperous French leaders has been an unwanted thorn in the side of Brussels bureaucrats since he arrived on the national scene.

That Spain,which seems since the crisis erupted, has fallen into the EU party line, came through unscathed suggests Machiavellian tactics are still alive and functional. Spain is the country remember during the downfall that had 25 percent, most likely a soft number, of unemployment during the crisis.

Taking a page from their French counterparts, Italian banking officials, according to the Financial Times, "..criticised parameters in the regulatory stress test as unrealistically harsh on the nine Italian  banks that failed and disputed the exact number of failures by the European Central Bank."

Anyone surprised here?

European central bankers and their MSM cohorts have a clear-cut message for those who care to swallow hard. We are doing something and things are not so bad after all. 

It's about restoring investor confidence. And they don't care how they do it, especially when it comes to the old fashioned way, fudging the truth.

True to its code MSM resorted to semantics, including the Times. 

"However, many of those failures were in effect technical ones, because banks raised money from investors subsequent to the December 2013 cut-off date."  

Translation: We're coming to your house in six months. Please don't hide the worst in obvious places.

We don't know about other countries, but in the U.S. random on-the-job drug screens have been around for a while.There is even a proposition on the California ballot in next month's election for random drug testing of health care workers, the first of its kind in the nation.

What these banks really need is a good old fashion random drug screen to get at the real truth.

Some are claiming this stress test was much more stringent than its predecessor. But if that one were any softer it could've been served over toast for breakfast.

The beat goes on. And so does the sham.

That's our view. We hope you know yours.

OVERNIGHT

                                        

Thin trading volume may set the market tone ahead of the Federal Reserve's upcoming two-day meeting this week where it's  expected they will announce QE is toast. At least that seems to be the cases overnight in Japan.

Though it's been in the news for a while now, one gets the feeling many investors are, to paraphrase an old saying from a black day in baseball history, "Say it ain't so, Janet!"

Odds are, however, it is so and investors will be trying to gauge the lay of the economic investment landscape as they adjust or go through withdrawals. In Europe investors will be trying assess the results of bank stress testing.

A cynic having seen the numbers--25 naughty banks out of 130 and the amount of under-capitalization a mere €48 billion--might say it smells a bit over cooked. But there aren't any more cynics around are there?

TOKYO, Oct 27 - Japanese stocks rose on Monday to a 2-1/2 week high as upbeat U.S. data and a weaker yen lifted sentiment in the overall market, but volume was thin as investors awaited the outcome of a two-day U.S. Federal Reserve policy meeting this week. The Nikkei share index ended 0.6 percent higher at 15,388.72, the highest closing level since Oct. 9. But only a total of 1.81 billion shares changed hands on the broader Topix, the lowest since Sept. 8. 

EBOLA CONTROVERY GROWS

One never hesitates to take on the mighty New York Times and their higher-than-high claim about printing accurate information.

The Times recently, commenting on the infectiousness of the Ebola virus, published the following, "people infected with Ebola cannot spread the disease until they begin to have symptoms, and it cannot be spread through the air."

The good editors at the Times obviously have never heard of--or worse yet, chose to ignore--the term "viral sloughing." In the case of  a well-known and widely spread affliction today, Herpes, it is believed to be infectious during a "sloughing phase" when the person infected with the virus is totally asymptomatic.

People can debate what they want about the differences, but they are viruses and viruses, like you and me, want to survive. And viruses mutate. Some of the information from the recent outbreak suggests that's already happened since the last outbreak owing to the increased temperatures being recorded in those newly infected cases.

In fact, one could argue that we humans are just giant two-legged viruses roaming the planet and every time we build up antibodies to fight off an infectious disease it's a form of mutation to survive.

As the Ebola controversy heats up, here are some guidelines being provided to health care workers who work in certain clinic environments to follow when a patient may come in complaining of Ebola-like symptoms or expresses he might have been exposed to someone with the disease.

 1. Make every effort to keep your distance from the patient--at least three feet--and avoid any contact with possibly contaminated surfaces and any direct contact with the patient.

2.  Get the history and review of systems from a distance at least three feet away from any contaminated area or the patient.

3. Based on your evaluation, categorize the patient as a) unlikely infected b) likely exposed or possibly infected

4. If infection unlikely, proceed as usual

5. If asymptomatic but may have been exposed to Ebola, notify local health officials.

6. If symptomatic and possibly infected, place patient in room, put Do Not Enter sign on door, immediately notify local public health officials or call 911.

7. Do not make any attempt to decontaminate room once patient is gone and do not enter room until cleared by public health officials.


Does any of this sound reassuring to you? It's taking precautions at best.

Another issue is how long will it take public health officials to decontaminate a room or an entire area?  In a worse case scenario one can see whole areas shutdown and people quarantined, not to mention a logjam that might well develop owing to the volume of places that need to be decontaminated.

The controversy about quarantining health care workers returning from areas where they have been helping victims is now pitting the White House against various states like New York, New Jersey and Mr. Obama's home state, Illinois. The states are right on this one.

In the new millennium, the centuries-old strategy of quarantine is becoming a powerful component of the public health response to emerging and reemerging infectious diseases. During the 2003 pandemic of severe acute respiratory syndrome, the use of quarantine, border controls, contact tracing, and surveillance proved effective in containing the global threat in just over 3 months. For centuries, these practices have been the cornerstone of organized responses to infectious disease outbreaks. However, the use of quarantine and other measures for controlling epidemic diseases has always been controversial because such strategies raise political, ethical, and socioeconomic issues and require a careful balance between public interest and individual rights. In a globalized world that is becoming ever more vulnerable to communicable diseases, a historical perspective can help clarify the use and implications of a still-valid public health strategy.

http://www.cdc.gov/quarantine/historyquarantine.html

The other controversy here is whether Ebola is an airborne threat. And the real answer to that is no one, not the New York Times or 60 Minutes or Mr. Obama's top advisers, virologists or otherwise, at this point knows for sure
  
One can call it precaution all he or she wants. But precaution is often a euphemism for: "We don't have a f****** clue!" And like it or lump it, that's just about where we are right now.

If Ebola turns out positively not to be airborne, it will be the exception, not the rule.

CALL FOR UK RATE HIKE

Spare capacity in the UK's fast recovering economy, according to Reuters, has at least one central bank official calling for hiking interest rates now, as concerns about how much spare capacity margin remains grow.

One of two central bank rate-setters who voted for rate hikes last August, Ian McCafferty, again, called for raising interest rates now even though British inflation remains at a five-year low of 1.2 percent below the central bank target of 2 percent.

There's something to be said for McCafferty's claim amidst all the deflation talk. If there's anything more in the media than deflation and more out than inflation we have not seen or heard it. It's been
over five years since the Bank of England cut rates to 0.5 percent in 2009.

Britain's unemployment rate is now down from 7.7 percent a year ago August to this past August. So McCafferty's concerns about wage hikes not being far behind is part is an argument others are also making.

McCafferty also called sinking commodity prices a one-off event partly affected by the strong sterling pound. There nine other members on the rate-setting committee. So far they are opposed to any rate hikes.

The market has priced in the first rate hike sometime around mid-next year. 

LOOKOUT: PRIVACY THIEVES ARE COMING

Barack Obama, the man who gained office for his first term running on a platform for change, has become noted for his wait-and-see approach during his second term.

There are at least three instances--Syria, the Ebola virus cases and the resistance to antibiotics program that critics say doesn't go far enough. We'll leave out for now his perpetual stalling on the now infamous KXL pipeline project.

While most at the moment are focused on the Ebola outbreak, resistance to antibiotics, according to sources familiar with the latest reports, last year in the U.S. alone was responsible for 2 million illnesses and 23,000 deaths.

One of the critics' major concerns is the rampant and some claim excessive use of antibiotics in farming and live stock feed.

Much of the use goes to preventing rather than treating disease in live stock, a fact many claim leads to creating antibiotic resistant bacteria. 

There is little doubt antibiotics get over used in treating humans, though not all the fault rests with medical practitioners. The public must bear its complicity since much of the public demands the medications for infections that antibiotics don't and won't help like viral colds.

Lawyers and insurance companies also contribute mightily to the problem as these people have input to so-called community standards. Medical providers are often put on the defensive not just for what they do do but also for what they don't.

Prescribing antibiotics for routine, non-contaminated wound repairs has become almost standard practice owing to push back fears. Infected wounds if they become complicated often bring with them lawsuits in what might be every trial lawyer's dream in America, the most litigation filing society on the planet.

 If you don't think lawyers and litigation is more about the money and less about safety and privacy, you're not familiar with California's Prop.46 on the ballot in the upcoming election. 

Remember, California for all its wackiness is often a trendsetter in many areas.

Prop. 46 if approved would create the first law in the United States to require the random drug testing of physicians and health care providers. 

It  would increase the state's cap on non-economic damages that can be assessed in medical negligence lawsuits to over $1 million from the current cap of $250,000. It will increase the cost of medical care, decrease access and in some instances threaten patient privacy.

Consumers, taxpayers and patients will pick up the tab and  California healthcare providers and pharmacists will be forced to refer to a massive statewide data base filled with each  person's personal medical prescription history without regard to patient privacy, sort of a California version of NASA.

There's yet another side to this as noted here.

For the past year, the fate of antibiotics R&D at AstraZeneca AZN.LN -0.16% has been uncertain. The drug maker, which possesses what is generally regarded as having the strongest antibiotics pipeline in the pharmaceutical industry, indicated that spending on this area would be reduced as part of a larger cutback and strategic refocusing. Ever since, speculation has grown that antibiotics may be abandoned altogether.

Now, an unconfirmed report suggests AstraZeneca may, in fact, be ready to walk away from the field. 

Any move by AstraZeneca will be closely watched because of the timing – public health officials, notably the World Health Organization, have been warning about the growing threat of resistance to existing antibiotics and the need to develop new products. Last month, for instance, the Obama administration released a game plan for combating antibiotic resistance. The pharmaceutical industry, however, has largely drifted away from research into this area.
t. man hatter