HELD RESPONSIBLE

Central bankers have been much in the news of late, given the meetings of two global heavy hitters last week, the Federal Reserve and the Bank of Japan. The risk on-again-off-again has been one of the popular themes of the market for some time now. Sort of like one of my old girlfriends, is she staying or going? Confusing to be sure, especially two years after her initial announced departure.

And that brings us to the Fed and it's current strategy when one doesn't have a clue any longer. Will they hike interest rates this year or won't they? And if so, how many times and when does it all start?

One time when it doesn't for sure start is just before what could be one of the most volatile, contentious presidential elections in the nation's history.

Just look at the market's reactions to the recent Bank of Japan's do nothing stance at it last meeting, it wasn't what those central bankers hoped for. And the same can be said for the ECB. Factor in this little riddle, too: The Fed's abrupt on-again-off-again recent concern about the global economy. We all know that the Yellen-led Fed claims to be data driven. But when that data are not driven in the direction you want or hoped for, what do you do then? Obfuscate.

The lesson here for investors and all those linear-thinking central bankers is not all markets are groupies. Recall too in the last few months how many Fed emissaries have been sent forward to give conflicting are-they-or-aren't-they messages about interest rates in the media. The shelves in the Global Monetary Policy store are empty. What's left is what's going on now.

When you can't find any inflation because your inflation-doctored data is now returning to bite you in the butt, when you no longer have a clue, confuse and obfuscate, and with a little luck somehow the problem just might disappear. But then as economists are so fond of saying: On the other hand.....!

As for that old girlfriend, that strategy didn't work. But a court ordered eviction notice did. And that's why in the future, the Fed, if there is one, ought to be held responsible for its actions. Around the globe these bureaucrats hold in their tiny linear and often pathetic econometric-laden minds the financial future of too many lives for a group of non-elected bureaucrats to escape responsibility.

OVERNIGHT

Doing nothing like every other strategy can have its shortcomings, too, as the Bank of Japan found out Friday when many Asian markets turned down just one day after the BOJ's decision to stand pat for now on any further easing of monetary policy.

While Hong Kong's Hang Send fell 1.2%, Korea's Kospi shed 0.6% and the Australian S&P/ASX 200 eked out a 0.3% gain. The Japanese market was closed for a holiday. Asian investors continue to show concern about prospects for global economic growth.

Market activity Thursday in the U.S. didn't do Asian shares any favors as the Dow Jones Industrial Average declined to its largest percentage loss since early February. And the yen hit an 18 month high against the dollar at 107.13, its strongest level since last 2014.  Another financial shoe that hit the floor Thursday was the first quarter slowdown the U.S. economy when GDP grew at a miserly 0.5% annual rate, lower than analysts were expecting.

It was the third time in a row that the GDP declined compared to the previous quarter and fits into the pattern of slow GDP growth in the U.S. for nearly a year. In fact, as one observer noted this slow economic growth during this administration's tenure will likely be the fourth worst in recorded history. Keep in mind this indicator has been changed many times recenlty and the changes favor the government not you and me.

But don't expect this to get accurately reported by MSM or central bankers. You also should realize just how desperate these people are to scavenger up some inflation. People who get so upset with Trump for saying anything apparently don't realize he's just doing what MSM and central bankers do every day. Say anything to keep this puppet show going.

And that  brings us back to our opening: Doing nothing like every other strategy has its shortcomings, too.

"THE SON OF A BITCH COULD PLAY FOR ME!"

Love or hate Bobby Knight, he says what's on his mind.

Campaigning for the Donald earlier today in Evansville, Indiana, Knight pointed out he was quite selective when he coached at IU in picking his players. Well, there's another guy, no less controversial than Knight, who speaks his mind. He's running for president. Here's what Knight had to say about him: "The son of a bitch could play for me."

Pancakes for breakfast anyone?

businessinsider.com/bobby-knight-donald-trump-2016-4?

OVERNIGHT

First there was the Fed's statement Wednesday that drove the yen lower and then when the BOJ decided to stand pat on any further monetary easing for now the yen rose sharply against the dollar, rallying 2.4% to 108.8770 chalking up its biggest one-day increase, according to the WSJ, since late August 2015.

The BOJ announcement came during lunch time Thursday, but when the market reopened the Nikkei headed south surrendering earlier gains of 1.6% that turned to losses of 3.2%. For many the announcement caught investors by surprise since there was a feeling the BOJ would take some action to further weaken the yen. The yen has been rising much of the year against the dollar, hurting Japanese exporters.

Others speculated that the market's negative reaction to the bank's previous easing could have affected their decision to hold off until they have more data. The strength of the yen against the dollar also caught many off guard, but the Fed's decision to hold off on what was earlier projected to be four interest rates hikes this year to possibly only two no doubt gave the yen a boost.

According to the report, consumer prices in Japan were down lending further confusion since any sign of inflation appears to be harder to find than a four leaf clover. Apparently, deflation still rules the day after massive and unprecedented monetary easing policies by the BOJ, leaving officials there to ponder their next move.

What's next is anyone's guess, but a confidence crisis might be a good guess as it appears not just Japanese central bankers have no clue. In the U.S. many believe there is a concerted ploy to keep the market afloat until after the November election. Meanwhile, other markets faded as the news spread with the Shanghai Composite off 0.7%, the Hang Seng down briefly before rallying 0.3% and the Kospi shedding 0.6%

OVERNIGHT

Not much was expected ahead of some central bank releases today and Thursday as Asian markets mostly traded lower, but crude oil owing to a supply draw down report held strong,  settling near 2016 highs.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS retreated 0.5 percent while Australian shares remained flat owing to weak inflation data as the Reserve Bank of Australia kept its rates unchanged though some investors feel a further cut could be in the works soon. One of the big questions is what will the Bank of Japan do Thursday. Some are expecting officials to further ramp up its monetary stimulus package.

 U.S. crude traded at $44.50 a barrel, not far from $44.83, the highest since early November. Tuesday, Brent crude was at $46.30 a barrel after rising to a five-month peak of $46.49 overnight. Energy shares are up 14% over the past three months, not necessarily what investors were anticipating, a move that outperformed most other sectors. In other Asian markets, the Shanghai Composite Index was flat, while Hong Kong’s Hang Seng Index fell 0.3% and South Korea’s Kospi was down 0.2%.

The WSJ reported: Stocks in Japan fell Wednesday amid disappointing corporate earnings ahead of decisions by central banks in the U.S. and Japan, while elsewhere in the region, energy shares rallied as oil prices reached new highs.

The Nikkei Stock Average fell 0.5% as traders were reluctant to put on big trades. Among individual stocks, bicycle parts maker Shimano dropped 4.4% after the company cut its net-profit projection for 2016, citing a weaker U.S. dollar against the yen.

IT HELPS TO HAVE FRIENDS

If there's a Wall Street firm more worthy of your contempt than Goldman Sachs, we have yet to see it.

This is a firm in the back pocket of the Federal Reserve, an advisor to billionaires and some of the world's largest corporations. It is an investment bank that loves to throw its political clout around. Just ask one of the major candidates in the current presidential circus. And see it's position on Brexit where it stands to take a big hit if the yes voters carry the day.

You know, despite their shilling for the fantasy global economic recovery meme, things are tough when GS goes after "cash-cushion" money. This is an haughty 150 year old, stuffy outfit so full of itself that they most likely wouldn't let the common guy step indoors during a downpour. Such rabble would sully the lobby.

Now this arrogant, elitist firm comes sniveling after what can only be called quasi-deposit monies. A recent purchaser of GE Capital Bank's online deposit platform, GS is going after the retail trade. Sort of. And that's what one has to be chary of. These folks aren't your friends by any stretch. Revenue from their investment banking and trading business hit the wall recently. In other words, bad economic times in the long run catch up with all of us.

The excuse floated by their MSM friends is recent tougher regulations. To attract business--see The Art of Coney Catching 18th Century UK literature--their offering high rates, 1.5% on savings accounts, a whopping 1% on CDs and, hold on to your passbook, 2% on five-year CDs, according to the WSJ.

What's the catch? There's only one way to get your money out and at that only six allowed withdrawals per billing cycle is by electronic transfer to another financial institution. No mention as far as one can tell whether these transfers like most things in the investment banking world come with a fee. It's near impossible to imagine two banks involved in a transaction without any fees.

Goldman is trying to catch up with other large Wall Street firms with fairly large deposit bases. Consumers in the eyes of big investment bankers are hardly the smartest people on the planet. Deposit funds are known for being really sticky. Given that and some stringent withdrawal rules and you got yourself a steady flow of low-cost, long-term funds to toy with.

It's a great gig if you can get it. But first you have to get approval from your friends in Congress and at the Fed. But after all, that's what friends are for, isn't it?

OVERNIGHT

Some are calling it caution before Tuesday's Fed meeting and well it might be with most Asian shares down overnight.The Nikkei was off 1% , the Kospi flat and the Australia's S&P/ASX was down 0.3%. The Hang Seng dropped 0.6% and the Shanghai Composite Index traded flat.

The BOJ has a two-day meeting starting Wednesday where many expect more monetary easing from officials to try to boost their economy, hoping in the process to weaken the yen and conjure up some inflation. It's been a see-saw for Japanese financials as one day they're stronger and like today they lead the market down.

Part of the trouble stems from the big state investment fund in Malaysia that defaulted on a $1.75 billion bond issue as news of it rippled through markets. Japan's automakers, which rely heavily on export sales for profits, felt some of the pain, with Toyota Motor Corp slipping 1.1 percent while Honda Motor Co Ltd slid 1.4 percent and shares of Nissan Motor Co Ltd were 1.5 percent lower.

Here's an interesting chart from davidstockmanscontracorner.com/another-gary-cooper-rebound-it-isnt-on-the-level



No matter. The madcap money printers at the BOJ have already bought up every Japanese government bond that can be pried loose and owns nearly 50% of Japanese issued ETFs. And now comes word that the BOJ has bought so much stock through ETFs and directly that it has become a top holder of most of the stocks in the Nikkei 225.

Some observers expect Japanese officials to extend their ETF purchases rather than cut rates lower or buy more bonds. For more on the mess called the Japanese economy, the yen and the BOJ read this.
zerohedge.com/news/2016-04-24/why-goldman-expects-japanese-yen-collapse-within-12-months

A CAN OF WORMS

If you want to know why the Republican Party is headed for extinction, here's why. Their willingness to stop at nothing to stop the Donald shows you how scared and pathetic they are. But way more important, they're telling all those who support Trump what they want doesn't matter. Besides that, they are calling all who disagree with them ignoramuses, xenophobes, hate mongers, racists and any other nasty epithets they think up.

This should help carry a long memory. This is indeed a watershed moment. They are now showing their true colors. It's their way or no way. Ask yourself if you want to belong to a party like that? And for all you independents and others who get the Trump message or simply want something different from the bores of the past in both parties, understand what this is, a frontal in-your-face assault on your liberty and your freedom of choice.

You can lay down and roll over on your back with all four paws in the air they way they want you to or you stand up fence-post straight, look them steady in their pupils, something they can't do, and let them know you're going to be heard. You're not going anywhere. This indeed is your can of worms. Let's get it opened.

As for the good campaign manager's concern about setting the party back, it would be difficult to set a party back a generation that hasn't been inclusive since Abraham Lincoln. In their conceit and arrogance they never expected this. Note the term "unlikely rise" in the story. They took you and your franchise for granted. 

PROVIDENCE, R.I.—Donald Trump’s rivals are joining forces to deny him the necessary delegates to win the Republican presidential nomination, the latest display of strife in a convulsive 2016 GOP race.

Ted Cruz and John Kasich issued near-simultaneous statements Sunday outlining an extraordinary compact that may be unprecedented in modern American politics. Under the arrangement, the Kasich campaign will give Cruz “a clear path in Indiana.” In return, the Cruz campaign will “clear the path” for Kasich in Oregon and New Mexico.

The arrangement does not address the five Northeastern states set to vote on Tuesday, where Trump is expected to add to his already overwhelming delegate lead. Kasich and Cruz had already retreated to Indiana, which holds its primary on May 3. Yet the shift offers increasingly desperate Trump foes a glimmer of hope in their long and frustrating fight to halt the former reality television star’s unlikely rise.

“Having Donald Trump at the top of the ticket in November would be a sure disaster for Republicans,” Cruz’s campaign manager, Jeff Roe, said in a statement explaining the new plans. “Not only would Trump get blown out by Clinton or Sanders, but having him as our nominee would set the party back a generation.”

FINANCIAL HUMPTY DUMPTY

For as long as we can remember we've been saying academics don't live in the real world. People for the most part are extensions of their upbringing. For economists it's their econometric models and Keynesian theories.

There's a difference between academic and real worlds, one most academics never seem to get. People don't always act rationally. In fact, an interesting thought might be what if irrational is the norm, at least in certain situations? Whoever dreamed up the rationale for putting a human being behind the steering wheel of a 2000 pound part metallic object that can exceed 100 miles per hour speed?

Yes, we now have behavioral economics. But that get's modeled also. If you start with a false premise it's likely any conclusion you come up with will also be false. The biggest false premise of all just might be human behavior is understandable. So we come up with exceptions and excuses like neuroses and such--iconoclastic, eccentric or just plain different.

These might make us feel better, but that hardly makes them facts. In the stock market most investors disdain volatility. Volatility is to chaos as psychology today is to people. You find one you'll find the other. So why wouldn't China which has been the locomotive for a large part of global growth the past decade or so doctor it's GDP numbers once the economic winds start to leave those sails?

It might surprise you, but China is run by people, too, people who wish to not only stay in power but consolidate that power. The meme that we in the Western world are any different is just that--a fanciful meme officials hope the gullible with continue purchasing. Don't forget every generation brings with it a number of the new gullible set. Some believe that if China's GDP numbers were any more doctored they'd be a shingle hanging outside a new office building.

For those who care to carefully look few of the basic problems that punctuated this mess have been corrected. A cynic might say none. Swept under a convenient carpet or just kicked down the road, that's still the official solution of the times. Wallpaper it over. You know that by the growing attack against austerity. The globe is awash in debt and nobody dares to stick his finger in the dike. That's akin to cutting your throat just to watch yourself bleed. In the ken of politicians and bureaucrats hemophilia is an afflictions only for the masses.

So the debasing continues. Not just the currencies, but the social, political and educational. Rumor has it Diogenes picked up his lantern one dark night and strolled out into the blackness searching for an honest soul. Somewhere he made a wrong turn and wound up in Washington DC where after just a few minutes he tossed his lantern away and, reportedly was heard to utter: "Screw it!"

That's what more and more people around the globe are saying today. And there will be tons more once this financial Humpty Dumpty falls. It's the hard landings that crack the egg.

DRAGHI SPEAKS

Today was to be an important day for the European Central Bank and what President Mario Draghi would do and say about monetary policy. Here a brief note from Business Insider:

• The euro is up 0.8% at 1.1385 after the European Central Bank left both its key interest rate and deposit rate unchanged at 0% and -0.40%, respectively. The inaction was expected after the ECB cut rates and increased its asset purchases at the March meeting. 

In the Q&A session here are some of his responses:

On inflation, Draghi says inflation rates could slip back into negative territory in coming months but that the ECB expects inflation to pick up in the second half and futher recover in 2017 and 2018. That’s in line with the ECB staff forecasts.

Draghi is asked if he worries German criticism of the ECB’s policies could have a negative impact on investment and business activity.

Draghi says a “polite, lively debate” helps the ECB better explain its policies. But he says criticisms “of a certain type” could be seen “endangering the independence of the ECB.”

That could lead to delayed investment and risk taking, he says, but the ECB will continue mplementing policies it deems appropriate. The only impact will be to delay the achievement of the ECB’s objectives and to require even more policy expansion, he says.

On a related question about Britain’s upcoming referendum on whether to remain in the European Union, Draghi says Brexit concerns have already produced significant market consequences.

Draghi is asked about the prospect of “helicopter money”–a program in which a central bank injects money directly into the economy.

Draghi expresses surprise that his response to an earlier question about the extreme monetary policy measure has drawn so much attention. “The bottom line is that we have never discussed it,” he says.

But what about pensioners? Draghi is asked what he would say to German citizens worried about the fate of their pensions given ultralow and negative interest rates.

Draghi says there’s no doubt pensions and insurance firms are affected, but urges them not to blame everything wrong in the sector on low rates.

He also notes that they’ve also reaped the benefit of large captial gains on their bond holdings as a result of the ECB’s asset-buying program. Also, it’s not just a function of the ECB, he says, noting the U.S. long had rates near zero before the ECB.

Low interest rates are a “symptom of low growth and low inflation, it’s not the monetary policy consequence,” Draghi says. “If we want to return to higher interest rates,” higher growth and inflation is required, he says. Getting back to growth requires the current monetary policy stance.

At the same time, its worth noting real rates–interest rates minus inflation–are higher than they were 20 or 30 years ago, but that’s difficult to explain to savers, Draghi says, telling he questioner, “perhaps that’s your job.”

As you can see his responses were laced with the usual bureaucratic speak. Nobody in their right mind among average consumers cares about inflation adjusted interest rates. That's about as far form the real world as are these bureaucrats. It's a condescending remark, the same ploy used against the price of gold not being higher than it was in 1980.

His comment about pension and insurance funds is another dodge. A recent report noted there are something like 153 underfunded country pension funds today. Did the same savers who it would be sol difficult to explain real rates to cause this also?

And then there's  his "broadly positive" comment about the ECB's experience with negative interest rates. It's right of the waffle iron.