THEY SHOULD BE

 
We don't know what vat the editorial staff at the WSJ quaffs from daily, but it's clearly vintage stuff. In this case the same old stale stuff in their attempt to protect and maintain the status quo.

In today's Opinion section they featured Fred Barnes, "Trump Needs Ryan More Than He Knows," a rather weak and pathetic veiled threat that Trump must now sell out those 10 million crazies who voted for him and unify the party. It might not be PC, but let's be blunt here. The Republican Party is bankrupt. Paul Ryan at least in the eyes of many is a symbol of that bankruptcy.

It's a safe bet--what out of touch people like Fred Barnes never get--that many of those 10 million votes Trump received is because the status quo is no longer palatable, something Barnes in his article keeps harking back to with his nonsense about unifying the various wings of the party.

Barnes, a Washington insider, rolls out a few veiled threats like this gem: "Mr. Trump could wind up embarrassed by the very convention that nominates him." Given that the Republican party has been an embarrassment for years, this is hilarious. This is a party that served up George Bush, John McCain and Mitt Romney, all in the same century.

Then there is Barnes' threat that the GOP's congressional wing is wider than the members of Congress, that it is "loosely organized and exists in an orbit around Mr. Ryan. He is the architect of its agenda and is pursuing it vigorously in the House. Party elites are on his side."

Barnes proves with that little ditty he and his kind haven't got a clue. Many of those 10 million votes came from people who are sick of those party elites and want to get rid of them. Including Mr. Ryan. Barns then cites another threat if Trump fails to play ball, a third party candidate.

The party can cough up a third or fourth or fifth party candidate. It will only validate what those 10 million votes were saying all along: the GOP in its current state is an anachronism. Out of touch, out of threats and out of time.

The one thing Barnes gets correct is his assertion there's much at stake here. There sure is. And it has nothing to do with a party that's been socially insolvent for years and everything to do with the liberty, freedom of choice and privacy of those 10 million voters. And there are hordes more out there.

Paul Ryan is the water boy of the elite. The day of the neocon has come and gone. Thanks in part to the Internet people are now hip to the neocon jive: Wars, phony trade agreements, huge military-industrial complex, one world government and U.S. hegemony.

There's an old saying about being too close to the forest to see the Aspens. That's what goes on in DC. Barnes and his fellow travelers at the WSJ are too entrenched and too benighted to be embarrassed for being so out of touch. They should be.

OVERNIGHT

If you ever had a yo-yo as a kid, you have some idea of what's going on in the Nikkei: the dollar firms, stock prices rise. It weakens and shares sell off.

That's about as plain of a beggar thy neighbor play there is, though many will deny such shenanigans ever go on. Meanwhile, the dollar strengthened overnight pushing the yen lower and the Nikkei higher to a 1-1/2 week high Tuesday among investor jitters about upcoming earnings reports and future forecasts.

The Nikkei gained 1.2 percent to 16,412.88 by midmorning, the highest since Apr. 28. As expected to round out the theme, exporters led the market higher with the three major auto manufacturers, Toyota, Honds and Nissan, all advancing. One high flier was Asahi glass, up 8.5% after reporting nearly a 5% rise in operating profits.

The dollar settled at 108.29 after it strong Monday performance. That followed the yen's run sat week when it hit a 1-1/2 year high. Meanwhile, things heated up after the U.S. last week announced terms to prevent the Bank of Japan from intervening in currency markets to weaken the yen. The WSJ reported the following within the last hour:

TOKYO—Japan’s finance minister said he was “prepared to undertake intervention” in the foreign exchange market if the yen rose further and sharply, describing more explicitly than before a policy the U.S. opposes.

The comment by Taro Aso in parliament on Monday was his first direct reference to the possibility of intervention during his tenure as finance minister under Prime Minister Shinzo Abe.

Mr. Aso’s remarks added to signs of tension between the U.S. and Japan over exchange rates as both countries struggle to gain traction in the face of slowing global growth. Gains in the yen are generally a blow to Japan’s exporters, making them less competitive than their rivals in the U.S.

The comments helped push the dollar up about 1.2% against the yen to ¥108.38 in late afternoon New York trading, paring part of the dollar’s 11% fall against the currency this year through Friday.

The finance minister also broke from the protocol of keeping currency negotiations between countries under wraps to avoid feeding undue speculation. Mr. Aso disclosed how Japan’s Ministry of Finance and the U.S. Treasury Department have been at odds in private conversations over the yen’s recent appreciation.
But U.S. Treasury officials think differently, Mr. Aso said. “Their stance is that it [the rise in the yen] is still only ¥5, and we are not at a stage yet” to worry about currencies, Mr. Aso said. “We have often been arguing over the phone.”

In its semiannual currency report issued at the end of April, the U.S. Treasury placed Japan on a list of trading partners whose exchange-rate policies need monitoring. Japan has met two of the three criteria used by the department to identify a country pursuing policy that “could give it an unfair competitive advantage” against the U.S.

Investors interpreted Japan’s inclusion in the list as a U.S. call against intervention, but Mr. Aso said it was due to Japan’s trade surplus and didn’t mean the U.S. found Tokyo’s currency policy inappropriate.

Mr. Aso said the recent volatility in the yen was “not desirable” because it affects all government policy, from trade to economics to fiscal measures. “We are certainly prepared to undertake intervention” if the yen continues to make sharp movements, Mr. Aso said.

Intervention is an attempt by authorities to control exchange rates by trading their own currency in open markets. Japan last intervened in the fall of 2011, when the dollar was around 75 yen. It currently is about ¥107.50.

Mr. Aso also said the Treasury’s move to put Japan on a monitoring list “won’t constrain” Tokyo’s currency policy.Bank of Japan Deputy Governor Kikuo Iwata, also speaking in parliament, said the Treasury report wouldn’t affect the central bank’s monetary policy.

We said a private deal was recently cut to weaken the dollar and we will stand by that assertion until we see evidence to the contrary. So as more nerves get frayed we're likely get a further glimpse of the truth.

THEIR STOCK AND TRADE

This is a story about something we've been saying for a long, long time, particularly about MSM. But we make no exceptions for politicians.

 A lot of people think Las Vegas created the saying what happens there stays there. They didn't. This is a meme that dates to the first time anyone thought up the idea of politicians and that they might be good and necessary. They aren't.

Trying to keep the truth from the masses is the stock and trade of these people.  

The White House is scrambling to clean up the political mess created by a New York Times Magazine profile of President Barack Obama's deputy national-security adviser, Ben Rhodes, who offered surprisingly blunt comments about the Iran nuclear deal and other contentious topics.
In the interview, Rhodes was candid about how the administration has sought to shape its foreign policy, and went into some detail about how "Beltway insider" experts and reporters helped the White House sell the Iran nuclear deal to the general public.
The profile has sparked backlash among those who feel that Rhodes admitted to being part of a campaign to "spin" the narrative and deceive Americans into approving the landmark nuclear deal.
Rhodes' comments also angered Washington reporters, whom he characterized as "27-year-olds" who "literally know nothing" or as "handpicked Beltway insiders" who report on the White House uncritically. And he was critical of the Washington foreign-policy establishment, which he apparently refers to as "the Blob."
Rhodes responded to the criticism in a post on Medium published on Monday morning: "How We Advocated for the Iran Deal." In the post, Rhodes defended the strategies the White House used to sell the deal to the general public and protect it from its opponents.
In his daily press briefing, White House Press Secretary Josh Earnest told reporters that Rhodes was motivated to discuss the administration's communications strategy further because "there has been an attempt by opponents of the Iran deal to say that the effort to protect the deal was based solely on 'spin.'"
Jonathan Ernst/ReutersDeputy US National Security Adviser Ben Rhodes at the Washington Ideas Forum in Washington, DC, on September 30, 2015.
"I recognize that there is an attempt by those who either lied or got it wrong to re-litigate this fight," Earnest told reporters. But "time and time again, the critics of the deal have been wrong. I think that is an indication that our attempts to protect the agreement were rooted in fact. And that's what Ben wanted to reiterate in his piece."
Jonathan Karl, ABC's chief White House correspondent, asked Earnest if it is "the White House view that Hillary Clinton is part of the foreign policy 'blob'" Rhodes referred to in his interview, which he said was clearly meant as a "derogatory" term.
Earnest replied that he had never heard Rhodes use the term "blob."
"I'm not even sure what that means," Earnest said.
Earnest also told reporters that Rhodes' comment about the "27-year-old" reporters was "not meant as a put-down" of the White House press corps.
"Based on that reaction I'm confident he would say it differently if he had the chance," Earnest said.
Fox News White House correspondent Kevin Corke later confronted Earnest again about the administration's attempts to sell the Iran deal.
"Can you state categorically that no senior official in this administration has ever lied publicly about any aspect of the Iran nuclear deal?" Corke asked.
"No, Kevin," Earnest replied.

SNAP CRACKLE AND POP

 
 Want to know how bad things in China really are?

Well, you had two signs over the weekend, their trade numbers disappointed and what the WSJ, "China Bolsters Ailing Firms," noted: "China is doubling down on efforts to keep unprofitable factories afloat despite years pledging to curb excess capacity, adding to a glut of basic materials flooding the global economy."

The first thing you should know about this is the broader implication. Government bureaucrats never fix any thing unless they're forced to. The austerity program that the Germans and a few other half-way solvent EU members prefer is anathema to the kick the financial can crowd in Brussels.

The next thing is the term doubling down, an activity most traders and gamblers understand. Some would call it risking good funds after investing previous bad ones. The Keynesian crowd just never gets it. Keynes was supposedly noted for his remark in the long run we're all dead. Well, in the long run most firms either die or get absorbed. There is a well known term for it if they all get absorbed by the government.

Firms are like people they ought to be allowed to die in dignity. We've said it before and we will say it again. Despite all the monetary global madness nothing has been fixed. Papered over maybe, but not fixed. When things get fixed there's usually some pain involved like loss of jobs or employers moving to more friendly climes.

Often doubling down is a bureaucratic form of burying one's head in the pillow and hoping the problem will either correct itself or, like my old girlfriend, just go away. She didn't. And neither will these long-festering problems. Tons of global jobs have already been lost in the weak economy. What the Chinese and others are doing is making it even weaker by boosting more capacity without requisite demand.

As Einstein noted: "You can't solve a problem with the same consciousness that caused it." A change of consciousness for these blokes would be to stop kicking the can and claim it. You caused it, you own it. You screwed the pooch.  This is in part what the upcoming election in the U.S. is about. It's what Brexit is about. It's what Grexit is about. And it's what given the circumstances today things should be about.

If you let the MSM shills tell you otherwise you become just another accomplice in the kick the can game. At the risk of exhuming Keynes' spirit one more time, sooner or later unless there's some drastic changes, the global economy will do it's best impression of an old jingle for a popular U.S. breakfast cereal years past.. It will go snap, crackle and pop.

OVERNIGHT

Couple disappointing U.S. job numbers with weak-than-expected Chinese trade data and you get opening market weakness in Asian shares Monday. That 's what one could consider two strikes against investors coming from, as it does, the two largest global economies.

Add in Canadian wildfires and the fallout they cause in the oil patch by driving up the price and markets have a case of the Monday morning blues as Australian shares dropped 0.4%, the Kospi retreated 0.6% and MSCI's broadest index of Asia edged down 0.2%. The trade data impacted Shanghai shares as they fell 2% with only the Nikkei fighting the trend on the yen's recent upswing weakened. The index rose0.5%. The number on China's exports fell nearly 2%, coming in at 1.8% officially.

The dollar will most likely have much to say about these markets, especially if it spikes up. But many believe that a deal has been cut by the G3 to keep the dollar weak at least going into the upcoming presidential election.  The WSJ reported:

The powerful rallies that have lifted stocks, crude oil and emerging markets for the past three months have one important thing in common—the falling dollar—and investors are growing anxious that it could prove to be the weak link.

While the dollar is down 4.5% this year and near a one-year low against a basket of currencies, other investments have surged. U.S. crude prices are up 69% from their February lows. Gold was up 16.5% in the first quarter, its best in three decades. And emerging-market stocks, bonds and currencies have enjoyed double-digit gains in 2016.

Analysts at Morgan Stanley measured the correlation between a weak dollar and their own index of investor appetite for riskier assets. They found it near its highest level in 20 years.

The concern is that it is a relationship that could easily go in the opposite direction. The dollar is heavily dependent on perceptions of what the Federal Reserve will do with interest rates, and those perceptions could change quickly. Meanwhile, analysts warn that the fundamentals for oil, emerging-market assets and even many stocks look too weak to support the recent price gains on their own.
 

RECKLESS POLICY

They are not going to take this market down before Nomember.

After that a 20% correction would be healthier than a 3-day stay in Maui.That wouldn't take all the excesses out this madness, but it might help. We say might because going all the way back to 2008 and rolling forward to now little if anything has really changed or, to use a more severe, unwelcome note, been corrected. Messes get made, never corrected. It's rule number one in the bureaucratic code.

A famous American general near the end of his life said: "Old soldiers never die, they just fade away." That's the end game hope of every bureaucrat on the planet for the messes they create. And there are few worse messes than a monetary mess. You should know that by now. You've been in one for nearly a decade.

Sometime this summer you'll have your cue: here are some things you might want to consider: take some profits, sell some covered calls, stagger a sprinkle of puts to average the cost of your protection and pull your hard helmet out of the closet if you already have one. If not buy one. But before you do any of that, however, way before, buy some gold, physical and otherwise. And don't let MSM frighten you away from commodities. Scarcity pushes up prices. Scarcity and ugliness are fraternal twins. Just to remind, things could get really ugly.

This is our caveat--and our disclaimer--what we do, or anyone else for that matter, might not be right for you. Corrections are as much a part of cycles as good times. The folly is not in our stars but in those who want to outlaw corrections as if they are unnatural and don't need to be a part of the way things go.

We have lived in an historical period of reckless global monetary policy. To think there won't eventually be some pushback--perhaps quite sever pushback beyond the norm--is about as unnatural as the monetary policy we have lived through.

JOBS REPORT: YOU DECIDE

MSM never tires of trying to bolster public confidence and cover for the utter madness of U.S. monetary policy.

When they can't find anything concrete they turn to a convenient source, jobs numbers. In Friday's WSJ, "Job Market's Underappreciated Strength,"  Steven Russolillo wrote: "In the lackluster, slow growth economy, at least one thing isn't appreciated enough: the steadiness of monthly job gains."

He then covers his you know what and attempts to minimize any upcoming disappointment in the April number set to come out obviously after he filed his story by saying any negative surprise "....will be viewed as an aberration rather than the start of something more problematic."

He the noted it's important since it's the next to last such report before the Fed's June meeting where some think the Fed could surprise and hike rates. Well, the report is now out. Economists were expecting 205,000, a number in line with recent ones. Russolillo points out how favorable these reports have been the last six months averaging 246,000 jobs, the best six month rolling average since February 2015."

But as the man said, "Not so fast." Reuters said that the Labor Department showed the economy gained 160,000 jobs in April, "the fewest in seven months, and Americans dropped out of the labor force in droves, signs of weakness that cast doubts on whether the Fed will lift rates before the end of the year."

Gold immediately on the news rallied 1% before the Fed sent out one of it heavier hitters, New York Fed President William Dudley who told the New York Times that "two rate hikes in 2016 remain 'a reasonable expectation," causing gold to give back of its gains. Gold is a surrogate now for the direction of interest rates as long as this uncertainty continues, rallying on each Fed's delay and indirectly reflect a growing lack of confidence in central bankers.

Dudley's appearance itself was questionable. Was it spontaneous or just waiting in the wings if the number came in sour? Once the job numbers came public stock market around the globe faded and yields on Treasury paper fell. And perhaps less noticed silver and other metals also rallied earlier in the week.

THE END OF APRIL

What a difference a few short months makes.

If you've ever run a portfolio you know what we're talking about. And if you're one of those so-called political soothsayers who predict election outcomes you also are getting the idea.

Coming into this year the investment landscape looked straight forward enough. In December the mighty Fed had not only spoken, it actually acted, hiking interest rates 25 basis points and calmly projected at least four more well-spaced hikes ahead. The mighty emperor QE after a longer life expectancy than anyone but a government bureau could dream of was dead.

In the presidential primary festival that happens every four years many of the political pundits who live, breathe and spout off from their editorial caves poked fun and popped jokes about a well known, brash New York businessman with a strange blondish soufflé hairdo. He couldn't make a splash in a swimming from a ten meter board. And winning his party's nomination, well, that only happens in Hollywood. That's for some middle-aged, uneducated Caucasian Iowa tow truck drivers who butcher what's left, if anything, of decent grammar every time they speak.

The dollar was set so most believed to appreciate against the yen and the euro, the Fed would continue its tightening act and emerging markets should be avoided more than long john underwear in July. But then along came not a fellow named Jones but slower economic growth than most expected including those lovers of everything Chinese.

Bonds continued to rally and consumers either forgot or couldn't afford to spend their expected savings from cheaper gasoline, no doubt much of it siphoned off by soaring rents; and that magical 2% inflation number central bankers everywhere worship so much proved harder to find than a California virgin.

In currencies linear thinking took a drubbing when the Bank of Japan acted not to act. First quarter corporate earnings turned out more disappointing than our old girlfriend and that was with most still wearing their heavy Wall Street makeup. Goldman Sachs, the newest investment banking friend to every proletarian, presciently noted the soaring yen posed an "existential challenge" to the Bank of Japan.

All of this took us through just the end of April.

OVERNIGHT

Last night just after it was announced we discussed the Reserve Bank of Australia cutting its benchmark interest rate 25 basis points to 1.75 and investors need to keep an eye on market reactions.

Well, today we got one, according to the WSJ, as: Stocks and oil futures tumbled and Japan’s yen hit its highest intraday level against the dollar since October 2014, as investors struggled to reconcile recent market gains with unease over the pace of global growth.

The latest tumult erupted after the Reserve Bank of Australia on Tuesday cut its benchmark rate by one-quarter of a percentage point to 1.75%. The move reflects soft inflation and economic sluggishness driven in part by weak demand from China, the largest buyer of Australian exports. Adding to concerns were a drop in Chinese manufacturing and signals that eurozone growth is slowing more than previously forecast, traders said.

Tuesday’s developments reflect worries that have shadowed a surprising 2016 recovery in the prices of stocks and many commodities. Global growth has slowed this year, prompting major forecasters to cut their outlooks. Yet in recent months the decline of the U.S. dollar and easier policy from global central banks have helped fuel gains in many riskier assets, allowing the Dow industrials to recover from a decline of as much as 10% earlier this year.

In other markets the Hang Send was down 1.3%, the Australian S&P/ASX 200 shaved off 1.4% after the above-mention rate cut, the Korean Kospi edged 0.79% lower and the Shanghai Composite Index slipped 09.4%. Another problem hanging over area banks, though not much talked about, is the gap between loan loss reserves and bad loans should things get worse, estimated by some at around $60 billion should we return to 2008-like conditions. An estimated third of that gap is in one country, China.

SOARING RENTS

You can get caught up all you want in the different ways inflation gets measured. Much of that is just a form of intellectual masturbation: Economists writing for other economists, academics writing for other academics and so forth. In truth, the way the Fed measures inflation has over the years had more facelifts than a handful of aging Hollywood stars.

Real live everyday people have to have shelter and they have to have energy for a variety of reasons. Though we would take exception with some of what the author concludes here, this is an article you can read and decide for yourself. We seriously doubt that the government's data, as ugly as it is for renters, captures certain outlying areas like parts of Southern California  and San Francisco where rents have soared.

marctomarket.com/2016/05/great-graphic-us-rents-and-core.