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.

Overnight

The  Nikkei was down for the week trading flat Friday at 16,481.29 as the benchmark is off for the week 2.6% while investors remain reluctant going into the weekend. Though down for the week, the  dollar gained against the yen, trading at 100.22 yen after climbing 0.4%.

Meanwhile, the Wall Street Journal reported: The Bank of Japan will likely take bold action next month, an adviser to Prime Minister Shinzo Abe said, rejecting speculation that the central bank may use a coming policy review to justify a paring back of its stimulus.
“However they conduct the assessment, there is already an answer: Monetary policy hasn’t been eased enough,” Etsuro Honda said of the review set for release at the central bank’s next policy meeting in September. Without further action, people would give up on the Abenomics drive to defeat deflation, he added.

The central bank’s planned “comprehensive assessment” of its policies has generated speculation over the direction of Mr. Abe’s 3½-year effort to end deflation. The review was announced at the bank’s previous board meeting in late July, where the BOJ took modest easing action.

In other markets, the Kospi was down 0.14 percent. In Australia, the benchmark ASX 200 added 0.16 percent, as the heavily-weighted financials sub-index reversed early losses to trade nearly flat. In Hong Kong, the Hang Seng index was down 0.53 percent. Chinese mainland markets were also lower, with the Shanghai composite off 0.38 percent, while the Shenzhen composite dropped 0.13 percent. Oil prices once again captured center stage on news that OPEC and other major producers might be cutting a deal to deal with the oversupply that  seems to be overhanging the market suppressing prices. Oil was up overnight at $48.28 a barrel in the futures market after rising Thursday.

The Bruising Truth About Shipping

Maybe some would call this a sign of a bottom. But for those who believe the bond market isn't a bubble, we say may the force be with you.

One sign the global economy isn't what the cheerleaders want it to be is plain, old vanilla shipping. A recent WSJ article had this to say: Until a year ago, the shipping industry was ordering ships in droves. This year, orders of new vessels have fallen to a record low and companies can't get rid of ships fast enough.

About 1,000 that have the combined capacity to haul 52 million tons of metric cargo--about the weight of 142 Empire State buildings--will be dragged onto beaches, cut into pieces and sold for scrap metal this year. That is second only to the record amount of capacity of 61 million  so-called dead weight tons that were scrapped and real cycled in 2012.

The global economic slowdown is putting shipping through its most bruising period since the 2008 financial crisis....As the companies, mostly based in Europe and Asia, fight for bigger shares of the global market, freight rates have dropped so low they barely cover fuel costs.

Much like the energy industry this is capacity going offline. The average for recycling ships is 30 years, the Journal notes. But in 2016 it's been cut to 15 years, a move, as noted, to cut excess capacity. But cutting over capacity doesn't solve the problem. There is something out their called China, not to mention the almost non-existent signs of any growth in Europe.

China's been a big importer of commodities, just ask those exporting commodity nations that are feeling China's slowdown. Or take a look at this. zerohedge.com/news/2016-08-17/japanese-imports-exports-crash-worst-rate-2009

For the 19th month in a row, Japanese Imports plunged - dropping 24.7% YoY (worse than expected), the biggest drop since Oct 2009. Exports were just as dismal, also missing expectations, plunging 14.1% YoY - worst since Oct 2009. The biggest driver of the collapse of Japanese trade was a 44% crash in the Chinese trade balance. 

 

Overnight

It's about the dollar. What it's not about is the Fed. The Fed is becoming more insignificant as time goes on in a world that's being twisted and jerked by crazy central bank policies and bureaucratic incompetence.

 The good thing about both is they create opportunities to make money, lots of money. They create imbalances. As Reuters noted: Asian stocks rose and the greenback languished near two-month lows on Thursday after minutes of the U.S. Federal Reserve's latest meeting showed policymakers were in no rush to raise interest rates.


MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.4 percent as investors added to positions after a 14 percent rise over the last two months.
Technology stocks, especially Tencent (0700.HK) and Lenovo Group (0992.HK) led the index higher

Hong Kong shares .HSI was the top gainer in Asia with a 1 percent rise, while a stronger yen, thanks to the Fed's cautious outlook, pulled Japan's Nikkei .N225 back 0.5 percent. The July meeting minutes released on Wednesday showed that Fed policymakers were generally upbeat about the U.S. economic outlook and labor market. But they also said they wanted to "leave their policy options open" as any slowdown in hiring would argue against near-term monetary tightening.
That's what's known as fence sitting or hedging your bet, something this Fed is now famous for, the lack of will to make a decision. Even the good job numbers are phony and they know it. So what's that say about the bad job numbers. Forget the Fed minutes. Watch the dollar.
The regional story was about stronger currencies with the yen rising and the Aussie dollar up, pushing stock markets down. The Wall Street Journal reported: Shares in Asia were mixed Thursday, with stronger regional currencies putting pressure on some stocks, while China’s plans to further open its equities market provided a delayed boost. The Nikkei Stock Average was hit by a stronger yen, falling 0.2% in morning trade. The yen broke below the 100 level versus the U.S. dollar. Elsewhere, Australia’s S&P/ASX 200 edged down 0.4% as its local currency strengthened following strong jobs data.Hong Kong’s Hang Seng Index was up 1.5%, Seoul’s Kospi added 0.3%, while the Shanghai Composite Index gained 0.2%.