Line 'Em Up

 The news is out. Again.

The Federal Reserve is optimistic. Again. One wonders in their next incarnation if this heady group of central bankers can come back as chameleons, just is their nature. The latest is the end of the year is back on the table for what most likely would be a 25 basis point hike for these brave souls.

Since all the pundits and scaremongers including a certain nation's president turned out so far to be wrong about the Brexit fallout and the U.S. stock market has been artificially pushed to artificial new high records, higher interest rates is back in the air. This group over its tenure has sent more messages than an old time Western Union office.

But as usual in the vernacular of this group there's always a big if in here. If the economy is on more stable footing than when they met in June this could set up a September rate hike. There is, as is usual for these clutch-at-any-straw bureaucrats, much nonsense in here. The June job numbers and a hint of inflation have rendered these nervous Nellies nervous. One governor was recently quoted as saying, "We are basically at full employment. I think the underlying fundamentals remain very sold for the U.S. economy."

That's brings up a couple of questions. First, if after all this massive global money printing this is the best we can get in jobs. The second is the choice of the phrase "remain very solid" when just a short time earlier they looked fairly putrid. One guesses to the Fed aberrations, like Jacks and Queens, never come in pairs.

We think the Fed is so far behind in the count given the global ZIRP and NIRP nonsense, at least three or four bubbles afloat depending on how much one want to contest the point, one should be positioning oneself for the unexpected. The world is drowning is debt. Nearly a decade of monetary madness has only piled up more debt. Much of that will never be repaid. Overt beggar-thy-neighbor tactics proved fruitless, consumers, at least for now, got he message: they're on their own, and central bankers now have about as much credibility as Joe Biden when it comes to plagiarism.

If you like ducks in a row, now might be your time.

In Case

In  case you didn't notice, going into this past weekend MSM fell all over itself trying to convince us how well the economy is now doing.

Story headlines like, "Consumers Give Boost to Economy," in the WSJ to many others gives you a clue t the straw-clutching going today with all  the global turmoil. Here's an opening blurb from that piece: If here's any lingering worries about tab economy, consumers just put that to rest." The author goes on to cite retail sales for June jumped to 0.6% from 09.2% in May and the Labor Department reporting prices picked up in June.

He then cites near record low mortgage rates , new stock market highs and gasoline prices trending lower. We don't know where he lives but gasoline prices in our area have been trending higher for the past several weeks. Moreover, real estate prices and rents are higher than  most government spy satellites.

Now the stock market is another interesting case, as was pointed out in Barron's this weekend. The Nasdaq, the Dow transports and the Russell 2000 are not confirming the new highs. Also, corporate earnings seem to be petering out and the narrowness the the new records are more concerning, "...take a few hundred stocks out of the equation, the broad market hasn't surpassed the highs." There is another concern, valuation.

On the global front China remains a mystery, as enigmatic as ever, and that's if anyone can believe or trust any of the data coming out of that country. A cooling property market, a less than robust service sector, official joblessness rates that are less reliable than a politician's election promises and rising government spending versus falling private sector investment all hand over this market. And those are the things someone might know about.The unknowns are anyone's guess.

The bulls will tell you after a long trending sideways market, new highs bode well for further upside.
We like a real bull market as well as the next guy. And when the next real one comes around, we hope to make some decent profits. Meanwhile, this is a trading vehicle. sell some covered calls and buy some cheap puts on further upside.

Overnight

China was really the big news overnight as its economy grew 6.7% on-year in the April-June quarter. Economists had predicted 6.6% growth, so the minor higher blip was welcomed by many and no doubt will be twisted by others into positive spin. Reuters reported: Retail sales for June in China were up 10.6 percent on-year, industrial output for June grew 6.2 percent on-year, while fixed asset investment for the January-June period was up 9 percent on-year.

The news helped push Asian shares higher Friday with some other help from the U.S. where markets recorded another record close. The Nikkei 225 was up slightly, 0.82%; Australia's ASX 200 rose 0.64%; the South Korean Kospi rallied 0.6%; the Hang Send Index was up 0.29%. In China the Shanghai Composite added 0.18% with the Shenzhen Composite flat at 2,044.86. The broader Topix and the JPX-Nikkei Index 400 each gained 0.9 percent to 1,322.75 and 11,886.93. 


 Currencies captured some attention when the Bank of England voted to hold its interest rate stready for now at 0.5% and not to change its current QE program. The UK pound traded at $1.34126 to the dollar with the dollar trading at 96.13 against a basket of currencies. the Japanese yen weakened against the buck, 105.89, as opposed to its stringer levels last week.

It Matters

 
It takes some awhile to get it. Not a criticism just a statement of fact.

Brian Wesbury of  First Trust Advisers writes in his July 12 Morning Outlook post (second paragraph here) it's time to start ignoring central banks. Though there have been others, mostly lonely wolves, saying the same thing for some time now, Wesbury's suggestion should pique your interest.

If we had a soon-to-be-disappearing C-note for every time we have questioned what the Fed and its global cohorts in financial incompetence have been doing over the past several years, we'd popping some champagne now. But this is a serious matter. And Wesbury captures the essence of it with his blurb.

Some are spinning the July 287,000 jobs report as a "relief" to the Fed, but this only makes sense if somehow the Fed were thinking of cutting rates, but chose to ignore the weaker than expected May jobs data thinking things would get better. In other words, the Fed's indecision and wobbly-knees are creating uncertainty and an environment of fear.

We think it's time to start ignoring central banks. The pretense of global central banks the past several years is that without their decisive action, the crisis of 2008-09 would have turned into a global depression. All it took was a combination of massive quantitative easing, zero percent rates, and now negative interest rates to prop up growth.

This, we think, is nonsense. Quantitative easing just piled banks a mile high with reserves that they didn't lend. And, if QE really did create economic growth, it would have also generated higher inflation and a weaker dollar, but inflation remains low by historical standards and the dollar isn't weak.

The same goes for negative rates. Central banks have always thought lower short-term rates create more stimulus. So, what's to stop them from going the next step and believing that negative rates must be even better! What this theory misses is that negative rates are, in effect, a tax on the financial system, which is supposed to be the conveyor belt for monetary policy. That's why countries adopting negative rates haven't yet generated the economic improvement those rates are supposed to yield. Quit waiting, it's not going to happen. In fact, negative interest rates lead to slower money growth.

But, it's not central banks that create wealth, it's entrepreneurial vigor – new ideas that make consumers' lives better, and engineering improvements that are freeing the US from unstable foreign energy supplies. Government spending and regulation stifle growth, and for the most part that's been getting worse in recent years. But, guess what? In some ways, things are getting better. For example, American oil producers are exporting crude oil for the first time since the 1970s.

The Fed has never written an App. It may use the Cloud, but it didn't build it. Remember this the next time the financial press obsesses about the next move, or lack thereof, by the Fed, the European Central Bank, Bank of England, or Bank of Japan. It hardly matters at all.

We get Wesbury's point about it hardly matters at all. And in one sense he is correct. In another, however, it matters major give the damage these bureaucrats can unleash on the financial future of millions.
advisorperspectives.com/commentaries/20160712-first-trust-advisors-monday-morning-outlook.

Overnight

The Wall Street Journal reported overnight, A week-long rally across Asian stocks hit the brakes Thursday, with investors waiting to see whether the Bank of England’s interest-rate decision would make or break further equity gains.

Japan’s Nikkei Stock Average remained the biggest outperformer in the region, gaining 0.4% to add to its 7.7% ascent this week. Investors’ hopes for fiscal-stimulus policies helped set the benchmark on track to scoring its best weekly performance so far this year.

The Nikkei 225  hit 16,355.30 as the average remained the biggest winner in the region, gaining 0.4% to add to its 7.7% ascent this week.The Japanese yen gained against the dollar, while the British pound weakened. The former is up by 0.4% at 104.28 per dollar, while the latter is down by 0.4% at 1.3192 reversing a trend where the yen weakened against the greenback, while the pound was stronger.

• Dow: 18,372.12 (+0.1%)
• S&P 500: 2,152.43 (+0.0%)
• Nasdaq: 5,005.73  (-0.3%)
• WTI crude oil: $45.15 (-3.5%)
• 10-year Treasury yield: 1.473 (-2.7%) 

Meanwhile, the rest of Asia traded like this: Australia’s S&P/ASX 200 was up 0.2%, Korea’s Kospi was down 0.2% and Hong Kong’s Hang Seng Index edged down 0.1%. China’s Shanghai Composite Index lost 0.3%, and Singapore’s Straits Times Index was off 0.1%. Gold had inched up 0.2 percent at $1,345.46 per ounce by 0109 GMT. It rose about 0.9 percent on Tuesday, closing at $1,342.45, after touching a session-high of $1,345.20.
U.S. gold climbed 0.3 percent at $1,347 an ounce.

Overnight

This chart from WSJ tells the story as the  DJIA pushed to a record Tuesday, surpassing their May 2015 milestone and ending the longest stretch without a record since the period from October 2007 to March 2013. The Dow was up 120.74 points, or 0.7%, to 18347.67 to climb past its previous closing record of 18312.39 set May 19, 2015.

Overseas, the Nikkei hit a one month high Wednesday as investors continue to look for more monetary stimulus from the BoJ. The Nikkei edged 1.0% higher to 16,444.25, highlighting its gain since the election Sunday to 7.5%, with today's rally to a one month high. Tuesday Prime Minister Abe met with form Federal Reserve Chairman Ben "Helicopter" Bernanke amid speculation that they would discuss that topic in an attempt to put an end to the deflation that's been troubling the Japanese economy for longer than most can recall.Further easing would increase liquidity that would be expected to find its way into the equity markets.

Elsewhere, the WSJ reported: Australia’s S&P/ASX 200 was up 0.3%, Korea’s Kospi gained 0.6% and Hong Kong’s Hang Seng Index added 0.4%. China’s Shanghai Composite Index rose 0.4%. The gains follow strong performance on Wall Street overnight, with the Dow Jones Industrial Average closing 0.7% higher to a fresh record high. 

Chinese shares were also up, despite a ruling from an international court against the country’s claims over the South China Sea. Though China rejected the ruling, it struck a conciliatory tone to say that it was open to talks with its neighbors. That, along with investors exiting positions, led to declines in defense-related stocks on Wednesday.

Meanwhile, China’s yuan was trading slightly weaker against the U.S. dollar ahead of data this week, ranging from second-quarter economic and credit growth figures, to June property and industrial-production numbers.

And They Have

This is one of those who's correct and who's wrong scenarios. What it shows is the panic of central  bankers and their taking a short-term outlook for obvious reasons, their credibility is nearly gone. Storming the gates could be just over the horizon.

It reminds of that  old poem from the dying mother."Don't let my boy grow up to be a central banker, the dying mother said. Don't let my boy grow up to be a central banker, I'd rather see him dead." In brief, the status quo elites are on the ropes, not a place they're familiar with or use to being.

After the Abe election victory Japanese investors expect more monetary oomph. The BOE head honcho, Mark Carney, is on record for saying he will provide stock market fuel. Magic Mario Draghi is still on the loose, sort-sellers worst nightmare. In the short run. For the entire article zerohedge.com/news/2016-07-12/mystery-who-pushing-stocks-all-time-highs-has-been-solved.
The long term short -the-market theme is still alive and well, yet one must be alert as to when and how one positions his or her play. These are scared people who fully understand now if this thing unravels and gets really ugly, a lamp post with their name on it might being waiting somewhere. These are tough times and tough times require tough people. Uncertainty is the rule of the day now, a lot more so than when that Berlin Wall crumbled and global bureaucrats got the opportunity of a millennium to screw it up. And the have.


One conundrum stumping investors in recent months has been how, with investors pulling money out of equity funds (at last check for 17 consecutive weeks) at a pace that suggests a full-on flight to safety, as can be seen in the chart below which shows record fund outflows in the first half of the year - the fastest pace of withdrawals for any first half on record...
... are these same markets trading at all time highs?  We now have the answer.

Recall at the end of January when global markets were keeling over, that Citi's Matt King showed that despite aggressive attempts by the ECB and BOJ to inject constant central bank liquidity into the gunfible global markets, it was the EM drain via reserve liquidations, that was causing a shock to the system, as net liquidity was being withdrawn, and in the process stocks were sliding.

financialspuds.blogspot.com/

Your Job

People are always looking for similarities from the past to predict the future. This blurb is from:
http://www.zerohedge.com/news/2016-07-11/good-luck-getting-your-money-out-when-next-crisis-hits. The comparison here is with Bear Sterns crashing and the market making new highs afterwards before the whole thing later unraveled.

After the new high in the market today articles like this are also common: marketwatch.com/story/its-only-a-matter-of-time-before-the-global-melt-up-2016-07-11. Your job, should you choose to accept it, is to figure out which one is correct. that's why it's called a stock market.

Another similarity between 2007 and 2008 has hit.
The first major warning sign of the 2008 meltdown was several Bear Stearns hedge funds that specialized in subprime mortgages imploding.
The UK is now experiencing something very similar.

Three more fund managers have stopped investors from leaving their UK property funds, trapping an additional £5.5bn and bringing to six the funds unable to meet withdrawal requests after the Brexit vote.

More than half of the £25bn of funds committed to commercial property by retail investors is now locked down by managers, who are under pressure to sell buildings to raise cash.

Overnight

This is more a story about Wall Street where the S&P 500 index crossed over into new ground Monday than it is about Asian markets.  Last week the index bumped up against the new high but didn't quite close there. The shift comes as the S&P 500 SPX, +0.34% hit an intraday record of 2,141.30 and closed at a record 2,137.16, surpassing its previous all-time high of 2,130.82 set May 21, 2015.

 Taking their lead apparently from the U.S., Asian markets across the board were up, continuing a bull move that started on Monday with the Nikkei 225 leading the pack, up 2.65%. The index is now up 6.7% in two days, this in anticipation of further stimulus from the Bank of Japan after Prime Minister Abe's election win on Sunday.

Reuters reported: Those gains are being replicated across the region, albeit on a smaller scale.
Like stocks, higher-yielding currencies are all up for the session, mirroring similar moves in commodity markets.
Government bonds yields, despite still remaining near all-time record lows, are also modestly higher.
The world is suddenly good again, just two week's after looking like it was all going to come to an end.
The only question now is what will happen when the expected stimulus splurge arrives, presuming that it will. A lot is being priced in, suggesting that there's scope for disappointment.
 
Anyway, that's for another day.

• ASX 200 5385.40 , 48.30 , 0.90%
• Nikkei 225 16124.36 , 415.54 , 2.65%
• Shanghai Composite 3010.55 , 15.63 , 0.52%
• Hang Seng 21025.34 , 144.84 , 0.69%
• KOSPI 1988.86 , 0.32 , 0.02%
• Straits Times 2890.66 , 14.52 , 0.50%
• S&P 500 Futures 2131.50 , 1.25 , 0.06%

Here's what action overnight looked like in other markets, again according to Reuters.
Currencies

• USD/JPY 102.98 , 0.19 , 0.18%
• USD/CNY 6.6997 , -0.0053 , -0.08%
• AUD/USD 0.7590 , 0.0061 , 0.81%
• NZD/USD 0.7266 , 0.0048 , 0.67%
• AUD/JPY 78.16 , 0.77 , 0.99%
• EUR/USD 1.1086 , 0.0030 , 0.27%
• GBP/USD 1.3085 , 0.0092 , 0.71%
• USD INDEX 96.336 , -0.2350 , -0.24%

Commodities

• Gold $1,355.20 , $0.35 , 0.03%
• Silver $20.38 , $0.12 , 0.57%
• WTI Futures $44.97 , $0.21 , 0.47%
• Copper Futures ¥37,080 , ¥260 0.71%
• Iron Ore Futures ¥443.50 , ¥16.00 , 3.74%

10-Year Bond Yields

• Australia 1.958%
• New Zealand 2.320%
• Japan -0.260%
• Germany -0.159%
• UK 0.761%
• US 1.437%

Britain Will Survive

Most have heard those words to the song about "Don't cry for me, Argentina." Well, the tears coming from the crybabies who can't get themselves to accept the Brexit results make those Argentina tears look like a mere cloudburst.

In today's WSJ Simon Nixon writes: " Britain's exit from the European Union promises to be one of the most complex divorce negotiations in history: Untangling this 43-year relationship will require painful decisions that touch upon almost every aspect of national life."

As for the record setting history and complexity of the divorce, it's obvious Mr. Nixon didn't go through ours. There are plenty of longer standing relationships than 43-year ones that bridge this gap. One needs to remind Mr. Nixon that Brits are quite adept at minding the gap.

He goes on to talk about the types of debates taking place in the UK and the continent over the process and timing since, a popular crybaby stall, nobody has a credible (There's hedge term, if you've ever heard one!) exit plan, the government should hold off invoking Article 50 for two years. Maybe by then, crybabies like Mr. Nixon hope, these rubes who voted to leave will have discovered the error of their ways.

Here's a guy who has the nerve to mention complexity and the EU in the same breath. The EU, my man, coined the original term complexity. You can wager your last beloved sterling it wouldn't take Margaret Thatcher long to make that decision. Even before the vote was announced many EU bureaucrats were quoted that if Brexit passed," leave means now." There's no two year holding period to that. Jean-Claude Juncker, the pathetic EU Commission President, seconded that motion in more ways than one.

Mr. Nixon than bewails the possibility that discussions might become acrimonious. Really. The idea that unless the UK strikes some trade deal with the EU, the island will pull an economic Houdini and disappear from the planet is pure scaremongering. There's probably more souls around the globe willing to purchase UK products now than ever for one simple reason: they had the courage to stand up and strike a blow for liberty for damn near everyone who actually cherishes it.

As for concerns about acrimony, wasn't that what stay people and their Brussels cohorts did nearly the entire pre-election time, bringing in all those scaremongering, name-calling heavyweights. The next UK PM, whoever she is, needs to find her mark on the floor, look the EU bureaucrats dead center in the eyes and: tell them: "We are the proud British people. We played your bureaucratic games for 43years. It's over." And then let the chips fall whichever direction they take. Britain will survive. It's extremely doubtful the EU will.

CB Caused Mania

As negative interest rates spread around the globe anyone with even a little common sense should realize this can't end well. Manias hardly ever do.

But if you're looking for people with a bit of that common sense trait, you need to look elsewhere than the confines of central bank edifices. Investor quest for yield is now at mania proportions and only going to get worse as global central bankers in the main continue to pursue what has been and clearly is failed policy.

Last week the yield on 10-year U.S. Treasury notes hit 1.366%, a record close. According to one report, there is currently $13 trillion negative yielding debt floating around the globe and spreading faster than the Zika virus. There was supposedly $11 trillion before UK voters voted to thumb their noses at the EU and as late as mid-2014 none.

Italy, a country hardly known for it economic forthrightness, reportedly has $1.6 trillion negative sovereign debt. A cynic might ask where is the sovereignty in  that? Here's some more sovereignty for you. Fifty year Switzerland bonds, the nation's longest maturity holding, now offer negative yields. We know what's going on in Japan and Germany isn't much different where nearly 80% of government bonds offer negative yields.

Is there anyone left who thought corporate debt was immune to such madness. If so we have a good tax-payer secure job with plush benefits. Just apply at your local branch of the Federal Reserve Bank. What central bankers have done and are doing is a crime against humanity. Let's start at the beginning nearly a decade now ago when the Fed essentially kicked off this economic charade.

To assume that these so-called economic experts didn't realize cutting rates would end up ultimately benefiting the few and hurting the many leaves only one of two possible conclusions: either they are not economic experts and haven't a clue or they knew precisely what they where doing: screwing older people dependent on fixed income and the like or purposely widening the economic gap between the haves and the withouts to bailout their rich banker and Wall Street friends.

It matters little now because these policies are an outrage and can easily be classed as a crime against humanity. And like anyone else they should be held accountable for their actions. We think it comes under the heading more of gross negligence than the latest MSM buzz "excessive carelessness."

Either way, for those enamored with the idea of a global court, let's see how much these closet globalists like the concept.

 cafe4now.blogspot.com

Close The Public Trough

France got away with it for a longtime, bending the EU rules as the organization's second largest economy. It's all part of the big dogs get fed first.

Now Italy, the EU's third largest economy, wants its place at the bailout or bail-in trough. Anyone surprised here. One of the huge phony recovery stories since 2008 was that anything got fixed, that anything changed. It didn't. That's just part of what Brexit is about. Another part is the pubic trough.

Change is afoot on a global scale and it could get pretty ugly, but it's a change, or changes, to be more precise, long overdue. Change never goes down easily. The false MSM meme that debt and money printing don't matter is now coming home to roost. Debt either gets defaulted on or inflated away by wars.

We're now talking trillions here and it will never be repaid. And in case you have not been paying attention, the elites are trying to gear up the rubes for another conflict. Central banks have made a complete mess of things, but what would one expect of  a group of distance academics and bureaucrats huddled around a committee table?

Italy's ongoing attempts to bend Europe's bail-in rules and revert to the "older" bailout protocol continue to run into problems. The latest confirmation came from Eurogroup head Jeroen Dijsselbloem who earlier today said he was not "particularly" worried about Italian banks. More interesting was his insistence that “there have always been and will always be bankers that say ’we need more public money to recapitalize our banks.... and I will resist that very strongly because it is, again and again, hitting on the taxpayer." He then added that "the problems with the banks need to be sorted out in the banks and by banks.”

He sided further with the Merkel camp when he said that he finds the ease in which bankers ask for public funds to sort out problems is “very problematic.”
Dijsselbloem added that “there has to come an end to” bankers asking politicians to solve their problems.
His statement comes just a day after David Folkerts-Landau, the chief economist of Deutsche Bank, called for a €150 billion bailout for European banks, confirming that it is no longer just an "Italian" issue.
Dijsselbloem's further comments showed that he won't be easily swayed absent a market-wide panic and/or a steep slump in the economy

The only problem, Dijsselbloem either by accident or purpose forgot to include politicians need to quite causing these problems and balance their own spending. Close the public trough.

zerohedge.com/news/2016-07-11/eurogroup-head-dashes-italy-bank-bailout-hopes-i-will-resist-taxpayer-bailouts-very-