Archives for May 2015

Greece Says Creditor Agreement Deal Close, Senior Eurozone Official Says “I Wish it Were True”

Courtesy of Mish.

The curious story of the day is back-to-back reports, minutes apart, by the same news agency, saying different things.

Greece Says has Begun Drawing Up Agreement with Creditors

Here is Reuters headline number one: Greece Says has Begun Drawing Up Agreement with Creditors

Greece and its creditors are starting to draft a technical-level agreement, a government official said on Wednesday, signalling progress in long-running talks to unlock aid for the cash-strapped country.

“At the Brussels Group (of credit negotiators) today procedures to draw up a staff-level agreement are beginning,” the official said, adding that Prime Minister Alexis Tsipras would be in constant touch with other leaders to conclude a deal.

The official said the deal would avoid wage and pension cuts, include reform of value-added taxes and include a lower target for a primary surplus in the first year.

The Greek official also cited differences between the EU and IMF as holding up an overall deal and called on the creditors to do their part to ensure a deal was struck.

“There remains a problem with the differing stance among the institutions. If an agreement by the IMF was not needed, the deal would have closed by now,” the official said.

Eurozone Officials Dismiss Greek Comments

Here is Reuters headline number two (actually 8 minutes before the above): Euro Zone Officials Dismiss Greek Comments on Deal Being Drafted.

Greece’s European creditors cannot confirm a statement by Athens that it is starting the process of drafting a technical-level agreement with creditors to secure aid, an EU official told Reuters on Wednesday.

“I wish it were true,” a senior euro zone official said.

Loop of Lies?

It’s vaguely possible no one is lying here, but that’s only possible if the senior eurozone official does not know what is going on.

Another curious aspect is the Greek official blaming the IMF, when actually it is the IMF and not the eurozone creditors that have admitted Greek debt needs another haircut. …

Continue Here

Today’s News

Courtesy of Phil’s Stock World

Financial Markets and Economy

Regional Fed Manufacturing Surveys for May and the ISM Index (Calculated Risk)

Earlier today the last two regional Fed surveys for May were released. As expected, the Dallas Fed was especially weak due primarily to weakness in the oil sector.

Fed Manufacturing Surveys and ISM PMI

FischerFischer: Fed Rate Hikes May Trigger Global Volatility (Fox Business)

When the Federal Reserve raises U.S. interest rates for the first time in nearly a decade, it should weigh the effects on global economies and can expect some bouts of financial market volatility, a top Fed official said on Tuesday.

“In the normalizing of its policy, just as when loosening policy, the Federal Reserve will take account of how its actions affect the global economy,” U.S. Federal Reserve Vice Chairman Stanley Fischer said in Israel. “The actual raising of policy rates could trigger further bouts of volatility, but my best estimate is that the normalization of our policy should prove manageable for the emerging market economies.”

Thoughts: The Fed is constrained in just how far they raise rates, so yes they will, but it won’t be a massive increase. The world will not fall apart due to that and the increase in interest will not be enough to pull money away from income-producing investments (like dividend paying stocks) anytime soon. 

MBA: Mortgage Refinance Applications Decrease in Latest Weekly Survey, Purchase Index up 14% YoY (Calculated Risk)

Mortgage applications decreased 1.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 22, 2015. …

Mortgage Refinance Index

This grid battery startup is raising funds to ramp up in a competitive market (Forbes)

Meet a young startup with a huge utility deal and a lot of promise.

Tesla is only the most well-known company that’s usinglow-cost batteries and software to potentially change how the power grid operates. There are a half dozen others, and one of those is a startup called Advanced Microgrid Solutions that hopes to raise $18.8 million to compete in the space, according to a filing.

Even Wall Street’s China bulls are worried (Business Insider)

China is slowing down.

The pace of that slowdown, however, has been up for some debate. But it’s looking increasingly like the more bearish side is winning.


MORGAN STANLEY: Russia’s consumer crisis today is ‘much harsher’ than it was during the global financial crisis (Business Insider)

Russia’s tumultuous political adventures and structural economic problems have claimed their victim: the average Russian consumer.

russian consumer

Venezuela’s Currency Just Collapsed 30% on the Black Market (Bloomberg)

The stunning collapse of Venezuela’s bolivar in black market trading this month — it fell to as low as 423 bolivars per dollar from 279 at the start of the month — has left Venezuelans scratching their heads,  with many wondering why it has sunk below the value of gold and hard currency the central bank has to back it.

How Uber Is Actually Killing the Value of a New York City Taxi Medallion (The Street)

Since New York City taxi-meter revenue peaked in May 2013 at $599 per day per medallion, according to the New York Taxi and Limousine Commission, the average taxi-medallion owner has experienced a sharp drop in pre-tax income after debt service — more precipitous than anyone has yet admitted.

The culprit? Primarily Uber, the hot on-demand car-service start-up that has been valued in excess of $40 billion — a number that keeps on rising, even as valuations fall for medallions, the license needed to operate a cab in New York. Corporate medallions (those sold in pairs for use as part of a taxi fleet) were last auctioned in April 2014 and sold for $2.6 million per pair, or $1.3 million each. In March 2015, there were transfers of medallions for as little as $1.8 million for a pair, or $900,000 each.

Fears over yuan’s inclusion in IMF currency basket are overblown (Market Watch)

The debate over whether the Chinese yuan should be added to the International Monetary Fund’s special drawing right is a tempest in a teapot, according to Capital Economics.

It’s unlikely that the yuan will be added to the exclusive basket of reserve assets this year, the economists said. But even when the yuan, also known as the renminbi, is finally added — as Christine Lagarde, the managing director of the IMF, has said she expects it to be — its inclusion will have little significance, except to Chinese policy makers, who will likely see it as a symbolic victory.

Bill Gross: “My ‘Short Of A Lifetime’ Bund Trade Was Well Timed But Not Necessarily Well Executed” (Zero Hedge)

While the bulk of Bill Gross’ latest monthly investment outlook deals with the vagaries of the bubbly art market summarized by the following chart which “oddly” mimics the move of global capital markets (and thus central bank balance sheets)…

Stocks and Trading

Time Warner Cable Investors Should Thank the Federal Government (Maybe) (Fool)

Are you a long-term Time Warner Cable (NYSE: TWC ) shareholder? It may be a little premature, but eventually, you may want to write a letter of thanks to the Federal Communications Commission. Because it appears the FCC — and its chairman, Tom Wheeler — may have unintentionally added as much value to your investment as Time Warner Cable’s CEO Rob Marcus.

Michael Kors Continues to Fall Out of Favor (24/7 Wall St)

Michael Kors Holdings Ltd. (NYSE: KORS) reported its fiscal fourth-quarter earnings Wednesday before the markets opened. The company had $0.90 in earnings per share (EPS) on $1.08 billion in revenue, versus Thomson Reuters consensus estimates of $0.91 in EPS on $1.08 billion in revenue. In the same quarter of the previous year, Michael Kors posted EPS of $0.78 and $917.45 million in revenue.

It’s official: Chinese stocks have surged over 100% (CNN)

Chinese markets just keep powering ahead.

The Shenzhen Composite rallied 3.6% on Tuesday, pushing gains so far this year over 100%, and easily making it the world’s top performing stock market.

Stocks in Shanghai and Hong Kong have also surged year to date, climbing 20% and 52% respectively. That makes the S&P 500’s 3.3% gain this year seem pretty ho-hum.

Will Hormel Be Taken Seriously in Organic Meat With Applegate Buyout (24/7 Wall St)

It is no secret by now that more consumers want to eat more and more organic or naturally raised foods. The fight against antibiotics, hormones and use of GMO franken-feed for animals has become one of the most easily recognized megatrends in America.


Republicans’ 2016 math problem, explained in two charts (Washington Post)

It’s easy to overthink elections. I do it all the time. But at its most basic level, demographics tend to be political destiny. And that’s why Dan Balz’s column over the weekend, which details the difficult demographic realities facing the Republican Party in 2016 (and beyond), is so important.


For years, scientists have been attempting to turn fantasy into reality by working on a system known as Champ, or Counter-electronics High-powered microwave Advanced Missile ProjectThe silent missile that can destroy enemy electronics with microwave PULSES: Air Force confirms terrifying new weapon (Daily Mail)

From Ocean’s Eleven to Star Trek, weapons that wipe out enemy electronics are a staple of science fiction films.

For years, scientists have been attempting to create such a weapon as part of Champ, or the Counter-electronics High-powered microwave Advanced Missile Project.

Self-parking Volvo ploughs into journalists after owner neglects to pay for extra feature that stops cars crashing into people (Independent)

A video showing a car attempting to park but actually plowing into journalists might have resulted from the Volvo’s owner not paying an extra fee to have the car avoid pedestrians.

New technology could power battery-free electric cars within five years (Science Alert)

Australian scientists have developed graphene-based supercapacitors that are so light they can be used to create electric vehicles that are powered by their own body parts, instead of batteries.

Electric cars are often touted as the future of sustainable transport, but they’re held back by the fact that they require really heavy, slow-releasing batteries to power them – even the top-end Lithium-ion batteries on the market charge extremely slowly and weigh a lot.


Health and Life Sciences

Summertime, and Risk Grows for Kidney Stones (Wall Street Journal)

Summer is a big season for kidney stones.

Doctors say more people suffer the condition when the weather is hot and dry and people become dehydrated. That can encourage minerals in the body to crystallize in the kidneys. When the so-called stones move to other parts of the urinary tract they can cause severe pain depending on their size.

Seeing the actionResearchers develop a novel device to image the minute forces and actions involved in cell membrane hemifusion (Phys)

Cells are biological wonders. Throughout billions of years of existence on Earth, these tiny units of life have evolved to collaborate at the smallest levels in promoting, preserving and protecting the organism they comprise. Among these functions is the transport of lipids and other biomacromolecules between cells via membrane adhesion and fusion—processes that occur in many biological functions, including waste transport, egg fertilization and digestion.

Life on the Home Planet

An Indian man takes bath under the tap of a water tanker on a hot day in Ahmadabad, India, Thursday, May 21, 2015. Extreme Heat Wave In India Is Killing People And Melting Roads (Think Progress)

A blistering heat wave in India has killed more than 1,100 people in the country in less than one week.

Eight hundred and fifty two people have died in a heat wave in Andhra Pradesh in southeastern India, while 266 have died in the adjacent state of Telangana, CNN reports. In northeastern West Bengal and Orissa, at least 24 people have died. Most of the deaths, according to officials, have been among construction workers, the elderly, and the homeless — people who are typically most exposed to high heat and who don’t have access to air conditioning.

velellaBillions of Blue Jellyfish Setting Sail for Beaches (Live Science)

Expect another bountiful crop of blue jellies this year along West Coast beaches.

Billions of “by-the-wind sailors,” also called Velella velella, could wash ashore in coming months because of favorable water temperatures and onshore winds, scientists say. People have already spotted thousands of the baseball-size creatures at beaches from Washington to Southern California. A gargantuan number of the stunning sea sailors were also blown onto western beaches in 2014.

Dementor wasp‘Soul-sucking dementor wasp’ among new species already at risk says WWF (BBC)

A “soul-sucking wasp” is among 139 species recently discovered in south-east Asia.

Named Ampulex dementor, it steals its prey’s “free will”, paralysing it with a sting before eating it alive.

But according to animal charity WWF the wasp and many of the other new species are already under threat.

Snapchat CEO Warns “Easy Money Policy” Has Created The Tech Bubble, “Matter Of Time Til It Bursts”

Courtesy of ZeroHedge. View original post here.

A month ago 24-year-old Snapchat CEO Evan Spiegel gave global sheeple investors a glimpse at the reality in Silicon Valley's and how the second tech bubble will burst (via his comments from 2013). Overnight he stepped up the rhetoric, as ReCode reportsitself in the midst of a stock-only buyout by VoxSpiegel warns we are currently living through a tech bubble and that it’s a matter of when, not if, the tech bubble will burst. "People are making riskier investments and… there will be a correction," he warned, placing tha blame squarely on The Fed's shoulders, explaining that the bubble is being fueled by an "easy money policy" and low interest rates – that may not last much longer.

What Spiegel said in December 2013:

Fed has created abnormal market conditions by printing money and keeping interest rates low. Investors are looking for growth anywhere they can find it and tech companies are good targets – at these values, however, all tech stocks are expensive – even looking at 5+ years of revenue growth down the road. This means that most value-driven investors have left the market and the remaining 5-10%+ increase in market value will be driven by momentum investors.

At some point there won't be any momentum investors left buying at higher prices, and the market begins to tumble. May be 10-20% correction or something more significant, especially in tech stocks.

More importantly, Spiegel brings up an absolutely critical point for the second tech bubble fueled by social-media stocks: there simply is not enough ad spending dollars in existence to support the gargantuan market caps.

Total internet advertising spend cannot justify outsized valuations of social media products that derive revenue from advertising. Feed-based advertising units will plummet in value (in the case of Twitter, advertising spend may not move beyond experimental dollars) similar to earlier devaluing of Internet display advertising.

And now,

Evan Spiegel isn’t afraid to say that we are currently living through a tech bubble, even if he and his Los Angeles-based company are taking advantage of it. The CEO of the popular messaging service said on Tuesday that it’s a matter of when, not if, the tech bubble will burst.

“I think that people are making riskier investments and … there will be a correction,” he said on the first night of the Code Conference in an interview with Kara Swisher and Walt Mossberg.

“[I]t’s definitely something we factor into our plans,” he added.

The full interview is enlightening – it appears 'they' know it's just a matter of time…


Bad News For China: Bernanke Says It’s Okay

Courtesy of John Rubino.

Former Fed chairman Ben Bernanke will be remembered by future generations as the guy who didn’t see a housing bubble while he was creating it.

That is, unless he says something even dumber, like this:

Bernanke: No risk of hard landing in China

(CNBC) – Former Federal Reserve Chairman Ben Bernanke said that China’s economic slowdown should not worry markets as there was no risk of a hard landing, and emphasized that a move to raise U.S. rates should be viewed as a positive sign for the world’s largest economy.

Bernanke also said the economic slowdown in China is necessary as it needs to change its growth model to be more sustainable in the long term.

“China was growing 10 percent a year. And it was doing that through heavy capital investment, steel plants and so on. Very export oriented,” he said.

“As the country gets more rich and sophisticated that kind of growth is no longer successful.”

He added he was “optimistic” China’s economy would not experience a hard landing.

Annual economic growth in the world’s second-biggest economy slowed to a six-year low of 7 percent in the first quarter, prompting a range of stimulus measures from Beijing.

That these bland assertions are unencumbered by any actual data might be because the numbers are terrifying. Just yesterday Zero Hedge posted a long, must-read analysis of exactly how much debt China’s infrastructure/export capacity build-out required. Here’s one representative chart:

China bank assets

What this means is that the Chinese economic miracle of the past decade has been driven by a huge increase in borrowing, much of which went to projects — including entire “ghost cities” — that aren’t now generating much in the way of cash flow. In the absence of even more debt those projects will default, leading to…who knows what. China has never been through a major credit crisis so it’s not clear how its mostly brand-new and untested institutions will manage.

So to say “there’s no chance of a hard landing” implies an understanding of a situation that can’t be understood, since it has no historical precedent. In other words, it’s even dumber than dismissing the obviously-raging housing bubble in 2005, and therefore even more likely to be wrong.

Visit John’s Dollar Collapse blog here

Robo-Journalism Will Produce 1 Billion Web Stories in 2015 (This Isn’t One of Them); McJournalism Coming Up

I'm supplementing Mish's article on journalists being replaced by robots with an incomplete Pro/Con list:


1. Greater number of articles in circulation. 

2. Decreased variability in quality. Automatically generated articles will be basically well-written. Higher numbers of computer-generated articles will dilute out poorly written, human-generated articles. 

3. Increased competition. The market for original, investigative jouralists will firm up as the market for mediocre journalists shrinks. (But can people tell anymore? There is so much free content available now that I wonder whether the market for good writing will really survive.) 


1. Greater number of articles in circulation saying the same thing. 

2. Decreased variability in quality. Automatically generated articles will be basically unoriginal. Higher numbers of computer-generated articles will dilute out more original human-generated articles. 

3. Increased competition. The market for human journalists will shrink.  

Picture source and further recommended reading: AP's 'robot journalists' are writing their own stories now 

Robo-Journalism Will Produce 1 Billion Web Stories in 2015 (This Isn't One of Them); McJournalism Coming Up

Courtesy of Mish.

Replaced by a Robot

I sometimes get asked what I am going to do when I am replaced by a robot. On other occasions, I get emails from people hoping I get replaced by a robot.

Those in the second group typically accuse me of not knowing what it is like to not have a job.

Actually, I do know what it is like to be without a job for an extended period because I was jobless for several years between 2001 and 2004.

I started this blog hoping someone would hire me as writer. The Motley Fool had an opening for a writer and turned me down for the position.

With the exception of the bit about the Fool position that I wanted and needed, I have written about this before on several occasions, most recently on January 30, 2015, in Financial Blogger Profile of "Mish" on Equities.Com.

McJournalism Coming Up

With that journalism backdrop, please consider You’ll be Sorry When the Robot Journalists Take Over by Irish Times writer Jennifer O’Connell.

If you consume much of your daily news diet online, you’re probably already acquainted with the work of “robot journalists”, you just don’t know it yet.

AP relies on a content generation package called Wordsmith to produce some of its quarterly-earnings business stories and will soon be using it for sports coverage too. You’ve never heard of Wordsmith but you’re probably familiar with its work: it produced 300 million stories last year and is aiming for one billion this year. A rival company, Narrative Science, provides content to Forbes, Fortune and others.

“We sort of flip the traditional content creation model on its head,” Robbie Allen, creator of Wordsmith told the New York Times. “Instead of one story with a million page views, we’ll have a million stories with one page view each.”

The cheerleaders for this new technology – who includes some journalists (New York magazine declared that “the stories that today’s robots can write are, frankly, the kinds of stories that humans hate writing anyway”) – claim that it will free journalists up to do more meaningful pieces, while algorithms churn out rewrites of press releases, mine longer texts for insights, or produce entirely personalised packages of content tailored for individuals….

That’s nonsense. As always, “freeing people up” invariably means “liberating them of their jobs”. But leaving aside the prospect of fewer people in employment, the notion that algorithms may end up taking over even the quotidian aspects of content production is depressing, and not just for journalists.

This isn’t just another whine from a journalist on the state of this troubled industry. Well, maybe it is. Journalists in every organisation are already under pressure to produce more for less. I was recently offered a freelance job writing content for a US-based website. Each piece would have taken most of a day and some travel to research, and a couple of hours to write. The pay was $50 per piece, expenses included.

As a news consumer, you may not care whether the copy you read was produced by a robot in 0.01 of a second, or by a human in half a day (for $50), if it tells you what you need to know. You may not care that the humans in my industry are being replaced by robots – although yours could be next. But in the end, it’s you, the reader, who will suffer. Algorithms may be good at crunching numbers and putting them in some kind of context, but journalists are good at noticing things no one else has. They’re good at asking annoying questions. They’re nosy and persistent and willing to challenge authority to dig out a story. They’re good at provoking irritation, devastation, laughter or controversy.

Wildly efficient robot journalists may offer hope to an industry beset by falling advertising rates and disappearing readers. The world will have fewer human journalists as a result, which may not be altogether a bad thing. But the question is: does it really need a billion more pieces of McJournalism?

Will Anyone Be Sorry?

Jennifer O’Connell says "You’ll be Sorry When the Robot Journalists Take Over". I wonder how many will even notice.

More importantly, those who would notice are likely not paying much precedence to mainstream media anyway.

Except for Hollywood scandals, murders, and other meaningless but sensational stories, national news needs to be condensed down to 30 second soundbites.

Can most stories be generated by a robot? The sad truth is "probably" for the simple reason most want to be spoon fed garbage.

O’Connell says journalists are "good at asking annoying questions. They’re nosy and persistent and willing to challenge authority to dig out a story. They’re good at provoking irritation, devastation, laughter or controversy."

That's true as well.

So who will survive?

  1. The Robots
  2. The very best at provoking irritation, devastation, laughter, controversy, and asking annoying questions.

Until robots can do number two in a thought-provoking, educational, and random manner that encompasses minority and anti-establishment views, alternative journalism will survive.

Media parrots, however, will be replaced by robots. No one will be sorry because no one will notice.

Mike "Mish" Shedlock

Daily News

Courtesy of Phil’s Stock World

Financial Markets and Economy

The dollar is going crazy right now (Business Insider)

Traders are piling in to the dollar after long weekends in both the US and the UK.

The dollar index rate, which measures the currency against most major peers, is up over 1% today.

US Dollar against Yen rise

Euro Tumbles to One-Month Low Against Dollar (Wall Street Journal)

The euro tumbled to a one-month low against the dollar as doubts over Greece’s ability to repay its debts intensified, while Greek bonds came under renewed pressure.

The common currency fell 0.9% to $1.0885, extending the previous day’s declines as markets fully reopened following the long holiday weekend.

Global Trade Dives Most since the Financial Crisis (Wolf Street)

How great was the global economy in the first quarter?

We know the US economy was crummy. The revised GDP estimate will likely sink into red mire. Hence the heated proposals these days, including at the Fed, to apply “a second round of seasonal adjustment” that would “correct” the first-quarter GDP estimate, no matter how bad, into positive territory. An elegant way of covering up an unsightly sore.


China's yuan currency is IMF: China’s yuan currency is ‘no longer undervalued’ (Business Insider)

China’s yuan currency, which Washington has long alleged was manipulated, is “no longer undervalued”, the International Monetary Fund said Tuesday.

“Our assessment now is that the substantial real effective appreciation over the past year has brought the exchange rate to a level that is no longer undervalued,” the IMF said in a statement after a consultation mission to China.

South Africa’s Power OutagesSouth Africa GDP Growth Slows to 1.3% as Manufacturing Slumps (Bloomberg)

South Africa’s economy, the continent’s second-largest, grew at a slower pace in the first quarter as power outages curbed manufacturing output and farming output contracted.

Gross domestic product rose an annualized 1.3 percent from the previous quarter, when it expanded 4.1 percent, the statistics office said in a report released in Cape Town on Tuesday. The median estimate of 19 economists in a Bloomberg survey was 1.5 percent.

Stocks and Trading

Stocks: 4 things to know before the open (CNN)

Get ready for an exciting day!

premarket stocks trading

Chinese Stocks Are Now Up Over 100% Year-To-Date (Zero Hedge)

Another day, another dip to be bought aggressively in China. The only catalyst for moar – aside from “well it was up yesterday” – is the news that the Shanghai-HK Stock Exchange aggregate quota will be abolished, leaving room for more speculative excess to flood into 500%-gainers.  CSI-300 is now up almost 6% since Friday’s close and Shenzhen and CHINEXT are soaring back from underperformance yesterday. To round things out on a superlative note, the Shenzhen Composite – which contains all the ponzi-based self-collateralized idiot-makers, is now up over 100% year-to-date. Simply put, you can’t keep a bad market down..

Opinion: Selling stocks in May can keep your cash cool this summer (Market Watch)

The month of May has been pretty merry for investors, with the S&P 500 up more than 2%.

So maybe the old adage to “sell in May and go away” is a bad idea, after all.

Well, not really. Wary as I am of geeks bearing statistics, I thought I’d check out the actual raw data of how selling in May performed in previous years. So I hunted out monthly return data for the S&P 500 SPX, -0.22%   going back to 1950, and took a close look.


<p>Democratic presidential candidate Hillary Clinton tours the Smuttynose Brewery May 22, 2015 in Hampton, New Hampshire.</p>Will Hillary Clinton Run Against Her Husband’s Welfare Legacy? (Bloomberg)

Almost 20 years ago, when Bill Clinton made good on his campaign promise to “end welfare as we know it,’’ some of his oldest friends were beside themselves. The plan, as originally conceived, had been to pump significantly more money into programs designed to move poor single mothers off of assistance and into jobs, which couldn’t be done on the cheap. Yes, Clinton had proposed a strict time limit on benefits, but he had also pledged to “make work pay.” As it turned out, only one of those two things happened.

IMG_Amanda-Houser-Cuomo-_3_1_BO9GF73N.jpg_20141226.jpgMedical marijuana in N.Y. remains out of reach (USA Today)

The 10-year-old girl stood smiling at the governor’s side as he signed a medical marijuana bill into law last July.

Amanda Houser was so excited for the event, her mother said, her health problems — a rare form of epilepsy — were nearly forgotten for the day. And the photo from the New York City event of Amanda bashfully holding her cheeks next to Gov. Andrew Cuomo is one of the more memorable images from his time in office.


Galaxy S6 edge Iron Man Limited Edition samsungSamsung is launching a gimmicky ‘Iron Man’ phone (Business Insider)

You can’t get your hands on the ultra-thin, futuristic Samsung phone Tony Stark uses in “Avengers: Age of Ultron” — because it doesn’t exist. But you will soon be able to buy a special Iron Man handset.

As part of a broader tie-in with Marvel’s summer blockbuster, Endgadget reports, the South Korean electronics company is releasing a special edition Iron-Man themed version of its flagship smartphone, the Galaxy S6 Edge.

Health and Life Sciences

E-cigarette vapor, even when nicotine-free, found to damage lung cells (ScienceDaily)

With the use of e-cigarettes on the rise, especially among young people, research to uncover the health effects of e-cigs is becoming increasingly important. In a new study, researchers find that e-cig solution and vapors—even those that are nicotine-free—damage lung health.

Allergenic pollen mixClimate change could bring misery for hay fever sufferers (The Guardian)

Climate change could help a notorious invasive weed known to trigger severe allergy attacks gain a foothold in the UK, experts have warned.

Ragweed, or Ambrosia artemisiifolia, is native to North America but has been spreading rapidly across warmer parts of Europe since the 1960s. It is still rare in the UK, but by 2050 could be scattering pollen throughout much of England, inflicting new levels of hay fever misery, research suggests.

Cross-section of a human cortical spheroid showing the specific arrangement of radial glial processes, orthogonal to the lumen of a ventricular-like zone. Radial glia are labeled with an anti-GFAP antibody (red); nuclei labeled with DAPI (blue).‘Brain Balls’ Grown From Skin Cells Spark With Electricity? (Wired)

SCIENTISTS SHOULDN’T BE allowed to name their own creations. Today, researchers at Stanford announced a new way of creating gobbets of human brain cells that look and act like real, living grey matter. The researchers took this striking result and named their product “human cortical spheroids,” or hCSs. Which is terrible. C’mon guys, tell it like it is: You’re makingbrain balls.

A woman walks with a bag of fast food beverage containers in New York May 31, 2012. REUTERS/Brendan McDermidFight over hot new cholesterol drugs may be won in milligrams (Reuters)

Two powerful and innovative cholesterol drugs likely to be approved this summer both target the same protein and have been shown to sharply lower LDL in high-risk patients.  But there is at least one significant difference between the two offerings: the dosages in which they will be sold.

Assuming approval from the U.S. Food and Drug Administration, Amgen Inc. will offer its drug, Repatha, as a biweekly 140 mg injection or a monthly injection of 420 mg, while Praluent, from Regeneron Pharmaceuticals Inc and Sanofi, will be offered in biweekly injections of 75 mg or 150 mg.

Life on the Home Planet

California Farmers Have Agreed to Water Cuts. What Exactly Does That Mean? (Mother Jones)

As California endures its fourth year of grueling drought, officials are getting more serious about mandatory water cuts. Gov. Jerry Brown imposed the state’s first-ever water restrictions last month, ordering cities and towns to cut water by 25 percent. But the vast majority of water in California goes not to homes and businesses but to farms, which so far have suffered minimal cuts.

The Drifting World (New Yorker)

Plankton are the sea stuff that we do not eat and cannot see. They are, by definition, not swimmers but drifters; any creature that cannot propel itself against the current is a plankter (that’s the singular). Their tiny cosmos contains multitudes—an estimated million and a half species, including plants and animals, bacteria and viruses, fish larvae and microalgae, predators, parasites, and prey.

Writing in 1951, in “The Log from the Sea of Cortez,” John Steinbeck proposed that “the disappearance of plankton, although the components are microscopic, would probably in a short time eliminate every living thing in the sea and change the whole of man’s life.” This is quite possibly an understatement. Plankton are at the center of the marine food web, produce at least half of the oxygen in Earth’s atmosphere, and absorb enough carbon dioxide each year to counteract half of humankind’s fossil-fuel emissions. Altogether, they make up ninety-eight per cent of the oceans’ biomass, more than every whale, shark, herring, starfish, and lobster combined. Still, until very recently, our knowledge of the planktic realm remained limited.

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$500 Million LA Home – Built on Spec

Courtesy of Mish.

To highlight the enormous and growing income inequality issue, please consider California Dreaming: Record $500 Million Tag on L.A. Home.

Nile Niami, a film producer and speculative residential developer, is pouring concrete in L.A.’s Bel Air neighborhood for a compound with a 74,000-square-foot (6,900-square-meter) main residence and three smaller homes, according to city records. The project, which will take at least 20 more months to complete, will exceed 100,000 square feet, including a 5,000-square-foot master bedroom, a 30-car garage and a “Monaco-style casino,” Niami said.

“The house will have almost every amenity available in the world,” he wrote in an e-mail. “The asking price will be $500 million.”

The priciest home ever sold was a $221 million London penthouse purchased in 2011, according to Christie’s. The most expensive properties on the market include a $425 million estate in France’s Cote d’Azur, a $400 million penthouse in Monaco and a $365 million London manor.

Whether Niami can get more than double the previous record for his mansion remains to be seen.

Under Construction

Nile Niami House at 944 Airole Way stands in Bel Air, California, U.S., on Monday, May 18, 2015.
Photographer: David Paul Morris/Bloomberg

Questions of the Day

  1. What is the estimated profit on this monstrosity?
  2. What are the construction carrying costs if this thing goes unsold?
  3. What about insurance?
  4. Who wants to lay $500 million to live in LA?
  5. How many people in the world can afford a half-billion dollar home?
  6. Does anyone who can afford such a home, want one?
  7. Could a single California mudslide wipe the entire property off the map?

I don’t have any answers, I am just asking.

Mike “Mish” Shedlock

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Yesterday’s Tomorrowland


Yesterday’s Tomorrowland

Courtesy of James Kunstler

America takes pause on a big holiday weekend requiring little in the way of real devotions beyond the barbeque deck with two profoundly stupid movie entertainments that epitomize our estrangement from the troubles of the present day.

First there’s Mad Max: Fury Road, which depicts the collapse of civilization as a monster car rally. They managed to get it exactly wrong. The present is the monster car show. Houston. Los Angeles. New Jersey, Beijing, Mumbai, etc. In the future, there will be no cars, gasoline-powered, electric, driverless, or otherwise. Mad Max: Fury Road is actually a perverse exercise in nostalgia, as if we’re going to miss being a nation of savages in the driver’s seat, acting out an endless and pointless competition for our little place on the highway.

The other holiday blockbuster is Disney’s Tomorrowland, another exercise in nostalgia for the present, where the idealized human life is a matrix of phone apps, robots, and holograms. Of course, anybody who had been to Disneyland back in the day remembers the old Tomorrowland installation, which eventually had to be dismantled because its vision of the future had become such a joke — starting with the idea that the human project’s most pressing task was space travel. Now, at this late date, the monster Disney corporation — a truly evil empire — sees that more money can be winkled out of the sore-beset public by persuading them that techno-utopia is at hand, if only we click our heels hard enough.

Another theme running through both films is the idea that girls can be what boys used to be, that it’s “their turn” to be masters-of-the-universe, that men are past their sell-by date and only exist to defile and humiliate females. That this message is really only a mendacious effort to rake in more money by enlarging the teen “audience share” for the reigning wishful fantasy du jour is surely lost on the culture commentators, who are so busy these days celebrating the triumph and wonder of transgender life.

The reviewers are weighing these two movies on the popular pessimism / optimism scale. These are the only choices for the masses: whether to be a “doomer” or a “wisher.” Both positions are cartoon world-views that don’t provide much guidance for continuing the project of civilization, in case anyone is actually interested in that. It’s either rampaging id or the illusion of supernatural control, take your pick. I find both stances revolting.

Anyway, it’s interesting that the real Fury Road of the rightnow runs from Syria into Iraq starring ISIS. There is a growing sentiment in the news media (including the web, of course) of a sickening déjà vu with these developments. The old familiar talk of air strikes and ground troops infects the wifi transmissions. Maybe we should think about sending Charlize Theron over there with a few vestigial male sidekicks to load her assault rifle. How else to git’er done? Nobody knows.

Memorial Day is a dreary moment to have to face this onrushing calamity of rocket-propelled medievalism rampant — all those poor American soldiers blown up and mangled the past twelve years.  It’s also interesting that the news media is totally out-of-touch with the biggest prize on the great gameboard: Saudi Arabia. You think ISIS overrunning Iraq is bad news? Wait until the ordnance starts flying around Riyadh. Notice, too, that there’s no news coming out of Yemen on the base of the Arabian peninsula, a failed state with a population nearly equal to its neighbor. If we have any idea what’s going on there — and surely the Pentagon and NSA do — then it’s not for popular consumption.

This is ironic because if the trouble happens to spread into Saudi Arabia — and I don’t see how it will not — then we’ll find out in a New York minute how America’s future is not about monster trucks, cars, dirt bikes, holograms, phone apps, and all the other ridiculous preoccupations of the moment.

[Note: JHK’s 2014 Garden Report is finally up.]

PIMCO and Stocks: The Slow Motion Train Wreck


PIMCO and Stocks: The Slow Motion Train Wreck

Courtesy of Wade of Investing Cafe


I believe it was Bill Clinton who said, “If you don’t toot your horn, it usually stays untooted.” Good advice, but keeping his horn concealed may have helped his political and personal career in a few instances too.

In sticking with the horn metaphor, I will toot my own horn as it relates to my skepticism about bond behemoth PIMCO’s long failed attempt to enter the equity fund market. Since 2009, watching PIMCO’s efforts of gaining credibility in stock investing has been like observing a slow motion train wreck.

Although, PIMCO may continue its flailing struggles in its so-called equity offerings, the proverbial nail in the coffin was announced last week when PIMCO’s chief investment officer of global equities, Virginie Maisonneuve, left the bond giant after only a year. This departure adds to the list of high profile departures, including Bill Gross, Mohamed El-Erian, Paul McCulley, Neel Kashkari, and others.

The Wall Street Journal states PIMCO only has $3 billion (0.2%) of the firms $1.6 trillion of assets remaining in actively traded stock funds. PIMCO claims to have more assets in equity funds managed by Research Affiliates but good luck finding any stocks in these portfolios – for example, Morningstar lists 0 Stock Holdings and 698 Bond Holdings in its PIMCO RAE Fundamental Plus EMG Stock Fund. And please explain to me how this is a stock fund?

Regardless, any way you look at it PIMCO continues to flounder in its stock fund efforts. If you would like to read more about my victory lap, please reference my previous February 2013 PIMCO article, Beware: El-Erian & Gross Selling Buicks…Not Chevys.

Here is a partial excerpt:

PIMCO Smoke & Mirrors: Stock Funds with NO Stocks

Just when I thought I had seen it all, I came across PIMCO’s Equity-Related funds. Never in my career have I seen “equity” mutual funds that invest solely in “bonds.” Well, apparently PIMCO has somehow creatively figured out how to create stock funds without investing in stocks. I guess that is one strategy for a bond-centric company of getting into the equity fund market? This is either ingenious or bordering on the line of criminal. I fall into the latter camp. How the SEC allows the world’s largest bond company to deceivingly market billions in bond-filled stock funds to individual investors is beyond me. After innocent people got fleeced by unscrupulous mortgage brokers and greedy lenders, in this Dodd-Frank day and age, I can’t help but wonder how PIMCO is able to solicit a StockPlus Fund that has 0% invested in common stocks. You can judge for yourself by reviewing their equity-related funds on their website (see also chart below):

PIMCO Equity-Related Funds with NoEquity

PIMCO Equity-Related Funds with No Equity

PIMCO Active Equity Funds Struggle

With more than 99% of PIMCO’s $2 trillion in assets under management locked into bonds, company executives have made a half-hearted effort of getting into the equity markets, even though they’ve enjoyed high-fiving each other during the three-decade-long bond bull market (see Downhill Marathon Machine). In hopes of diversifying their bond-heavy revenue stream, in 2009 they hired the head of the high-profile $700 billion, government TARP program (Neil Kashkari). Subsequently, PIMCO opened its first set of actively managed funds in 2010. Regrettably for PIMCO, the sledding has been quite tough. In 2012, all six actively managed equity funds lagged their benchmarks. Moreover, just a few weeks ago, Kashkari their rock star hire decided toquit and pursue a return to politics.

Mohamed El-Erian and Bill Gross have never been camera shy or bashful about bashing stocks. PIMCO has virtually all their bond eggs in one basket and their leaderless equity division is struggling. What’s more, like some car salesmen, they have had a creative way of describing the facts. If it’s a Chevy or unbiased advice you’re looking for, I recommend you steer clear from Buick salesmen and PIMCO headquarters.

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper. 

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds (ETFs), but at the time of publishing, SCM had no direct position in PEFAX or any other PIMCO security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.

Regional Manufacturing Comparative Wrap-Up: Empire State, Philly, Kansas City, Richmond, Dallas

Courtesy of Mish.

Two more regional manufacturing reports came out today, from Dallas and Richmond.

The Dallas region was the weakest in six years thanks to oil. For details, please see Dallas Fed Manufacturing Index Collapses: Lowest Production Reading in 6 Years, Orders Contract 7th Month, New Orders 5th Month.


May 05: Empire State
May 15: Philly
May 21: Kansas City
May 26: Richmond
May 26: Dallas


  • Some regions use the term "order backlog" others "unfilled orders"
  • Some regions had a production index component, others not.
  • Richmond discussed prices paid and received on an annualized basis, not an index component that could be directly compared to the others.

Significant Points

  • The Dallas and Kansas City regions were both hammered by collapse in oil prices and oil related services.
  • Order Backlog was negative across the board.
  • Employee Workweek was down in four of five regions.
  • Prices Received was down in three of four regions.

In aggregate, these are weak to very weak reports….

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Dallas Fed Manufacturing Index Collapses: Lowest Production Reading in 6 Years, Orders Contract 7th Month, New Orders 5th Month

Courtesy of Mish.

Dallas Fed Manufacturing Index Plunges Below Any Economist’s Estimate

Fed manufacturing surveys remain weak at best. Today the Dallas Fed Business Activity Index fell to negative 20.8, well below the bottom end of any Bloomberg  Estimate.

Contraction in the energy sector continues to pull the Dallas Fed report into deeply negative ground, to a headline minus 20.8 vs minus 16.0 and minus 17.4 in the prior two months. Production shows a turn for the worse, at minus 13.5 vs April’s minus 4.7, as does employment, at minus 8.2 vs plus 1.8. New orders remain deeply negative, at minus 14.1 vs minus 14.0. Prices paid also fell further though the decline is easing, to minus 1.7 from minus 11.2.

The regional Fed reports all point to another slow month for the manufacturing sector which is struggling with energy contraction, especially evident in this report, as well as weakness in exports.

Dallas Fed Production Index Lowest in 6 Years

Orders Contract 7th Month, New Orders 5th Month

For additional details, let’s dive into the Dallas Fed Texas Manufacturing Outlook Survey.

Texas factory activity declined again in May, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell to -13.5, its lowest reading in six years.

Other measures of current manufacturing activity reflected continued contraction in May. The new orders index held steady at -14.1, and the growth rate of orders index held steady at -15.2, marking the fifth and seventh negative reading in a row for these indexes. The capacity utilization index edged down to -11.6. The shipments index fell nearly 8 points to -13.2, with more than 30 percent of firms noting lower shipment volumes in May than in April.

Perceptions of broader business conditions worsened further this month. The general business activity index fell to -20.8 in May, its lowest reading since June 2009. The company outlook index moved down to -10.5, also hitting a low not seen since summer 2009.

Labor market indicators reflected employment declines and shorter workweeks. The May employment index declined 10 points to -8.2, after rebounding slightly above zero last month. Twelve percent of firms reported net hiring, compared with 21 percent reporting net layoffs. The hours worked index fell from -5 to -11.6….

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Surplus Repression And The Self-Defeating Deep State

Courtesy of Charles Hugh-Smith of OfTwoMinds

If you type Deep State into the custom search window in the right sidebar [on OFM's website], the search results fill 10 pages. I think it is fair to say I have long had a deep interest in the Deep State.
The Deep State is generally assumed to be monolithic: of one mind, so to speak, unified in worldview, strategy and goals.
In my view, this is an over-simplification of a constantly shifting battleground of paradigms and power between a number of factions and alliances within the Deep State. Disagreements are not publicized, of course, but they become apparent years or decades after the conflict was resolved, usually by one faction consolidating the Deep State's group-think around their worldview and strategy.
History suggests that this low-intensity conflict within the ruling Elite is generally a healthy characteristic of leadership in good times. As times grow more troubled, however, the unity of the ruling Elite fractures into irreconcilable political disunity, which becomes a proximate cause of the dissolution of the Empire if it continues.
I recently proposed the idea that Wall Street now poses a strategic threat to national security and thus to the Deep State itself: Who Gets Thrown Under the Bus in the Next Financial Crisis? (March 3, 2014)
Many consider it "impossible" that Wall Street could possibly lose its political grip on the nation's throat, but I suggest that Wall Street has over-reached, and is now teetering at the top of the S-Curve, i.e. it has reached Peak Wall Street.
Consider what the extremes of Wall Street/Federal Reserve predation, parasitism, avarice and power have done to the nation, and then ask if other factions within the Deep State are blind to the destructive consequences.
Frequent contributor B.C. recently submitted two working papers from the Deep State network that suggested rampant financialization was harming the real economy. This is powerful evidence that the corrosive consequences of financialization on the stability of the real economy is filtering into the group-think hive of the Deep State Network:
Why does financial sector growth crowd out real economic growth? (Bank for International Settlements) After studying how financial development affects aggregate productivity growth, we concluded that the level of financial development is good only up to a point, after which it becomes a drag on growth, and that a fast-growing financial sector is detrimental to aggregate productivity growth.
Here is a sketch of The Deep State Network, which includes not only the nodes of centralized power but of the institutions that feed and support the Deep State's decisions and policies. These include Ivy League and federally funded research universities, the Mainstream Media, think-tanks, NGOs (non-governmental organizations) and the spectrum of institutions that influence the public's ability to frame and contextualize events, i.e. the institutions of propaganda.
A recent interview with Deep State scholar Peter Dale Scott made me wonder if the increasingly repressive policies of the visible state are also being recognized as destabilizing and therefore a threat to the entire American Imperial Project.
Scott's key phrase is surplus repression, which I interpret to mean repression that exceeds the practical needs of the Deep State to maintain public order.
We can anticipate the Deep State fracturing over the question of how much repression is enough: those who believe there is no upper limit on the effectiveness of repression, and those who understand that at some point, unlimited policing and financial repression will unleash a social destabilization that will threaten the integrity of the Empire and the Deep State itself. Here is an excerpt from the interview:
Peter Phillips: We’re really happy to have you here. I’ve just finished reading your book, The American Deep State: Wall Street, Big Oil, and the Attack on U.S. Democracy. In your new book you talk about the egalitarian mindset culture of America. We believe in the Constitution, the Bill of Rights, open government, transparency. And then you say also that there’s a dark side, or a deep side inside America that’s repressive, that is looking to be able to detain people without warrants, warrantless wire tapping and all of that – there’s a repressive side. Can you tell us a little bit more about how you frame this understanding of this culture of repression?
Peter Dale Scott: Actually, I think there’s always been a deep state in America and there have been times when it has been very repressive. We’re in a period of, you might say, surplus repression – repression that doesn’t serve anyone’s interests, not even the interests of the ruling class. (emphasis by CHS)
But it’s not in its essence repressive; it’s just repressive when it wants to be. I think a lot of the trouble we’re in now, actually is – and I say this in my book – that in the 1970s the deep state – the bankers, the lawyers, the people in foundations, all kinds of people – were really quite terrified at the forces in America calling for revolution – the African-Americans, but also, equally and perhaps ultimately even more, the anti-war movement because if you had a successful anti-war movement that would mean America would have to get out of the business of war. And that was, I think, an intolerable thought for them.
I think the Deep State was terrified of more than the anti-war movement–it was terrified of the counter-culture, which threatened the entire status quo of mindless consumerism and obedience to authority.
The Counterculture, which included the culmination of the Civil Rights Movement and the birth/expansion of the feminist movement, Eastern spirituality in the U.S., back-to-the-land self-sufficiency, rock music as a cultural force, the nonviolent anti-war movement, the anti-nuclear movement, experimentation with communal living and drugs, Futurist concepts, and a widespread expansion of freedom of self-expression and experimentation. Many observers believe this era also launched a Fourth Awakening as evangelical denominations expanded and "Jesus freaks" found religious inspiration outside mainline churches.
The book What the Dormouse Said: How the 60s Counterculture Shaped the Personal Computer makes a strong case that this era set the stage for the ultimate technological medium of experimentation and self-expression, the personal computer, which then led irresistibly to the World Wide Web (all the foundational technologies of the Internet were in place by 1969– The first permanent ARPANET link was established on November 21, 1969, between UCLA and Stanford Research Institute.)
Which changed the world, of course. Those darn hippies!
The nation is wallowing self-piteously in a fetid trough of denial and adolescent rage/magical thinking now that the nation's bogus, debt-based "prosperity" has crashed and cannot be restored, though the visible state (Federal Reserve and elected officials) keep trying to glue Humpty Dumpty back back together again.
The Deep State has been busy powering up the immense machinery of full spectrum repression to contain the inevitable disarray that will follow the collapse of the nation's bogus, debt-based "prosperity."
Our best hope for a productive outcome is that the cadre of those inside the Deep State Network who grasp the self-defeating nature of repression will gain influence over their repression-obsessed peers.
[Deep State picture source here.]

New Home Sales Bounce From Dismal April Numbers

Courtesy of Mish.

New Home Sales Rebound

Last month, new home sales fell a very steep 11.4 percent to a 481,000 annual rate. Given the volatile nature of this series one might have expected a bounce in May and sure enough we got one, albeit not enough to wipe out April's dismal performance.

May new home sales came in at an annualized rate of 517,000 units, stronger than the Bloomberg Consensus Estimate of 509,000 but pretty much in the middle of the consensus range of 485,000 to 540,000.

New home sales bounced back solidly in April, up 6.8 percent to a 517,000 annual rate that is on the high side of Econoday expectations. Strength is centered in the South which is the largest and important housing region and where sales rose 5.8 percent, this however fails to reverse the region's 11.8 percent drop in the prior month.

Supply rose slightly in the month, to 205,000 new homes on the market, but supply relative to sales fell to 4.8 months from 5.1 month. Low supply should encourage builders to bring more homes on the market but at the same time low supply hurts current sales. Price readings are mostly favorable led by a 4.1 percent rise in the median price to $297,300 for a strong 8.3 percent year-on-year gain.

Readings in this report are always volatile month-to-month but the gains for April underscore the recent surge in housing starts & permits and help offset last week's disappointing weakness in existing home sales. The housing sector is still trying to get off the ground but indications, taken together, are improving.

New Home Sales

The above chart should help put the rebound of new home sales into proper perspective.

Mike "Mish" Shedlock


Daily Happenings

Courtesy of Phil’s Stock World

Financial Markets and Economy

Iraq About to Flood Oil Market in New Front of OPEC Price War (Bloomberg)

Iraq is taking OPEC’s strategy to defend its share of the global oil market to a new level.

The nation plans to boost crude exports by about 26 percent to a record 3.75 million barrels a day next month, according to shipping programs, signaling an escalation of OPEC strategy to undercut U.S. shale drillers in the current market rout. The additional Iraqi oil is equal to about 800,000 barrels a day, or more than comes from OPEC member Qatar. The rest of the Organization of Petroleum Exporting Countries is expected to rubber stamp its policy to maintain output levels at a meeting on June 5.

America will die old and broke: The systematic right-wing plot to ransack the middle-class nest egg (Salon)

Through a quirk in state term limits combined with a terrible midterm election, the Nevada legislature has been taken over by amateurs and extremists. The legislature is now debating whether to dismantle the Nevada public employee pension system (PERS), a system that has gotten consistently high marks for transparency, responsibility and stewardship.

This attack on retirement benefits follows a very familiar pattern of fabricating data to destroy retirements that work and that people really like. It’s the same nonsense and lies used to destroy private pensions two decades ago, but this time it’s being done as part of a partisan wet dream of “limited government.” It’s a strategy as American as fast food and crumbling infrastructure.

An Oil Processing Facility In The Upper NileSouth Sudan Oil Field Becomes Key Battleground as Economy Reels (Bloomberg)

After 17 months of civil war spanning a swathe of South Sudan bigger than Syria, President Salva Kiir’s survival may hinge on the fate of a single oil field.

Paloch in Upper Nile state, the only region still pumping crude in a nation with sub-Saharan Africa’s third-largest reserves, has re-emerged as the rebels’ prime target.

The latest economic forecast for Africa is a downward revision from projections made in 2014 which suggested the region's economy would expand by 5.7 percent this yearAfrica’s economy to strengthen in 2015 despite Ebola, oil price (Business Insider)

Africa’s overall economy should advance in 2015, expanding by 4.5 percent, showing resilience despite weak commodity prices and the devastating Ebola epidemic, an annual report published Monday said.

And future growth could be spurred by the continent’s population doubling to two billion over the next 35 years, repeating in Africa the economic boom seen in Asia’s biggest countries.

Little Evidence Monetary Policy Affects Demand, Says Montier (Value Walk)

James Montier, a member of the asset allocation team at GMO, argues that we’ve become way too obsessed with monetary policy.

James Montier central bank short rates

Inflation Watch: Prices To “The Happiest Place On Earth” Are Up 2900% Since 1971 (Zero Hedge)

Having previously shown that money can buy happiness, it appears, as Bloomberg reports, that the cost of buying that happiness is soaring. With well-managed government-provided statistics on inflation, why would one look elsewhere for clues as to the declining standards of living across much of America… but look we did and with wages stagnant, the 2900% surge in prices to Disneyland since 1971 makes ‘the happeist place on earth’ a place only the wealthy can afford to visit.

Asian shares slip, dollar stands tall (Reuters)

Asian shares fell in early trading on Tuesday, while the dollar held near highs scaled in holiday-thinned trading in the previous session.

European shares marked a weak finish in thin trade on Monday, with many markets in the region closed for holidays. U.S. markets were also closed for Memorial Day.

ShanghaiWhen Predicting China Stocks There’s Only Wrong and Very Wrong (Bloomberg)

Only in China can you predict the world’s biggest stock-market rally and still come out looking like a pessimist.

A year ago, analysts who cover the 50 largest companies trading in Shanghai and Shenzhen said equities were set to rally 28 percent. Turns out they weren’t anywhere near optimistic enough, as monetary easing and a buying frenzy among Chinese retail investors sent shares surging 111 percent through last week.

Stocks and Trading

Risk Aversion: What Does It Mean, and Is It Good or Bad for Investing? (Fool)

If you’re risk-averse, it generally means you don’t like to take risks, or you’re comfortable taking only small risks. When applied to investing behavior, the meaning changes slightly, and it can actually be damaging to your ability to produce the best returns over time.

Let’s take a deeper look at the meaning and the implications. While being risk-averse as an investor isn’t necessarily a bad thing, it’s really about how you manage risk at different stages of your life that’s important.

10 Year Treasury Rate Chart

A Time Warner Cable office is pictured in San Diego, California October 15, 2014.  REUTERS/Mike Blake

Charter Communications nears $55 billion deal for Time Warner Cable (Reuters)

Time Warner Cable Inc is nearing an agreement to be acquired by smaller peer Charter Communications Inc for about $55 billion, combining the second and third largest U.S. cable operators, people familiar with the matter said on Monday.

A deal would create a major rival to Comcast Corp, the biggest operator in the U.S. cable and broadband market, and marks a triumph for Charter, which was rejected by Time Warner Cable just last year.

Oil Trades Near $60 as Mideast Violence Flares Before OPEC Talks (Bloomberg)

Oil traded near $60 a barrel amid rising violence in the Middle East before OPEC meets to discuss its production quota next month.

Futures were little changed in New York. Iraq’s Prime Minister vowed a swift takeover of the city of Ramadi from Islamic State militants, while Saudi Arabia’s King vowed to punish those responsible for a suicide attack on Shiite-Muslim worshipers in his nation. There was no floor session Monday on the Nymex because of the Memorial Day holiday, and transactions will be booked Tuesday for settlement purposes.


Koch brothers’ humiliating secret: Why even their billions can’t save the GOP from self-destruction (Salon)

Faced with the nightmare of up to 20-something GOP presidential candidates in 2016, Fox News last week announced its bid for sanity: It would limit its debate to the top 10 candidates in national polls. Now David Koch tells Larry Kudlow that he and brother Charles are likely to distribute some of the $900 million they’ve socked away for 2016 to “several” contenders, not just one Republican candidate.

Paul Waldman reads this as an attempt to cull the GOP field, and so do I.  The Kochs can spread the wealth, at least among Republicans, because the entire 2016 roster supports their tax-slashing, regulation-gutting, climate-change accelerating policies. Their real interest is having a limited debate among the “grown-ups” of the party and sending a strong candidate off to face the Democratic nominee, most likely Hillary Clinton.

Spain’s Local Election Results Reshape Political Landscape (NY TImes)

Ada Colau, 41, was not even born when Manuela Carmena, 71, joined Spain’s underground Communist party and started her legal career by attacking labor restrictions imposed by Francisco Franco, the Spanish dictator.

But even if separated by a generation, Ms. Colau and Ms. Carmena both found themselves claiming similar left-wing victories by upstart candidates over Spain’s political establishment after Sunday’s regional and municipal elections.

Jeb Bush Says His Brother Was Misled Into War by Faulty Intelligence. That’s Not What Happened. (Mother Jones)

Last week, Jeb Bush stepped in it. It took the all-but-announced Republican presidential candidate several attempts to answer the most obvious question: Knowing what we know now, would you have launched the Iraq War? Yes, I would have, he initially declared, noting he would not dump on his brother for initiating the unpopular war. “So would almost everyone that was confronted with the intelligence they got,” Bush said.

84199284Email dump reveals how Team Clinton deals with ‘pain in the a–‘ reporters (Business Insider)

Emails from former Secretary of State Hillary Clinton’s personal email account that were released by the State Department on Friday contain several interesting glimpses of her team’s interactions with the media.

In two cases, the messages show her top staffers seemingly mocking reporters, dubbing one a “pain in the ass” and accusing another of engaging in behavior that’s not normal “among any type of mammal.”


MasterCard Send Speeds Up Money Transfers With A Little P2P Magic (Tech Crunch)

Created as an effort to follow the Federal Reserve initiative aimed at speeding up the money transfer system, Send allows instant disbursements – imagine payments from insurance companies that land to your bank account nearly instantly – and P2P payments that let consumers “seamlessly send and receive funds from friends and family typically within seconds through providers including issuers, money transfer operators, merchants and more.” That’s finance talk for really fast remittances and money transfer. You can also send money from card to card, even to non-Mastercard cards. If you’ve ever tried to send money you’ll know that this is kind of a big deal.

Health and Life Sciences

6 Simple Ways to Boost Your Metabolism (Time)

Throughout my years counseling clients I’ve seen many achieve fantastic weight loss results, including those who had not had success with other approaches, or thought they couldn’t possibly lose weight due to various circumstances, like being injured and unable to exercise, or being post-menopausal. 

Life on the Home Planet

Partly human yeast show a common ancestor’s lasting legacy (Science Daily)

Despite a billion years of evolution separating humans from the baker’s yeast in their refrigerators, hundreds of genes from an ancestor that the two species have in common live on nearly unchanged in them both, say biologists. The team created thriving strains of genetically engineered yeast using human genes and found that certain groups of genes are surprisingly stable over evolutionary time.

Historic Beer 1843 was developed from a brew that spent more than a hundred and seventy years at the bottom of the Baltic Sea.The Quest to Reproduce the World’s Oldest Shipwreck Beer (New Yorker)

In the summer of 2010, Christian Ekström, a diver from the Åland Islands, an autonomous region of around sixty-five hundred isles off of Finland’s west coast, began searching for a shipwreck in the Baltic Sea, based on a tip he’d received from a fisherman. The Baltic’s temperature is unusually consistent (between about thirty-nine and forty-three degrees Fahrenheit* on its seabed), and it has a salinity level that is less than a fifth that of oceans. Its coastal waters are also treacherously shallow. All of this makes it particularly well suited to sinking ships, and then, once they’ve sunk, to preserving them for centuries.

Coney Island, Brooklyn.On Memorial Day, See New York’s Beaches and Parks From Above (Time)

Memorial Day 2015 is upon us—and, with it, the unofficial start of the summer season. In New York City, thousands of people will crowd the five boroughs’ beaches and pools, putting behind them the long winter months and their freezing temperatures.

For German photographer Tobias Hutzler, Memorial Day is the perfect example of what makes New York so attractive. “I’m fascinated by the energy of this city,” he says. “It’s pure life.”

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JPMorgan Chase Writes Arrogant Letter to Its Swindled Forex Customers

Courtesy of Pam Martens.

Troy Rohrbaugh, Head of Foreign Exchange Trading at JPMorgan Chase, Chairs the New York Fed's Best Practices Group for Foreign Exchange Trading

Troy Rohrbaugh, Head of Foreign Exchange Trading at JPMorgan Chase, Chairs the New York Fed’s Best Practices Group for Foreign Exchange Trading. JPMorgan Chase Just Pleaded Guilty to a Felony for Conspiring to Rig Foreign Exchange Trading.

As the U.S. Department of Labor deliberates giving JPMorgan Chase a waiver to continue business as usual after it pleaded guilty to a felony charge for engaging in a multi-bank conspiracy to rig foreign currency trading, a letter the bank sent to its foreign currency customers should become Exhibit A in the deliberations. The letter effectively tells JPMorgan’s customers, here’s how we’re going to continue to rip your face off.

Two sections of the letter stand out in particular. One section reads:

“As a market maker that manages a portfolio of positions for multiple counterparties’ competing interests, as well as JPMorgan’s own interests, JPMorgan acts as principal and may trade prior to or alongside a counterparty’s transaction to execute transactions for JPMorgan…” (Italic emphasis added.)

Most of the general public believes that proprietary trading (trading for the house) was outlawed by the Volcker Rule under the Dodd-Frank financial reform legislation. Most of the public believes that trading ahead of your client’s order is called front-running and is illegal. On both points, the public is dead wrong. First, the Volcker Rule has yet to be implemented. Its effective date continues to be pushed forward. Secondly, foreign exchange spot trading between big banks and institutions (like the folks who manage your pension money) is an unregulated market left to the non-legally-binding “best practice” agreements by the biggest banks. As we reported on May 14, the Chair of the group drawing up these best practices is Troy Rohrbaugh, the head of Foreign Exchange trading at JPMorgan Chase since 2005 – including the periods for which the bank has been charged with felony conduct.

Making this best practice committee even more specious is that it is sponsored by the Federal Reserve Bank of New York, part of the Federal Reserve which just fined JPMorgan Chase $342 million for lacking “adequate Firm-wide governance, risk management, compliance and audit policies and procedures to ensure that the Firm’s Covered FX [foreign exchange trading] Activities conducted at the FX Subsidiaries complied with safe and sound banking practices, applicable U.S. laws and regulations, including policies and procedures to prevent potential violations of the U.S. commodities, antitrust and criminal fraud laws, and applicable internal policies…”

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Daily News

Courtesy of Phil’s Stock World

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Financial Markets and Economy

There’s no denying the effect that fees have on investments. While the difference between a fee of 0.5% and 0.25% looks tiny on paper, apply it to an index fund over a quarter-century or more of investing and let the effects of compounding work on it and you can easily see a worker winding up with tens of thousands of dollars less on account at retirement.

So it’s easy to see how and why the case protects workers and retirement savers.

The potential problems from the ruling are much harder to see, but they’re just beneath the surface now and likely to surface as the effects of the ruling play out.

7 Lies Investors Tell Themselves (Market Watch)

After six years of rising U.S. stock prices, investors are no doubt richer. But they may be thinking a little less clearly.

“In a bull market, there’s a tendency for investors to think they’re brilliant,” says Brad Barber, a finance professor at the University of California, Davis, and an expert in behavioral finance. Indeed, as share prices climb, investors’ confidence grows and they start making all kinds of dubious claims.

Here are seven comments you have probably heard from friends—and that may have escaped your own lips.

Here’s your complete preview of this week’s big economic events (Business Insider)

It’s a short week in America as everyone takes Monday off to celebrate Memorial Day and enjoy some barbecue with their friends and family.

Surely, they’ll also be talking about the economy. But what’ll be the topic of discussion? Signs of wage growthLow gas pricesThe all-time-high stock market?

db bianco corrections sell-offs

Two Ways Successful Private Equity Funds Stand Out Early On (Value Walk)

It’s difficult to analyze private equity fund performance in the first few years of its life cycle because net cash flows are generally still negative – fund managers are in the process of acquiring and bolstering private companies. But a study of more than 300 US buyout funds found that there are two early indicators of whether a fund will ultimately land in the top or bottom quartile of PE fund performance: early distributions and a shallow J-curve.

PE cumulative distributions private equity

ECB President Mario DraghiCentral Bankers Want Governments to Lend a Hand (Bloomberg)

Three of the world’s top central bankers used the stage of a monetary policy conference to defend their strategies and call on governments to do more to boost growth.

Haruhiko Kuroda, governor of the Bank of Japan, reiterated on Saturday that the effects of monetary easing are working through the economy and price trends are improving. Mario Draghi, president of the European Central Bank, urged governments to step up structural reforms. And Stanley Fischer, vice chairman of the Federal Reserve, defended stimulating the U.S. economy to counter low inflation.

Economic data to carry more heft as earnings dry up (Market Watch)

First-quarter earnings reports are winding down, and most companies appear to have dodged the dreaded year-over-year decline. That should free investors to refocus their concerns on broader economic data in the week ahead.

Federal Reserve Chair Janet YellenU.S. Stocks End 2015’s Slowest Week Near Records on Fed Comments (Bloomberg)

No volume? No volatility? No problem.

U.S. stocks churned higher in the slowest week of trading since New Year’s and the tightest range for equities in six months, as comments from the Federal Reserve boosted speculation interest rates won’t rise too soon or too quickly to snuff out economic growth.

How the American economic story changed in just a few weeks (Business Insider)

All of a sudden, the first quarter was gone.

On April 2, just a few days after the first quarter officially ended — but still about a month before we’d get our first read on economic growth to start the year — the Atlanta Fed’s GDPNow tracker indicated that the economy did not grow at all to start the year.

fredgraph (13)

Hedge Fund Manager Jim ChanosOil Becoming ‘Mundane Return-on-Capital’ Business to Chanos (Bloomberg)

“Having to do things like drill in the Arctic” and “deal with Mr. Putin” are some of the reasons hedge fund manager Jim Chanos said he’s “really negative” on integrated oil companies.

“They’re replacing $20 oil with $80 oil, that’s the problem,” Chanos said in an interview on “Wall Street Week” posted on the TV show’s website Sunday. “What were really high return-on-capital businesses are becoming more mundane return-on-capital businesses.”

Pound Strength Endures as BOE Helps Shift Focus Toward Economy (Bloomberg)

As the pound continued strengthening versus most of its major peers in the aftermath of the U.K. election, the Bank of England has helped shift investors’ focus to economic data.

Stocks and Trading

Screen Shot 2015 05 22 at 5.27.09 PMEverything you need to know about the hottest stock on the market (Business Insider)

Shake Shack’s performance has been stunning.

The casual fast food chain closed up 3.3% at $92.86 per share on Friday. That was the sixth straight day of gains, and the longest such streak since its January 30 public market debut.

China Stocks Surge, Europe/US Purge, & Portuguese Bonds Are Crashing (Zero Hedge)

Between escalating Grexit concerns and Podemos ‘victory’ in Spain, European bond and stock markets shuddered somewhat today. EURUSD continues to close lower – back below 1.1000. All major bourses across Europe are in the red with Greece and Spain worst (ASE -3%) but the most notable shift is a collapse in Poruguese bonds.

Nigerian Stocks Retreat Fifth Day as Fuel Crisis Hits Companies (Bloomberg)

Nigerian stocks retreated for a fifth day, with the declines seen continuing as Africa’s biggest oil producer faces a fuel shortage that’s crippling the economy and causing companies to cut back operations.

Traders work at their screens at the stock exchange in Frankfurt January 23, 2015. REUTERS/Pawel KopczynskiEurope stocks stumble, dollar lifted by U.S rate view (Reuters)

European shares fell in thin trade on Monday while the dollar powered ahead after U.S. Federal Reserve Chair Janet Yellen indicated that the central bank was poised to raise interest rates this year.

Investor concerns about Greece’s debt problems and a poor regional and local election result by Spain’s ruling People’s Party also weighed on the euro and European shares.


Apple’s iOS 9 Could Herald A New Future For Older iPhones And iPads (Tech Crunch)

Apple’s next-generation operating systems, for both mobile devices and PCs, are reportedly going to have a strong focus on zapping bugs and improving stability, reports 9to5Mac. We’d heard this about iOS before, but it appears this will be a smoothing year (but with new features, too). The more interesting news, however, is that Apple is also said to be working on improving iOS support for older devices – including ones that aren’t even necessarily on sale anymore.

Health and Life Sciences

Should placebos be used in randomized controlled trials of surgical interventions? (Science Based Medicine)

Alone of all the regular contributors to this blog, I am a surgeon. Specifically, I’m a surgical oncologist specializing in breast cancer surgery, which makes me one of those hyper-specialized docs that are sometimes mocked as not being “real” doctors. Of course, the road to my current practice and research focus was long and involved quite a few years doing general surgery; so it is not as though I am unfamiliar with a wide variety of surgical procedures. Heck, I’m sure I could do an old-fashioned appendectomy, bowel resection, or cholecystectomy if I had to. Just don’t ask me to use the da Vinci robot or, with the exception of the case of a cholecystectomy, a laparoscope, although, given the popularity of robotic surgery, I sometimes joke that I really, really need to figure out how to do breast surgery with the robot. After all, if plastic surgeons are using it for breast reconstruction, surely the cancer surgeon should get in on the action.

Life on the Home Planet

Holy Shit! Almonds Require a Ton of Bees (Mother Jones)

Growing 80 percent of the globe’s almonds in California doesn’t just require massive amounts of water. It also takes a whole bunch of honeybees for pollination—roughly two hives’ worth for every acre of almonds trees, around 1.7 million hives altogether. That’s at least 80 percent of all available commercial hives in the United States, Gene Brandi, a California beekeeper who serves as vice president of the American Beekeeping Federation, recently told NPR.

Anti-Immigrant Sheriff Wants Public To Help Him Pay To Defend His Racial Profiling Policies (Think Progress)

An anti-immigrant Arizona sheriff is asking the public to help with his legal fees while he waits for a decision on a contempt of court hearing about his department’s systemic racial profiling of suspected undocumented immigrants. In an email to supporters last week, Maricopa County Sheriff Joe Arpaio wrote that he doesn’t have the “personal wealth” to pay for a lawyer and felt “targeted” by pro-immigration reform advocacy groups that are suing him to stop his acts of racial bias against Latinos.

Polish Voters Elect Eurosceptic President; Disenchantment with Brussels Spreads

Courtesy of Mish.

Andrzej Duda outed president Bronis?aw Komorowski, the the pro-Brussels incumbent centrist Civic Platform party president, in an election over the weekend. Komorowski was expected to win.

The Duda Victory Sent Shockwaves Through Polish Politics, and no doubt Brussels as well.

The win for the socially conservative, nationalist, eurosceptic party, which saw Mr Duda oust Bronis?aw Komorowski, the government-backed incumbent from the presidential palace, represents a significant lurch to the right in Polish politics. It has sent shockwaves through the country’s political establishment that could ultimately topple the ruling party in October after eight years in power.

Backed by both the country’s restless, anti-establishment youth and its conservative pensioners, Mr Duda’s election, which was unthinkable just a few months ago, represents a significant and far-reaching rejection of the ruling Civic Platform party.

Mr Duda has called for a repatriation of more powers from Brussels to individual member states, an effort that chimes with British prime minister David Cameron’s attempts to renegotiate the UK’s relationship with Europe ahead of a referendum on its EU membership.

The vote illustrated deep divides in Polish society. Despite headline growth figures since 2008 that are almost twice as large as any other EU member, the fruits of Poland’s economic boom have not been equally shared.

Strikingly, all of the country’s poorer eastern regions backed Mr Duda, while the more prosperous western regions supported Mr Komorowski without exception.

In rural areas, 62 per cent of voters backed Mr Duda, according to an exit poll, while Mr Komorowski carried 59 per cent of votes from the country’s cities.

Poland Vote

Disenchantment with Brussels Spreads

The Polish unemployment rate is a modest 7.8%. Youth unemployment is 20.5% as of March. Both numbers are better than France and far better than Spain.

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Debating Hillary for President: Robert Reich v. Nomi Prins

Courtesy of Pam Martens.

Robert Reich Explains How to Tame Wall Street In New MoveOn Video

Robert Reich Explains How to Tame Wall Street In New MoveOn Video

Robert Reich, former Labor Secretary in Bill Clinton’s administration and currently Professor of Public Policy at the University of California at Berkeley, is an important voice for tackling income inequality in America by bringing back the Glass-Steagall Act, busting up the too-big-to-fail banks, and imposing a securities transaction tax.

In 2013, Reich released a documentary, “Inequality for All,” that demonstrated that there is a finite equilibrium of income distribution at which the U.S. economy can grow and prosper. In 1928 and 2007, the year before each of the greatest financial crashes in our nation’s history, income inequality peaked. When workers are stripped of an adequate share of the nation’s income, they are not able to function as consumers, creating a vicious cycle of layoffs and slow economic growth – the situation the U.S. has been mired in since the Wall Street crash of 2008.

Unfortunately, Reich, an otherwise clear-eyed progressive has a deep blind spot. Her name is Hillary Clinton. In a column posted to his blog last month, Reich had this to say about Hillary:

“In declaring her candidacy for President she said ‘The deck is stacked in favor of those at the top. Everyday Americans need a champion and I want to be that champion.’

“Exactly the right words, but will she deliver?

“Some wonder about the strength of her values and ideals. I don’t. I’ve known her since she was 19 years old, and have no doubt where her heart is. For her entire career she’s been deeply committed to equal opportunity and upward mobility.”

This is more than a dangerous, rickety limb for Reich to be climbing out on when the financial stability of the nation hangs in the balance. During the primary challenge in 2008 between Barack Obama and Hillary, Reich made headlines by endorsing Obama despite his long-term friendship with the Clintons. That decision was at least partly influenced by what Reich called Hillary Rodham Clinton’s (HRC’s) “Odd Economics.” In an April 2008 post on his blog, Reich appeared to intuitively understand that the same men who deregulated Wall Street and mushroomed the derivatives gambling casino under Bill Clinton would be back in power in a Hillary presidency.

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Whatever Happened to Antitrust?


Whatever Happened to Antitrust?

Courtesy of Robert Reich

Last week’s settlement between the Justice Department and five giant banks reveals the appalling weakness of modern antitrust. 

The banks had engaged in the biggest price-fixing conspiracy in modern history. Their self-described “cartel” used an exclusive electronic chat room and coded language to manipulate the $5.3 trillion-a-day currency exchange market. It was a “brazen display of collusion” that went on for years, said Attorney General Loretta Lynch. 

But there will be no trial, no executive will go to jail, the banks can continue to gamble in the same currency markets, and the fines – although large – are a fraction of the banks’ potential gains and will be treated by the banks as costs of doing business.

America used to have antitrust laws that permanently stopped corporations from monopolizing markets, and often broke up the biggest culprits. 

No longer. Now, giant corporations are taking over the economy – and they’re busily weakening antitrust enforcement. 

The result has been higher prices for the many, and higher profits for the few. It’s a hidden upward redistribution from the majority of Americans to corporate executives and wealthy shareholders. 

Wall Street’s five largest banks now account for 44 percent of America’s banking assets – up from about 25 percent before the crash of 2008 and 10 percent in 1990. That means higher fees and interest rates on loans, as well as a greater risk of another “too-big-to-fail” bailout.

But politicians don’t dare bust them up because Wall Street pays part of their campaign expenses. 

Similar upward distributions are occurring elsewhere in the economy. 

Americans spend far more on medications per person than do citizens in any other developed country, even though the typical American takes fewer prescription drugs. A big reason is the power of pharmaceutical companies to keep their patents going way beyond the twenty years they’re supposed to run.

Drug companies pay the makers of generic drugs to delay cheaper versions. Such “pay-for-delay” agreements are illegal in other advanced economies, but antitrust enforcement hasn’t laid a finger on them in America. They cost you and me an estimated $3.5 billion a year.

Or consider health insurance. Decades ago health insurers wangled from Congress an exemption to the antitrust laws that allowed them to fix prices, allocate markets, and collude over the terms of coverage, on the assumption they’d be regulated by state insurance commissioners.

But America’s giant insurers outgrew state regulation. Consolidating into a few large national firms and operating across many different states, they’ve gained considerable economic and political power.  

Why does the United States have the highest broadband prices among advanced nations and the slowest speeds? 

Because more than 80 percent of Americans have no choice but to rely on their local cable company for high capacity wired data connections to the Internet – usually Comcast, AT&T, Verizon, or Time-Warner. And these corporations are among the most politically potent in America (although, thankfully, not powerful enough to grease the merger of Comcast with Time-Warner). 

Have you wondered why your airline ticket prices have remained so high even though the cost of jet fuel has plummeted 40 percent?

Because U.S. airlines have consolidated into a handful of giant carriers that divide up routes and collude on fares. In 2005 the U.S. had nine major airlines. Now we have just four. And all are politically well-connected. 

Why does food cost so much? Because the four largest food companies control 82 percent of beef packing, 85 percent of soybean processing, 63 percent of pork packing, and 53 percent of chicken processing. 

Monsanto alone owns the key genetic traits to more than 90 percent of the soybeans planted by farmers in the United States, and 80 percent of the corn. 

Big Agribusiness wants to keep it this way. 

Google’s search engine is so dominant “google” has become a verb. Three years ago the staff of the Federal Trade Commission recommended suing Google for “conduct [that] has resulted – and will result – in real harm to consumers and to innovation.” 

The commissioners decided against the lawsuit, perhaps because Google is also the biggest lobbyist in Washington.

The list goes on, industry after industry, across the economy.

Antitrust has been ambushed by the giant companies it was designed to contain.

Congress has squeezed the budgets of the antitrust division of the Justice Department and the bureau of competition of the Federal Trade Commission. Politically-powerful interests have squelched major investigations and lawsuits. Right-wing judges have stopped or shrunk the few cases that get through. 

We’re now in a new gilded age of wealth and power similar to the first gilded age when the nation’s antitrust laws were enacted. But unlike then, today’s biggest corporations have enough political clout to neuter antitrust. 

Conservatives rhapsodize about the “free market” and condemn government intrusion. Yet the market is rigged. And unless government unrigs it through bold antitrust action to restore competition, the upward distributions hidden inside the “free market” will become even larger.

Angry Voters Hand Spain’s Ruling Party Heavy Regional Losses; Podemos Scores Upset Victories in Barcelona, Madrid

Courtesy of Mish.

The Spanish economy will supposedly grow at three percent. The bad news is Spanish employment is well over 20 percent and is also expected to stay that way.

Angry voters unhappy with that setup took it out big time on PP, the party of prime minister Mariano Rajoy.

Please consider PP Suffers Heavy Regional Losses.

Spain’s ruling Popular party suffered heavy losses in Sunday’s string of regional and local elections, as two upstart movements made dramatic gains at the expense of the country’s established parties.

The PP still emerged as the biggest party in nine of the 13 regional contests, but its ability to head governments at both the regional and local level was severely curtailed. According to preliminary results, the party of Mariano Rajoy, Spain’s prime minister, failed to obtain an absolute majority even in its historical strongholds — meaning it can govern only with the support of at least one of its rivals.

The PP suffered a particularly marked decline in Madrid. Esperanza Aguirre, its high-profile candidate for mayor, beat a coalition of leftwing groups only by the smallest of margins but has little prospect of forming an administration. A similar leftist alliance also scored an upset triumph in Barcelona, meaning Spain’s two principal cities are now likely to be led by a pair of charismatic, leftwing women from outside the political establishment: Manuela Carmena in Madrid and Ada Colau in Barcelona.

The ruling party’s losses were mostly the gain of two political newcomers, the anti-austerity Podemos movement and the centrist Ciudadanos party. Both were on track to enter regional parliaments in force in several key regions, potentially handing them the role of kingmakers. Podemos was also the leading force behind the two municipal victories in Madrid and Barcelona.

Sunday´s elections took place in 13 of Spain’s 17 regions and in more than 8,100 municipalities, providing a crucial test of the national mood ahead of general elections later this year. The overall picture, based on preliminary results, confirm what polls have been saying for months: frustrated voters are turning away from the established parties in ever greater numbers, converting Spain’s decades-old two-party regime into a much more volatile four-horse race.

Like Syriza in Greece, Podemos had been running on an anti-austerity platform. Podemos went even further, threatening to exit the euro.

Voters simply do not believe in the recovery. Nor should they with youth unemployment near 50% and overall unemployment near 23%.

For discussion of Spanish unemployment, please see Spain’s Unemployment Rate Increases to 23.7%; 114,300 Jobs Vanish in First Quarter, Public Sector Jobs Rise.

Mike “Mish” Shedlock 

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Canaries In The Coal Mine, Part 2: Three Chinese Stocks Lose $40 Billion In One Week

Courtesy of John Rubino.

The Chinese stock market’s spectacular run is turning into a stagger:

Two more Hong Kong stocks collapse after Hanergy crash

(AFP) — Two of Hong Kong’s best-performing stocks plunged more than 40 percent Thursday, a day after a mysterious crash of almost 50 percent in Chinese solar firm Hanergy that saw almost $20 billion wiped off its market value.

Goldin Financial sank 43.34 percent to HK$17.48 and Goldin Properties crashed 40.91 percent to HK$14.36, after soaring more than 300 percent since the start of January, according to Bloomberg News.

The drop slashed the firms’ combined market value by more than $20 billion.
The companies, which have interests ranging from property development in Hong Kong and China to vineyards in California and France are owned by Chinese tycoon Pan Sutong.

The dramatic sell-off came after a 47 percent dive in Beijing-based solar energy firm Hanergy Thin Film Power (HTF).

Trading in the firm was suspended after 24 minutes, but not before $19 billion was struck off the firm’s value. The company said it would make an announcement containing “insider information” in the wake of the suspension, although it has not yet done so. HTF had surged more than sixfold in the past year, making it the world’s largest solar power company by market value, but prompting questions over its valuation and revenue sources.

Even by tech standards, those are big, fast moves. And the bull market in which they occurred is also pretty epic. From London’s Telegraph:

China’s stock market bubble shows no sign of bursting yet

Last week I wrote that the market in German Bunds had become a bit too exciting for some investors. By the orderly standards of fixed income investing, the ups and downs of bond prices may have been a bit frisky. But they pale into insignificance compared to what’s going on in Shanghai and Shenzhen. China is becoming the Wild West of investment.

Since the start of the year, the Shanghai index has risen by 37pc and its sister exchange in Shenzhen is up by 53pc. Over the past year the two markets have risen by 122pc and 96pc respectively. That’s punchy enough, but it fails to tell the whole story. Many individual shares have done much more. Beijing Baofeng Technology, a video company, rose by 44pc on its first day on the Shenzhen market in March and then by the 10pc daily limit each day every day for a month. It is currently worth more than 40 times its IPO price. The flotation was nearly 300 times oversubscribed.

Consider, too, that around half the stocks listed in Shenzhen are valued at more than 50 times their expected earnings and nearly a fifth at more than 100 times. Margin trading, where investors buy shares with borrowed money, has more than quadrupled since last summer to be worth nearly £200bn. At 8pc of total trading volumes, these risky trades have reached a level that not even previous manias in Taiwan and Japan approached. The average valuation multiple on Shenzhen’s index for start-ups, ChiNext, is over 100 despite (or because of) the fact that one in five of the companies listed there is not even covered by any investment analysts.

There’s more. The volume of trading on China’s major exchanges has reached nearly £140bn on several days this year. That’s around four times the value of daily deals on the New York Stock Exchange. In one week recently, a record 3.3m new trading accounts were opened. There are now more than 200m accounts being used by an estimated 100m investors. Worryingly, half of these new investors received no education beyond high school against a quarter of existing account holders. The shoe-shine boys are tipping stocks again.

Why this bubble now? Because of the usual mix of catalysts: Aggressive government borrowing abetted by a central bank that most people expect will shortly join the global currency war, and, as the Telegraph article notes, deregulation that has allowed millions of new players (most with a limited understanding of how share prices normally relate to underlying earnings) to belly up to the buffet.

What happens next is also pretty standard, and it generally begins with a few notable high fliers that never should have been reverting to their true value. We won’t know if these are them until after the fact, but today’s numbers do make the inevitable look imminent.

Visit John’s Dollar Collapse blog here

Greece Will Default on June IMF Repayment Says Interior Minister


Greece Will Default on June IMF Repayment Says Interior Minister; Greek Choice Same As It's Always Been

Courtesy of Mish.

One way or another the crisis in Greece is highly likely to come to a head in June.

Greek finances are in such sorry shape it needs a third bailout or it will be unable to meet payment obligations in August. And unless an agreement in June is reached to unleash more funds, Greece will not make it to August.

Today we learn, Interior minister warns Greece will default on June IMF repayment.

Greece has again threatened to default on loan repayments due to the International Monetary Fund, saying it will be unable to meet pension and wage bills in June and also reimburse €1.6bn owed to the IMF without a bailout deal with creditors.

“The money won’t be given . . . It isn’t there to be given,” Nikos Voutsis, the interior minister, told the Greek television station Mega.

He claimed the EU and IMF were pressuring Greece to make unacceptable concessions in the current bailout talks in return for unlocking €7.2bn of aid frozen since last year.

Predicting when Athens will run out of cash has proven a fraught affair for eurozone officials, who have been bracing for default since March.

Given the repeated warnings from Greek officials that bankruptcy is imminent, some officials have begun to disregard such threats, believing Athens is now using them as a negotiating tactic.

But a senior Greek official with knowledge of the government’s funding position confirmed that Athens would be unable to make the IMF payments, which fall due in four separate instalments of more than €300m each between June 5 and June 19, unless a deal is struck.

“We won’t accept blackmail that says it’s either liquidity with a memorandum [the Greek term for a bailout programme] or bankruptcy”, Mr Voutsis said.

The government has ruled out a domestic default on payment obligations to Greece’s 2.9m pensioners and 600,000 public sector workers, saying they have first claim on the country’s shrinking resources.

People who have spoken to Mr Tsipras say he is in a dour mood and willing to acknowledge the serious risk of an accident in coming weeks….

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Three and a half years since the last 10% correction

If the S&P 500 does not have a 5% correction this year, it will be the first time in 20 years. And it's been 3.6 years since the last 10% correction. And trailing and forward PEs are relatively high. In the low interest rate environment, higher-than-normal stock prices are the new normal, but how much higher? And should we expect a reset with the Fed's plans to ease the interest rate higher?

Three and a half years since the last 10% correction

Courtesy of 

Deutsche Bank is out with a piece of research this weekend mentioning the fact that the S&P 500 has just broken a record high thanks to a median trailing PE ratio of over 18 – the highest we’ve seen since 2010. They note that this PE ratio is 12% above the long-term average going back to 1960. The forward PE of 17.3 times earnings expectations over the coming four quarters is 22% above the historical median. David Bianco attributes this, as almost all of us do, to the incredibly low yields on bonds and their effect on the equity risk premium.

More interestingly, Bianco includes an acknowledgement that it has now been 916 days since the last 10% correction for the index, or 3.6 years (last October’s Ebola /ISIS sell-off was 9-and-change percent intra-day). We’ve not had even a 5% correction so far in 2015 despite a spate of elevated volatility earlier in the year.

Here’s David Bianco and Ju Wang:

We believe the probability of a 5%+ dip is high this summer and our tactical call remains Down given the S&P now at an even higher PE than a year ago, heightened uncertainty in 10yr yields, weak earnings growth and continued soft economic data. We haven’t had a 5%+ dip this year. Historically 5%+ dips are common and happen at least once a year since 1960, except 1964, 1993 & 1995. It has been 916 trading days (3.6 years) since a 10% correction. Selloff triggers could be a further rise in 10yr yields especially if UE keeps falling amidst slow economic growth and Fed remains unclear on first hike timing, or a jump in the dollar upon the Fed expressing firm intentions to hike in Sept.

Screen Shot 2015-05-23 at 10.48.16 AM


S&P hits record high on 18 trailing PE, PE will be sensitive to Treasury yields
Deutsche Bank – May 22nd, 2015

Picture by Geralt at Pixabay.


Psychology more Important than Data in the Week Ahead

Courtesy of Marc to Market

The US dollar's recovery last week may not get the kind of fundamental support that medium and long-term investors would like to see to raise the confidence that the two-month correction has run its course.  

Owing to a greater deterioration of net exports and a smaller than expected inventory build, Q1 GDP is likely to be revised sharply lower.  The 0.2% expansion may turn into a 0.8-1.0% contraction.  Although it is backward looking, especially given that the second quarter is two-thirds when the revision is announced, it does have an important implication.

It means that rather than raise rates in June, as many of us had previously anticipated, the Federal Reserve will have to cut its GDP growth forecast for the entire year.  In March, the Fed's central tendency forecast, which excludes the three highest and three lowest forecasts was 2.3%-2.7%.  It is possible that growth in the first half is flat or barely positive.  This means that even if growth in the second half averages 3%, GDP for the entire year would be about 1.5%.  To reach the current Fed forecast, the economy would have to expand by close to 5% in H2.

The projection for growth in the current quarter could edge higher if the details of the April durable goods orders report on May 26 is firmer.  The headline activity may slip on the back of lower aircraft orders.  Boeing reported its April orders slipped to 37 from 39 in March.  However, orders, excluding defense and aircraft and shipments of the same, which are inputs for capex and GDP forecasts, should both be above Q1 averages.

Separately, the Richmond and Dallas Fed manufacturing surveys, and the Chicago PMI and Milwaukee ISM will also likely boost confidence that the world's largest economy is not recession-bound.  Whereas the Atlanta Fed's GDPNow suggests the US economy is tracking 0.7% growth in Q2, we expect the incoming data to gradually lift this estimate.  The increase in aggregate income (~5% year-over-year) and the increase in savings (~$125 bln in Q1) will likely provide the fuel for stronger consumption going forward.

The economic data is one thing, but how the markets respond to it is a different matter.  For the better part of the past two months, disappointing, though not always weak, US data sparked dollar selling.  At the same time, the dollar was not rewarded for good news.  This was broadly consistent with the dollar's downside correction after recording one of the strongest quarterly performances in many years.   How the markets respond to the new fundamental news may be more revealing that the economic data itself.

The Bank of Canada is the only central bank that meets during the last week of May. There is little doubt that policy will remain on hold.  The economy has generally performed in line with the Bank of Canada's expectations.  Speculators shift to a net long positions in the futures market, for the first time since last September strikes us a premature.  We suspect that this net long position was established at the end of the Canadian dollar's two-month upside correction.  

The economic highlight from the eurozone will be April money supply data.  M3 has been trending up for a year.  It is expected to have accelerated on a 3-month year-over-year basis to 4.5% from 4.1%.  It had bottomed at 1% in April 2014.  More importantly, credit extension is accelerating a well.  This is important because this is the last data point to set the condition for the TLTRO that will be available in the middle of June.  Lending to households had turned positive recently and now lending to business is expected be turn up too.

The unresolved Greek crisis continues to hang over the market.  No doubt it will be a point of discussion at the G7 meeting being held in Dresden on May 27-29.  Just like there has been greater progress since Greek Prime Minister Tsipras reigned in his finance minister, is it really beyond the pale to suspect that if Merkel would reign in her finance minister (who has recently appeared to advocate referendum and a parallel currency for Greece), it would also be helpful?  What Europe has to convince its G7 partners of is that is it not turning a broken state into a failed state.  

The immediate problem is that Greece owes the IMF about 1.6 bln euros spread out over four payments in June.  Recall that the last payment to the IMF was made possible only because the Greek government borrowed from a reserve account held by the IMF itself.  If that reserve account is not repaid in a few weeks, the IMF will begin another set of procedures against Greece.  It is true that Greece has cried wolf many times, saying it would not make a debt payment, but then somehow,  miraculously,  found the means to make the payment.  

Greece was the proverbial canary in the coal mine in 2010 and Syriza is performing a similar function five years later.  The political push back against austerity is not isolated to Athens.  Today's local elections in Spain will offer a test for Podemos, which shares many beliefs of Syriza. Prime Minister Rajoy has staked his political future on the improving macro-economic conditions.  The strategy has not yet yielded positive results.  The local elections will also be a test for the new center-right alternative to Rajoy's PP, the Ciudadanos.

Three non-EMU European countries will report Q1 GDP figures in the week ahead.  The UK is expected to revise up its preliminary estimate of 0.3%.  Industrial output and construction figures for March were stronger than the ONS projected.  Sweden, where the central bank has set a negative repo rate and is engaged in a bond-buying program is likely to have grown just less than 1% after growing a little more than 1% in Q4 14.  Switzerland's growth is expected to have slowed to 0.3% from 0.6%.

Turning to Asia, there is a Japanese economic report every day in next week.  The picture that is likely to emerge from the data is an economy that is picking up after losing some momentum as Q1 wound down.  Retail sales, overall household spending, and industrial production are expected to have improved.  However, if the main thrust of the aggressive monetary easing was to fuel an increase in inflation, it has been considerably less successful.  With last year's sales tax increase dropping out of the base effect, core inflation (which excludes fresh food) is expected to be around 0.2%.  

Lastly, before the weekend Chinese officials confirmed the long anticipated mutual recognition of mutual fund listing between the mainland and Hong Kong (SAR) will begin July 1.  This represents a new era for asset managers.  Previously foreign asset managers accessed Chinese savings by partnering with local mutual fund companies.  The mutual recognition will allow Hong Kong domiciled funds to sell directing into China and allows China-based fund managers to sell their product in Hong Kong.  The initial quota will be CNY600 bln  (~$97 bln) evenly split between the two.  This is seen as enhancing the case to include Chinese "A shares" into the MSCI indices and demonstrating the liberalization that may see the yuan included in the SDR later this year.