Japan Data Dump – – -Mostly Dumping All Over Abenomics

en days ago, it was reported that the Bank of Japan for the first time set aside reserves against expected losses should its massive portfolio of JGB’s finally move toward QQE success. The main part of all this ‘stimulus’ has been the accumulation of primarily government bonds at massive premiums. If it were ever to actually work, then the Japanese central bank will have the very good problem of a winning economy causing financial losses as market-determined interest rates rise. To account for that scenario, BoJ last year updated its policy framework so that it could set aside some interest income to offset any such principal losses.
The first accumulation of this reserve was reported as 450 billion for the year ending March 2016. It is a tiny fraction of the 350 trillion in total JGB holdings, but much larger in proportion to the payments the central bank makes to the central government (but it’s not monetization?). In fiscal 2015, the BoJ is believed to have only remitted about 425 billion, much less than the 757 billion paid during the prior fiscal year. Part of that drop was in relation to this new reserve, while BoJ also had to take account the rest of its enormous asset holdings – including those denominated in foreign currencies (like UST’s).
As with any bank’s loss reserves, the intent is to minimize swings in income so that results are far more predictable, in this case payments to the federal government. The implication is that BoJ is more confident in the ultimate success of QQE and NIRP so that it would begin what is really an ‘exit’ strategy.

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ May 31, 2016.

Mood Swings – – The Chicago ISM’s Got Vertigo

The ISM Chicago Business Barometer PMI fell back below 50 again in May, the ninth time in the past sixteen months that the index came out under the supposed dividing line. It is more likely, however, that US businesses especially in manufacturing just don’t know what to make of the past year and a half or so, and have switched more so to being cautious (even more than they already had been throughout this ‘recovery’). With the index average hovering right around 50, that might be the only way to interpret the violent mood swings in manufacturing sentiment in the Midwest.
According to MNI Chief Economist Philip Uglow:
Firms ran down stocks at the fastest pace for more than 6 years in May, and while a rebuilding over the coming months could support output, the underlying message appears to be that businesses are not confident about the outlook for growth.
It is rather amazing that the PMI could suffer such a huge setback and then remain under conditions of such stasis for so long. The Chicago BB started 2015 at 59.4, which the mainstream took as a forward indication that Yellen was right about ‘transitory’ weakness. Unfortunately, the very next month, February 2015, the index dropped precipitously to 45.8. Since then, monthly volatility has been the operative condition in what can only be a war between believing Yellen and the business reality of this economy.

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ May 31, 2016.

Rattle Me This – – So What If The G-7 Fools Are Uncomfortable?

President Obama says that the feckless world leaders who squandered their taxpayers’ money on last week’s G-7 junket to Japan are ‘rattled’ by Donald Trump.
Bully for the Donald!
These clowns need to be rattled – -right to their very bones. And we might as well start with our own snake oil salesman-in-chief.
It seems that Obama can’t stop taking bows for the awesome recovery he claims to have presided over and the 14 million new jobs he claims to have created. Yet that’s as big a whopper as anything that Trump has ever let fly.
In fact, at the February 2008 peak prior to the crisis, the BLS reported 138.5 million nonfarm payroll jobs compared to 143.9 million in April 2016. The net gain is thus only 5.6 million, and it means nearly 9 million or 61% of the 14 million new jobs our President has been crowing about are not ‘new’ at all.
Actually, they were ‘born-again’ jobs, and even then they consist of lower paying and lesser quality jobs than the ones obliterated during the crash and so-called Great Recession.

This post was published at David Stockmans Contra Corner By David Stockman ‘ May 31, 2016.

The Libertarians Did It – – -Nominated Neither Liars Nor Bullies And Wrote A Good Platform, Too

Yes, let’s go ahead and suck it up: That guy, James Weeks II (his eponym must be so proud), who disrupted the Libertarian Party convention by stripping down to a thong while announcing his withdrawal from the chairmanship race, is an embarrassment to his party and the larger movement for which it stands.
Such antics, along with what Brian Doherty has rightly called a candidates debate packed with puerile questions better geared for a late-night college bull session, make it easy for conservatives and liberals to troll the LP and dismiss a serious challenge to the played-out politics of the Democrats and Republicans.
Here’s the latest version of that, via National Review’s Ian Tuttle:
The Libertarian party is a reminder that no one truly grows out of Dungeons and Dragons. Around the Rosen Centre [in Orlando], there are lots of suits-with-sneakers and punk-rock hairstyles and impromptu chants of ‘Taxation is theft!’ Organization-wise, it’s the political equivalent of the cantina scene from Star Wars. Since its founding in 1971, the Libertarian party has been a catchall for political misfits. ‘We’re weirdos,’ says a Georgia delegate who has been in the party since 1972. ‘We’ve always been weirdos.’ No offense, but no kidding. (And in a display of pure, untrammeled, glorious cosmic irony – enough to make me revise my disbelief in Fate – MegaCon, an annual gathering of 80,000 comic book fans, sci-fi cosplayers, fantasy-lovers, and gamers, is taking place over the same 48 hours, and at the very same Orlando hotel.)
Har har har.
And yet…lest we forget, it’s the Republican and Democratic parties that are imploding, with the former group split over a candidate who openly mocks handicapped people, has zero grasp of even the most basic policy issues, and calls for the forcible removal of 12 million (his count) illegal immigrants and their children (even if the kids are actually U. S. citizens).
And before ‘real conservatives’ object that they are #NeverTrump, remember that Trump is saying exactly the same stuff they’ve been calling for over the past 30 years. Here’s the editors of National Review’s ‘Against Trump’ house editorial from late last year, which called Trump soft on immigration!:

This post was published at David Stockmans Contra Corner on May 31, 2016.

Mind The Price-To Sales Ratio – – Now The Highest Ever

By one measure, U. S. stocks are even more expensive than they were during the tech bubble of 2000.
While price-to-earnings ratios, which can be manipulated by financial engineering, aren’t at alarming levels, price-to-sales ratios indicate stocks are well beyond being merely fully priced, as the chart from Ned Davis Research below shows.

This post was published at David Stockmans Contra Corner on May 31, 2016.

Investors Are Fleeing As Attention Returns To Brazil’s Depression

Now that the market’s fascinated dream with the regime of Brazil’s new president Michel Temer is quickly turning into a nightmare, following two immediate resignations of his closest ministers over the ongoing Carwash corruption scandal, including ironically that of the country’s anti-corruption minister, Fabiano Silveira, attention is gradually returning to what is truly the cause of Brazil’s woes: an unprecedented economic depression, although only for the people – certainly not for the political elite.

This post was published at Zero Hedge on 05/31/2016.

The Rapid Spread Of Ad Blockers – – Why The Next Billion Mobil Users My Be Invisible

The use of ad blocking browsers in mobile devices almost doubled in 2015.
New ad blocking technologies can also intercept in-app advertising.
Ad blocking is disrupting the traditional Web advertising model, and investors should be cautious about companies dependent on advertising.
A new report on mobile ad blocking by PageFair suggests that the next billion of mobile users in emerging markets will be mostly invisible to advertisers. PageFair has found that use of ad blocking technology has skyrocketed in emerging markets. This calls into question the long-term growth strategies of companies such as Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) and Facebook (NASDAQ:FB) that are actively seeking the ‘next billion(s)’ of mobile device users in emerging markets.
Where the Action Is
Following the development of extensions for Apple’s (NASDAQ:AAPL) iOS browser, Safari, that enable ad blocking, I wrote some articles about the technology with a focus on iOS and the possible impact to Google. What’s interesting about the PageFair report is that iOS devices don’t seem to be where the real growth is in ad blocking. The report indicates that about 20% of the estimated 1.9 billion mobile device users employ some form of ad blocking tech, but the vast majority are concentrated in emerging markets, where iOS has fairly low usage share.

This post was published at David Stockmans Contra Corner on May 31, 2016.

The Debt Binge This Time – – The Corporate C-Suites Have Borrowed Trillions To Fund Financial Engineering, Not Growth

Consumers were the Achilles’ heel of the U. S. economy in the run-up to the last recession. This time, companies may play that role.
Among the warning signs: rising debt, lagging profits and mounting defaults. While the financial vulnerabilities aren’t likely to lead to another downturn soon, economists say they point to potential potholes down the road for an expansion that’s approaching its seventh birthday.
‘Companies have been adding to their debt and their debt has been growing more rapidly than their profits,’ said John Lonski, chief economist of Moody’s Capital Markets Research Group in New York. ‘That imbalance in the past has usually led to problems’ in the economy as companies cut back on spending and hiring.
Case in point: Last week’s news that so-called core capital goods bookingsfell for the third straight month in April. The seasonally-adjusted total of $62.4 billion for non-defense orders excluding aircraft was the lowest in five years, prompting Neil Dutta of Renaissance Macro Research to label business investment ‘pathetic.’

This post was published at David Stockmans Contra Corner by Bloomberg Business ‘ May 31, 2016.

Washington’s Multi-Trillion Bridge To Nowhere In The Greater Middle East

We have it on highest authority: the recent killing of Taliban leader Mullah Akhtar Muhammad Mansour by a U. S. drone strike in Pakistan marks ‘an important milestone.’ So the president of the United States has declared, with that claim duly echoed and implicitly endorsed by media commentary – the New York Times reporting, for example, that Mansour’s death leaves the Taliban leadership ‘shocked’ and ‘shaken.’
But a question remains: A milestone toward what exactly?
Toward victory? Peace? Reconciliation? At the very least, toward the prospect of the violence abating? Merely posing the question is to imply that U. S. military efforts in Afghanistan and elsewhere in the Islamic world serve some larger purpose.
Yet for years now that has not been the case. The assassination of Mansour instead joins a long list of previous milestones, turning points, and landmarks briefly heralded as significant achievements only to prove much less than advertised.
One imagines that Obama himself understands this perfectly well. Just shy of five years ago, he was urging Americans to ‘take comfort in knowing that the tide of war is receding.’ In Iraq and Afghanistan, the president insisted, ‘the light of a secure peace can be seen in the distance.’
‘These long wars,’ he promised, were finally coming to a ‘responsible end.’ We were, that is, finding a way out of Washington’s dead-end conflicts in the Greater Middle East.

This post was published at David Stockmans Contra Corner on May 31, 2016.

Last Call For The Momos – -Hedge Funds That Choked On Momentum Stocks Just Took Another Bite

Hedge funds are piling into the same shares that zapped their returns at the start of the year.
They just added momentum stocks for a fifth consecutive quarter, according to an Evercore ISI analysis of 13F filings with the Securities and Exchange Commission. Those shares, loosely defined as the ones that went up the fastest in the past 12 months, posted some of their worst losses in seven years at the start of 2016.

This post was published at David Stockmans Contra Corner on May 24, 2016.

Markit’s PMI For Production Drops Below 50.0 For First Time Since 2009

It is easy to make jokes about the BEA’s newfound respect for ‘residual seasonality’ that in the words of CNBC’s chief economist makes each Q1 appear to be a ‘different economy altogether’, but that doesn’t mean there isn’t something to it if in a far different manner than the mainstream would ever contemplate. There clearly is and has been for at least the past two or even three years a confusing set of circumstances that have repeated. Each year starts out very slowly only to seemingly rebound, but with each rebound being far more ‘transitory’ than the actual weakness that preceded it. The result is almost a ratchet effect, where the media and economists over-emphasize each bounce that ‘somehow’ leads only to the next bout of weakness at an even lower condition.
It started in 2014 during the Polar Vortex but really took shape last year after the sudden and dizzying drop in so many economic accounts; especially those related to manufacturing and the distribution of global goods. The Markit Manufacturing PMI ended 2014 on a major downswing, with the index having rebounded from the ‘cold’ winter to start that year before jumping to nearly 58 by mid-year. It started 2015 at about 54 before again rebounding to almost 56 in February and March. Given that Fed Chair Janet Yellen declared all weakness, as oil prices and ‘inflation’, transitory, it was enough for everyone to suddenly see it that way, too; including Markit (from March 24, 2015):

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ May 24, 2016.

Brazil’s New Anti-Corruption Minister Quits After Leak Exposes His Involvement In Corruption Scandal

Our prediction that the cabinet of Brazil’s new president Michel Temer would not last long received its first validation just 10 days after the impeachment of Dilma Rousseff, when a recording was leaked in which Brazil’s new Planning Minister under Temer, Romero Juca, was overheard explaining how the removal of Rousseff would “prevent the wide corruption probe dubbed Carwash from proceeding.” This prompted many to wonder if Rousseff was indeed correct all along claiming a silent, US-sponsored coup had taken place in Brazil, one in which the cost of sweeping the Carwash scandal under the rug was her own scalp.
Incidentally, Juca quit shortly thereafter to preserve the new president’s reputation as corruption-free as possible.
Then earlier today, things for the new, just as corrupt as his predecessor president, Michel Temer got particularly awkward, not to mention painfully ironic, when none other than Brazil’s Transparency and Anti-Corruption Minister, Fabiano Silveira resigned on Monday after leaked recordings suggested he tried to derail a sprawling corruption probe, the latest cabinet casualty impacting interim President Michel Temer’s administration.
No amount of commentary can do justice to the gruesome farce that Brazilian economics is quickly devolving into. That said, it was perfectly predictable. On May 12, the day Rousseff was removed from power, we asked if Temer “can he avoid ouster himself“?

This post was published at Zero Hedge on 05/30/2016.

Memorial Day And The Abolition Of Historical Memory

We might as well get rid of Memorial Day, for all the good it does us. Originally ‘Decoration Day,’ the last Monday in May has been the designated time for us to remember the war dead and honor their sacrifice – while, perhaps, taking in the lessons of the many conflicts that have marked our history as a free nation. In line with the modern trend of universal trivialization, however, the holiday has been paganized to mark the beginning of summer, when we get out the barbecue grill and have the neighbors over for hamburgers and beer. As for contemplating the meaning of the day in the context of our current and recent wars, that is left to those few pundits who pay attention to foreign policy issues, or else to writers of paeans to the ‘Greatest Generation’ – World War II being the only modern war our panegyrists deign to recall, since it is relatively untouched by the ravages of historical revisionism.
Indeed, as far as our wars are concerned, the very concept of historical memory has vanished from the post-9/11 world. It seems the earth was born anew on September 11, 2001, and only ragged remnants of our mystified past – mostly from World War II and the Civil War – survived the purge. In the new version our victories are exaggerated and glorified, while our defeats – e.g. Vietnam, Korea, our nasty little covert wars in Central and South America – are not even mentioned, let alone considered in depth.
The abolition of historical memory is one of the worst aspects of modernity: it is certainly the most depressing. For the modern man, it’s an effort to recall what happened last week, never mind the last century. The news cycle spins madly and ever-faster, and the result is that we are lost in the blur of Now: for all intents and purposes, we are a people without a history, who recall past events – if we remember them at all – as one would summon a vague and confusing dream.

This post was published at David Stockmans Contra Corner by Justin Raimondo ‘ May 30, 2016.

Open Letter to the Guardian

The Guardian headline is supporting government propaganda that 9 out of 10 economists warn of a dire future if Britain exits the EU. For a newspaper who published Snowden, I would expect a lot more integrity on this issue. The Guardian is reporting propaganda on a grand scale. They reported that ‘Some 72% [of economists] said that a vote to leave would most likely have a negative impact on growth for 10-20 years.’
The propaganda implies that economic growth in Britain has benefited from the EU single market since it joined in 1973. Let us expose the lies and corruption propagated by this pool of economists. Using the government’s own statistics from the Office for National Statistics, annual economic growth for Britain peaked BEFORE it joined the EU and has been declining ever since. This forecast that leaving the EU will have a negative impact on British economic growth is clearly a bunch off lies. Annual economic growth for Britain has fallen ever since it joined the EU in 1973. Each rally produced a lower economic growth peak.
This is the end of Britain if it remains in the EU and the media will not tell the truth or expose what is going on all to save the jobs of bureaucrats at the expense of their own families (feel free to forward this article to everyone). The British pound peaked against the dollar in 1864. It has been a bear market long-term. If the pound simply now closes below 14600 for 2016, it will fall to make new historic lows well under par to the dollar seen back in 1985.

This post was published at Armstrong Economics on May 30, 2016.

The Endless Dodge – – -Why Washington Doesn’t Come Clean On The Downing Of MH-17

A newly posted video showing a glimpse of a Buk missile battery rolling down a highway in eastern Ukraine has sparked a flurry of renewed accusations blaming Russia for the July 17, 2014 shoot-down of Malaysia Airlines Flight 17 killing 298 people. But the ‘dash-cam video’ actually adds little to the MH-17 whodunit mystery because it could also support a narrative blaming the Ukrainian military for the disaster.
The fleeting image of the missile battery and its accompanying vehicles, presumably containing an armed escort, seems to have been taken by a car heading west on H-21 highway in the town of Makiivka, as the convoy passed by heading east, according to the private intelligence firm Stratforand the ‘citizen journalism’ Web site, Bellingcat.
However, even assuming that this Buk battery was the one that fired the missile that destroyed MH-17, its location in the video is to the west of both the site where Almaz-Antey, the Russian Buk manufacturer, calculated the missile was fired, around the village of Zaroshchenskoye (then under Ukrainian government control), and the 320-square-kilometer zone where the Dutch Safety Board speculated the fateful rocket originated (covering an area of mixed government and rebel control).
In other words, the question would be where the battery stopped before firing one of its missiles, assuming that this Buk system was the one that fired the missile. (The map below shows the location of Makiivka in red, Almaz-Antey’s suspected launch site in yellow, and the general vicinity of the Dutch Safety Board’s 320-square-kilometer launch zone in green.)

This post was published at David Stockmans Contra Corner on May 29, 2016.

Default Chain Reaction Looms Over China’s $3.6 Trillion WMP Market

The risk of a default chain reaction is looming over the $3.6 trillion market for wealth management products in China.
WMPs, which traditionally funneled money from Chinese individuals into assets from corporate bonds to stocks and derivatives, are now increasingly investing in each other. Such holdings may have swelled to as much as 2.6 trillion yuan ($396 billion) last year, based on estimates from Autonomous Research this month.
The trend has China watchers worried. For starters, it means that bad investments by one WMP could infect others, causing a loss of confidence in products that play an important role in bank funding. It also suggests WMPs are struggling to find enough good assets to meet their return targets. In the event of widespread losses, cross-ownership will create more uncertainty over who’s vulnerable – a key source of panic in 2008 when soured U. S. mortgage securities triggered a global financial crisis.
Those concerns have become more pressing this year after at least 10 Chinese companies defaulted on onshore bonds, the Shanghai Composite Index sank 20 percent and China’s economy showed few signs of recovery from the weakest expansion in a quarter century.
‘There’s abundant liquidity in the financial system, but a scarcity of high-yielding assets to invest in,’ said Harrison Hu, the chief Greater China economist at Royal Bank of Scotland Plc in Singapore. ‘All the risks are accumulating in an overcrowded financial system.’

This post was published at David Stockmans Contra Corner on May 30, 2016.

Clinton Cash coming to a Theater Near You

Clinton Cash is coming to a theater near you. This film is so explosive that there has remained talk that they may try to indict Hillary to allow Joe Biden to save the day. This talk keeps circulating especially since Bernie will not step down. He knows a lot more about the Clintons than he can even say publicly. He too knows this film was shown at the Cannes Film Festival in time for the US elections. The film exposes how the Clintons go from broke when they left the White House in 2001 to amassing in excess of $150 million with $2 billion in donations to their foundation in only a few years. What this film is playing directly into is the overwhelming corruption that has engulfed politics.

This post was published at Armstrong Economics on May 25, 2016.

Losing Ground In Flyover America, Part 3

As we indicated in Part 2, the Fed’s crusade to pump-up inflation toward its 2.00% target by hammering-down interest rates to the so-called zero bound is economically lethal. The former destroys the purchasing power of main street wages while the latter strip mines capital from business and channels it into Wall Street financial engineering and the inflation of stock prices.
In the case of America’s 80 million working age adults (25 or over) with a high school education or less, the Fed’s double whammy has been catastrophic. As we demonstrated yesterday, the employment-to-population ratio for this group has plummeted from 60% prior to the great recession to about 54% today.
In round terms this means that the number of job holders in that pool of the less educated has shrunk from 49.4 million to 43.5 million since early 2007. That’s nearly 6 million workers gone missing or 12% of the total from just nine years ago.
And as we documented yesterday this plunge is not due to aging demographics. The MSM meme that its all about the baby boom hanging up their spikes doesn’t wash; the labor force participation rate of persons over 65 has actually increased sharply in recent years.

This post was published at David Stockmans Contra Corner on May 28, 2016.

Hillary Doesn’t Get It

There is no question that Hillary is playing the ‘woman card.’ Hillary Clinton will join the all-female cast of ‘Ghostbusters,’ playing that women card to the hilt. Hollywood is the Mecca for liberal females and Democrats who worship a dogma before the big white ‘Hollywood’ sign. They are just as terrible as the mainstream media in using their position to try to indoctrinate people without any practical understanding of the economics or the pervasive corruption Hillary represents. In Hollywood, people are disconnected from reality and living a dream, so it is no wonder why Hillary herself lives in a fantasy world. They live in Hollywood land and their unions are notoriously greedy and operate in a real, organized crime fashion.

This post was published at Armstrong Economics on May 28, 2016.

Another Letter From The Bluegrass State

Frankfort, the state capitol of Kentucky is in turmoil. Kentucky Republican Governor Matt Bevin’s explosive charges against the administration of his predecessor Democrat Steve Beshear coming on the same day that federal prosecutors had secured a guilty plea on bribery charges from former Beshear Personnel Cabinet Secretary Timothy Longmeyer, makes one thing very clear – investigations into Kentucky corruption aren’t going to end anytime soon. Most of you can buckle up and enjoy the ride while others better consider lawyering up!
If you needed any more proof, look no further than the public comments made by the FBI Special Agent in charge of cleaning up the Commonwealth, who went so far as to say that that government corruption was ‘tolerated’ and ‘ingrained’ in Kentucky’s political culture.
In light of everything going on, our first communication endeavored to shine a brighter light on a legal case that requires much closer scrutiny – the staggering and legally absurd $870 million judgement (plus 12% annual interest) against Amaya/Poker Stars. The suit was part of the Beshear Administration’s long-run vendetta against online gambling, aka a government money-grab by Frankfort politicians desperate to plug budget holes created by their overspending.
Legally speaking, the handful of people paying close attention to the case know that this outrageous ruling has virtually zero chance of holding up on appeal based on the clearly applicable and definitive ruling from the highly-respected Seventh Circuit Federal Appeals Court. The 7th Circuit recently struck down a substantially similar, if not identical, case in Illinois to the one here in Kentucky.

This post was published at Lew Rockwell on May 28, 2016.