Contributed by Michael Lombardi, MBA for Profit Confidential: The US housing market recovery took it on the chin this week. While most investors were focused on the collapsing stock market, courtesy of the Fed’s announcement that it would "taper" its money-printing program later this year, bond yields rose sharply. And mortgage rates followed.
Keyhole Inc., a venture-capital funded startup, was acquired by Google in 2004. Its product became Google Earth. Its technology filtered into Google Maps and Google Mobile. One of the venture-capital investors? The CIA. It didn’t ruffle any feathers at the time. But now we have NSA leaker Edward Snowden and his media blitz.
Japan’s make-or-break economic policies have been named lovingly after Prime Minister Shinzo Abe – lovingly, because if they fail, he gets to carry an albatross called Abenomics around his neck for the rest of his life. And one of the “three arrows” of Abenomics is already headed that way: goosing the economy through a frontal attack in the Currency War.
Contributed by John Mauldin: The China effect has been fearsome, destroying jobs and shuttering factories around the world. But in China, subsidies have created enormous overcapacity, inefficiencies, a wall of debt, and other challenges.... Here are three eye-opening articles: Innovation Hurdle, China’s Ambitions in Excess, and Steelmakers Struggle to Shut Down Capacity. Plus John's excellent introduction.
Fed Chairman Bernanke and his ilk refuse to see the connection. They’re too busy ogling inflation in the US that is suspiciously low. But China has its eyes riveted on the revolt in Brazil. Like all revolts, it’s about deep-seated issues and inequalities, but the spark that lit it – after inflation had made life too expensive – was an increase in bus fares.
“We’ve intentionally blown the biggest government bond bubble in history,” confessed Andy Haldane, Director of Financial Stability at the Bank of England. The bursting of that bubble was a risk he felt “acutely.” He saw “a disorderly reversion” as the “biggest risk to global financial stability.” Seatbelts are being fastened; the clicks can be heard around the world.
Contributed by Don Quijones: Steppenwolf’s The Pusher, the opening song for the 1969 movie, Easy Rider, was about dealers who “push” tainted drugs on unsuspecting users. The pusher “don’t care if you live or if you die,” it goes. Similarly, Spanish banks pushed investment products called preferentes on unsuspecting clients.
Contributed by Christina Macpherson: According to the nuclear industry, the real hurdle to developing nuclear power isn’t cancer, birth defects, genetic instability, risks of nuclear accidents.... It’s simply overcoming the fear of radiation.
Contributed by Sasha Cekerevac for Investment Contrarians: While the S&P 500 has continued moving higher, with investor sentiment in America cautiously bullish, over the past month there has been a huge increase in volatility; and stock and bond markets in the emerging nations have been hit significantly.
France vetoed the launch of free-trade negotiations between the EU and the US, though France has racked up a big trade surplus with the US and has much to lose. The problem: cultural protectionism. It wants “an explicit exclusion of the audio-visual sector.” A catch phrase for American movies! And a theme that is in the DNA of the French political class.
The Japanese stock market has become a case study of central-bank manipulations, and of what happens eventually as reality cannot be eliminated forever. What you hear is a giant hissing sound. What you get is capital destruction and wealth transfer.
Abenomics has its detractors – in peculiar places – and Prime Minister Shinzo Abe must be experiencing some interesting pillow talk. His wife has attacked one of the major components of his economic policies, the nuclear power industry.
Contributed by Chriss Street: Edward Snowden was one of thousands of contractors with top-secret security clearances and the ability to conduct surveillance against any foe of the US. Or as he so eloquently said: “I, sitting at my desk, certainly had the authorities to wiretap anyone, from you or your accountant, to a federal judge, to even the President.” Hence the ancient question: Who will guard the guardians?
During the hearings before the German Constitutional Court, Finance Minister Schäuble, perhaps unwittingly, put his finger on yet another fatal flaw of the Eurozone: a central bank that could bail out speculators and pile the resulting losses on taxpayers of other countries, no questions asked, whenever it felt like it, without controls – “to save the euro,” as it were.
In theory, Germany’s Constitutional Court could throw a monkey-wrench into the efforts to keep the Eurozone duct-taped together; it could rule against the ECB’s money-printing and bond-buying mechanism, lovingly dubbed OMT, that would create a "brave new Huxley-world of the unlimited debt,” a world where “money is no longer earned but printed.”
Contributed by Lee Adler of The Wall Street Examiner. The Fed’s QE has been great for bubbles. Since the Fed began publishing its open market operations in 2002, we’ve seen correlations of Fed’s System Open Market Account with 3 stock market bubbles, the biggest credit and housing bubbles in history, and the creation of fake bubble jobs in 2005-2007.
Contributed by Chriss Street: Presidents Nixon and Clinton, embroiled in scandals, triangulated in favor of legislation considered vital by their opponents. President Obama, facing a blizzard of scandals, is likely to go down the same path and support conservative legislation that would reform corporate income tax and spur a renaissance in manufacturing.
Contributed by Don Quijones: Just when you thought the concept of universal justice was dead, a courageous Spanish judge, Elpidio José Silva, did what no other judge in the Western world, bar Iceland, dared to do: He refused to grant bail to a former top banker, sending him to prison before facing trial for his alleged role in Spain’s financial crisis.
Junk bonds had a phenomenal run. With each truckload of money that the Fed delivered to the markets, valuations soared and yields plunged. Desperate investors, mauled by the Fed’s zero-interest-rate policy, took on risks no questions asked. But suddenly the feeding frenzy turned into a brutal rout – a harbinger of things to come in other markets.
So, 175,000 jobs were created in May. The gains for March and April were revised down by 12,000. The unemployment rate ticked up to 7.6%, from 7.5%, or as the BLS said in its politically correct manner "was essentially unchanged." With disturbing racial disparities that we’ve become inured to. A showcase of the dreary impact of the Fed's policies on jobs!