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Testy Tuesday – S&P 2,000 & Nikkei 17,000 Yet Again

Bank of Japan Gov. Haruhiko Kuroda speaks to reporters after meeting Prime Minister Shinzo Abe at the prime minister's official residence in Tokyo last month. Unchanged!  

That was the monetary indecision by the Bank of Japan early this morning and the Dow Futures (/YM) are down 130 points from their high (now 17,183) and the S&P Futures (/ES) are down 15 points (1,999) with the Nasdaq (/NQ) down 26 points (4,344), Russell (/TF) 1,070 and the Nikkei (/NKD) is at 16,935.  Essentially, we're still at the same lines we've been looking to short since last week (see yesterday's post for levels), but no clear signal yet

The BOJ stood pat despite the trouble facing Abenomics, Prime Minister, Shinzo Abe’s growth program. Conditions have improved little—some have worsened—since the BOJ decided in late January to impose negative rates, an unorthodox step seen as a desperate attempt to ignite growth – one which has since been followed by the ECB.  BOJ Governor, Haruhiko Kuroda, said during a news conference that the negative rate policy was lowering borrowing costs but the central bank needed more time to measure its effects, particularly on the real economy.

Japan GDPIn its policy statement, the BOJ said Japan’s economy still faces risks from overseas, including the “European debt problem” and “developments in the U.S. economy and the influences of its monetary policy response to them on the global financial markets” which is funny because the US and Europe are worried about the risks coming from Japan's non-stop money-printing, massive debt and stagnant economy.  

Overall, rates in Japan are a bargain compared to Europe at -0.1%, you get to keep 99% of your money if you leave it in Japan for 10 years – in Europe, it can be as low as 95% so start planning your retirement now! 

There's nothing unexpected in this move, or non-move as yesterday we talked about their INCREDIBLE (as in NOT credible) Industrial Production Numbers that only could have meant that the BOJ needed some "good" news to lean on when explaining why they were not lowering rates.  Keep in mind Abe's fate is up for grabs this summer as he faces a no confidence vote so expect him to do ANYTHING to prop up the numbers.

Japan Monetary PolicyOne thing that's already propped up is the money supply in Japan.  We sometimes talk about how crazy it is that the US has doubled the money supply since the Financial crisis but Japan has doubled theirs IN TWO YEARS!  There was a brief moment last fall in which Japan paused the printing press but then the Nikkei fell from 20,000 to 16,000 (-20%) and they turned those machines back on very quickly.

This is where we'd have to admit that an economy ADDICTED to fiscal stimulus and can no longer function without it.  Japan is long dead but nobody wants to pull the plug.  According to Bloomberg: "The failure of the yen or euro to weaken in the wake of Kuroda's sub-zero foray or Draghi's latest salvo has prompted analysts to think that the currency channel, one avenue by which monetary policy affects real economic activity, has been closed."  

"Central banks hold a declining number of less effective policy tools," writes Andrew Sheets, head of cross-asset strategy at Morgan Stanley. "Their latest foray, negative rates, may do more harm than good."  Policy can’t change the course of the underlying economy, it can only nudge it one way or the other," added Sheets. "The lack of additional policy tools is one reason there is more downside to our equity bear cases than in 2013 or 2014."  Morgan Stanley cut its 12-month price target for the S&P 500 to match our target level 2,050 from 2,175.

"We went underweight equities last week because we see the maturing U.S. business cycle limiting earnings and price upside against greater downside risk from an eventual US recession," wrote JPM Chief Market Strategist Jan Loeys. "Part of our equity bearishness is that we share investor concerns about the lack of 'ammo' in central bank arsenals that will be needed to battle adverse shocks."

What also needs to be taken into account is the running cost of negative rates – especially to the banking sector where, so far, qualitative easing is having the opposite effect that was intended as excess reserve deposits to the ECB have gone UP significantly, not down, further draining liquidity from the system despite the "punishment" for holding money there.  More likely than not, it's an indicator that there is simply nothing safe to do with money at the moment – and it's costing banks on the bottom line:

negative rates

There should not be a correlation between QE and excess reserves. Bank of America presents figures showing that the opposite is indeed true. In fact, the bank goes so far as to say that there is a strong directional correlation between the two, and it’s highly likely that more QE will create more excess reserves.  To this end, Bank of America summarizes that QE and negative rates are already creating an income problem for banks and any further move into negative territory, or increase in QE (just as the ECB has now done) will accelerate the challenge faced by banks.

It should not be a surprise that leading economorons have gotten it totally wrong on monetary policy – totally wrong is their default setting. This is why, at, we teach you how to be an independent trader as you shouldn't have to rely on other people to tell you how to do something as important as manage your own money.   Just look at this shocking chart:

How Many Active Managers Outperform Their Benchmarks Infographic

THIS is why "investors" are willing to put their money into negative yield bonds – they still do far better than the average hedge fund and at least you know how much you are going to lose each year.  What's wrong with the Global Economy is there is no such thing as Financial Services – there is only Financial Thievery, where dozens of institutionalized criminal organizations have come up with hundreds of different ways to take your money after you earn it.  

These are the same organizations who are telling you that Government is the problem and the Government is coming for your money – all while charging you 2 & 20 in hedge fund or just taking 1% of your money per year in an ETF – negative rates are not new, they are just being renamed as people have left funds and ETFs for CASH, so now they are going to tax your cash.  That's right, it's a tax – they just don't call it that when a business is taking your money!  


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  1. FU Japan!!!!

  2. FU Bankers!!!

  3. Good Morning!  :)

  4. Good morning! 


    Bernie wants to make America Great Again:

    Why We Need Bernie Sanders! – "We Can Be"

    This video, entitled "We Can Be" completely encapsulates the core principles of Bernie's powerful message of love, hope, acceptance & opportunity through a gorgeous production!Este video titulado, "Podemos ser" encapsula completamente los principios básicos de la potente mensaje de amor, esperanza, aceptación y posibilidad de Bernie a través de una producción magnífica!Este vídeo, intitulado "Nós podemos ser" encapsula completamente os princípios fundamentais da poderosa mensagem de Bernie de amor, esperança, aceitação e oportunidade através de uma produção lindo!Thanks to Keem Ibarra

    Posted by Viva Bernie 2016 on Monday, March 14, 2016



    Donald Trump's Campaign Rally Violence Spreads

    Bernie Sanders gives a message of peace, while fights break out at Donald Trump rallies

    Posted by NowThis Election on Sunday, March 13, 2016

  5. Just catching up with yesterday.  This piece:

    WTF – do they not teach macroeconomics anymore?  "Balance budget" is just excuse to cut.

  6. Phil/AAPL,

    zooming up….upgrades..upgrades…and also the run up to the event. Will it keep going up?


  7. Phil/AAPL,

    oops sorry forgot the mention my position.

    I had 4 AAPL 100 Calls expiring this week. 2 of them I closed out last Friday with a small profit. 2 still remain with avg price $1.76. Better to just get out with this move up. "sell into initial excitement".

    How to handle in the money short expiry position? better to cash out in profit always?


  8. PPI and Retail sales not encouraging but Empire Manufacturing makes a huge turnaround:

    Decline in prices of final demand goods by 0.6% lead to 0.2% decrease in index

    • Feb. Producer Price Index: -0.2% M/M vs. -0.2% consensus, +0.1% previous.
    • Core PPI flat M/M vs. +0.1% consensus, +0.4% prior.

    Retail sales slip in February, January revised significantly lower

    • February Retail Sales-0.1% M/M vs. -0.1% expected, -0.4 prior (revised from +0.2%).
    • Core Retail Sales -0.1% M/M vs. -0.2% expected, -0.4% prior (revised from +0.1%).
    • Retail Sales less autos and gas +0.3% vs. +0.3% expected, -0.1% prior (revised from +0.4%).

    Redbook report shows sales have started to pick up in March

    U.S. consumers keep cautious stance

    • Retail sales fell in February to mark the second month in a row of negative growth.
    • Sales fell in key categories such as auto dealers (discounting?) and general merchandise stores (TGTWMTCOST) in a disturbing trend, while gas station sales plummeted as largely expected due to prices.
    • The building materials/garden equipment category showed strength, up 1.6% M/M and 12% Y/Y, as warmer weather helped traffic for companies such as Home Depot (NYSE:HD) and Lowe's (NYSE:LOW).
    • Tepid traffic at restaurants has been a leading indicator that U.S. consumers aren't spending freely.

    Business conditions stabilizes in March

    • March Empire State Survey+0.62 vs. -10 consensus, -16.64 prior.
    • New Orders +9.57 vs. -11.63
    • Shipments -+13.88 vs. -11.56

    Tuesday's economic calendar

    Treasurys hold gains after retail sales report

    • Core retail sales fell 0.1% in February, beating expectations for a 0.2% decline, but January's core retail sales was revised from a gain of 0.1% to a drop of 0.4%. On balance, we'll call the report a miss.
    • Lower already, the 10-year Treasury yield dipped another couple of basis points to 1.91% following the print. It's since bounced back to 1.94%, off three basis points on the session.
    • In other economic news, the Empire State Survey printed positive for the first time in eight months, and the FOMC begins its two-day meeting today, at which no change in monetary policy is expected.

    Bank of Japan keeps monetary policy steady

    • Waiting to assess the impact of its entry into negative interest rates, the BOJ kept its powder dry following the second day of its March policy meeting, but downgraded its assessment of the economy.
    • Exports and production "have been sluggish due mainly to the effects of the slowdown in emerging economies," while public expectations of future inflation have "recently weakened."
    • The central bank also maintained its pledge to increase base money at an annual pace of ¥80T ($700B) as widely expected, but clarified that money reserve funds would be excluded from the negative rates it introduced at the end of January.
    • Nikkei -0.7% to 17,118.

    Brexit now has a 7 point lead

    • Among those who plan to vote, 52% say they'll vote to leave the EU vs. 45% who say they will vote to stay.
    • Victory now hinges on whichever campaign inspires people to turn out and vote.

    The 'perfect storm' has passed – Jefferies

    • In a note this morning, analysts at Jefferies sound a bullish tone, noting that relative calm has returned to the high-yield debt market and money-flows are normalizing. In their words:
    • "U.S. monetary conditions have loosened as the inflation rate has climbed and real rates have gone negative despite last year's rate hike. China's monetary conditions through the double whammy of a cut in the RRR and increased bank loan growth have further eased monetary conditions in the dollar bloc.
    • "The drop in non-OPEC oil production (primarily led by the U.S.) and tentative verbal agreements amongst some OPEC members appears to have put a bottom in oil prices.
    • "The bottom line is that the 'perfect storm' is passing and that a number of unrelated factors have caused monetary conditions to ease."
    • Contrast Jefferies' view with that of Morgan Stanley, who said yesterday there's a 30% chance of a U.S. recession.

    Oil prices force Saudi Arabia into new austerity drive

    • With its finances strained by low oil prices, Saudi Arabia is opening a fresh austerity drive by ordering ministries to cut their spending on contracts by at least 5%, Reuters reports.
    • The government ran a record budget deficit of nearly $100B last year and has been seeking ways to narrow the gap.
    • It is laying plans to boost non-oil revenues with taxes, but that will take years to have much impact, leaving spending cuts as the main way to bring state finances under control.

    Obama reverses course, will not allow drilling off Atlantic coast

    • The Obama administration reportedly will withdraw plans to allow oil and gas drilling off the Atlantic coast, reversing an initial plan to auction off drilling rights in as many as 104M coastal acres from Virginia to Georgia in 2021.
    • An Interior Department announcement could come as soon as today, according to theNY Times.
    • In January 2015, Obama's original draft plan drew the wrath of environmentalists and many coastal communities but praise from the oil industry and many state lawmakers who saw new drilling as creating jobs and bolstering state revenue.
    • The U.S. estimates there are 3.3B barrels of recoverable oil on the Atlantic’s outer continental shelf and 31.3T cf of natural gas.

    U.S. airlines battle for Cuba routes

    • U.S. airlines have both filed proposals with the Department of Transportation on adding routes to Cuba. In their filings, the carriers are taking plenty of shots at each other on pricing and capabilities.
    • American Airlines (NASDAQ:AAL), Southwest Airlines (NYSE:LUV), Spirit Airlines (NASDAQ:SAVE), and JetBlue (NASDAQ:JBLU) all seek the highly-coveted landing slots at Havana's major airport from different cities in the U.S.
    • The DOT is expected to award the routes this summer.

    Lyft, GM unveil new push to attract drivers

    • Drivers for ride-hailing app Lyft (Private:LYFT) will no longer face the imperative of owning a car under a newly launched rental program with General Motors (NYSE:GM).
    • Express Drive will allow company employees to rent cars for $99 a week, plus $0.20 a mile, with Lyft and GM paying for maintenance and insurance.
    • The project is set to start in Chicago later this month, and will roll out in Washington, D.C., Boston and Baltimore by midway through the year.

    Toshiba to unveil business plan on Friday

    • Toshiba (OTCPK:TOSYY) will reveal its business strategy for next fiscal year on Friday in an announcement expected to include plans to sell its medical equipment unit to Canon (NYSE:CAJ) and boost its finances following a $1.3B accounting scandal.
    • The Japanese industrial conglomerate is also in late-stage talks to sell its white goods business to the Midea Group, in a deal that's expected to fetch tens of billions of yen.

    Whirlpool on watch after giant price target boost from JPMorgan

    • JPMorgan lifts Whirlpool (NYSE:WHR) to an Overweight rating after having the stock set at Neutral.
    • The investment firm issues a price target of $205 on the appliances giant from a prior level of $155. The new PT implies 24% upside potential and is just a shade over Whirlpool's 52-week high of $204.64.
    • With an eye on some of the recent GOP rhetoric, Whirlpool is a company that is seen as benefiting from a sharper focus on trade policies after filing an anti-dumping petition with the Department of Commerce late last year.

    Shake Shack sells its first hamburger in California today

    • Shake Shack's (NYSE:SHAK) first store in California opens today in West Hollywood (photos).
    • The restaurant chain's entry into the Golden State is a bold move with the popular In-N-Out Burger chain well-entrenched in key regions.
    • What to watch: Shake Shack has New York City DNA with its first store popping up in the Madison Square Park area of Manhattan. The success of the first couple of stores in SoCal could tip the company's overall expansion plan across the West Coast.
    • Recent articles on Seeking Alpha covering Shake Shack lean to the bearish side.
    • Related: Shake Shack: An Over-Hyped Story Investors Should Avoid (Mar. 10 2016)
    • Related: Shake Shack Fails To Satisfy Investors (Mar. 10 2016)
    • Related: Shake Shack Is Getting Chewed Up (Mar. 10 2016)

    Heavy drug price increases still plague the U.S.

    • The average price of branded prescription drugs in the U.S. has doubled in the past five years, a finding that threatens to fuel the political backlash against high prices.
    • Express Scripts (NASDAQ:ESRX), the country's largest pharmacy group, said the average wholesale price of branded medicines, which are protected by patents, rose 16% last year and was up a total of 98% since 2011.
    • High drug costs have become a persistent theme in the current U.S. election campaigns, with both the Democratic and Republican frontrunners, Hillary Clinton and Donald Trump, pledging to crack down on elevated prices.

    3D Systems lower on post-earnings JPMorgan downgrade

    • Shares of 3D Systems (NYSE:DDD) are down 4.7% in premarket trading Tuesday after JPMorgan analyst Paul Coster downgraded the 3D printing technologist from Neutral to Underweight, saying that investors seem to be “pricing in unrealistic expectations of a V-shaped recovery.”
    • Despite the downgrade, Coster upped his price target on the stock to $10 (from $9), representing about 30% worth of downside from where the shares closed yesterday.
    • Coster argued that while 3D Systems’ Q4 results managed to blow out estimates on Monday, the expectations-bar was already set pretty low, making the 25% rally particularly excessive.
    • Coster downgraded close peer Stratasys last week on similar reasoning of a seemingly stretched valuation. 

    Google to push Congress about self-driving cars

    • The head of Google's (GOOGGOOGL) self-driving car program will urge Congress today to grant national auto safety regulators authority to speed the introduction of autonomous vehicles on American roads.
    • "If every state is left to go its own way without a unified approach, operating self-driving cars across state boundaries would be an unworkable situation and one that will significantly hinder…the eventual deployment of autonomous vehicles," Google's Chris Urmson will tell the Senate Commerce Committee.

    GT Advanced to emerge from bankruptcy 'as soon as possible'

    • GT Advanced Technologies (OTCPK:GTATQ), a sapphire glass maker, expects to emerge from Chapter 11 bankruptcy "as soon as possible," after a bankruptcy court entered an order confirming the debtors' amended joint plan of reorganization.
    • The company filed for Chapter 11 bankruptcy in October 2014 after its scratch-resistant sapphire glass was left out of Apple's iPhone 6 and 6 plus.

    Why Isn't Anybody Shorting Apple?

    Morgan Stanley comments boost Apple

    • Supply chain revisions have bottomed, says Morgan Stanley's Katy Huberty. "Our Asia tech team led by Jasmine Lu believes supply chain inventory digestion has come to an end."
    • They're modeling 40M builds for both the March and June quarters.
    • Morgan's iPhone tracker sees sales of 56.5M units this quarter vs. Street estimates at about 50M.
    • Notable Calls: "We've had some 'green shoots' in the past ten days, but Katy putting her foot down is what matters."
    • AAPL +1.45% premarket

  9. VRX !!!- now a play?

  10. Economics/Rexx – That's why it's so great to be a teacher, people get stupider every year and all you have to do is pull up a lesson from 20 years ago and they go "WOW!".  

    AAPL/Pat – They are so undervalued it's easy to get them going.  I got bored telling people to buy it around $95 but they should be back at $120 by the end of the year if the markets don't tank and drag them down.  Of course you should take $105 as a gift and watch that line for rejection but, if not, that's your stop you have better than a double in hand – what are you risking $5 on now?  

    If you want to double up on AAPL, then the June $97.50s are $9.60 and the June $105s are $5.10 so net $4.50 on the $7.50 spread that's $7 in the money so there's your double (close) and all AAPL has to do is not go lower than it is now.  If you don't have the faith to buy that spread – that answers your question as to what to do with Friday calls!  

    /NG flying again, $1.90 on the front-month. 

    Oil sad at $36.50 but that's the 5% Rule in action, as noted yesterday morning:

    Oil going down and down, -3.5% already is -$1.26 so about $36.50 should be bouncy (-5% line).  Iran said they are not playing ball on production freeze and, frankly, the Saudis have never said they'd cooperate – all BS and, to the extent that the rally was predicated on an oil recovery – that can unwind too!     

  11. Teacher/Phil – it's even worse – measured intelligence, at least in the US, is dropping steadily and significantly. Not only can you pull up a 20-year-old lesson and freak people, you're teaching that lesson to a much higher grade level than originally. I'm going to have some fun teaching epidemiology to undergrads at DGIST (one of the Korean MIT/Caltech equivalents) this fall.

  12. Saw a blurb that other large holdings of Ackman could also get hit here.  Would think he'll be forced to liquidate some positions.  As our friend Cramer says "house of pain,"

  13. Watched a pretty interesting documentary last night on the Ukraine maidan protests called "Winter on Fire". Would recommend it to anyone who is interested, its out on Netflix. 

  14. UNG/Phil, StJ

    Is it possible to construct a spread on NG Options to counter the contango UNG suffers without hedging away UNG's upside potential? UNG today is about 83% NGJ6. I looks to me that UNG's roll from April to May contracts will cost it about 4.5%. 

    Has anyone developed a solution? Perhaps a spread on another ETF?

  15. Never looked at that Enfilade… 

  16. UNG / enfilade – The contango is large (0.092 between the front month and May as of the writing of this comment). So you would need to sell an option or two for a total of 0.092 per contract to cover that. It'll be difficult to safely sell for that price, but you could get a part of it back by selling one May 1.75 put @ 0.053 per contract.

    I got out of UNG because of this (and also closed my /NG contracts). Instead, I sold the May 1.6/2.3 strangle @ 0.53 (I also sold the strangle in April and will sell them in June). The BP needed per strangle pair is about $1,300 (TD), so efficient. The contango is just so high (and could go higher) that I think I'd rather be selling premium than paying for it.

    In addition to this, you have to realize that the spot price was 1.68 this morning! It's been coming up slowly, but not at a rate fast enough to cover the distance between it and the current front month contract price of 1.871 (as of writing this) by front month expiration.

    /NG is dangerous right now.

  17. Teaching/Snow – My cousin teaches at Oxford (Classics) and she was asked to teach at Princeton for a year and she almost quit in the first week because she couldn't believe how dumb the kids were.  Compared to what she was used to in the UK, they had no real understanding of art, literature or history – she was miserable, said she felt like she was teaching grade school when she's used to being challenged by her students at Oxford.  

    Ackman/Albo – What a run of bad luck he's having.  I think Carl may have a hand in it.  

    Nice pop we got at 10 – wasn't the data and check out Russell – totally going the other way.  

    NAHB Housing Market Index just shy of estimates

    That's not it.

    business inventories

    That's not it either….



    Subprime auto worry hits lenders

    • weekend WSJ story about the 2007-like blowup of a subprime auto loan securitization continues to take its toll on Santander Consumer (NYSE:SC), down 7.8% today and 11.9% over the last two session.
    • Ally Financial (NYSE:ALLY) is down 2.3% since Monday morning.
    • Not necessarily auto-related, but certainly tied to the boom in less than prime lending, two-day losses for OneMain Holdings (NYSE:OMF8.1%, OnDeck Capital 3.3%, Lending Club 5.5%.
    • Credit Acceptance Corp (NASDAQ:CACC) is down 5.2%.

    Barrick Gold raised to Buy from Hold at Argus

    • Barrick Gold (ABX +2.2%) is upgraded to Buy from Hold with an $18 price target at Argus,which cites improving fundamentals in the gold industry.
    • Argus expects the U.S. dollar to decline at least modestly this year, which in turn is likely to result in higher gold prices.
    • The firm likes ABX's plans to reduce its debt by at least $2B in 2016, besides taking steps to lower overall operating costs and divest non-core assets, and expects ABX's earnings to grow by 19% in 2017.

    Alcoa spinoff on track for H2, to be named Arconic

    • Alcoa (AA -4.2%) says it is still on track to split itself during H2 2016, and that the new company it plans to spin off will be named Arconic.
    • Alcoa says the “A“ echoes Alcoa’s heritage, the “Arc” represents the "arc of progress,” and that the “conic” speaks to the company’s history of creating “iconic products.”
    • Arconic will focus on making multi-alloy manufactured goods for the aerospace and automotive sectors, which for now is a more lucrative business than smelting.

    Board battle at iRobot hits a higher gear

    AAPL REJECTED at $105 (of course it is on the first try). 

    Winter on Fire/CRS – Thanks.  I live that kind of stuff but hard to watch in the living room because the kids act like they're at the dentist if I watch a documentary.  At least I got the liking the Daily Show….

    Magical trade/Enfil – If a solution existed, there wouldn't be contango.  Logically, you can short UGAZ if you are so positive you have this contango issue but I contend that 90% of it is caused by your insistence on using short-term contracts because, if you compare UNG to /NG over time – by your count, there should be horrific decay, yet there isn't.  The decay is from contract to contract in the Futures, not in the ETF itself.  

    So, in July of last year, Nat gas was just under $3.50 and UNG was $13.50.  In October, Nat gas weas $3 in the middle of the month (down 16.6%) and UNG was $11.50 (down 14.8%).  In December, Nat gas bottomed at $1.70 (down 43%) and UNG hit $7 (down 44.4%).  The real issue is that, at the moment, /NG is $1.87 (down 37.6%) and UNG is $6.66 (down 50.6%) so it has lost ground on the way up but likely that's sentiment and it will pop and catch up a bit.

    Still, to me, losing even 13% over the course of a year does not put me off trading the ETF, especially when I'm BEING THE HOUSE and selling the premium in a bull call spread.  That makes the decay the other guys problem – I make money on anything over $5 and I expect $9 but, if it's $7.50 due to decay – I can live with that too!  

  18. Thanks guys

  19. UNG / Phil : Morning Phil hope all is well. is it too late to chase natural gas ? i just say your recomendations for the year. i have been out.

  20. Bought some VRX at $38.20 for a scalp. 

  21. Also sold some VRX Jan 2017 32.50 puts for a sub $25 entry.

  22. Gene Munster is becoming too much of a cheerleader now:

    "There will be a car that you can see and order in 2019-2020," said Munster. "We don’t think it will probably be delivered until after that… maybe 2021." He added "an advantage of showing it early" will be "to hold up the market in anticipation."

    In terms of the most likely go to market price, Munster also has a strong opinion.
    "If you look at the overall automotive industry Apple historically plays toward the high-end." The price when Apple starts selling it in 2020 or 2021 will be "around $75,000."

    Or maybe trolling TSLA! But this doesn't make much sense for AAPL. First, that target market will be pretty crowded by 2020 by traditional car manufacturers and second, what's the margin on cars. To expect that AAPL would sell a $35K car for $75K to keep their 50% margin and expect fanboys to rush and buy it because it's AAPL is just a fantasy now.

  23. Phil,

    With the /TF at these levels, and Yellen at "bat " tomorrow, they are not going to allow a further drop from these level, especially with Option expiration this week…..of course, what the hell do I know? Muppets and all…..was thinking of playing long just 1 contract for shit and giggles! Your thoughts always appreciated

  24. VRX – Out.

  25. Leon Coopermann sprouting garbage about the 0.1% and looking for sympathy from the 99% percent….let me get out my violin!!

  26. will $36 hold??

  27. Re-entered some VRX.  Making it a swing trade.

  28. UNG/Micro – Well you can still sell the 2018 $6 puts for $1.30 and that's enough to buy the $5 calls ($2.60) and sell the $9 calls ($1.15) for net $1.45 and that's net 0.15, which isn't as good as our net entry on UNG in the OOP, which is a net credit but, then again, we sold the $10 puts as we were too early so, technically, better than what we do have.  

    VRX/Albo – Not one I'd play with but could bounce – I just wouldn't catch the knife.  


    Munster/StJ – He is quite the cheerleader and he knows nothing about cars.  AAPL has 110,000 total employees who generate $233Bn in revenues so about $2M each while TSLA, who are a model of efficiency, have 13,000 employees generating $4Bn in sales (and a boatload more infrastructure).

    So the premise of AAPL going into the car business is that, rather than hire 10,000 people who will generate $10Bn in 35% profit-margin sales ($3.5Bn) with very little CapEx, they will instead spend Billions on CapEx (not an issue for them) and spend all that time building the company up by 10% staff (will take years) in order to generate $4Bn at 5% ($400M) or even 10% ($800M) would be a ridiculous waste of their time.  

    "They are not going to allow"/Jasu – Wow, I wish I had that degree of certainty!  I, myself, have no friggin' idea what these guys are doing but I do know the markets ran up too far, too fast and the chance of the Fed doing something to justify the enthusiasm is very slim indeed.  Certainly they won't raise but what in their language would change?  They aren't going to reverse and ease and they're very unlikely to even say they are considering it with wages rising and unemployment so low.  The RUT is not wrong – just early, I think.

    VRX/Albo – Ah, over that time-frame I approve the trade!  wink

    Cooperman/Jasu – Mo money, mo problems!  

    Image result for mo money mo problems meme

    Oppenheimer: Private-equity is too cheap

    • Private-equity based asset managers have the best businesses model he's seen in thirty years of covering financial stocks, says analyst Chris Kotowski. Yet the shares "languish" at less that 7x 2017 cash distributable earnings estimates.
    • Over the last five years, alternative asset managers have grown AUM by an average 14.5% annually, roughly double that of traditional asset managers. On revenue, alternatives have averaged 16.2% growth vs. 5.5% for traditional players.
    • Kotowski and team calculate fair value for Blackstone (BX -2.5%) at $32, roughly 20% upside; Carlyle Group (CG -1.7%) at $31, about a double; KKR (KKR -1.3%) at $23, or 70% upside.
    • ETFs: PSPPEX

    Builder confidence holds steady in March

    • The NAHB builder confidence gauge was unchanged in March, staying nicely above the 50-point mid-range at 58.
    • It's "slow and steady progress," says NAHB Chairman (and builder) Ed Brady, but respondents continue to report problems with lot and labor shortages.
    • The sub-component measuring current sales conditions held stead at 65, while the gauge measuring expectations in six months slipped three points to 61. The buyer traffic measure rose four points to 43.
    • Full release
    • Homebuilder ETFs: ITB -0.8%XHB -0.6%

    WSJ: Many shale companies are unable to ramp up oil output

    • U.S. shale producers and oilfield services companies are warning that they may not be able to jump-start drilling even if oil prices stabilize, as many are too financially strapped, have cut too many workers, or have idled too much equipment to quickly ramp up againWSJ reports.
    • Some of the largest U.S. oilfield services firms have laid off 110K people in the past year, Evercore ISI analysts estimate, and many of those workers have no plans to return to the industry.
    • Basic Energy Services (NYSE:BAS), which has cut more than 40% of its workforce since the downturn began, estimates that only one in five laid-off workers will return, taking with them the expertise they developed during the years when companies mastered techniques such as drilling and fracking wells that extend thousands of feet horizontally underground.
    • Some shale drillers also are tempered by what occurred last spring, when producers jumped back into drilling new wells after oil prices briefly rose, inadvertently worsening a supply glut that ultimately made prices worse.

    Valeant management doesn't have a handle on the health of its own business – Piper

    • "Valeant (NYSE:VRX) reported 4Q15 adjusted revenue and EPS of $2.8B and $2.50, respectively, but more importantly issued 2016 guidance that was well below the ranges that management had withdrawn on 2/28/16.
    • "Further, the ever-shifting commentary from VRX surrounding a number of segments in our view suggests that management simply does not have a handle on the health of its own business.
    • "Given the persistent uncertainty over the trajectory of a number of key segments, along with the reality of high debt levels and specifically myriad debt covenants (specifically, financial reporting covenants in the near-term; i.e.,

      the specter of multiple defaults if the company cannot file its 10K in the near-term), we are moving to an Underweight rating from a Neutral.
    • "Our PT continues to be suspended given the absence of audited financials."
    • Source: Piper Jaffray
    • VRX -44% to $38.60.

    Moody's: FCC privacy plan likely harmful to broadband providers

    • The FCC's new Internet privacy plan, calling for broad consumer consent for data collection, is "credit negative" for broadband providers.
    • Those companies could be "severely handicapped" in competition with advertising giants like Facebook and Google, which are notably left out of agency Chairman Tom Wheeler's proposal.
    • The FCC plan calls for consumer consent on data collection and more disclosure of what's collected, along with more work to protect information and report data breaches when they happen. Meanwhile, Google, Facebook, Twitter and other sites would continue collecting data from visitors without consent.
    • "We believe this to be a long-term risk to the current TV advertising business model, as well as all broadband providers whom also have ad sales exposure," Moody's said.
    • Related tickers: TVZCMCSACHTRTWCCVC

  29. Phil – I think there's value at this level.  Hedge funds are bailing like crazy.  Sold a few more 2017 $32.50 puts.  Short those at $8.40 average.  We'll see.

  30. Phil, in your opinion does the RUT usually lead the other indexes?

  31. Mo' money / Phil – My mother was a school nurse and I always recall that visiting doctor who once told my mother how lucky she was not have that much money and all the problems that come with it! I guess perspective is different depending on your point of view.

  32. I'll take "Mo' Money", I'm a mad problem solver!!

  33. Value/Albo – They still have their accounting issues (GAAP earnings are about 1/3 of what they report) and those acquisitions are killing them.  The GAAP accounting puts their cash-flow massively negative and, most likely, unsustainable and their model (raising prices on rare and necessary drugs) is looking to be unsustainable – I'm not even sure Trump approves of this one.  Also, they failed to file their annual report and that puts them in breach of loan covenants and could trigger a default from a nervous lender.  It WOULD trigger a default if they thought Valiant had enough money to pay them ($30Bn debt)!  At least Ackman is on your side…  

    RUT/Rs – Well the RUT has a narrow pipe as it's so much smaller than the others so, when sentiment changes, the RUT tends to over-react in either direction as it's so much easier to move.  

    Money/StJ – I do have friends I'm jealous of who are in the sweet spot where they and their spouse make over $100K and they have 9-5 jobs that they don't think about for a second when they are not working and they take 10-day vacations without a single work call – but we always want what we don't have.  Usually I love my job and my lifestyle but no such thing as a real vacation and it would be so nice not to have to talk to a lawyer for a year or redlined contracts!  So, yeah, mo money, mo problems but the same can be said about getting up in the morning and breathing – if you want to live your life, you have to take the good and the bad.

  34. Speaking of the RUT, 1,060 has been pretty bouncy.  

    It's right between 1,030 and 1,090 so it's looking like the top half of the range – good to keep an eye on.  

    Oil held $36, Brent $38.50.

  35. Yes, Ackman and I are both in VRX.  Only I've got less than a full position and he's already drowning.  Also my average cost in the stock and the short puts is about $29.  His is more than $100 above that.  Big difference IMHO.

  36. MOSCOW — Vladimir V. Putin’s typically theatrical order to withdraw the bulk of Russian forces from Syria, a process that the Defense Ministry said it began on Tuesday, seemingly caught Washington, Damascus and everybody in between off guard — just the way the Russian leader likes it.<p>By all …

  37. <i>The “unsinkable” global financial system is rushing headlong toward its encounter with the iceberg.</i><p><b>Why did the Titanic sink, despite being considered</b> …

  38. <b>After rallying off major support for the past month, the Global Dow Index is testing its key January breakdown level.</b><p>Money managers and strategists …

  39. (Reuters) – Valeant Pharmaceuticals International Inc cut it revenue forecast for the year, due to slower growth in its U.S. dermatology, gastrointestinal and woman’s health businesses.<p>Total revenue is expected to be $11.0 billion-$11.2 billion, compared with its previous estimate of $12.5 …

  40. Kim Jong-un has said North Korea will soon detonate another nuclear warhead and test launch ballistic missiles capable of carrying them, according to the official KCNA news agency.<p>Kim made the comments as he supervised a successful simulated test of atmospheric re-entry of a ballistic missile that …

  41. <b>Russian forces have started leaving Syria after Monday’s surprise withdrawal announcement by President Vladimir Putin.</b><p>Russian defence ministry video showed the first group of aircraft taking off from Hmeimim air base in Syria on Tuesday morning and later in flight.<p>But Russia will continue air …

  42. On Feb. 29, Carol Greider of Johns Hopkins University became the third Nobel Prize laureate biologist in a month to do something long considered taboo among biomedical researchers: She posted a report of her recent discoveries to a publicly accessible website, bioRxiv, before submitting it to a …

  43. Venture capitalists think they have an answer to the growing housing crunch in San Francisco and other big cities across the U.S.: adult dorms.<p>Shared office space giant WeWork Cos., recently valued at $16 billion, and a handful of smaller startups are experimenting with “coliving,” a concept that …

  44. According to my Twitter feed, a transportation expert named Reilly Brennan just explained on a panel at South by Southwest that Uber drivers are …

  45. NORTH MARION, Ohio (Reuters) – Republican presidential front-runner Donald Trump faced a last day of campaigning on Monday before a crucial round of nominating contests including in Florida and Ohio, where establishment Republicans worked to trip him up.<p>Trump supporters and protesters have clashed …

  46. Pershing Square Holdings, the publicly traded vehicle led by hedge fund billionaire Bill Ackman, has been halted.<p>Pershing Square Holdings, which trades in Amsterdam, was last down $1.47, or down 9.77%, at $13.58.<p>A Pershing Square spokesperson has yet to respond to our request for comment.<p>Ackman is …

  47. DeepMind’s AlphaGo artificial intelligence has won the final match of the Go series against world champion Lee Sedol.<p>During a week long competition in South Korea, the AI from the London-based company forced Go world champion Lee Se-dol to admit defeat in almost every match played.<p>The final match, …

  48. According to recent research by Retale into ad blocking, Millennials are “more inclined to tune out display and banner ads while on a PC, they’re …

  49. Economists have offered various explanations for the frustrating slowness of global growth, from excessive debt to a shifting balance of power bringing an end to an American century. A new analysis suggests there’s one that deserves greater attention: the chilling effect of inequality.<p>Think of an …

  50. VATICAN CITY — Pope Francis on Tuesday approved sainthood for Mother Teresa, a Roman Catholic nun known as the “saint of the gutters,” who founded a religious order dedicated to assisting the poorest of the poor.<p>She will be made a saint on Sept. 4, 13 years after her beatification and 19 years …

  51. Aubrey McClendon’s car was traveling 78 miles per hour when it crashed, killing him on March 2, the Oklahoma City police said Monday. The shale oil pioneer’s 2013 Chevy Tahoe hit a wall and burst into flames on a two-lane road near the city.<p>McClendon tapped on the brakes several times, but didn’t …

  52. Obama knocks ‘vulgar and divisive’ presidential campaign

    <b>Washington (CNN) —</b> President Barack Obama lamented a “vulgar and divisive” presidential campaign Tuesday, saying that GOP presidential candidates were setting bad examples for children and tarnishing the United States’ reputation abroad.<p>”In America, there is no law that says we have to be nice to …

  53. Nowhere in the Federal Reserve’s mandate is there any mention of the Standard & Poor’s 500 Index, one of the U.S. stock market’s main benchmarks. But don’t tell that to traders and investors, many of whom are convinced that the S&P 500 SPX, -0.47% plays a dominant role in policy decisions.<p>When the …

  54. (Reuters) – Big Wall Street banks, after spending massive amounts of money and time to get their old, creaking systems in better shape, are now trying to sell technology they’ve developed in-house to other companies.<p>U.S. banks including Goldman Sachs Group Inc, Morgan Stanley and JPMorgan Chase & …

  55. <b></b>has a “check-in” period every few years as Wall Street tries to find out if the company can generate real cash flow. It appears the market may be doing the same thing with <b>SolarCity</b> lately, as shares have crumbled more than 60% from all-time highs in mid-2015.<p>SCTY data by YCharts.<p>In its …

  56. JOHANNESBURG (Reuters) – Slumping commodity prices have taken African currencies down with them, exposing the fundamental economic frailties of the world’s poorest continent by driving up inflation in countries that import most of their manufactured goods.<p>Regional economies are in no position to …

  57. <i>Disclosure: I’m long Dril-Quip, Federal Signal, KLX, Westlake Chemical and Innospec.</i><p>Are value stocks making their long-awaited comeback?<p>It certainly seems that way. And it’s about time. U.S. value stocks have been lagging their growth (glamour is probably a better term for these pricier issues) …

  58. China’s state television channel CCTV broadcast a 45-minute documentary on Sunday (Mar. 13) to hundreds of millions of households in China, accusing the US of severe human rights abuses from sexual assault to gun violence to racism.<p>The movie is the latest example of Beijing’s increasing criticism …

  59. When I was growing up, income inequality wasn’t yet a big issue, because the middle class was strong and the plutocracy fairly marginal. But there was a great deal of alarm over the troubles of the African-American community, where social disorder was on the rise even as explicit legal …

  60. What Should Investors Expect From Cuba’s Economy?

    Ahead of U.S. President Barack Obama’s 2016 visit to Cuba a few major companies are already scrambling to negotiate deals to set up shop in the small island economy. A few of the big names that have expressed interest in Cuba are AT&T, Starwood Hotels, and Marriot. “We see many opportunities for …

  61. Last last year, “60 Minutes”, the flagship news magazine show on US television network CBS, ran a whole segment on M-Pesa, the mobile money service which started in Kenya nine years ago by Safaricom, the country’s largest mobile phone company. It was a great moment for Kenyan innovation, being …

  62. Phil/LABU –  $6.05, down $1.11.  Worth an adjustment to take advantage of 15% drop (thanks to VLX, I guess)? Or just let it be?  Original trade was:

    Sell 10 LABU Sept $5 puts for $1.35 ($1,350) 
    Buy 10 LABU Sept $5 calls for $3.70 ($3,700) 
    Sell 10 LABU Sept $9 calls for $2.20 ($2,200)

  63. Oh Lord please make Kudlow stop sprouting his brand of garbage…..CNBC needs to make him go away!

  64. VRX/Albo – As long as you REALLY want to own it for $29…

    LABU/Tom – Well that's Albo's fault, er, I mean that's VRX's fault.  As I just said to Albo – it could get a lot worse so I think I'd rather stick to plan and wait until after the Fed to make any changes to our portfolios.

    As it stands, we have STP at $495,349 (up 395%), LTP at $849,049 (up 70%) for a combined $1,344,398, which I guess is another record despite my continuing to rather be in cash…  

    The Butterfly Portfolio is up a stupid 134% at $234,397 and that one really has to be hedged out before it evaporates and last, and least, is our much newer (Aug) OOP, which is back to $120,689 (up 20.7%) and very well-balanced at this point.

    Kudlow/Jasu – Sorry, they just signed him to a brand-new 3-year contract.  Horrifying.

  65. It's all my fault.  Sorry guys. 8-)

  66. ROFL – Larry Kudlow is trying to explain Capitalism to Robert Reich and clearly making a fool of himself.  Reich's general expression while talking to Kudlow is exasperation…..

  67. Phil

    What time is the FED?


  68. Phil,

     Missed my chance to get out of /NGK6 above 1.94. Should I dump it now or do you think I'll get another chance?

  69. Fed/QC – 2pm and then Yellen at 2:30.

    /NG/Japar – I missed my chance to get back in so we're in strange situations.  I'm still a believer, I just thought we were a bit overdone on Friday and not worth the risk.  Now you have to decide if you feel comfortable into API, EIA and then Nat gas inventories.  Remember:  When in doubt – sell half!  

  70. Phil, 

    Good advice. I'll get out of 1/2

  71. Amazon might be competing with FedEx/UPS

    ~~Amazon leases 20 Boeing jets to speed up deliveries

  72. Interesting, between when I left early on Friday and early mon morning, my Twitter feed had under 300 tweets.  Now, since 10 am, there are 1,500.  I like my twitter feed – lots of gems like:

    Drug cartels are taking over the tortilla business in Mexico — via

    A guide to a not-so-terrible Twitter: More improvements are on the way

    Indiana Jones will have to dig himself up at this point: Harrison Ford, Steven Spielberg return for a fifth Indiana Jones movie via

    Fanatical central bankers doubling down on the hot potato of negative rates

    Fraud office drops criminal forex probe

    Almost $2 billion — that's how much free media coverage Donald Trump has gotten during his campaign:

    Anonymous just declared ‘Total War’ on Donald Trump

    The secret to Trump’s rise: Political science explains why people who crave conformity love his campaign

    GDPNow Forecast Dips To 1.9% Following Retail Sales Report

    Jefferies Taking Appropriate Steps to Mitigate Risk: Laying off its clueless economists.



    Speaking of Nat Gas demand: UPS makes $100 million investment in CNG vehicles:

    The weird, offensive argument at the heart of the Supreme Court case against birth control

    he NFL admits that there are consequences to head trauma. The science behind concussions

    The awful consequences of yet another Socialist science hoax (if you're a virus!): What the introduction of different vaccinations meant for the population in the US.

  73. CMG down big after hours:


    March 15 (Reuters) – Chipotle Mexican Grill Inc said sales at established restaurants fell 26.1 percent in February.

  74. Ouch on CMG but only down 2.5% (though was already down 2.5% from Monday's high) on news that sounds pretty awful.  If anything, it's confirmation that everyone who wanted to get out is out at this point.  

  75. Vaccines / Phil – A quick calculation shows about 30,000 lives saved this year, not counting the potential costs of epidemics and the treatment of 7M potential victims (just using their numbers and a 300M population). I guess vaccines make sense!

  76. Some sectors might be a tiny bit overbought:


    More at the link!

  77. hope API isn't a tease!

  78. where can I go to learn how to use this %&^@$(!  CK editor.  ? Thanks

  79. GOLDMAN: US rates hikes are on the agenda

    With US economy growing above trend, unemployment at just 4.9% and inflationary pressures now moving higher, the US Federal Reserve is now close to meeting its dual mandate on employment and inflation, ensuring rate hikes will be on the agenda at the FOMC’s current policy meeting.<p>That’s the view of …

  80. Image Source: ExxonMobil corporate website<p>Oil industry supermajor<b>ExxonMobil</b>(NYSE: XOM) just went to the market and raised $12 billion of cash through the issuance of bonds. Exxon didn’t really need the money, so it makes a person wonder if the acquisition prowl hasn’t begun.<p>In a buyer’s market for …

  81. Donald Trump’s near sweep of states on Tuesday — with the notable exception of Ohio — set up a true three-way race for the second half of the primary season.<p>The results Tuesday night showed why it’s a race he could win.<p>Despite his loss in Ohio, Mr. Trump is positioned to make a serious run at …

  82. The impact on the U.S. and Europe is expected to be minimal.<p>The sudden slump in Chinese exports last month prompted IMF deputy chief David Lipton to warn next month’s projections for global growth will very likely drop below the current prediction of 3.5%. Chinese exports declined by an astonishing …

  83. Donald Trump Takes 3 States, John Kasich Wins Ohio

    Donald J. Trump routed Senator Marco Rubio in Florida on Tuesday, driving him from the Republican presidential race, and easily won the primaries in Illinois and North Carolina, amassing a formidable delegate advantage that will be exceedingly difficult for any rival to overcome.<p>But with a victory …

  84. More and more companies are massaging their earnings

    When I first got into the investment business, the overwhelming majority of companies followed the rules of Generally Accepted Accounting Principles. Now most companies report earnings based on Pro Forma rules.<p>Pro Forma earnings are when you adjust for unusual, non-recurring, one-time expenses. …

  85. In this past weekend’s newsletter, I reviewed the current fundamental, economic and technical backdrop of the market following the March rebound from …

  86. The iPhone SE launches next week giving Apple fans the upgraded 4-inch smartphone they’ve long craved. But a beast will follow it…<p>The beast in question is the ‘iPhone 7 Pro’, a new 5.5-inch flagship device that will sit above both the iPhone 7 and iPhone 7 Plus when the three phones are released in …

  87. Playstation VR just established itself as the mass market VR headset to beat. The headset will hit the market in in October 2016 for $399, $200 lower than competitor Oculus Rift and less than half of the $800 HTC Vive. That means anyone looking to get into VR can do so for just $800, a far cry from …

  88. The Federal Reserve is expected to keep interest rates unchanged in a range of 0.25% to 0.5% when it concludes its two-day March meeting on Wednesday, putting off a planned rise after fears of a slowdown in China and collapsing oil prices have rattled investors worldwide.<p>Most economists expect …

  89. Anbang Insurance Group, a well-connected Chinese conglomerate, has agreed to pay $6.5 billion for a portfolio of Four Seasons and other luxury hotels owned by the Blackstone Group, according to numerous recent reports—and is gunning to take control of Starwood’s Westin, Sheraton, and W Hotels as …

  90. <b>The Baltic Dry Index has risen for the last few weeks,</b> buoyed by hopes (a la Iron Ore) of a National People’s Congress stimulus surge from China. …

  91. Oil, gas producer to skip $60 million interest payments on bonds maturing in 2021, 2022<p>Linn Energy LLC warned Tuesday that a chapter 11 bankruptcy filing may be “unavoidable” for the oil and gas producer.<p>The company said it has hired financial and legal advisers “to address our liquidity and …

  92. Retailers in China are shedding staff, slowing expansion plans and seeing stocks pile up in warehouses as shoppers tighten their belts – a major headache for a country that has pinned its hopes on consumers to drive economic growth.<p>With that growth running at its slowest in a quarter of a century, …

  93. Jeffrey Ubben, chief of ValueAct Capital Management, is a very well respected hedge fund manager. On Monday, Ubben appeared on CNBC and pointed at the media and short sellers when talking about the drop in Valeant’s stock price in recent months, saying they “are dying for some new crisis like …

  94. You’re just a Google search away.<p>Want to find out how much money has been donated to Donald Trump’s presidential campaign? You’re just a Google search away.<p>The search giant announced on Tuesday that it’s adding campaign finance information for the 2016 presidential nominees to its search …

  95. Alexander Hamilton As U.S. Economic Architect

    How did America get so rich so quickly?<p>It’s a question at the heart of economics, which in one broad definition, is a study of how some countries get rich and some stay poor.<p>Some people, including me, would say that the United States benefited hugely from sound property rights and hands-off …

  96. Much digital ink has been spilled over corporate earnings this year.<p>Something fishy is happening. The numbers are getting fudged. Companies are hiding things. It’s all an illusion.<p>And so on.<p>So let’s add this to the list: earnings are getting worse.<p>The following chart, which comes to us from the …

  97. <b>China’s parliament has ended its annual session by approving a new five-year economic plan, as Premier Li Keqiang says the country will push ahead with economic reforms.</b><p>The plan aims to grow the world’s second-largest economy by around 6.5 to 7% a year by 2020.<p>Measures include cutting high debt, …

  98. Jabo- Are we really happy when API shows a build of "only" 1.4 Mb? Yes compared to recent weeks this is a modest build, but still it is a build and it is almost a million and a half barrels! Yeah, that should get us over $40, right? Phil just curious, as always, what will EIA numbers need to be to move the price of oil significantly in either direction? I know that production numbers are now becoming even more important than storage numbers (I think). You are usually pretty much dead on with your calls on this subject. 

  99. Good morning!  

    Nothing exciting going on as we wait on the Fed.  Total Global Flatline:

    Whatever the Fed does today, without infrastructure spending to spur demand, we are doomed to fail, economically (and nowhere is that more evident than Japan, who are 15 more years of low-rate policy ahead of us and STILL it isn't working).  I've been saying this for years and, as we discussed in last week's webinar (or was it an interview, I forget) that's what real Keynesian economics is about!  Finally, I'm being joined by one of the only non-morons in Economics, Barry Eichengreen, of Berkeley, Oxford and former senior adviser to the IMF (before they were taken over by "THEM") – hopefully more people of influence will follow.  

    The solution is straightforward. It is to fix the problem of deficient demand not by attempting to further loosen monetary conditions, but by boosting public spending. Governments should borrow to invest in research, education, and infrastructure. Currently, such investments cost little, given low interest rates. Productive public investment would also enhance the returns on private investment, encouraging firms to undertake additional projects.


    Thus, it is disturbing to see the refusal of policymakers, particularly in the US and Germany, to even contemplate such action, despite available fiscal space (as record-low treasury-bond yields and virtually every other economic indicator show).


    Ideological and political prejudices deeply rooted in history will have to be overcome to end the current stagnation. If an extended period of depressed growth following a crisis isn’t the right moment to challenge them, then when is?

    Kuroda Says Minus 0.5% Rate Is Theoretically Possible for JapanThe Bank of Japan has quite a lot of room to cut its key interest rate further and theoretically it could go to minus 0.5 percent, Governor Haruhiko Kuroda said in parliament Wednesday. While the BOJ kept policy unchanged on Tuesday, Kuroda underscored in a press conference a readiness to move on any of three fronts: a reduction in the present minus 0.1 percent rate, an acceleration in boosting the monetary base or an expansion in purchases of riskier assets. Questioned by a lawmaker in parliament Wednesday, he agreed that it would be theoretically possible to lower the rate to minus 0.5 percent.

    Kuroda U-Turn & PBOC Devaluation Send Yen, Yuan Tumbling In Early Asia Trading

    Abenomics Seen Stalling With Toyota Pushback Against RaiseTo understand what Prime Minister Shinzo Abe is up against in trying to spring Japan from the deflationary trap stunting its economy, consider the pushback by its most prominent industrialist Akio Toyoda at the wage negotiating table this month. Toyota Motor Corp. had told its union last week that it would be difficult to increase monthly base wages even by 1,000 yen ($9) — about the price of a bowl of ramen noodles — because global conditions were harsh, its workers were already relatively well-paid and there’s been little inflation in Japan, according to people familiar with the negotiations and a labor group newsletter reviewed by Bloomberg News. The virtuous economic cycle that Abe has sought isn’t working well,” said Hiroaki Muto, chief economist at Tokai Tokyo Research Center Co. in Tokyo. “With Japan’s economic outlook dimming, company management can’t be aggressive about wage hikes that increase fixed costs.

    China Freight Index Collapses To Fresh Record Low

    South Korea Unemployment Rate Jumps to Six-Year High at 4.1%South Korea’s unemployment rate rose to a six-year high last month as more college graduates failed to land jobs amid slowing economic growth. Distortions from the lunar new year holiday were also a seasonal factor behind the rise. The seasonally adjusted jobless rate climbed to 4.1 percent in February, the highest since February 2010, Statistics Korea said on Wednesday. The agency said the youth unemployment rate for those ages 15-29 was 12.5 percent, the highest on record, with college graduates rushing to join the workforce after graduation.

    Risk of Dollar Rally Seen on Fed Outcome as Rate Rise Odds ClimbRisks are skewed toward a rally in the dollar, National Australia Bank Ltd. and Commonwealth Bank of Australia said, as the currency fails to keep up with increasing speculation the Federal Reserve can raise interest rates again by June. A gauge of the dollar has slumped 3.7 percent since rising to its highest level in data starting from 2004 in January. That’s even as the probability of a rate increase by the Fed’s June 14-15 meeting rose to 54 percent in futures markets, from as low as 2 percent on Feb. 11. The two-year Treasury note yield has climbed about 31 basis points in that time. Chair Janet Yellen and her colleagues have an opportunity to clarify where they stand on the outlook for policy when a two-day meeting wraps up today. “The rates market has increasingly come to the view that it’s been overly complacent, and yet the dollar is still pretty much flat on its back,” said Ray Attrill, co-head of currency strategy at NAB in Sydney. “If whatever the Fed says overnight at least underpins the grind higher we’ve seen in U.S. yields, then I’m on the lookout for that being reflected in a somewhat stronger dollar.”

    US inflation rears its ugly head as global cycle nears danger zoneThe trigger for the next global recession is at last coming into view after a series of loud distractions and false alarms. The Atlanta Federal Reserve's gauge of "sticky-price" inflation in the US soared to a post-Lehman peak of 3pc in February. This index is a 'pure' measure of core inflation – the underlying story once the noise is stripped out.


    All those startups that promised to spoil you rotten are starting to fail

    Corporate America's profit outlook keeps getting worse

    More and more companies are massaging their earnings

    Margin Debt Flashes Red As The Fed Cometh

    These Are The Energy Bonds Most Likely To Default In The Next Six Months

    Oil Pops After Lower-Than-Expected Crude Build

    These Are The Energy Bonds Most Likely To Default In The Next Six Months

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  100. EIA/Craigs – To be bullish, they have to back up API with a very small NET build but that's doubtful as last week we had evidence of refining coming off-line (seasonal) and that may draw gasoline but will build oil barrels on the other end of the refinery.  Still $40 is big overhead resistance for Brent, which is now $39.36 with /CL at $37 so just about $37.50 is still a better shorting line than long and I think you need more than inventories to move the needle – it's really all about whether on not you get production cuts.  Remember, last week we worked out that we're 3Mb/week oversupplied out of 133Mb/week so about 2.5% over-supplied – demand simply doesn't pick up slack that fast.  

  101. Thanks Phil. Very helpful, but of course we will need to see the 1PM report to really know what's going on. We also have to watch out for the head fakes the bots love to throw at us.