The Wall Street Examiner http://wallstreetexaminer.com Get the facts. Sat, 01 Nov 2014 00:46:17 +0000 en-US hourly 1 Magnificent Market Meltup Cakewalk http://wallstreetexaminer.com/2014/10/magnificent-market-meltup-cakewalk/ http://wallstreetexaminer.com/2014/10/magnificent-market-meltup-cakewalk/#comments Fri, 31 Oct 2014 22:19:42 +0000 http://wallstreetexaminer.com/?p=215306 The magnificent market meltup marched on. The target could be the uptrend line forming the upper line of a broadening pattern at 2040, or it could be the 6-7 and 8 week cycle projections or the 13 week cycle projection that is even higher. Here’s what the data suggests now.

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Bank of Japandemonium Resorts to “Monetary Shamanism,” and all Heck Breaks Loose http://wallstreetexaminer.com/2014/10/bank-of-japandemonium-resorts-to-monetary-shamanism-and-all-heck-breaks-loose/ http://wallstreetexaminer.com/2014/10/bank-of-japandemonium-resorts-to-monetary-shamanism-and-all-heck-breaks-loose/#comments Fri, 31 Oct 2014 21:55:37 +0000 http://wolfstreet.com/?p=8835 This is a syndicated repost courtesy of Wolf Street. To view original, click here.

With impeccable timing – on Halloween, which is increasingly popular in Japan among adults who are trying to escape their reality – Bank of Japan Governor Haruhiko Kuroda formally announced that he’d cure Japan’s economic and fiscal ills by resorting entirely, and not just partially, to “monetary shamanism.”

That’s what Izuru Kato, an economist and president of Totan Research, calls Kuroda’s dubious strategy. Japan practiced QE before it ever become a term in English. With predictable results: it did nothing for the economy but triggered unbridled government profligacy that generated ever larger budget deficits and an insurmountable mountain of debt.

But the QE that the BOJ has unleashed since April 2013 isn’t just QE anymore. It’s QQE: quantitative and qualitative easing. No-holds-barred QE. So in the true spirit of Halloween, Kuroda promised that the BOJ would:

  • Increase the monetary base by ¥80 trillion annually (over 16% of GDP!), up from the previous commitment of ¥60-70 trillion. In a few years, its balance sheet will exceed Japan’s GDP.
  • Increase its JGB holdings by ¥80 trillion annually, up 60% from the prior insanity.
  • Lengthen the average remaining maturity of its JGB holdings to 7-10 years, up from the current goal of 6-8 years. Before Kuroda arrived at the BOJ, the average maturity was under 3 years.
  • Triple the annual purchases of ETFs and J-REITs.
  • And keep doing all of this until hell freezes over.

The goal is to demolish the yen, savings, real wages, people’s wealth, and that onerousness mountain of debt, much of which will end up on the BOJ’s balance sheet in a few years. And it seems to be working.

As planned under the economic religion of Abenomics, inflation has roared higher. In September, prices were 3.2% compared to a year ago, with goods prices up 4.6% and service prices up 1.9% (service providers are so pressured by struggling consumers and businesses that they’re eating the 3-percentage-point consumption tax increase rather than passing it on). Here is what that inflation looks like:

Japan-CPI-2010-2014_September

Unperturbed, the BOJ uses its own and more convenient measure of inflation, taking out just about everything that adds to it, such as food, energy, and the impact of the consumption tax increase, to come up with a new and much tamer price index – the yellow dotted line in the chart above – which is still too low and has to be jacked up further.

But wages aren’t rising, so households – which do have to pay for food, energy, and the consumption tax hike – are having a hard time making ends meet. And the increasingly numerous retirees are losing purchasing power and wealth as their savings are being devalued. They’re all coming to grips with the scourge of Abenomics: “inflation without compensation.” It boils down to this, as the Statistics Bureau reported today with equally impeccable timing: In September, inflation-adjusted household incomes plunged 6.0% from a year ago.

READ THE REST of this post at WolfStreet.com

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A Growing Stink About Think Tanks http://wallstreetexaminer.com/2014/10/a-growing-stink-about-think-tanks/ http://wallstreetexaminer.com/2014/10/a-growing-stink-about-think-tanks/#comments Fri, 31 Oct 2014 21:02:53 +0000 http://alantonelson.wordpress.com/?p=1598 This is a syndicated repost courtesy of RealityChek. To view original, click here.

Here’s an encouraging development for anyone hoping to curb the role of big money and special interests in American politics: The Mainstream Media is starting to shine the spotlight on the too-long-overlooked influence-peddling role played by leading think tanks that continue portraying themselves to policymakers, the media, and the general public as disinterested seekers of the truth.

As I wrote in September, the current wave of interest in these institutions was kicked off by a ground-breaking New York Times expose of foreign government contributions to major tanks like the Brookings Institution, the Center for Strategic and International Studies, and the Atlantic Council. The findings were so stunning (even to me) that Virginia Republican Congressman Frank Wolf has asked the Justice Department to investigate whether these contributions are efforts to circumvent federal laws monitoring foreign government lobbying activities.

Just as important, California Democratic House member Jackie Speier has proposed requiring any witness before a Congressional committee, including think tank staff, to disclose the sources of financial support for their work – which would include the domestic interests that have long used think tanks for “idea laundering” purposes. These corporations, trade associations, and other contributors benefit greatly when proposals from which they would benefit are disseminated by organizations generally assumed to be motivated by the broader national interest.

Two days after the Times piece appeared, moreover, the Washington Post broke the story that, thanks to contributions to the Center for Strategic and International Studies, the ambassadors from Britain and the United Arab Emirates were able to buy their way into a classified meeting at the Pentagon. The ambassadors were invited by CSIS President John Hamre, who troublingly remains chair of a key Defense Department advisory group called the Defense Science Board even though his think tank duties obviously involve rattling a tin cup in front of prospective foreign government supporters. As previously reported in the Times article, one of these governments is China.

This morning, media scrutiny resumed with a long article in the Post detailing the growing tendency of projects at Brookings to dovetail with the interests of particular domestic and foreign donors, including foreign governments. Especially welcome about this article was its description of technology industry funding for Brookings research on the H-1B program that admits immigrants with special talents – many of which work in information technology.

The program has been extensively used to help depress wages in the U.S. technology sector, and expanding quotas has long been a key goal of American technology companies. But this nexus is only the tip of the iceberg of corporate funding for think tank globalization-related activities, as I’ve detailed in Congressional testimony linked in my previous post.

The Times and Post coverage, however, raises a tough question for these and other Mainstream Media pillars themselves. Now that they’re starting to understand how compromised so much think tank research is, will they report such apparent (at least) conflicts of interest when they use the work of think tank specialists, as Rep. Speiers has suggested when it comes to Congress? Or will they continue to perpetuate the myth, even if unintentionally, that think tank analyses and perspectives originate on the mountaintop?

By the way, in researching this post, I came across two useful-looking sources of information about think tanks: Think Tank Watch and Transparify. I’ll be keeping track of them regularly now, and you may want to visit their sites, too. And if you find other sources in this field, please let me know!

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Treasuries Pause and Dollar Breaks Another Resistance Level http://wallstreetexaminer.com/2014/10/treasuries-pause-and-dollar-breaks-another-resistance-level/ http://wallstreetexaminer.com/2014/10/treasuries-pause-and-dollar-breaks-another-resistance-level/#comments Fri, 31 Oct 2014 20:54:20 +0000 http://wallstreetexaminer.com/?p=215292 Treasuries have paused in their 2 week uptrend and the Dollar has broken through another resistance level as it takes aim on higher levels.

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Bank of Japan QE “Treat” Is a Massive Global Trick http://wallstreetexaminer.com/2014/10/bank-of-japan-qe-treat-is-a-massive-global-trick/ http://wallstreetexaminer.com/2014/10/bank-of-japan-qe-treat-is-a-massive-global-trick/#comments Fri, 31 Oct 2014 20:47:23 +0000 http://moneymorning.com/?p=168962 This is a syndicated repost courtesy of Money Morning. To view original, click here.

The Bank of Japan (BOJ), Japan’s central bank, just tricked global marketsby lavishing them with an awesomely sweet Halloween treat.

There’s only one problem, and that’s how the addition of all this fake sweetener stuff will end.

Keep reading. Your heart is going to pound…

Bank of Japan Stimulus: Back from the Grave

The BOJ brought “Abenomics” back to life this morning when it announced it would ramp up efforts to treat, treat, and treat the economy to some more sugar-laced stimulus on steroids. (Abenomics is the tag hung on Prime Minister Shinzo Abe and his central bank’s stimulus efforts.)
Nikkei

This was a three-way lick ‘em and stick ‘em bonanza:

  • First, the BOJ promised to triple the pace of its purchases of stocks and property funds.
  • Second, the bank said it’s going to extend the maturities (buy longer-dated issues) of bonds it’s stockpiling by three years, to an average maturity of 10 years.
  • And third, the bank is going to raise the ceiling of its annual government bond purchases by 30 trillion yen ($267.56 billion) to 80 trillion yen ($713.5 billion).

And if that triple threat wasn’t enough, Japan’s gigantic public pension fund – the largest in the world – said it will start buying more global stocks and exchange-traded funds (ETFs) to jolt its returns.

Holy sugar shack.

Equity markets are soaring higher on the news. Central bank stimulus is sweet music to stocks.

If you want to make money on this news, you buy, buy, and buy stocks and more stocks.

Keep on dancing until the music stops.

Of course, there’s just one little problem. Eventually, all that sweet stuff will give global markets a heart attack…

In the meantime, enjoy the treat. I’ll tell you when the party’s over and it’s time to slim down on stocks and short everything.

More from Shah Gilani: The triple-digit moves we’ve been seeing so much of lately in the Dow Jones Industrial Average are telling. And they’re not likely to go away any time soon. Here’s why market volatility is the new normal…

The post Bank of Japan QE “Treat” Is a Massive Global Trick appeared first on Money Morning 

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US Gets A BoJob As Federal Tax Collections Zoom Higher, Treasury Hoards Cash http://wallstreetexaminer.com/2014/10/federal-tax-collections-zoom-higher-treasury-hoards-cash-and-us-gets-bojob/ http://wallstreetexaminer.com/2014/10/federal-tax-collections-zoom-higher-treasury-hoards-cash-and-us-gets-bojob/#comments Fri, 31 Oct 2014 18:57:23 +0000 http://wallstreetexaminer.com/?p=215283 That’s right. Uncle Kuroda, the head of the Bank of Japan is giving US a BoJob and for today at least, the US stock market was feeling it. Of course, markets top out when everything looks magnificent and they couldn’t look much brighter than they do right now.

This post is an excerpt from today’s weekly Professional Edition post on the Federal Government’s cash flows. Each week these reports show in brief the details of those key flows and explains what they tell us about the US economy in real time, as well as  their impact on Treasury supply and the stock and bond markets. 

The big market mover on Friday was the BoJ’s announcement that it would increase its asset purchase rate from around $70 billion per month in US dollar equivalent terms to around $85 billion or so. Simultaneously Japan’s massive public pension fund said it would buy more stocks and fewer JGBs.  Specifically, the fund will buy approximately $150-160 billion of foreign stocks over an unspecified time. Apparently the BoJ will buy bonds from the pension fund, financing the fund’s effort to acquire more stocks. The BoJ is printing money to buy stocks. We don’t have to guess the impact.

So the Fed is quitting QE? Who cares? Japan is giving us a BoJob. As The Last Ponzi Game Standing in the world, US stocks will attract more than their share of that cash. Treasuries may occasionally catch a bid as well.

Fed, BoJ Balance Sheets and US Stocks- Click to enlarge

Fed, BoJ Balance Sheets and US Stocks- Click to enlarge

 

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Japan Goes All In http://wallstreetexaminer.com/2014/10/japan-goes-all-in/ http://wallstreetexaminer.com/2014/10/japan-goes-all-in/#comments Fri, 31 Oct 2014 17:31:40 +0000 http://alantonelson.wordpress.com/?p=1593 This is a syndicated repost courtesy of RealityChek. To view original, click here.

I was already having a hard enough time trying to figure out whether to focus this morning on three big data releases or on some of the other economic and non-economic developments crowding the headlines – and then the Japanese government rocked the economic world with two mega-announcements.

So the Labor Department’s Employment Cost Index, the Commerce Department’s survey of personal incomes and saving, and the Chicago purchasing managers‘ new monthly sounding all will have to take a back seat to the Japanese central bank’s unveiling of a massive new stimulus program, and the Japanese government pension fund’s announcement that it’s going to start investing considerably more in stocks both in Japan and around the world.

There’s no need to review the most obvious implications of this news. Just Google “Bank of Japan” and “GPIF” (Government Pension Investment Fund). You’ll quickly see that the former’s decision to buy many more Japanese government bonds, along with stocks and other financial assets, is expected to boost the prices of the such assets all around the world, further weaken Japan’s yen, and fend off another bout of deflation — with all the damage that would do to the Japanese and global economies. Financial assets will also get a major lift – all else equal of course! – from the Japanese government employee pension fund (the world’s biggest public sector investor) shifting its strategy to buying more stocks in Japan and abroad.

To me, the less obvious implications matter more, especially these two:

First, one of the biggest long run dangers of the unprecedented central bank stimulus programs adopted to contain the financial crisis is that investment capital around the world will be spent badly. The idea is that if investors know that the Federal Reserve and the European Central Bank or the Bank of Japan will ride to their rescue with yet more credit if they make mistakes in allocating funds, the discipline that’s supposed to be one of the main virtues of free markets and capitalism will be badly eroded and possibly destroyed.

The crisis itself clearly was fueled in the first place by the glut of credit provided by the Fed in particular during the bubble decade. Super-easy money encouraged both Wall Street and homeowners to bid up the price of fundamentally unproductive assets like houses wildly beyond sensible levels. Government housing subsidies and implicit guarantees didn’t hurt, either.

The Fed doesn’t buy stocks but its Japanese counterpart has invested in exchange-traded funds and real estate investment trusts. Now the Bank of Japan will triple those purchases, along with boosting its bond buys. Is it remotely possible that this step will increase the efficiency of capital allocation in Japan, the United States, or anywhere?

In addition, the $1 trillion-plus Japan government pension fund, the world’s largest public investor, will more than double its holdings of Japanese and foreign stocks to 25 percent each. Of course, public pension funds have long been major players in financial markets. But U.S. funds hire private sector investment professionals to manage their portfolios. That hardly makes them perfect, but at least they have a history of responding in standard ways to market (and more recently, government and central bank) signals.

The GPIF’s portfolio, by contrast, is run by government bureaucrats. Moreover, they’re bureaucrats from the Japanese government, whose devotion to free markets has been historically difficult to spot. I’m someone who actually thinks that Tokyo has a good record of intervening in the economy, especially in manufacturing. But that doesn’t mean I have much confidence in it as a stock- or sector-picker – which of course is a different animal altogether from identifying approaches to nurture the long-term development of industries. Moreover, why would anyone hewing to the conventional wisdom about Japan’s allegedly disastrous penchant for “picking losers” believe that its leaders will now suddenly start making decisions that improve the efficiency of their own economy, let alone economies anywhere else?

The second less-than-obvious set of implications of Japan’s new policies concerns trade flows and trade policy. As widely recognized, the extra BOJ bond-buying has already brought the yen to roughly seven-year lows versus the U.S. dollar. The question Washington needs to ask is why it’s still pursuing a Trans-Pacific Partnership trade deal when the biggest economy involved in the talks so far outside the United States, which already has a strong record of protectionism, has just moved to cheapen the price of its exports and raise the price of its imports – and all for reasons having nothing to do with market forces?

Further, this latest instance of Japanese currency manipulation will likely affect trade flows more than Fed easing ever could – even if ZIRP and QE haven’t been accompanied by a stronger, not weaker dollar. For as defenders of this Japanese exchange-protectionism keep ignoring, the BOJ isn’t simply mimicking the Fed because monetary easing policies in a mercantile, production and export-led economy like Japan’s will always have fundamentally different – and inevitably more protectionist – effects than easing policies in a consumption- and import-focused economy like America’s.

Finally, even though Washington reportedly is more determined than ever to ignore foreign currency devaluations in the mistaken belief that its leading, and slow-growing, trade partners deserve such help, the much weaker yen is likeliest to spur similar moves – or the introduction of other beggar-thy-neighbor measures – in other mercantile, export-led economies in Asia, notably Korea and China.

Without a meaningful U.S. response – meaning a sharp turnabout in import- and deficit-friendly American trade policies – the inevitable results will be an even bigger U.S. trade shortfall, a consequently weaker American recovery, and reflation of the global imbalances that played such a prominent role in triggering the financial crisis to begin with. Unless, finally, this time, for reasons no one has yet identified, it really is different?

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Market Stronger Than Dirt – LINK CORRECTED http://wallstreetexaminer.com/2014/10/market-stronger-than-dirt/ http://wallstreetexaminer.com/2014/10/market-stronger-than-dirt/#comments Fri, 31 Oct 2014 14:57:53 +0000 http://wallstreetexaminer.com/?p=215222 Cycle screening measures remain extremely strong. The last time the aggregate measure was above +1000 for 8 straight days was in October of last year, and before that, March 2009. But it may not mean the same thing this time. This report covers what the numbers portend.

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Get daily updates on the 4 week, 6-7 week, 13 week, and 6 month cycle projections in the Wall Street Examiner Professional Edition Daily Market Update. In addition you get multiple time frame cyclical, regression channel, and equal width channel support and resistance chart updates, in essence, a roadmap to guide your trading, daily in the Wall Street Examiner Professional Edition Daily Market Update.

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Good Bye Mr. Gold, We Always Believed In You http://wallstreetexaminer.com/2014/10/good-bye-mr-gold-we-always-believed-in-you/ http://wallstreetexaminer.com/2014/10/good-bye-mr-gold-we-always-believed-in-you/#comments Fri, 31 Oct 2014 13:10:26 +0000 http://wallstreetexaminer.com/?p=215254 Gold is going the way of Mr. Hanky the Christmas Poo this morning. Precious metals stocks are also in an outright crash. This report covers the revised short term through long term price targets for the metal and the precious metals stock sector.

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The BOJ Jumps The Monetary Shark—–Now The Machines, Madmen And Morons Are Raging http://wallstreetexaminer.com/2014/10/the-boj-jumps-the-monetary-shark-now-the-machines-madmen-and-morons-are-raging/ http://wallstreetexaminer.com/2014/10/the-boj-jumps-the-monetary-shark-now-the-machines-madmen-and-morons-are-raging/#comments Fri, 31 Oct 2014 13:05:15 +0000 http://davidstockmanscontracorner.com/?p=27247 This is a syndicated repost courtesy of David Stockman's Contra Corner » Stockman’s Corner. To view original, click here.

This is just plain sick. Hardly a day after the greatest central bank fraudster of all time, Maestro Greenspan, confessed that QE has not helped the main street economy and jobs, the lunatics at the BOJ flat-out jumped the monetary shark. Even then, the madman Kuroda pulled off his incendiary maneuver by a bare 5-4 vote. Apparently the dissenters——Messrs. Morimoto, Ishida, Sato and Kiuchi—-are only semi-mad.

Never mind that the BOJ will now escalate its bond purchase rate to $750 billion per year—-a figure so astonishingly large that it would amount to nearly $3 trillion per year if applied to a US scale GDP. And that comes on top of a central bank balance sheet which had previously exploded to nearly 50% of Japan’s national income or more than double the already mind-boggling US ratio of 25%.

In fact, this was just the beginning of a Ponzi scheme so vast that in a matter of seconds its ignited the Japanese stock averages by 5%. And here’s the reason: Japan Inc. is fixing to inject a massive bid into the stock market based on a monumental emission of central bank credit created out of thin air. So doing, it has generated the greatest front-running frenzy ever recorded.

The scheme is so insane that the surge of markets around the world in response to the BOJ’s announcement is proof positive that the mother of all central bank bubbles now envelopes the entire globe. Specifically, in order to go on a stock buying spree, Japan’s state pension fund (the GPIF) intends to dump massive amounts of Japanese government bonds (JCB’s). This will enable it to reduce its government bond holdings—built up over decades—– from about 60% to only 35% of its portfolio.

Needless to say, in an even quasi-honest capital market, the GPIF’s announced plan would unleash a relentless wave of selling and price decline. Yet, instead, the Japanese bond market soared on this dumping announcement because the JCBs are intended to tumble right into the maws of the BOJ’s endless bid. Charles Ponzi would have been truly envious!

Accordingly, the 10-year JGB is now trading at a microscopic 43 bps and the 5-year at a hardly recordable 11 bps. So, say again. The purpose of all this massive money printing is to drive the inflation rate to 2%. Nevertheless, Japanese government debt is heading deeper into the land of negative real returns because there are no rational buyers left in the market—-just the BOJ and some robots trading for a few bps of spread on the carry.

Whether it attains its 2% inflation target or not, its is blindingly evident that the BOJ has destroyed every last vestige of honest price discovery in Japan’s vast bond market. Notwithstanding the massive hype of Abenomics, Japan’s real GDP is lower than it was in early 2013, while its trade accounts have continued to deteriorate and real wages have headed sharply south.

So there is no recovery whatsoever—-not even the faintest prospect that Japan can grow out if its massive debts. The latter now stands at a staggering 250% of GDP on the government account and upwards of 600% of GDP when the debts of business, households and the financial sectors are included. And on top of that there is Japan’s inexorable demographic bust—–a force which will shrink the labor force and squeeze even further its tepid growth of output as far as the eye can see.

Stated differently, Japan is an old age colony which is heading for bankruptcy. It has virtually no prospect for measurable economic growth and a virtual certainty that taxes will keep rising —since notwithstanding the much lamented but unavoidable consumption tax increase last spring it is still borrowing 40 cents on every dollar it spends.

So 5-year JGBs yielding just 11 bps are an insult to rationality everywhere, and a warning that Japan’s financial system is a disaster waiting to happen. But even that is not the end of it. Having slashed its historic holdings of JCBs, the GPIF will now double it allocation to equities, raising its investment in domestic and international stocks to 24% each.

Stated differently, 50% of GPIF’s $1.8 trillion portfolio will flow into world stock markets.  On top of that—the BOJ will pile on too—-tripling its annual purchase of ETFs and other equity securities. This is surely madness, but the point of the whole enterprise explains why the world economy is in such extreme danger. A Japanese market watcher caught the essence of it in his observation about the madman who runs the bank of Japan,

Kuroda loves a surprise — Kuroda doesn’t care about common sense, all he cares about is meeting the price target,” said Naomi Muguruma, a Tokyo-based economist at Mitsubishi UFJ Morgan Stanley Securities Co., who correctly forecast more stimulus today.

That’s right. Its 2% on the CPI…..come hell or high water.  There is not a smidgeon of evidence that 2% inflation is any better for the real growth of enterprise, labor hours supplied and economic productivity than is 1% or 3%.  Its pure Keynesian mythology. Yet all the world’s central banks are beating a path toward the same mindless 2% inflation target that lies behind this morning’s outbreak of monetary madness in Japan.

Folks, look-out below.  As George W. Bush said in another context…..this sucker is going down!

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