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02Jun2015 Market Close: The Markets Getting Ready For A Crash?

Written by Gary

U.S. stocks turned higher today, reversing their morning declines, when bond markets and the U.S. dollar sold off sharply. Greece's debt standoff continued as oil prices rose to the highest level of the year and expectations of a fifth straight weekly decline in U.S. crude supplies. Lower highs and lower lows has been the markets trend for the last 7 sessions alarming some savoy investors and analysts of an imminent downturn.

Todays S&P 500 Chart

The euro vaulted toward its biggest one-day gain against the dollar in more than two months, as signs of movement in creditors' standoff with Greece triggered another round of volatility in currency markets.

Wall Street was little changed as investors fretted over Greece's shaky finances.

Global growth is languishing, corporate revenues too, but CEOs are trying to show they can grow their companies the quick and easy way. Cheap debt is sloshing through the system while yield-hungry investors offer their first-born to earn 5%. And this cheap debt along with vertigo-inducing stock valuations have created the largest M&A boom the US has ever seen, with May setting an all-time record.

The Market in Perspective

Here are the headlines moving the markets.

Blood On The Street In The Big Boys' Markets: Bonds & Dollar "Blatter"-ed

We suspect more than a few professional traders can find some analagous context with this clip after today's turmoil... (forward to 1:30 if it does not automatically jump)

Quite a day...



0400ET Early drop on hotter-than-expected EU inflation

0500ET Ramp on Greek deal rumors once again

0815ET Airline Bomb Threats send stocks lower

0830ET BTFDers ignore those headlines - stocks jump

0915ET Dijsselbloem dismisses deal - stocks drop

0945ET S&P touches 50DMA and bounces

1000ET Terrible Factory Orders data - stocks surge

1130ET Rip to new highs as algos latched on to Crude's spike - run stops

1200ET VIX monkey-hammered lower surges stocks

1400ET Stocks start to rollover on no news

1430ET NYMEX Closes, oil-stock link fades and stocks drop into red

1445ET RTRS headline bullshit on EU agreement on terms for Greece

1500ET Great Auto Sales data bumped stocks briefly but faded

* * *

While stocks traded like an EKG today, the big story is in FX and Bond markets where turmoil was an understatement...

The USDollar was crushed today... down a stunning 1.8% as EUR spiked over 2% ahead of tomorrow's ECB conference

This is the 2nd biggest down day for the Dollar since March 2009...

Chief Says I.R.S. Struggles to Stay Ahead of Online Attackers

The head of the Internal Revenue Service said the agency was hamstrung in protecting taxpayer identities by software so antiquated that its makers are no longer updating it.

Greece's creditors draft deal to unlock aid, Athens resists

BRUSSELS/ATHENS (Reuters) - Greece's creditors drafted the broad lines of an agreement on Tuesday to put to the leftist government in Athens in a bid to conclude four months of acrimonious negotiations and release aid before the cash-strapped country runs out of money.

Goldman executives take victory lap in debate over business model

NEW YORK (Reuters) - Senior Goldman Sachs Group Inc executives took a victory lap on Tuesday, telling an investor conference that the bank's recent results show they have been right all along about its trading-heavy business model.

U.S. stocks slip; utilities fall as bond yields jump

(Reuters) - U.S. stocks dipped late Tuesday afternoon as a jump in bond yields weighed on utilities, but gains in energy shares and optimism that Greece may be close to a deal with its creditors limited losses.

Bits Blog: Pinterest Brings E-Commerce to Social Bookmarking With a Buy Button

Pinterest, the online scrapbooking site, enters the ecommerce realm with a "Buyable Pins" button that enables people to purchase items through its site.

Greece Breaks America's Heart, Will Sign MOU With Russia For Gas Pipeline

Greece has received what The New York Times recently described as "dueling sales pitches" on two proposed natural gas pipelines.

One proposal comes from Russia, where the Kremlin is keen to use the tumultuous negotiations between Athens and creditors to advance Moscow's energy and geopolitical interests. Moscow hopes to essentially buy Athens' participation in the Turkish Stream pipeline which, as a reminder, will allow Russia to bypass Bulgaria by piping gas through Turkey, then through Greece, Serbia, and Hungary straight to the Austrian central hub.

(Greece's options)

Some have suggested over the past several months that Athens may be able to secure an advance on its potential profits from the pipeline, thus giving Greece some much needed breathing room in what have a series of suffocating negotiations with the troika. This would suit Vladimir Putin just fine as it would allow him to solve the South Stream â€'problem' while securing a Greco-Russo economic and energy alliance just as Europe debates how to proceed with regard to the conflict in Ukraine. For its part, Europe has responded by filing antitrust charges against Gazprom.

The US proposal involves The Southern Gas Corridor, a project aimed at "improving the diversity of the EU's energy supply" â€" in other words, it's an ...

5 Investing Myths Debunked

Submitted by Lance Roberts via STA Wealth Management,

1) The Market Has Generated 10% Annual Returns

One of the biggest myths perpetrated by Wall Street on investors is showing individuals the following chart and telling them over the "long-term" the stock market has generated a 10% annualized total return.

SP500-LongTerm-Nominal

The statement is not entirely false. Since 1900, stock market appreciation plus dividends have provided investors with an AVERAGE return of 10% per year. Historically, 4%, or 40% of the total return, came from dividends alone. The other 60% came from capital appreciation that averaged 6% and equated to the long-term growth rate of the economy.

However, there are several fallacies with the notion that the markets long-term will compound 10% annually.

1) The market does not return 10% every year. There are many years where market returns have been sharply higher and significantly lower.

2) The analysis does not include the real world effects of inflation, taxes, fees and other expenses that subtract from total returns over the long-term.

3) You ...

Last Two Times This Happened, Stocks Crashed

Wolf Richter www.wolfstreet.com www.amazon.com/author/wolfrichter

Global growth is languishing, corporate revenues too, but CEOs are trying to show they can grow their companies the quick and easy way. Cheap debt is sloshing through the system while yield-hungry investors offer their first-born to earn 5%. And this cheap debt along with vertigo-inducing stock valuations have created the largest M&A boom the US has ever seen, with May setting an all-time record.

There may be a sense of desperation among CEOs as the Fed's cacophony evokes interest rate increases, the first since July 2006. So companies are issuing all kinds of cheap debt while they still can. Bond issuance has totaled over $100 billion per month in the US for the past four months, the longest such streak ever, according to Bank of America Merrill Lynch.

And that record issuance doesn't account for the booming "reverse Yankee issuance," where US corporations take advantage of the negative-yield absurdity Draghi has concocted in Europe and issue euro-denominated bonds into European markets.

"Issuers should realize that the window to lock in low long-term yields for any purpose is closing," Hans Mikkelsen, a senior strategist at BofA, wrote in a note, according to the Financial Times. And so in May, M&A deals hit an all-time record of $243 billio ...

Petrobras Pays Up: The High Price Of Issuing A 100 Year Bond

The scandal-surrounded, junk-rated, state-managed Brazilian oil producer Petrobras managed to successfully issue a $2.5 billion notional 100-year bond yesterday. Mainstream media is cock-a-hoop over the fact that the 'market' seemed to soak this bond up so easily and at a yield of 8.45% (which was 20-30bps below guidance) amid an order book apparently up to asround $10 billion. However, for those with some math skills, the truth is that it cost Petrobras around $380 million more than market-implied levels to successfully launch the bond (and so it should).

Petrobras is not the first to issue a Century-bond (as the following chart from Bond Vigilantes shows back in 2010)

But this was the largest recent issuance.

Petrobras pricing details...

Rio de Janeiro, June 1st, 2015 - Petróleo Brasileiro S.A. - Petrobras announces the pricing of its 100-year Global Notes denominated in U.S Dollars (U.S.$) issued by its wholly-owned subsidiary Petrobras Global Finance B.V. ("PGF") and ...

Wal-Mart to raise wages for 100,000 U.S. workers in some departments

(Reuters) - Wal-Mart Stores Inc said it would raise minimum wages for over 100,000 U.S. employees including some department managers and deli workers, its second wage hike this year.

IMF economists say some countries can 'just live with' high debt

WASHINGTON (Reuters) - Some countries with high public debt levels might be able to "just live with it," because cutting back carries its own risks, three IMF officials said in a paper that disputes decades of dogma about the benefits of austerity.

Itau, Bradesco, Santander Bid on HSBC's Brazil Unit

Itau Unibanco Holding SA, Banco Bradesco SA and Banco Santander Brasil SA have bid to buy the Brazilian unit of HSBC Holdings PLC, according to four people close to the talks.

Greece Challenges Creditors With New Proposal to Break Debt Impasse

Athens unveiled a plan to unlock financial aid, as creditors like the European Commission and I.M.F. were working on their own proposal.

DealBook: Reflections on Stress and Long Hours on Wall Street

Wall Street has always thrived, in part, on its eat-or-be-eaten culture. Would curbing its competitive nature cut into its success?

A 10% Correction Now Or A 20% (Or More) Bear Market Later On

Via ConvergEx's Nichaolas Colas,

If U.S. equities feel brittle, they should. Even though the S&P 500 is up 2.6% on the year, all that gain has come since early April - Q1 was a washout for large caps with the headwind of a stronger dollar. Valuation of 18x current year earnings means domestic stocks are priced for perfection in a distinctly imperfect world: negative revenue growth for multinational companies, increasingly negative earnings comparisons, and a domestic economy stuck in (at best) first gear.

Yes, central bank liquidity from Japan and Europe may well push global equity markets higher. But what we really need is a pullback - that classic 10% correction that flushes out weak hands, reestablishes the discipline of "Risk" in the "Risk-Return" equation, and shows capital markets how to do more than just follow central bank liquidity. So watch June's price action in U.S. stocks very carefully, because this process needs to start now. The bull market that began in March 2009 is now an ancient bovine indeed.

After all, better 10% now than 20% or more later in the year. The first is inconvenient. The second is unwelcomed.

One of the greatest - if largely forgotten - stories from ancient Greece is a text called the "Anabasis". Written by soldier and writer Xenophon around 400 BC, it tells of 10,000 Greek mercenaries stuck deep inside the Persian Empire and very far from home. Their sponsor, Cyrus the Younger, had managed to get himself killed and with no local sponsorship the 10,000 have to retreat all the way from what is now Baghdad to the Black Sea, some thousand-plus miles to the north. On the way th ...

Fed's Brainard: global troubles weighing on U.S., may delay rate hike

WASHINGTON (Reuters) - It may be impossible for the Federal Reserve to raise interest rates until the rest of the world economy improves, Fed board member Lael Brainard said on Tuesday, in the most direct acknowledgement yet of how weak global markets could handcuff the U.S. central bank.

Fed Mouthpiece Jon Hilsenrath Furious "Stingy" US Consumers Refuse To Buy The "Recovery" Propaganda

No commentary necessary on this piece originally posted on the Wall Street Journal by Jon Hilsenrath (the same ad hoc, trial ballooning Fed mouthpiece whose work as it relates to the Federal Reserve has to be precleared by the Federal Reserve itself as we first reported five years ago).

And no, to our best knowledge, this is not the WSJ transforming into the Onion.

from HILSENRATH'S TAKE: A LETTER TO STINGY AMERICAN CONSUMERS

Dear American Consumer,

This is The Wall Street Journal. We're writing to ask if something is bothering you.

The sun shined in April and you didn't spend much money. The Commerce Department here in Washington says your spending didn't increase at all adjusted for inflation last month compared to March. You appear to have mostly stayed home and watched television in December, January and February as well. We thought you would be out of your winter doldrums by now, but we don't see much evidence that this is the case.

You have been saving more too. You socked away 5.6% of your income in April after taxes, even more than in March. This saving is not like you. What's up?

We know you experienced a terrible shock when Lehman Brothers collapsed in 2008 and your employer responded by firing you. We know stock prices collapsed and that was shocking too. We also ...

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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