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05Jun2015 Market Close: Markets Closed Mixed With The DOW Off 0.31%, Indicators Signaling Investors Seriously Concerned About Current Events

Written by Gary

Volatility ruled the day moving back and forth across the unchained line where the large caps closed down in the red and the small caps solidly in the green. Oil moved smartly from its morning lows to new session highs while the U.S. dollar remained relatively quiet near its morning highs. Overall market trend is down.

Todays S&P 500 Chart

The $SPX closed below the 50DMA for the second session and the DOW closed below the 145 DMA which is not a comforting stat for the bulls. A spinning top candle for the day, which could mean a reversal in market direction if confirmed tomorrow, would be welcome to the bulls.

The Market in Perspective

Here are the headlines moving the markets.

The Next Round of the War on Cash Will be Even More Aggressive

For six years straight, the Fed has been trying to "trash" cash.

First it cut interest rates to zero... making it so that savings deposits produced almost nothing in the way of interest income. Consider that at current rates, a retiree with $1 million in savings earns a measly $2,500 per year in interest income.

The Fed's hope was that by making it painful for savers to sit in cash, said savers would move into risk assets such as bonds and stocks. This has worked in that stocks are now in one of, if not THE biggest bubbles in history... while bonds are trading at yields never before seen outside of war-time.

However, this has now created a NEW problem for the Fed.

With bonds yielding so little, (AND increasingly volatile due to the lack of liquidity caused by QE), cash is once again looking increasingly attractive.

Put it this way, if you had a choice between having your cash earn next to nothing but remain stable vs. watching your capital gyrate by 5% or more per year (while still earning next to nothing), which would you take?

The answer is easy: you'd pick cash. Sure, you'd make next to nothing... but it sure beats the roller coaster ride you get in stocks or bonds. Indeed, cash actually produced the SAME return as stocks did last year... without the volatility!

This has created a REAL problem for the Fed... and it's going to result in a far more aggressive campaign ...

Dow, S&P 500 end lower after payrolls report

NEW YORK (Reuters) - The Dow and S&P 500 eased on Friday as increasing views the Federal Reserve could raise rates as early as September offset optimism over further signs of recovery in the U.S. labor market.

Waltons fend off shareholder bid to loosen their control of Wal-Mart

FAYETTEVILLE, Arkansas (Reuters) - Wal-Mart Stores Inc's founding family maintained its control of the world's No. 1 retailer as the board named a Walton family member chairman, and shareholders defeated a measure calling for an independent chair.

Artist's Impression Of Iran Nuclear Deal "Monitoring"

Presented with no comment...


Walmart, Lagging in Online Sales, Is Strengthening E-Commerce

Trailing Amazon in e-commerce sales, Walmart is starting a new online shipping program, hiring tech employees and pledging to invest $1 billion in online operations.

Dollar Soars on Robust Jobs Data

The dollar soared to a 13-year high against the yen and rose against the euro on Friday after a U.S. jobs report signaled a strengthening labor market.

Creditors Give Puerto Rico Agency a 2-Week Extension

Puerto Rico's cash-strapped power authority will have another two weeks to reach a deal with creditors after proposing a plan to restructure its finances this week.

Confused Economists Ponder Missing Wage Growth "Mystery"

On Thursday, in "â€'Where's My Raise?': American Workers Suddenly Realize The â€'Recovery' Isn't Real", we once more took up the topic of America's missing wage growth.

The idea that unemployment is trending lower while wage growth remains stagnant is perplexing to central bankers and although we solved this apparent mystery some three months ago, we understand that for PhD economists, it takes a while for things to sink in, which is why we're happy to explain once more that there is in fact wage growth in America â€" just not for 80% of the workforce.

We suspect this still hasn't hit home for the central planner/ Ivory Tower crowd, but we're at least encouraged to learn that Fed economists are thinking very "seriously" about this vexing problem and indeed, the WSJ has taken the time to lay out nine prevailing theories from some of the country's â€'finest' economic minds.

Without further ado, here are some proposed explanations for non-existent wage growth in America, straight from your favorite Fed researchers:

1. The labor market simply hasn't healed from the 2007-09 recession, according to Chicago Fed economists Daniel Aaronson and Andrew Jordan.

2. Sluggish productivity growth and other long-term changes in the economy, such as workers' declining labor ...

Greek PM rejects 'absurd' proposal from lenders

ATHENS (Reuters) - Athens delayed a 300 million euro payment to the International Monetary Fund on Friday and Prime Minister Alexis Tsipras spurned an "absurd" proposal from lenders in the impasse that threatens to push Greece into bankruptcy and out of the euro.

Deutsche Bank probes $6 billion suspected money laundering: source

(Reuters) - Deutsche Bank AG is looking into possible money laundering transactions by some of its clients in Russia which could exceed $6 billion, a source familiar with the matter told Reuters on Friday.

Greek Banks On Verge Of Total Collapse: Bank Run Surges "Massively" As Depositors Yank 700 Million Today Alone

While the Greek government believes it may have won the battle, if not the war with Europe, the reality is that every additional day in which Athens does not have a funding backstop, be it the ECB (or the BRIC bank), is a day which brings the local banking system to total collapse.

As a reminder, Greek banks already depends on the ECB for some 80.7 billion in Emergency Liquidity Assistance which was about 60% of total deposits in the Greek financial system as of April 30. In other words, they are woefully insolvent and only the day to day generosity of the ECB prevents a roughly 40% forced "bail in" deposit haircut a la Cyprus.

The problem is that a Greek deposit number as of a month and a half ago is hopefully inaccurate. It is also the biggest problem for Greece, which has been desperate to prevent an all out panic among those who still have money in the banking system.

Things got dangerously close to the edge last Friday (as noted before) when things for Greece suddenly looked very bleak ahead of this week's IMF payment and politicians were forced to turn on the Hope Theory to the max, promising a deal with Europe had never been closer.

It wasn't, and instead Greece admitted its sovereign coffers are totally empty this week when it "bundled" its modest 345 million payment to the IMF along with others, for a lump 1.5 billion payment, ...

"The Job Numbers Literally Do Not Add Up"

By Jeff Snider of Alhambra Investment Partners

Payroll Stats Become Even More Implausible

Since Q1 GDP was revised lower by almost 1% that meant estimates of productivity were going to be even more out of alignment than they were at the first release. Of course, in a less massaged environment productivity might have preserved some sense if there was less rigidity from the BLS on the employment side. In other words, when "output" estimates were reduced (and they were, by more than GDP) it would make sense that everything would be revised downward in a more cohesive process. Instead, output was reduced significantly, by 1.4%, while total hours worked was marked down by all of 0.1%.

As a result, productivity is revised from a nonsensical -1.9% to an even more skeptical -3.1%.

If this was just a one-quarter problem, then it would be easy to dismiss as random variation or expected variance in all these statistics trying to tie together across real economy lags and such. But that is not the case, as productivity, and by extension the estimates for how "expensive" marginal labor is and thus the primary reason businesses hire and fire in the first place, has been seriously "off" for some time. With these latest estimates and revisions, productivity is now -0.7% over the last 5 quarters dating ...

Fed seen raising rates in October as job market firms

(Reuters) - After an unexpected surge in U.S. job gains in May, traders are now betting the Federal Reserve will start raising interest rates as soon as October, and will make a second increase early next year.

Merrill Gives Brokers Bigger Leeway to Slash Fees

Merrill Lynch executives told the firm's brokers this week that they would be allowed to slash fees by 15% or more on wealthy accounts.

QE Breeds Instability

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

Central bankers have promised ad nauseum to keep rates low for long periods of time. And they have delivered. Their claim is that this helps the economy recover, but that is just a silly idea.

What it does do is help create the illusion of a recovering economy. But that is mostly achieved by making price discovery impossible, not by increasing productivity or wages or innovation or anything like that. What we have is the financial system posing as the economy. And a vast majority of people falling for that sleight of hand.

Now the central bankers come face to face with Hyman Minsky's credo that â€'Stability Breeds Instability'. Ultra low rates (ZIRP) are not a natural phenomenon, and that must of necessity mean that they distort economies in ways that are inherently unpredictable. For central bankers, investors, politicians, everyone.

That is the essence of what is being consistently denied, all the time. That is why QE policies, certainly in the theater they're presently being executed in, will always fail. That is why they should never have been considered to begin with. The entire premise is false.

Ultra low rates are today starting to bite central bankers in the ass. The illusion of control is not the same as control. But Mario and Janet and Haruhiko, like their predecessors before them, are way past even contemplating the limits of their powers. They think pulling levers and and turning switches is enough to make economies do what they want.

Nobody talks anymore about how guys like Bernanke stated when the crisis truly hit that they were entering â€'uncharted territory'. That's intriguing, if only because they're way deeper into that territory now than they were back then. Presumably, that may h ...

Fed Unable To Comply With Congressional Subpoena Due To Criminal Probe

On October 3, 2012, consulting firm Medley Global Advisors sent a newsletter to clients entitled "Fed: December Bound." The "special report" essentially constituted an early leak of the minutes from the FOMC's September meeting, at which the central bank launched the third installment of QE.

An internal investigation by then-Chairman Bernanke revealed that indeed, some members of the committee had met with the firm that year but the names were not disclosed.On April 15, Congress sent Yellen a letter requesting that the Fed furnish a list of names no later than April 22.

That deadline came and went with no response.

On May 4, the Fed acknowledged a DoJ and OIG criminal investigation into the leak, and in the same letter, Yellen admitted that indeed, she had met with the analyst who penned the newsletter at the center of the controversy:

Subsequently, The Committee on Financial Services subpoenaed the Fed for records related to the central bank's review. Now, the Fed has de ...

It's Not The Economy, Stupid, It's The Flow

By now it should be clear, without the flow of Federal Reserve funny money, the wedge between the reality of collapsing macro- and micro-fundamentals and ever-expanding valuation hope-based stock prices is bound to close... and that is why the following 2 charts must be scary for Janet (and every asset-gathering commission-taking talking head out there).

The Wedge: (the Fed-engineered gap between reality and unicorns)

And the flow: (the rate of change of The Fed balance sheet - as opposed to the level or 'stock' of The Fed balance sheet - is what matters after all, via NJC)

So once again we'll ask, as we have ever since 2014: is the Fed simply rising rates just so it badly crashes the economy and has the cover to launch QE4, the same way Russian sanctions crippled Germany's economy and led to the ECB's very first episode of bond monetization?

China's IPO Market Leaves U.S. in the Dust

China has overtaken the U.S. this year as the world's top venue for IPOs, riding a steady stream of small-cap listings in Shanghai and Shenzhen together with several multibillion-dollar brokerage offerings in Hong Kong.

OPEC Keeps Output Unchanged

OPEC will keep its collective output level unchanged at 30 million barrels a day, the second time in six months it decided to take no action amid a global glut of crude and weak oil prices.

Sturdy U.S. jobs report boosts chances of Sept Fed rate hike

WASHINGTON (Reuters) - U.S. job growth accelerated sharply in May and wages picked up, signs of strong momentum in the economy that bolster prospects for a Federal Reserve interest rate hike in September.

Teva raises its stake in acquisition target Mylan

(Reuters) - Teva Pharmaceutical Industries Ltd has increased its stake in Mylan NV to nearly 2.2 percent as it presses on with an unsolicited bid for its generic drug-making rival, a regulatory filing showed on Friday.

This Is The Fed's "Second Biggest Nightmare" According To Citigroup

Two weeks ago, Citigroup presented what it thinks is the biggest nightmare for the Fed: it said that the FOMC's "biggest worry is not lift off and its market and economic implications, but what happens if the economic recovery dies of old age without the Fed having done anything to tighten." And, according to Citi's FX strategists, "if this were to occur, the USD would probably fall faster than it rose from July-March." A precursor to loss of faith in the Dollar's reserve currency status perhaps.

Today, Citi's Steven Englander lays out what is the Fed's second biggest nightmare: a rebound which is so fast, the Fed's entire carefully planned renormalization schedule collapses.

Some further details:

Based on current trends we will be at zero unemployment before we are at 2% inflation (Figure 1). This is unlikely, even if you are a dedicated trend follower, so we have to decide which trend will bend first. It's tempting to say that the unemployment trend will bend first because going to zero unemployment is a bit like breaking the speed of light. Paraphrasing Herbert Stein, if two trends are incompatible, they will collide, it will turn. However, it is quite plausible that unemployment is will keep on trend long enough for inflation to turn up. Moreover, given the strong employment bounceback that so far is not matched on the demand side, we could get a third quarter in a row of negative productivity and stunning unit labor cost numbers. This note examines the implications for asset markets and the USD of the Fed getting to its inflation targets quicker than the trends in Figure 1 and money market pricing would suggest.

Lehman to Pay Barclays $1.28 Billion

Lehman Brothers Inc. will pay Barclays PLC $1.28 billion, settling a long-running legal fight with the bank that bought its brokerage business days after the investment bank collapsed.

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