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15Sep2015 Market Close: Markets Close Higher, DOW Closed At 229, But The Caution Flags Are Waving

Written by Gary

U.S. stocks climbed unexpectedly today as investors awaited a U.S. interest-rate decision on Thursday. The current thought is that the Fed will not raise rates which many investors support. Also in the news, the Obama administration does not support a House bill to lift the ban on U.S. oil exports. Crude earlier climbed up to the resistance of $45 barrel on news of a House vote later this month on lifting the 40-year ban and closed in the mid 44's.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Amazon's Jeff Bezos ups his stake in billionaires' space race

CAPE CANAVERAL, Fla. (Reuters) - Amazon founder Jeff Bezos unveiled plans on Tuesday to build a rocket manufacturing plant and launch site in Florida to better compete with fellow billionaires using their fortunes and tech prowess to open a new frontier in human space travel and exploration.

Explosive Allegation: Citigroup Leaked Central Bank Trading Activity To Select Clients

For years we had been wondering when it would start: by "it" we mean angry ex-bankers, disgruntled due to either the terms of their termination, their compensation, or generally unhappy with their treatment by their former employee, standing up and blowing the whistle on crimes they witnessed while (un)happily employed.

Then, over the past month, the answer has emerged as not one, not two, but at least six individual case have emerged in which former currency traders at Citigroup, HSBC, Lloyds and other banks have seen former employees sue their previous bosses. As Bloomberg reports, "some of the traders say they were unfairly swept up in clear-outs of currency desks at the center of regulatory probes into the manipulation of foreign-exchange markets."

And now they want revenge.

The reason for the wrath is that as a result of the crackdown on FX manipulation more than 30 traders were fired, suspended or put on leave over the last two years. However, as the Tim Hayes of Libor manipulation "rain man" fame has shown, in many cases those fired were merely the lowest men on the totem pole, and their termination was meant to cover up the crimes of individuals much higher up in the food, and value, chain. Indeed, Bloomberg adds, in the years after the 2008 financial crisis, fired bankers were telling London employment judges they had been made scapegoats for systemic failings.

Since most employment claims in the U.K. must be filed within three months of a dismissal to be allowed to proceed, they tend to come in clusters: and once one former worker shows there is little to lose, others quickly join in.

More importantly, since damages in employment cases are normally capped at about 78,300 pounds ($121,000), unless there is a finding of discrimination or the claimant wins status as ...

Destroying The "There Are No Signs Of An Imminent Recession" Meme In 4 Charts

Day after day investors are treated to 5-Star Morningstar managers, so-called "strategists", economissseds with entire religions on the line, and circus barkers who proclaim that: a) The US is decoupled from the rest of the world; and/or b) The US is the cleanest dirty shirt; an/or c) There are no indications that the US economy is near a recession. Here are four simple charts - from, just today's data - that destroy this glass half full and rose-colored ignorance of reality...

1) Business Inventories-to-Sales are at recesssion-inducing levels...

1a) Sidenote 1 - Wholesale Inventories relative to sales have NEVER been higher...

1b) Sidenote 2 - here is why that is a problem...

2) Industrial Production is - as would expeted given the inventories - rolling over into recession territory...

For the Fed, Markets May Be Flashing a Wait Sign

As Fed policy makers ponder this week whether and when to raise rates, an important factor in their decision will be whether to wait to see if the recent turmoil in stocks, bonds and currencies point to unanticipated troubles in the global economy, writes Greg Ip.

"A Few People Are Going To Drown": Oil Patch Financing Dries Up As BTFDers Back Up The Truck

To be sure, we've had our fair share at the retail crowd over the course of the dramatic decline in crude prices that began to accelerate late last year after Saudi Arabia decided to bankrupt the US shale space once and for all even if it meant killing the petrodollar in the process.

The thing about retail money is that it has a tendency to take the following rather simplistic view of asset prices: "that's gone down a lot and I've heard the guys on TV talking about â€'babies being thrown out with bathwater' so what I'll do is conduct some armchair due diligence on the way to snapping up some â€'undervalued' names." This mentality is affectionately known as "BTFD," and make no mistake, when the Fed is, as Jeremy Grantham recently put it, "bound and determined to engineer an asset bubble," buying the dips isn't necessarily too bad of a strategy.

The problem, however, is that when it comes to crude, the dynamics are complex, which means there are all manner of things going on behind the scenes, some are readily discernible to someone who understands a few basic concepts and knows how to read a 10K (PV-10 responds with a lag to price slumps), some less readily discernible but still easy enough to figure out if one is willing to invest a little time (the hedges are about to roll off and the second round of revolver raids is coming), and some req ...

U.S. grocery chain Albertsons to press ahead with IPO: sources

(Reuters) - U.S. supermarket chain Albertsons Companies Inc is moving ahead with plans for an initial public offering in late September or early October that could value it as much as $24 billion, including debt, according to people familiar with the matter.

Is This The True State Of The US Labor Market?

Despite all the confidence-inspiring propaganda from any and every mainstream talking-head, CEOs are cautious about the U.S. economy's near-term prospects and are trimming business plans for hiring and capital investment over the next six months. According to The Business Roundtable, the CEO Economic Outlook Index tumbled 7.2 pts, from 81.3 in Q2 to 74.1 in Q3...

"The downward trend in CEO plans for investment and hiring continues to reflect reasonable caution regarding near-term prospects for modest U.S. growth," said Randall Stephenson, chairman of Business Roundtable and chairman and CEO of AT&T Inc. Stephenson noted that business plans could be negatively affected if Washington fails to act on federal budgets, the debt ceiling and tax extenders.

"Predictability is critical to spur investment and unlock economic expansion and job growth," Stephenson said. "Congress and the Administration need to work together to pass a prudent spending plan and renew expired tax provisions. U.S. workers cannot afford the instability that comes with inaction."

But most worrisome is the disparity between CEO's employment perspective and the BLS 'augmented reality' having never been higher.

Which Asset Class Will Be Most Impacted By A Rate Hike?

Going into Thursday, everyone - and we do mean everyone - is scrambling to predict which asset classes are most susceptible to a Fed hike.

As we explained over the weekend, there's quite a bit of ambiguity this time around and not just because a third of Wall Street has never seen a rate hike in their professional careers.

The prolongation of ultra accommodative monetary policies across the globe (to the point that what was once "unconventional" might now fairly be classified as thoroughly "conventional") and the failure of the Fed to normalize while it had the chance, has served to create a situation where Janet Yellen is effectively boxed in. Liftoff risks destabilizing an already precarious situation in emerging markets where a Fed hike risks exacerbating capital outflows, pressuring already beleaguered commodity currencies, and ultimately magnifying the scope of the tightening far beyond what 25 bps would normally entail by forcing EMs to liquidate more FX reserves to support their flagging currencies.

There's also a risk that a hike forces some LatAm central banks to adopt pro-cyclical measures (i.e. hikes) to ensure that continual currency weakness doesn't result in too much pass-through inflation - this is a potential landmine, as hiking into a soft economy risks choking off growth at a pivotal time. And then there is of course China, where the PBoC's schizophrenic attempts to find an elusive middle ground between a free float and hard management of the yuan would be immeasurably complicated by a hawkish Fed.

All of the above is made that much more confusing ...

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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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