11May2016 Pre-Market Commentary: Futures Fractionally Lower, Crude Prices Rising, US Dollar Falling, Morning Short-Term Indicators Mildly Bearish

Here is the current market situation from CNN Money

European markets are lower today with shares in France off the most. The CAC 40 is down 0.83% while Germany’s DAX is off 0.67% and London’s FTSE 100 is lower by 0.14%.

Futures dip a day after S&P rally; Disney weighs

(Reuters) – U.S. stock index futures edged lower on Wednesday, a day after S&P 500 enjoyed its best day in two months and as Dow component Walt Disney reported a rare earnings miss.

Mitsubishi Motors says has cash to ride out widening mileage affair

TOKYO (Reuters) – Mitsubishi Motors Corp is confident it has enough cash to weather a damaging fuel efficiency scandal alone, even as it warned incorrect data may have been used for more of its cars.

Exclusive: U.S. investigates market-making operations of Citadel, KCG

NEW YORK (Reuters) – Federal authorities are investigating the market-making arms of Citadel LLC and KCG Holdings Inc, looking into the possibility that the two giants of electronic trading are giving small investors a poor deal when executing stock transactions on their behalf.

Oil gains on Nigerian supply disruption

LONDON (Reuters) – Oil prices rose on Wednesday as worries about supply disruptions resurfaced after Shell announced the closure of a key Nigerian pipeline.

Stuck with dangerous dollar dominance

LONDON (Reuters) – The world is getting an object lesson on the problems of having one dominant global currency and even the supposed prime beneficiary, the United States, can see the downside.

Deutsche Boerse CEO touts LSE merger, saying ‘size is everything’

FRANKFURT (Reuters) – Deutsche Boerse’s planned $30 billion merger with LSE Group is on track for completion late this year or in early 2017, the German exchange operator’s Chief Executive Carsten Kengeter said on Wednesday.

Panama, Lebanon among recent joiners of global tax info sharing deal: OECD

PARIS (Reuters) – Panama, rocked by a recent major tax scandal, has joined around 100 countries in an agreement to share financial information automatically to tackle tax evasion, the Organization for Economic Cooperation and Development said on Wednesday.

Exclusive: Chipotle hires former critic to help improve food safety

(Reuters) – Chipotle Mexican Grill has retained two leading food safety experts – including a critic of the burrito chain’s early response to disease outbreaks last year – as it redoubles its efforts to guard against health scares.

Disney reports rare earnings miss, shares sink

(Reuters) – Walt Disney Co, an investor favorite for consistently beating Wall Street earnings targets, reported a rare miss on Tuesday as advertising and subscriptions declined at sports channel ESPN and theme park revenue came in weaker than expected.

Gartman: “We Have Suffered One Of Our Worst Days Of The Year”

We were amused to report early on Monday that just as oil was trading within pennies of $46 and set to tumble, while US equity futures were about to commence their biggest two day gain in two months, none other than Dennis Gartman chimed in with yet another can’t miss “prediction” when he said that “it is time to buy crude oil and to sell equity futures, with the only problem now to decide how to weight the position.”

Sadly for the newsletter writer, “retirement fund investor” and CNBC Fast Money regular, there was another far bigger problem: the trade immediately blowing up in his face and as he writes today, “we have suffered one of our worst days of the year.”

For the dramatic admission that Gartman can actually lose “money” read on:

Share prices have risen nearly universally higher as nine of the ten markets comprising our Internaitonal Index have risen, and only the market in Hong Kong has fallen, and even then it has fallen by the barest of margins. As a result, we have suffered one of our worst days of the year in our retirement funds, losing a bit more than 1% as we came into the markets with a modestly bearish point of view and were therefore modestly net short of the equity market. For the record, as of this morning, stocks here in the US as measured by the S&P are up 1.9% for the year-to-date, while stocks in global terms as measured by our Index are still down 2.3%. Further, from their highs made very nearly one year ago ¦ the actual high having been made May 26th of last year when our International Index was marked at 11,188 ¦ stocks are still down a very material 16.5%.

In our retirement account, we are up a mere 4.8% …

Macy’s Massacred After Slashing Outlook On “Uncertain Consumer” As Inventories Reach Record Highs

The retailer apocalypse continues this morning with Macy’s crashing almost 10% in the pre-market after missing top-line and slashing its outlook citing the “uncertain direction of consumer spending,” which seems odd given the confidence with which The Fed, Obama, and every talking head proclaims the US consumer’s health. Comp store sales plunged 6.1% (almost double expectations) and this comes at a time when clothing inventories are at an all-time record high relative to sales.

œWe are seeing continued weakness in consumer spending levels for apparel and related categories. In particular, our sales trend relative to expectations meaningfully slowed beginning in mid-March, and first quarter results are below our original outlook. Headwinds also are coming from a second consecutive year of double-digit spending reductions by international visitors in major tourist markets where Macy’s and Bloomingdale’s are key destinations, as well as a slowdown in some center core categories ” further intensifying the challenges associated with growing topline sales revenue, said Terry J. Lundgren, Macy’s, Inc. chairman and chief executive officer.

Sales in the first quarter of 2016 totaled $5.771 billion, a decrease of 7.4 percent, compared with sales of $6.232 billion in the same period last year. The year-over-year decline in total sales reflects, in part, the 41 stores closed in 2015. Comparable sales on an owned plus licensed basis were down by 5.6 percent in the first quarter. On an owned basis, first quarter comparable sales declined by 6.1 percent.

Noting that the uncertain direction of consumer spending makes predictions of future performance difficult, Macy’s, Inc. now expects full-year 2016 comparable sa …

Paul Singer: “Gold Rally Just Starting” As JPM Predicts A New Gold Bull Market

It was just last week when legendary hedge fund manager Stanley Druckenmiller delivered his latest anti-Fed sermon and once again extolled gold as the asset class to own in these experimental times in which the “bull market in stocks is exhausted”, saying “what was the one asset you did not want to own when I started Duquesne in 1981? Hint ¦it has traded for 5000 years and for the first time has a positive carry in many parts of the globe as bankers are now experimenting with the absurd notion of negative interest rates. Some regard it as a metal, we regard it as a currency and it remains our largest currency allocation.”

Today, it is the turn of that other prominent anti-Fed crusading hedge fund billionaire, Elliott Management’s Paul Singer, who in his latest letter said that gold’s best quarter in 30 years is probably just the beginning of a rebound as global investors weigh the ramifications of unprecedented monetary easing on inflation.

As cited by Bloomberg, Singer said that “it makes a great deal of sense to own gold. Other investors may be finally starting to agree, Singer wrote in an April 28 letter to clients. “Investors have increasingly started processing the fact that the world’s central bankers are completely focused on debasing their currencies.”

He said that “if investors’ confidence in central bankers’ judgment continues to weaken, the effect on gold could be very powerful. We believe the March quarter’s price action could represent something closer to the beginning of such a move than to the end.”

What …

Monetary Analysis With Money, Please

Ever since the U.S. Federal Reserve (Fed) began to consider raising the federal funds rate, which it eventually did in December 2015, a cottage industry has grown up around taper talk. Will the Fed raise rates, or won’t it? Each time a consensus congeals around the answer to that question, all the world’s markets either soar or dive.

This obsession with taper talk ” the interest rate story ” is simple, but strange. Indeed, it is misguided ” wrongheaded. So, why the obsession? It is, in part, the result of a Keynesian hangover. The Keynesians focus on interest rates. The mainstream macro model that is widely in use today is referred to as a œNew Keynesian model. The thrust of monetary policy in this model is entirely captured by changes in current and expected interest rates (the price of money). Money is nowhere to be found, however.

The misguided focus on interest rates not only poses a problem for those who are observing the current economic environment and formulating expectations, but also for those who are interpreting important economic and market events of the past. For example, Nobelist and Keynesian Robert Shiller, in his famous book, Irrational Exuberance, comes to the conclusion that the stock market crash in 1929 was caused by the Fed’s excessively restrictive monetary policy. That’s because Shiller focuses on interest rates and thinks that the Fed’s increase in the discount rate in August 1929 signaled monetary tightening. But, as Elmus Wicker carefully documents in Wall Street, the Federal Reserve and Stock Market Speculation: A Retrospective, which was recently published by the Center for Financial Stability in New York, the Fed was accommodative, not restrictive, prior to the 1929 stock market crash.

This interest rate obsession is amazing, particularly since Keynes dedicates quite a few pages in A Tract on Monetary Reform (1923) to money and its role in national income determination. Then, in his two-volu …

Toyota Struggles to Find That Extra Gear

The world’s largest car maker delivered uninspiring results Wednesday, and a buyback gives shareholders reasons to grumble.

Italian Banks: A Painfully Slow Repair Job Hurts Everyone

The recent panic has been stopped and loan losses are improving. But without sustained efforts at reform, confidence will remain fragile.

Why China’s Bad Bank Needs Another $5 Billion

China Cinda Asset Management’s possible $5 billion preferred share deal tops up capital as swallowing distressed debts gets harder.

The Turnaround In Private And Public Financial Outflows From China

from Liberty Street Economics

— this post authored by Thomas Klitgaard and Harry Wheeler

China lends to the rest of the world because it saves much more than it needs to fund its high level of physical investment spending. For years, the public sector accounted for this lending through the Chinese central bank’s purchase of foreign assets, but this changed in 2015. The country still had substantial net financial outflows, but unlike in previous years, more private money was pouring out of China than was flowing in.

In October 2015, 69.2 Percent Of 2015 High School Graduates Enrolled In College

from the Bureau of Labor Statistics

In October 2015, 69.2 percent of 2015 high school graduates were enrolled in colleges or universities. Recent high school graduates not enrolled in college were about twice as likely as enrolled graduates to be working or looking for work (72.7 percent compared with 36.0 percent).

Outside the Box: What’s driving Saudi Arabia’s shake-up and it’s not just oil

Many Saudis and outsiders will be skeptical of a œreforming Saudi Arabia, but the weekend changes underscore how Saudi Arabia is taking aggressive action to protect itself from what it sees as a future that could be extremely dangerous if the United States continues to pull back, Iran continues to ascend, and young people become disaffected.

Brett Arends’s ROI: This is how much dumb luck it takes to become a billionaire

Nike co-founder Phil Knight’s new autobiography shows that to make a fortune, you need a lot of luck, writes Brett Arends.

Outside the Box: Stock market’s new real estate sector gives REITs a home

The stock market’s new Real Estate sector could bring more investors to REITs, writes John Coumarianos.