Excluding Obamacare, US Economy Contracted By 2% In The First Quarter

As if the official news that the US economy is just one quarter away from an official recession (and with just one month left in the second quarter that inventory restocking better be progressing at an epic pace) but don't worry - supposedly harsh weather somehow managed to wipe out $100 billion in economic growth from the initial forecast for Q1 GDP - here is some even worse news: if one excludes the artificial stimulus to the US economy generated from the Obamacare Q1 taxpayer-subsidized scramble, which resulted in a record surge in Healthcare services spending of $40 billion in the quarter, Q1 GDP would have contracted not by 1% but by 2%!

S&P 500 Pushes To All Time Highs On First Economic Contraction In Three Years

What do you do when GDP prints twice as bad as expected... buy stawks! And so it is that -1.0% GDP print for Q1 has been greeted with a buying drive in S&P 500 futures to lift it back near all-time record highs this morning. Gold, silver, and the USD are also rising.. and bond yields are rising very modestly.

Initial Claims Drop Near Cycle Low "As Good As It Gets" Levels

The flip-flopping noise of the initial claims data continues as last week's spike and miss is rebounded into this week's beat and drop. At 300k - down 27k from last week - initial claims are at their lowest since May 2007 - practically as good as it gets. Continuing claims continue to fall - now at 2.63 million - to the lowest in the cycle and lowest since Nov 2007. Continuing claims are falling at the fatest pace since 2010.

Our "Make It Look Good" Economy Has Failed

The essence of the U.S. economy is make it look good: never mind quality or long-term consequences, just make it look good today, this week, this month, this quarter: make the pink slime look like meat, make the company look profitable, make the low-quality product look good enough to close the sale, make the unemployment rate low enough to justify re-electing the toadies currently in power, make the body count of bad guys look good, and on and on--just makes the numbers look good now, the future will take care of itself. When rigged numbers are the basis of our success, we have failed.

Watch As Ukraine Helicopter With 14 Troops On Board Is Shot Down

Events in Ukraine may have been moved to the backburner because not only are they not impacting US equities but have somehow managed to push Russian stocks to pre-sanction highs, but that does not mean that there is any de-escalation in the self-proclaimed eastern regions of Donetsk and Slavyansk where fighting between pro-Russian groups and Kiev army rages on. The latest incident took place a little over an hour ago when Pro-Russian rebels in eastern Ukraine shot down a military helicopter near Sloviansk, killing 14 people, the country's outgoing president says. This attack took place following a weekend of heavy fighting in Donetsk following a push against "terrorists" by the new president that left many rebel soldiers dead.  The helicopter was hit during heavy fighting between Sloviansk and Kramatorsk on Thursday after it had dropped off troops at a military base, reports said.

Frontrunning: May 29

  • Snowden: 'no relationship' with Russian government (Reuters)
  • Bond Surge Worldwide Drives Index Yield to One-Year Low (BBG)
  • Shares flirt with record highs on ECB easing bets (Reuters)
  • Goldman Shuns Bonds Pimco’s Gross Favors in ‘New Neutral’  (BBG)
  • Porn may be messing with your head (Reuters)
  • Dish to Become Largest Company to Accept Bitcoin (AP)
  • To Make a Killing on Wall Street, Start Meditating (BBG)
  • Apple to get Beats, music mogul Iovine for $3 billion (Reuters)
  • Fink Says Leveraged ETFs May ‘Blow Up’ Industry  (BBG)

Buying Of Bonds And Stocks Continues In Event-Free Overnight Session

The complete implosion in volume and vol, not to mention bond yields continues, and appears to have spilled over into events newsflow where overnight virtually nothing happened, or at least such is the algos' complete disregard for any real time headlines that as bond yields dropped to fresh record lows in many countries and the US 10Y sliding to a 2.3% handle, confused US equity futures have recouped almost all their losses from yesterday despite a USDJPY carry trade which has once again dropped to the 101.5 level, and are set for new record highs. Perhaps they are just waiting for today's downward revision in Q1 GDP to a negative print before blasting off on their way to Jeremy Grantham's 2,200 bubble peak after which Bernanke's Frankenstein market will finally, mercifully die.

The Middle Class Will Die Within 30 Years Leaving "A Wealthy Elite & Sprawling Proletariat"

If we continue down this path of ignorance, we will be left with a "tiny elite and a huge sprawling proletariat" who have no chance of "clawing their way out of a hand-to-mouth existence," is the loud and clear message from UK government advisor David Boyle. As The Telegraph reports, Boyle cautions, "we won't own our own homes, we won't be able to afford it," adding that "we cheerled the rise of property prices not realising that it would destroy, if not our own lives, but the lives of our children." His conclusion, "the middle classes have to wake up to prevent it happening and to create a political movement that will do it."

Snowden Says "Stranded In Russia By State Department"; Kerry Blasts "Man-Up And Come Back To US"

This evening's interview between Edward Snowden and NBC's Brian Williams is already stirring up controversy. In one excerpt, Snowden blames the State Department for "stranding him" in Russia, saying he "never intended" to wind up there. John Kerry has been quick to react to this "For a supposedly smart guy, that’s a pretty dumb answer, frankly," Kerry said. "If Mr. Snowden wants to come back to the United States today, we'll have him on a flight today." In an interview with Chuck Todd on MSNBC, Kerry called Snowden a "coward" and a "traitor," adding that "he should man up and come back to the United States," the secretary of state said. There is a live special at 11ET (below) after the televised interview.

Commuters Herded Like Cattle As China Escalates Its Own "War On Terror"

We have often said that while 9/11 was a horrible event, our collective response to it has been the real tragedy ( How I Remember September 11, 2001 post). A terrible event is no excuse to become such scared children that we would relinquish the basic freedoms our ancestors fought so hard to secure for us. The only people who really benefit from an expansion of the surveillance state and a loss of liberties are the rich and powerful. With China’s economy in free fall and increased violence occurring, it appears the leadership there is taking a page out of our post 9/11 playbook. This is what the commute looks like at train stations in Beijing...

 

Chart Of The Day: Global Youth Unemployment

We have some bad news... for Africa: according to the latest data released by the International Labor Organization, your youth unemployment problem is almost as bad as that of Europe.

Bacon Prices To Soar Even More: The Pig Diarrhea Virus Is Back For Round Two

The last time we looked at the rather unpalatable issue of soaring bacon prices back in March, it was the direct result of exploding, no pun intended, prices of lean hogs stricken by the aptly named porcine epidemic diarrhea (PED) virus, which killed up to 7 million pigs and pushed the price of pork and its derivatives to record highs. We have bad news: according to Reuters an Indiana farm has become the first to confirm publicly it suffered a second outbreak of a deadly pig virus, fueling concerns that a disease that has wiped out 10 percent of the U.S. hog population will be harder to contain than producers and veterinarians expected. That's right, the PEDv, aka pig diarrhea bug, is back, and this time it may have mutated.

Japanese Retail Sales Collapse By Most On Record

Given the pre-tax-hike surge, the oh-so-smart economists around the world were expecting some give-back from dragged-forward demand but the 13.7% MoM decline missed expectations by 2 percentage points. This was the largest MoM decline on record. Talking heads are already blaming the tax hike (but they knew all about it?) and year-over-year was just as dismal (and less immediately prone to events) as it fell by the most since the 2011 Tsunami. Bad news (the worst) is good news though right? Well no - USDJPY is down as is Nikkei as remember, Japanese inflation pressures are building and Kuroda has pushed off any actions from the BoJ for now.

Market Timing With Dennis Gartman: "The Market Will Stop When It Stops, Not A Moment Before"

Renowned for something, Dennis Gartman has outdone himself once again (again). After explaining that bonds are rallying on pension fund rebalancing but stocks should not be lower and shorting bonds never works; the bearded market-timing philosopher gives a glimpse of the kind of insight that can only be purchased for $29.95: "the market will stop when it stops; not a moment before."

Things That May You Go Hmmm... Like Spamazon and Flutter

During the first internet boom, the business model of South Park's Underpants Gnomes was commonplace, as scores of companies flooded the marketplace, sustained purely by the promise of future profits that would somehow magically appear. As Grant Williams scoffs in his most recent letter, it was the corporate embodiment of George Costanza’s “yada, yada, yada”: “First we build a company... yada, yada, yada... we make billions.” Of course, most of these companies went the way of the dodo; but remarkably, a mere 14 years after the bursting of the original internet bubble, there are signs of what Yogi Berra so beautifully referred to as “déjà vu all over again” - signs which some real heavyweight financial minds have recently highlighted...

"I've Been Investing Since January & I've Never Seen Anything Like It"

“I don’t know what to say. I’ve been investing since January and I’ve never seen anything like it.” – Unnamed Hong Kong housewife during the Asian financial crisis of 1997/8.

What follows is a continued personal perspective on some of the challenges facing today’s investor...

NYPD Prepares To Use Drones As CA License Plate Readers Stir Controversy

One of the many civil liberties related themes we have focused on over the past several years has to do with how emerging technologies can pose a threat, first to our basic 4th Amendment rights, and then ultimately to freedom itself. Two of the most high profile technologies in this regard, and which have extremely high potential for abuse, are license plate readers and drones.