For First Time Majority Finds President Untrustworthy: Obama Approval Plunges Among Young Americans

Whatever the deteriorating economy could not achieve (courtesy of Ben Bernanke's relentless bubble blowing and pumping of the S&P 500-driven "wealth effect" distraction) for the past four years, one NSA whistleblower succeeded in a few short days, when earlier today, CNN - hardly a media known for its criticism of the administration - released a new poll according to which not only did Obama's approval rating drop by 8% in the past month, "one of the sharpest, fastest plunges in his presidency" to 45% from 53% (the first time the majority had a negative opinion of the president), not only did the majority find Obama to not be honest and trustworthy for the first time ever in his presidency, but Obama's support with one of his core constituencies - young Americans under 30 - imploded, plunging by 17 points. CNN adds: "That's particularly discouraging heading into 2014 because Democrats have felt they have a lock on the youth vote after the 2012 elections. "The drop in Obama's support is fueled by a dramatic 17-point decline over the past month among people under 30, who, along with black Americans, had been the most loyal part of the Obama coalition," CNN Polling Director Keating Holland said."

When The "Worked So Far" Meme No Longer Works

We have discussed the idea of a VaR shock (driven by Abe/Kuroda's loss of control) a number of times recently but as Saxo's Steen Jakobsen fears, reality is about to hit as the marginal cost of capital normalizes. The world, so far, has been kept in artificial equilibrium by the way quantitative easing (QE) and fiscal policies bring support and endless liquidity to the 20 percent of the economy that mostly comprises large and already profitable companies and banks with good credit and good political access. The premise for supporting these companies is based on the non-existent wealth effect which unfairly culminates in supporting the haves to the detriment of the have-nots. However, as Jakobsen notes below, things are rapidly changing; the recent increase in yields has happened despite no real improvement in the underlying data. The the next few days are potential major game changers – the bloated VaRs will make people hedge and over hedge, and the normalization process of rising risk premiums and higher real rates (higher yield plus lower inflation) will lead to more selling off of those trades that have "worked so far"... and increase volatility in their own right.

Bonds Versus Stocks - Just Ask Japan

The impact of substantially higher interest rates are not good for the economy or the financial markets going forward.  In the short term consumers, and the financial markets, can withstand small incremental shifts higher in interest rates.  There is clear evidence historically to suggest the same.  However, sustained higher, and rising, interest rates are another matter entirely. Before we get too excited, it is important to keep in perspective the recent "surge" in interest rates that has gotten the market's attention as of late. In reality, this is nothing more than a bounce in a very sustained downtrend. While there is not a tremendous amount of downside left for interest rates to go currently - it also doesn't mean that they are going to substantially rise anytime soon.  Weak economic growth, an aging demographic, rising governmental debt burdens and continued deflationary pressures can keep interest rates suppressed for a very long time.  Just ask Japan.

What The Fed Is Looking At

A sense among investors that the global economy is unraveling has injected tremendous volatility into the markets. As Bloomberg's Rich Yamarone notes, if the global equity market decline is not a “Sell in May” event, but the beginning of a great unwinding, then the economy, skating on thin ice, may be even more susceptible to recession. However, most of the US equity disconnect from the reality of weak data (and other markets) can be laid at the feet of the Fed's ever-generous monetary policy. However, given all of this 'weakness' - or missing of Fed benchmarks that we discuss below - that the Fed is well aware of, we ask again, why would so many members have been out discussing 'Taper' if it were not due to their concerns of broken markets and bubble conditions.

FT Joins The Fray: "Fed Likely To Signal Tapering Move"

It seems not only the entire developed world is sick and tired of Hilsenrath's "leaks" which have now become so grotesquely self-contradictory, not even Hilsenfollowers can make out the Hilsenfact from the Hilsenjoke. So it appears the Fed has now picked the FT as its interim pass through vehicle: "Ben Bernanke is likely to signal that the US Federal Reserve is close to tapering down its $85bn-a-month in asset purchases when he holds a press conference on Wednesday, but balance that by saying subsequent moves depend on what happens to the economy."

Greek Prime Minister Folds, Will Restart Public Broadcaster

Greek Prime Minister Samaras offers to allow the immediate restart of ERT broadcasting: government source #breaking

— Reuters World (@ReutersWorld) June 17, 2013