Bond

On the heels of yesterday's news that an Illinois cop staged his own suicide after being caught stealing money from a kid's fund, today's news is just pouring more fuel on the fire of public faith in America's police force. Late last month, an Arkansas police officer sparked a manhunt and investigation after claiming a motorist shot him during a traffic stop. In reality, the officer shot himself, and once authorities discovered this, he was subsequently fired and arrested for filing a false police report.

“TR’s motto was to speak softly but carry a big stick, but the ‘speak softly’ means talk to other people, see what we can do to reach agreement.”

Other asset-classes are screaming that deflationary headwinds are very much still in play...

For those eager to cut to the chase and curious if overnight we have had another standard USDJPY ramp levitating US equity futures on low volume, the answer is yes. And since the USDJPY carry was patient enough, it managed to trigger the 2100 ES stops and as of this moment the futures were comfortably on the politically-correct side of 2100.

Why is the price of oil so low now? In fact, why are all commodity prices so low? We see the problem as being an affordability issue that has been hidden by a growing debt bubble. As this debt bubble has expanded, it has kept the sales prices of commodities up with the cost of extraction (Figure 1), even though wages have not been rising as fast as commodity prices since about the year 2000. That period is ending as the productivity of additional debt is falling.

In a "difficult but necessary" decision, Kraft-Heinz will cut 2,600 jobs in the latest post-mega-merger "synergy" bloodbath. Thanks Warren.

Ripped from the scenes of the latest Bond movie, former Walmart CEO Bill Simon, piloting a small plane over Fayetteville, was forced to pop the aircraft's emergency parachute, to slow its landing, as a severe loss of oil pressure sent the plane plunging. No one was severely injured, but as the following clip shows, while things could have been a lot worse, the parachute-slowed plane still took a beating upon 'landing'.

Make no mistake, the War on Cash is very real. And it’s unfolding before our very eyes.

Following today's mauiling of the short end, few were expecting a strong 2 Year auction. They did not get it. As widely expected, the yield of 0.824% jumped from 0.699% a month ago to a level seen in April of 2010. The good news: it wasn't as bad as it could have been: the When Issued was trading at 0.825% at 1pm. The Bid to Cover was ugly too, because at 3.013 this was the lowest implied demand for 2Y paper since May of 2010.

"Absent the central banks, we would be in the later stages of a credit cycle," warns Principal Global Investors's David Blake as 2015 has now seen the most corporate debt downgrades since 2009 and the upgrade-downgrade ratio crashes to financial crisis lows. A lot of people are recognising we are closer to the end of the credit cycle than the beginning, and while stocks have bounced back dramatically as Dana Lyons' details, junk bonds have not; a combination normally associated with more extensive bear markets and recessions. As BofAML analysts warned "the slow moving train wreck seems to be accelerating."

The most entertaining overnight story has to do with the latest farcical development in the Chinese "market" when just after open, it was reported that PBOC Governor Zhou said a trading link with Shenzhen will start this year which promptly sent all Chinese brokerages soaring, and the Shanghai Composite jumped over 3%. And then, out of the blue, the PBOC said the undated comments were actually as of May. As Bloomberg put it, "China’s central bank unintentionally sparked a surge in the nation’s stock market by publishing five-month-old comments from governor Zhou Xiaochuan that said a link between exchanges in Shenzhen and Hong Kong would start in 2015."

"The "bailout culture" often coincides with sustained weak growth because, among other consequences, successful companies have to compete with companies who are alive only because of cheap credit. Overcapacity and inefficient production are engendered by such policies, causing price and profit declines. Failure is an essential element of capitalism, and if failure is politically denied, the most effective, efficient and innovative solutions cannot "win" over the "living dead" who clutter markets and consumer baskets."

"Tent outside - full use of apartment - cheap - $90"

"I have a caravan in my driveway that I'm going to rent out."

If it smells like a rat it probably is a rat, and so it is with respect to these deals by collusion between China and Western governments, and their chosen corporate protégés, whether on currency or trade or investment matters. This is all an exercise in some combination of crony capitalism (with cronies on both sides!) and diplomacy by stealth. The gains and gainers are deliberately kept opaque. The losers are much less evident than the gainers, on whichever side of the fence, but principle and practice tells us that the total losses are much larger than the gains.