Unemployment

If we could put the economics of Bernie Sanders into a nutshell, it would be this: Burden private enterprise with one directive after another, and then demonize it when it ultimately falls down under the awful weight of taxes, higher costs, and mandates. While many people believe that instituting the Sanders economic agenda would help turn the USA into another Sweden or Denmark, the more likely outcome would be turning this country into another Venezuela.

The Jackson Hole gathering may end up providing at least some clarification, but not even close to the manner in which everyone seems intent on inferring. With Janet Yellen’s notable absence, there isn’t the same sort of celebrity about what would have been the media hanging upon every word; that is, after all, what the Federal Reserve has become, not an organ of stability or even expertise but a public relations effort aimed squarely at trying to convince everyone possible that it is. Given the unique circumstances at the moment, the real issue is not whether they might raise rates but just how much systemic misdirection has already been revealed even to the least attentive of people.

It's a busy week for the market, and not to mention the Dow Jones-dependent Fed, which will have to parse through reports on Chicago PMI, Construction Spending, ISM (Mfg and Services), ADP, Productivity and Labor Costs, Factory Orders, Trade Balance, and the weekly highlight: Friday's Jobs reports.

A defensive trading idea that appreciates during a sell-off and is even better than holding extra cash!

For the moment, to paraphrase Alexander Solzhenitsyn, the “permanent lie [has become] the only safe form of existence”.

But the world cannot postpone, indefinitely, dealing decisively with the economic, resource management, social and political challenges we face.

The stability of global capital markets, the ECB meeting and US employment data are highlights.   Risk seems to be greater than discounted that Sept rate hike is still a distinct possibility.

Look out below... literally!

Simply put, a perfect storm of failing trends...

"Greece’s state insurance funds are resorting to external loans to cover their needs as fears grow that the measures of the third bailout will not be enough to cover the rest of 2015’s liquidity needs."

A half-century ago, America - and then the world - was rocked by a mighty stock-market crash that soon turned into the steepest and longest-lasting depression of all time. Those who ignore the lessons of history are doomed to repeat it - except that now, with gold abandoned and each nation able to print currency ad lib, we are likely to wind up, not with a repeat of 1929, but with something far worse...

Home prices rose 4.97% YoY in June, according to Case-Shiller's 20-City index, missing expectations for the 3rd month in a row. Price appreciation has now been flat for 5 months - despite surging home sales - as bubblicious San Francisco saw price depreciation once again. Portland amd Denver saw the most appreciation in June. This is the second month in a row of sequential seasonally-adjusted declines in home prices, and along with TOL's dismal report this morning, suggests maybe another pillar of the 'strong' US economy meme is being kicked out... and Case-Shiller warn more than one rate hike by The Fed (or a stock market plunge) will stymie housing considerably.

Brazil's flagging economy, which is mired in stagflation and remains a slave both to China and to what looks like intractable political turmoil, has destroyed nearly 550,000 jobs YTD. As Barclays notes, " [the July] print is compatible with 140,939 job eliminations, pretty close to the historical low of -154,355 in June."

As asset bubbles are in the way of the Fed’s policy, a decline in stock prices removes the equity market bubble and enables the Fed to print more money and start the process up again. On the other hand, the stock market decline could indicate that the players in the market have comprehended that the stock market is an artificially inflated bubble that has no real basis. Once the psychology is destroyed, flight sets in.

"We conclude that, under current circumstances, it is only a matter of time until Brazil loses its investment grade status."

By starving investors of safe return, activist Fed policy has promoted repeated valuation bubbles, and inevitable collapses, in risky assets. On the basis of valuation measures having the strongest correlation with actual subsequent market returns, we fully expect the S&P 500 to decline by 40-55% over the completion of the current market cycle. The only uncertainty has been the triggers.