While not nearly as impressive as this week's preceding 2- and 5-Year auctions, both of which saw whopping central bank demand and record low Dealer awards, today's 7 Year belly of the curve auction showed continued strong demand for US paper in what is rapidly becoming the most "liquid" market, that of primary issuance.
The mainstream media mouthpieces for the establishment peddle false narratives, disingenuous storylines, and outright propaganda to keep the ignorant masses confused, oblivious to reality, misinformed, and passively submissive to the opinions of highly paid “experts” and captured fiscal authorities. We are living in hard times. The reason tens of millions of Americans are rejecting the establishment and voting for Trump and Sanders is because of economic hardship. Most Americans have been screwed over by the system and are finally getting fed up. They aren’t exactly sure who screwed them, how they were screwed, or how to stop getting screwed, but they are angry. And someone is going to pay. The status quo is beginning to get nervous. Their usual propaganda, scare tactics and misinformation campaigns don’t seem to be working.
Having been debate-shunned by Hillary "ain't got time for that" Clinton, Vermont Sen. Bernie Sanders agreed Wednesday night to debate presumptive Republican nominee Donald Trump. Sanders, who was "disturbed but not surprised" that Hillary backed out of the California debate (ironic as Sanders is surging in polls ahead of the June 7th primary) enthusiastically tweeted "Game On" in response to Trump's agreement on Jimmy Kimmel Live to debate the Democrat contender, noting "it would have such high ratings." Imagine the protests outside of that event.
The Fed’s paint-by-the-numbers Keynesian incrementalism leaves it blind to the underlying rot in the US economy and to drastically over-estimate its capacity to maintain a stable growth equilibrium. In fact, corporate America is being strip-mined by Fed-fueled financial engineering and flyover America is sinking irretrievably into debt, dependency and shrinking living standards.
Officials from 11 U.S. states sued the Obama administration on Wednesday to overturn a directive telling schools to let transgender students use bathrooms matching their gender identity, decrying the policy as "a massive social experiment." Joining Texas in the lawsuit was Alabama, Georgia, Louisiana, Oklahoma, Tennessee, Utah, West Virginia and Wisconsin, plus Arizona's Department of Education and Maine's governor. "We are willing to fight this all the way to the Supreme Court if we have to," Republican Texas Attorney General Ken Paxton told reporters in Austin.
Hillary Clinton's closest aide Cherly Mills is comfortable with the release of the transcript of her deposition in the Hillary Email debacle, but has demanded that no audio or video be released because it "may be publicized in a way that exploits Ms. Mills’ image and voice in an unfair and misleading manner.” Or said otherwise, Mills doesn't want her body language or shakiness in her voice - as she answers questions about the way Clinton managed communications - to be shown to the public.
The OPEC meeting is only a week away, but the chances of a positive result are as remote as ever. Rising oil prices, the heightened rivalry between Saudi Arabia and Iran, and Saudi Arabia’s willingness to go it alone will make a deal all but impossible. "I don't think OPEC will decide anything," a source from a major oil producer in the Middle East told Reuters. "The market is recovering because of supply disruptions and demand recovery." An OPEC delegate told Reuters that any changes to the cartel’s policy is off the table. “Nothing. The freeze is finished,” the OPEC source said.
On the heels of the 17-sigma beat in new home sales, pending home sales soared 5.1% MoM in April - 6.5 standard deviations above economist estimates of a 0.7% jump. Pending home sales rose for the third consecutive month in April and reached their highest level in over a decade, according to the National Association of Realtors. All major regions saw gains in contract activity last month (with The West surging 11.5% MoM) except for the Midwest, which saw a meager decline.
Bill Gross, who manages the $1.3 billion Janus Global Unconstrained Bond Fund, said he is moving to sell credit risk and insurance on market volatility rather than buying long-term debt, because he believes a day of reckoning will come when central banks will no longer be able to prop up asset prices and investors will withdraw from markets.
As we warned previously, the devaluation, or breaking of the Saudi Riyal peg to the dollar, could be the black swan event for crude oil and the recent weakness in SAR forwards - while not as violent as Nigeria's Naira - certainly signals a renewed market fear that breaking the peg is imminent. It appears Saudi officials are none too pleased with the free markets speculating on this devaluation and as Bloomberg reports, banks in Saudi Arabia are coming under fresh pressure over products that allow speculators to bet against the kingdom’s currency peg, according to people with knowledge of the matter, which were supposedly banned in January.
Interestingly, privilege serves the same purpose--benefiting the few at the expense of the many--regardless of the system's ideological labels. Socialist, Communist and free-market elites loot their populaces and national wealth with equal gusto. Those who came to do good and stayed to do well first accumulate privileges, which they then leverage into wealth and power.
Core Durable Goods Orders tumbled 0.8% MoM and 6.7% YoY - down 15 of the last 18 months. However, following drastic revisions across the entire time series and thanks to a surge in military spending (+3.7%) and non-defense aircraft (+64.9% - bringing back memories of Boeing's aberration from a year or two back) the headline Durable Goods print rose 3.4% MoM. More worrying for GDP enthusiasts is the 0.2% decline in durable goods inventories in April for the 4th straight month.
"For our positions here at TGL… and we have had a terrible run this past week given that our largest position is and has been and shall continue to be gold and further given that we came into the week short of equities on balance and had to turn our trading ship around amidst this massive, violent rally that did indeed catch us off guard… we are up a scant 1.0% for the year-to-date"
WTI and Brent Crude oil prices have both broken above $50 for the first time since October 2015 this morning - almost doubling off its Feb 11th 26.05 lows. The immediate catalyst appears to be a combination of inventory drawdowns in US crude, continud US production cuts, and further supply disruptions (Nigeria specifically), none of which scream demand or growth is going to make a dent in the glut.
Is there anything that would make a gloomy Jeff Gundlach bullish? As it turns out the answer is yes, but it is a big bogey. “The market has been going sideways for 18 months, and when it breaks, either up or down, it should be a large move. So let the market prove itself. If it breaks to the upside, which I define as accelerating above 2,200, it is a good, low-risk, ‘go with’ buy." Aka, chase the momentum in either direction.