JUST WHEN YOU THOUGHT...

...things couldn't get more confusing, along comes today.  Let's review the bidding.  As late as two weeks ago we knew a couple of things for sure:

1.  The Fed was going to have at least three tightening events this year
2.  Manufacturing was on the move
3.  Confidence was way up
4.  There was a ray of sunshine Over There
5.  If you were going to do one thing this year it was stay the hell away from bonds.

Today, the 10 year was at 2.34% from 2.52% and every thing else we knew we found out we didn't. This has been some ride which shows no sign of ending as long as the political parties in this country...and Over There as well stop lobbing absolute bombs at one another.  Yes, the more moderate right came out ahead in Holland which knocked prospects for Mme. LePen down a notch or two but back she comes aided by an apparent infusion of serious cash from a Russian financial institution...SACRE BLU!..a few terrorist inspired murders and a solid showing in the tri-partite debate.  Then of course Greece has been rediscovered and Italy, which has been below the radar has suddenly popped up with recent economic performances which somewhat lag behind those of the aforementioned Greece.  Hozzat happen?  But the big one is next week when, if all goes according to plan, Mrs.May pulls the trigger on BREXIT just as the Euros finally figured out that if (when?) the Brits leave there's going to be hell to pay for those who are left...assuming there is anything left in which one might remain.

The Donald of course didn't help things with what was, honestly, a pretty crass handling of Angie who just wanted a handshake after all.  In a world which for some years now has given itself over to form rather than any substance you would think the guy would be smart enough to play the game at least a little bit.  Nope, not yet but then again he's in the White House with a couple of billion and a wife that makes the former First Lady of France look like the third runner up in the Miss Lug Nut Pageant and I'm going through the fourth  iteration of the new kitchen design.  Maybe that's it: the real world he seeketh not.  Assuming one knows what Beeth the Real World.

I suppose this is a long way of saying we are probably vulnerable to multiple event risks in multiple locations with probably less agreement and coordination among governing parties in the west as we have seen in a long time.  However, I am reminded of the sage wisdom of the great Henry Kissinger who once stated in remarks regarding his former boss that, "zum times it is gut to have people zink the President is a little crazy, ja?"   Funny, a lot of people thought and still think Henry is a bit crazy. Yeah, like a fox, nein?  

"THEY THINK IT'S OVER..."

That was the famous call on the Beeb in 1966 at Wembley as the crowd stormed the pitch believing that England had one the world cup.  More on that in a couple of days, but today the same thing happened in all markets as the Head of the FBI, Mr. Comey, announced late yesterday that there would be no change in his view that Mrs. Clinton should not be prosecuted even after the discovery of new emails on Weiner Waver's computer.  Given the legal nonsense of the previous announcement this was to be expected but the reaction was something else again.

The DOW closed up 371; NASDAQ up 110; markets all over the world rallied on the news.  The conclusion was that Ms. Clinton was now the winner and everyone was cashing in early.  This mantra was repeated all day.  Wonderful stuff except it was all nonsense.  Few humans made a decision all day.  In fact, if one were to look at the S & P which was up 25 on the day, one might have noticed that it hadn't budged from the rise one hour after the announcement which was made on a Sunday Night!
In other words, the machines moved the market, pre-programmed for just this event.  Welcome to the brave new world of investing and meet your new broker, Mr. Algorithm.

I have no idea who is going to win the election tomorrow but I do know this: if Mr. Trump prevails the bloodshed is going to make the missed call on BREXIT look like a boo-boo on a toddler's knee who fell off his tricycle.  Which brings me to this question: if trillions of dollars are at stake because of a pre-programmed machine, has anyone thought of the risk of manipulation simply by a well-planted word or news story?  It is becoming monumental and possibly collusive.  And while admittedly I am way over my head in dealing with this stuff, I'm not sure anyone else out there--at least I haven't heard about it--who has a handle on preventing this from happening. Let's not even talk about the individual investor.  He's dead, he just doesn't know it yet.

So comes tomorrow and the match continues.  No point in mid-match commentary, we'll wait for Wednesday for the post game analysis...if it's over by then.

As they say in Chicago:  Vote early and vote often.

HEY, HEY, CUBBIES!

...as the late, great Jack Brickhouse would have put it/  After a 108 year hiatus, the Chicago Cubs won the World Series.  Prayers answers, dreams fulfilled and who the hell cares about the most important election in the past 108 years.

But, life tho suspended for a moment in time goes on.  Tomorrow is the jobs report which will have less meaning than people thought simply because no one voting cares about anything else by the trials of Hilliary (real and perhaps future ones) and whether The Donald can pull this one out merely by keeping his mouth shut as revelations both from Wiki Leaks and leaks from the FBI point towards a level of corruption and duplicity withing the center of government that in many ways compairs unfavorably to the every day goings-on in Nigeria.  Can one say Third World Republic?  What we are learning is unspeakable if true.

Meantime, in Janet's World, things are still on hold but there are signs that the rate rise is coming in December.  That and the heightened possibility that Trump could actually win this thing or the specter of a crippled Hilliary battling scads of investigations for the next four years sent the DOW down for the seventh day on the trot.  More importantly, however, is the general view as expressed here over the past few days that interest rates are going up world-wide as central banks pull back from the money-creating operations of the past few years.  The Bank of Japan is the latest to essentially declare that mums the word when it comes to continued softening of monetary policy.

That all of this is occurring in the face of not-so-great economic performance as witnessed by third quarter profit reports and economic performance figures world wide is unsettling.  Job numbers, no matter what tomorrow brings have been holding up but besides the bedpan and burger gains a closer examination reveals that there is a lot of part-time work included in the numbers and whilst the government points to wage gains and family wealth performance, the data backing up these "wins" is clearly suspect.  Yet we are OK if not great Over Here.  Over There, I see further signs of economic and political malaise extending into 2017.  If Trump were to win, the effect of the Union could very well be calamitous for the internationalists and Brussels.  Even a close loss will have an effect.  The politics of Europe are, in my mind, the single greatest risk to be faced in the near future...and that's even without BREXIT which took a strange turn yesterday when the British High Court ruled that BREXIT could not go forward without parliamentary approval.  Having bypassed the people's elected representatives and gone directly to the constituency by referendum, it seems a bit odd to throw the whole thing back to the folks from whom it was taken away in the first place.  I mean, like, DUDE, that only happens in California, but then again it might make perfect sense once I read the opinion.

Anyway, we'll keep an eye on this and the number when it comes out tomorrow.  There's a parade in Chicago tomorrow and half the town will be knee-walking tonight so I hope they're still trading on the exchange at 8:30 a.m. EDT.  But the Cubbies did it and good on 'em and their ever-so-patient fans.  Can we all restore normalcy at this stage and go back to rooting for the Yankees?

IF IT GETS ANY ODDER...

I was just getting on the outside of my first see-through last night when all hell broke loose in Asia.  Three minutes after New York had effectively shut down, Sterling fell nealy10% in a blink of an eye in Hong Kong, settling at 1.1830  but with reported prints of 1.15.  Why?  no clue but the uncertain consensus was that was a glitch in certain algorithms or a "fat finger trade' (Chinese are notorious for having fat fingers) or just a computer malfunction.  After the initial shock and throughout the morning, the currency clawed its way back to the 1.23-1.24 range but never quite got back to the point from which it started its fall...in fact it was down nearly 4% and the London close.

The reason were explained as mechanicalbut the fundamentals behind the fall were reported to be the so called "Hard BREXIT" policy line of the May government which has the world all a-twitter that a British government would be so silly as to put politics before commerce irrespective of the fact that is was the politics of the Union that was the subject of the referendum not commerce.  The British people voted "out"and it is what their government is probably duty-bound to give them, but of course for any government to follow the will of its people is frowned upon in smart circles these days.  I mean, after all, how do the people know what's good for them?

Now all this is rather interesting and quite amusing if one thinks about it but today's events convey certain dark images which are worth exploring.

FX trading these days is roughly 70% by machine; the days of ringing up a broker or a trader directly are pretty much gone, which means you can trade from any place on the globe at any time...BUT, if you're going to get a move like today's in Sterling I find it hard to believe that it would not initiate in a major center for the currency...not in Hong Kong.  Then again, the timing was exquisite.  It occurred just minutes after "the book" was "passed" from New York to Hong Kong when there were no other major Asian Markets trading and therefore, by definition, liquidity was at its lowest which would of course magnify any large move in either direction.  Then, too NOTHING that happens in Hong Kong of this magnitude is to be taken as a random event but at the same time how the hell does one get apparently every trading program around to move in the same direction at almost the exact same time?  Beats me.  But folks are trying to find out and in the forefront is the Bank of England.  Stay tuned, because this wasn't random.


As for the jobs number, well of all things I got it wrong.  156,000 new buns and bedpan jobs.  A lousy number if the truth be known but one which certainly takes the pressure off the Fed but surprisingly, the equities dipped slightly and bonds did nothing except firm-up yields slightly.  While the former was viewed as a bit of a surprise, the latter might explain it.  Could it be that the bond market is simply not going to wait for central banks to reach the point of firming but is going to push them there?  There is this feeling of tension highlighted by these strange random events, seemingly unconnected but leaving the impression that something is afoot.  Then there is debate #2 this weekend.  Speaking of things getting odder...

SOMETHING'S A BIT ODD

At least it feels that way.  The pound fell to it's lowest level in thirty years today ostensibly on the announcement by Ms. may that talks will be begin in March on Brexit and the top of the agenda will be immigration.  Supposedly, this put the fear of God into all markets that the UK will be out in the cold, alone, like a poor waif straight out of Bleak House.  Of course this view overlooks the fact that the price of the pound has caused a small boomlet in the British economy through a big jump in exports and the British public seems not to give a toss about it in the first place.  Then again, we are still working off the old EU compact but if the Brits take this attitude and get thrown out.......and with that will end the export of 900,000 German motor cars to the U.K.  Dancing in the streets of Sheffield and Dagenham East to the latest Korean and Japanese pop tunes.  900,000 is a big internal market for the likes of KIA.   As my sons say to me, "Keep in real, dad."  Life is not so easy, and by the by  

     1. There is no joy in the EU as to immigration...certainly not to the extent of losing the Brits over the issue, and
     2.  Ms. May and her mob are a long way from being dumb.  Their timing, as suggested here and other places, may be perfect.

Then there's the small issue of whether the Pound is tanking on it's own or is it because of pressure from the Dollar whose country of origin is desperately trying to convince itself that higher rates are coming, as if a 1/4 of a point even in December would really make a fundamental difference.  Rubbish, but there may be a silver lining in this cloud of uncertainty that being that perhaps--just perhaps--the realization is beginning to set in that we all got this collectively wrong guys and we had better to start trying to figure out ways to get out of it before a bounty is put on the head of any Central Banker found anywhere.

Curiously, if that scenario were to be the case,the  this is the week in which to set the gears in motion.  The World Bank, IMF annual meeting is underway in Washington and whilst nothing of note ever happens in the few days that it runs  aside from the list of CAN YOU TOP THIS cocktail parties and Nirvana for The World's Oldest Profession from six bordering states (alas, Madame Claude is no longer with us hence the class formally brought to the proceedings will be absent), the rumor mill will be in full throated roar and I suspect we shall soon see if Yellen & Cie. are prepared to test the waters.

Anyway, intrigue such as this might be welcome as a replacement (for however brief) to the nonsense we have endured for so long.  Besides, a really good trader's market might come out of this thing for a while.  Good for ol' Charlie as well.  Good, hard copy we call it.  The stuff of dreams.

THE HOME STRECH

After an absolutely perfect weekend in the fly-over zone we are around the club house turn and headed for home.  The election in 60 days; the end to the third quarter; the G-20 (which produced nothing except for Il Duce getting humiliated) and the Fed meeting in a fortnight.  It's going to be a dull three months.

Everybody came back late so yesterday was a washout in more ways than one for our East Coast buds, but what numbers there were tended to be soft.  Same thing today as the whole world seems to be in a bit of a funk. The only really interesting stuff--and not that interesting--was in Europe where the embarrassment among returning politicians and resident geniuses was at a high level as nobody could figure out how they got in so wrong regarding Brexit.  Merry Ol' is the hot spot right now and the Proud Pound has made a heck of a recovery.  Dare I say as predicted?  But on the political front, Angela took a hell of a beating in her home state adding to the list of victories by nationalist parties and now serious concern as to the future of the Union which awaits with great trepidation the coming announcement of the day for the declaration from the U.K.  Amusingly, the guy who should have been right about this, the Guv of the Bank of England, was the one who got it the most wrong which might result, one would hope, in fewer proclamations from him in the coming months, but then again, he's Canadian.  What does he know.

The financial and, unfortunately, the political scene continues to be dominated by the Central Banks of the world more and more clearly in a growing unholy partership with the supposedly elected rulers.    There is occasionally humor in this as over the weekend one Democratic wag announced with great solemnity that Trump must be defeated, "To preserve the independence of the Federal Reserve."  These guys are a laugh a minute, but to give them credit the Fed has yet to succumb to the negative interest craze which has overtaken just about everyone in Europe and around the world.  One stands in amazement at what this has wrought as today it was reported that Italy was sounding the market for an upcoming debt issue of 50 year maturity.  Amount?  Oh, 3 billion Euros should be easy...maybe three and a half.  Four might be a stretch, but....Coupon?  Well, less than 3%.  Purpose?  Well, they'll spend it on something I guess.   Oh.

In this month's edition of Foreign Affairs there appears a letter to the editor by a fellow by the name of David Robinson who is a Senior Lecturer at the Hass School, Berkley, commenting on an earlier article by Martin Feldstein warning about the possible affects of the Fed's easy money policy.  Mr. Robinson believes that this is the "new" norm, that rates will and must stay low and should because there is no indication that the United States has any difficulty in raising even more debt.  This is the Little Paulie Krugman approach to Global Finance:  it's there, spend it while you can.  But the real telling line explaining what has happened is the following:

Lastly the United States has enormous sums of capital--some $24 trillion--held in pension funds.  Although many state and local pension funds are woefully underfunded, they nonetheless have trillions of dollars invested in stocks and bonds.  In a world awash in capital, sustained low rates of return may be the new normal.

No Mr. Robinson, the world is awash in debt not capital and there is a difference.  At a point debt has to be repaid.  Capital seeks risk for investment not merely a return, supposedly without risk as sovereign debt is viewed.  And the list of investors is shrinking.  Unfortunately, the debt--especially the sovereign debt being amassed is not invested for any useful purpose, either here or especially in Europe.  It is used to feed--for want of a better term--the welfare state.  Joltin' Joe has gone away, sir.  There isn't anyone out there who seems to understand this any more.  Stick to plastics Mr. Robinson.  Finance ain't your game.

WHY BOTHER

A thought which came to mind yesterday...and today if I were to be honest.  Breaking news there isn't.  Stale, dull, boring news there isn't.  The Fed finishes up tomorrow and absolutely nothing will happen but to make it seem important the pundits will be hanging on every word.  In case you miss it what will be said is that overall economic conditions improved some what but not enough to justify a  rise in the discount rate at this time, leaving open the possibility for a rise at a later date this year which will not happen.  There will also be some blather about how there remains a clouded view Over There because of BREXIT and the the Fed will be monitoring things going forward.  Back to sleep, children.  So much for international banking.  There was, however, the puff piece of all puff pieces on Fed Governor Lael Brainard on the first business page of the NY Times today.

Ms. Brainard, as has been explained before, is a fiercely partisan Fed governor along with Big Danny Tarullo, who besides being Democrats to the core also share a couple of other traits: they are both very intelligent and broadly disliked.  So, now that the game's afoot, it's time for the Times to rally 'round this Clintonista and start of make her acceptable to the Great Unwashed should Hilary win this thing for surely Lael would just love to be the Secretary of the Treasury in a Clinton administration.  It's wonderful to watch how the next move in a Democratic administration--even one not yet in existence--is forecast by the Times by way of a "news" piece.  No media bias there.  Nope.  Not a bit.

Nothing is going to happen Over Here until the convention is over and August begins this weekend...actually, on Thursday...Over There so that takes care of the western hemisphere.  If we are going to keep a watch on anything in the next month it's going to be currencies because if there is any action, that's where it's going to be.  Christmas has already come early for the Chinese as the Yuan continues to be devalued and there's not a damn thing anybody can really do about it.  Things might get exciting if Mr. Trump has anybody on board who knows anything about this kind of thing but even if he does, there isn't 10% of the voting public who will understand it or for that matter, care.  Not good for Bloggers...especially those dealing with these subjects.  At least the weather is beautiful.  Got me a killer sun tan but no material.  It could be worse.

MAYBE I SHOULD STAY AWAY

The DOW broke its winning streak today.  It's sort of like our class secretary.  It seems nobody dies when he's on vacation.  I keep telling him to never return.  I should probably take my own advice.

Mario Draghi did his thing today at the ECB which was really a lot of nothing which is what was expected.  All one could take away from his comments was that he's still not happy with the direction of the European economy but not so displeased as to initiate another rate cut.  Since everything is negative Over There I still keep trying to figure out why the guy wants to do more of what doesn't seem to work but as I keep saying I'm confused about a lot of things.  Oddly, there was no mention of the state of European banking which strikes me as being the numero uno fly in the ointment at the moment.

DeutscheBank suffered another downgrade this week but it is the entire Italian system that is the focus of the international markets, especially Monte de Paschi di Sienna, the world's oldest bank and far and away the most beautiful bank headquarters ever unless you are completely turned off by 15th century Italian architecture.  It's broke as is most of the system but I can't help believing that Sr. Draghi pays it no interest because he knows damn well that it will not be allowed to fail and the only question is who gets stuck with the bill.  Odds on here it will be the taxpayers of Europe (again) but this one is a bit of a closer call.  The problem of course is that while the problem is immediate, so is August and therefore we must recognize that like manana, domani is a word well-understood in Italy. It's going to get solved because Italy is a real country but with the Brits on the way out, getting there will be a delicate dance to insure that no one follows good ol' Albion in a huff.

Speaking of BREXIT, Ms. May met with Angie yesterday and Frankie Holland today to introduce herself and have some preliminary back and forth on the subject.  Except for the standard press releases, there has been little reporting on the talk...probably because there was nothing of substance to report.  This is like the early rounds of a heavyweight fight; jabbing and probing and faking.  We can certainly back-burner this one until 2017.

OK.  Now we are up to date.  With all this excitement maybe I should have stayed away even longer.  But duty called and I responded.  Besides, I couldn't afford the neighborhood.

WHAT A DIFFERENCE...

a week makes.  We were on the Left Coast for a week at another wedding and had a simply fine time. I thought I had mentioned it, but as a few dropped a line to inquire as to my well-being, I guess I didn't and to those a grateful, "Thank You."  It felt really good.

Anyway, from a 1.33% yield we closed today a6 1.58%  with seven consecutive days of the DOW heading upward.  Nothing but good news despite murders and mayhem all over the world, slaughter in our streets and a Presidential race that some 70 years ago could not have been covered by the public media lest the children be irreparably harmed.  A a wise man once put it, "Do you want to be right or make money?"  Which is why I don't have a private jet.  Air travel is awful by the way.

It feels good to be back although how we are going to pay for this latest sojourn to Fruit and Nut Land is a real question.  It is remarkable to experience what I guess the real world costs after huddling down in the fly-over zone for these many years.  The contrasts are remarkable highlighting an entirely difference aspect of the "two Americas" about which the politicians consistently speak.  Home base was Newport Beach with an old school buddy and his bride and, yes, it is one of the priciest pieces of real estate around but the rest of So. California is a sticker shock of major proportions these days to an old codger like me who--admittedly--never really traveled steerage when earning a buck.  I've returned with a greater appreciation of the generational differences which surround us today and a greater understanding of what might seem dangerous and risky and expensive to me is easily embraced by the millennials in our midst.  There is just so much out there that it seems it will never end.  Of course at some point it will.  Then again, it is a state where millions live on a fault line that will never shift...until it does.  They laugh at it and one cannot help but to admire them for it.  What a generation.

I'm trying to get into a new theme that isn't politically driven but wow, is it going to be hard.  I never watch conventions but if Melania swapped jobs with her old man she could have a vote sitiing here.  Zowie!  And Over There, the new Iron Lady has taken over and put on a good show with her first run-in with Parliament.  BREXIT is almost a thing of the past with the geniuses of the financial markets who will continue to pound the Pound until it is suggested that they stop as a last gasp at proving they were right.  Maybe things are really looking up...perhaps I should sneak away more often.  What a difference...

SO FAR, SO RIGHT

I'm really beginning to enjoy this.  Even took an extra day with the kids but despite a lack of my firm hand, things are going just as I expected.  The Euros are in crisis mode with the ECB of all people calling for the UK to move quickly as to how they wish to get out despite the fact that is obvious to everyone that the Brits have no intention of moving quickly...certainly not before they choose a new PM which will be a woman...again!!! (Don't we look stupid making so much of our situation Over Here?)   It took them about a nanosecond to figure out that the EU needs a deal far more desperately than they do and as every day goes by, their negotiating position improves.  The Euro politicians have buggered this to a fare-thee-well with some real worries ascending as to whether they are going to be able to put the genie back in the bottle.  Meanwhile, the Italians are openly talking about a bail-out of their banking system which, while legal I believe (have to check on that), is certainly not the preferred solution to what appears to be an intractable problem and sent (among other things) Angie off the rails the other day.  But the Italians have a real problem that was once their strength:  like Japan, their voters own the country's debt and in particular, the debt of the banks.  Therefore, if the banks get refinanced, somebody has to pay the price and if that person is Pietro Baccala from down the street instead of some insurance company...well, you get the picture.  Tough call for an Italian politician.

On a broader scale, Europe's worries are having a rather profound effect on global markets.  The rush to safety is palpable.  The 10 year is at 1.33%; the Bund in every maturity is negative; Japan's 20 year turned negative today, and then there's that old canard on which I have been harping: liquidity.

The rush to buy security is a bit different this time.  This is not a trading phenomena; this is a true rush to safety on the part of the buy and hold crowd at precisely the same time that every central bank around--bless their pointy little heads--are trying to pump liquidity into the system in order to spur global economies and manufacture inflation for their wonderful economic models that have been wrong for the past 15 years.  As I have said before, the Fed owns 20% of all Treasury debt outstanding; the ECB more than that...and they are buying corporates as well.  The Bank of Japan...God on;y knows.  The markets are now completely distorted as a result of central bank activity and as the 10 year Note is the touchstone for so many pricing decisions around the world, it is fair to say that no one know what the price of anything should be today.  Sound familiar?  It should.  2007-08 could be described as the greatest credit mispricing in history.  This is a condition looking for a bubble.  One is usually found.  But before that happens, it might very well be that someone needs Treasuries in order to settle something and they will not be available.  If we have a big fail...By the by, looked at the price of Gold lately?  It ain't just me.

Jobs data tomorrow.  There has been a flurry of OK economic numbers in the past week or so, but I am told the good folks on the Street are really concerned about what 8:30 a.m. tomorrow brings.  I f this is another bummer, there could be real fireworks, particularly in light of the fact that the central banks' ammo belts are at bingo.  This number could really be cooked as there is so much at stake.  If not, go long on Sikorsky Aircraft.  Helicopters are the best at dropping money from the sky...and for watching the sun set.

ACCORDING TO GORDON

"Shakespearian over here. Boris gone, stabbed to death by Gove. Boris won us Brexit (not Gove), but now Gove says Boris can't lead the country. Labour's disintegration in the hands of the hard left is accelerating. Europeans now talking about "Brexit Nexit", especially the blond Wilders who runs Holland. Something has been unleashed and slouches towards Bethlehem..."

...And that is all that I know but my bud, Gordon, usually gets it right.  I must admit I was gobsmacked by the news this morning  and I wasn't alone  I know knothing about Gove except what the papers say which is that he is quite brilliant and a total bastard.  Don't have a dog in this fight so we'll just wait and see what happens.

The buy-back is now complete with the Dow up a bundle again today, the 10 year at 1.48% and the pound leveling if albeit at far lower levels...as predicted.  Gold Star for Mrs. James' little boy, Charlie.  As for the future, I think I'll quit while I'm ahead but I still think that the EU should be on the watch list; Greece immediately but certainly Italy and to a lesser extent, Spain.  Then there's the Dutchies...but I leave them to Gordon.

Off to see the mid-west grandkids tomorrow and probably will not be back in harness until Tuesday.  Anyway, have a wonderful Independence Day and a query for our Brit readers...Doesn't it feel good!

AUGUST COMES EARLY

'Twas a grand day.  It started with Cameron back from Brussels where reports had it that he had been battered...and everyone ignored the reports.  Up went the market and by the time things got going in New York, things were really rolling.  The DOW close up 285 points and everything else followed.  The realization that the UK was not going to sink beneath the sea grabbed everyone and the geniuses who predicted disaster were fewer and fewer to be found.  Of course the July 4th. weekend is coming up so a lot of them might have been off to the Hamptons, having gotten square, where they could count their losses and blame them all on the stupidity of the British voter.  As Richard Haass of the Council on Foreign Relations said the other day--in public, mind you--"These issues should never be left to a referendum."  I'm sure he'll convince everyone at Donut du Jour in Sag Harbor this weekend...if the place still exists. After a few, he might consider a little swim in Plum Gut.  Glub, glub.

But wait!  It got better.  After the bell, Big Danny and his mob announced that from their standpoint 33 out of 35 major bank had paid the vig, got the numbers right and passed the capital plans on their stress test.  Announcements of raised dividends and buy-backs immediately followed.  In after hours trading, the entire sector was up.  Keeping in mind that it was this sector that suffered the heaviest losses on Friday and Monday, tomorrow's opening could be through the roof--keeping in mind that I don't know a damn thing about the stock market.

Oh, the two banks that did not pass?  The U.S. units of DeutscheBank and Santander; which is indicative of what the Euros are facing.  After 8 years, their financial sector still hasn't gotten itself out of the deep do-do in which it has been mired.  Frankly, I'm a bit surprised at Santander but NOBODY is surprised at Deutsche and I suspect that there are many others in the same boat who simply don't operate in size Over Here.  Not to panic, however, as  DeutscheBank has its Angie.  Anybody know the German for bailout?

So, what's it all about, Alf?  Back to original prediction.  The howling will die down, July will come and go and all of the Continent will shut down for August.  While this is going on, the Conservative Party will choose a new P.M. from, I suspect, a goodly number of applicants for the job--more than people expect.  He or she will take control when Cameron decides to leave.   Boris is odds-on but there is a reasonable chance that a REMAIN member might get the nod and this could be important.  Cameron's time-table will come to pass as many in the leadership realize that time is on their side and the Euros can't do a thing until the UK invokes article 50, all the time watching as things get nastier both politically and financially.  There will be rumblings to declare Mario Draghi a Living Saint but look out for Greece in this whole thing.  Their bargaining position has just traded on a major up-tick and it will be interesting to see how far they are prepared to push it.  I believe that the time is now for them to get the best possible deal even if a bit has to come direct from the Bundesbank--which is a total no-go, but in times of stress a way could be found.   Anyway, this is a day to day proposition, so let's wait to see what happens tomorrow.  Fascinating, truly fascinating.

STEADY THE BUFFS

"THE BUFFS" is the nickname of the East Kent Regiment--or the 3rd Regiment of  Foot if you prefer.  Supposedly at Waterloo, Wellington, seeing a bit of nervousness, rode among the squaddies and simply said, "Steady The Buffs."  The Buffs steadied and the rest is history.  Never happened of course, but the phrase has been a standby in England for a while.

Well, The Buffs steadied again today...a bit earlier than I thought they would, but steadied none the less.  Sterling was up. equities were way up, Gilts were better, yields were up all about as (predicted) the markets began to take a closer look at what just occurred.  I don't think it's over yet, but if we get another day or so it might just be.

What of course became even more unsettled is the politics of the thing as the Labor leader Mr. Corbyn was on the losing end of a huge "no confidence" vote by his party which he announced he plans to ignore (unsuccessfully, in the end).   Off went Mr. Cameron to Brussels on a "Sorry, lads" trip while his party was doing a bit of casting about looking for a replacement that wasn't named Boris Johnson and who had been in the REMAIN camp whilst at the same time trying to convince themselves that this would not result in the rest of the country storming Parliament seeking blood of politicians.  Johnson is of course crazy as a loon and absolutely brilliant aside from the fact that he would be an absolute kick to watch negotiating with the Euros...either in English or in French with which he is very comfortable...just to get their goat.  He's been known to lapse into Latin from time to time as well just for the hell of it.  Oh my, the material that could come from that!  I can't wait.

But, nothing is certain.  My Really Smart Friend, Larry, rang today to say that the odds are building that it will not happen at all.  Disagreeing with him is dangerous and one should never say "never," but I think the odds of that scenario playing out are far too long.  Too much personal interest at stake on both sides for a working compromise to be reached resulting in that achievement.  One thing he did add and with which I fully agree and to which I have alluded, most pundits do not recognize the leverage that the Brits have in this upcoming discussion.  Time is actually on their side as nothing good enough is going to happen in the near term to alter the trajectory of the EU which is clearly  downward; politically, financially and economically.  Things are going to be difficult for a while for the Brits but then again, you know these Eton Old Boys.  I'll bet the first thing out of the mouth of Boris is, "Steady The Buffs."  I have a feeling they will probably steady but only time will tell.  Tomorrow is another day in this adventure.

A STORM FOR ALL SEASONS

It lasted all of 15 minutes, but in that time about 2 inches of rain fell and one of our majestic Oaks was hit by a bolt of lighting that blew out, from the inside, about 30 feet of bark and wood.  The only thing I have ever seen that matched it was a air burst from an artillery shell.  Five foot long pieces of wood were propelled 30 meters in all directions, the TV was fried along with light sockets about the house and we were without power for 20 hours.  But no one was injured.  Anyone out side within 40 meters would probably have been killed.  A hundred foot tree; at least 100 years old.  Killed in an instant.  Makes on realize how insignificant we really are in respect to the forces of nature.

I've been dealing with the aftermath all day but it's still all about BREXIT.  48 hours from now the verdict will be in, but in the meantime some remarkable event are being overshadowed.  Rome just elected a female mayor who is about as anti establishment as one can be.  And Turin as well.  What's next?  Juvo coming out in  pink, horizontal stripes?  The establishment is facing some serious difficulty in Europe aside from BREXIT that should be receiving more attention, but as it in many respects mirrors the Trump phenomena in the U.S. one can almost be assured that it will be mainly ignored by the mainstream media.  But if the Leave side wins out...



Janet was up on the Hill today answering questions.  Everyone was very nice and Janet said nothing except that she didn't expect a recession this year although growth had slowed.  How growth can slow from damn near dead stop I leave for you to sort out as I am stumped.  I think I'll go pray for my tree. It's more rewarding.

BABY, WHY TRY TO CLING TO SOME FADING THING...

The greatest line from the greatest Sinatra song ever.  Don't Worry 'Bout Me, as most Sinatra songs, could not be more apropos today as we watched the panic--well, concern--in the markets continue to build over the BREXIT vote in ten days.  Flights to safety everywhere including of all places Japan with negative interest rates and nothing immediately apparent that will lead the country out of its economic doldrums.  The two day Fed meeting beginning tomorrow didn't help matters much either and while it is now generally agreed that nothing in the way of "normalization" will occur at this point in time, focus has now shifted to whether Janet will announce a July clam bake or can the entire idea altogether which will mean no further rate rise in 2016.  I think she will hedge.  BREXIT is going to make that decision for her depending on which way the vote goes.  But back to old Blue Eyes.

Not to put too much schmaltz into it, but it seems to me that this things boils down to the wishes of a free people to be free in their choice of government which I freely admit is more attractive-sounding to old geezers like myself rather than the youth of today who appear to be quite more content to rail after individual rights but seem to be quite content to do as they are told by a group of faceless bureaucrats be they located in Brussels or Washington.  Mind you, we are far better off as those in D.C. are at least our own countrymen but the Brussels mob...well, one might ask, why have a Parliament at all?  But the fear-mongers are out in force forecasting the death of Britain as a nation and if not quite that, then certainly the death of the City as a center for commerce, trade and finance.

Good argument, but may I suggest that it works only if one posits that the EU survives come what may and it is not, as the Chairman would croon it, "Some fading thing..."  Which some of us...like me believe it to be.  The U.K leaving would simply speed the inevitable or force the radical reform of the Brussels mandate.  That will not happen, for you see, the Euro politicians love the concept:  governance by a faceless, unknown mass who can be blamed for all failures great and small.  All are in charge and yet no one leads.  Perfect.  Except that it just might be As Frank put it; This little show is over and now the story ends.  Why not call it a day in a sensible way and just stay friends.

I have a growing feeling that this is what is going to happen.  The horror of this weekend in Orlando is surely going to stiffen the resolve of those who wish to leave for as much as the more PC-minded wish to avoid the issue, immigration is at the top of list for many of those who seek separation and in the minds of all.  This can only add to their belief that ...Look out...look out for yourself should be the rule.  I hope somebody Over Here and Over There has a plan.  Keep calm and carry on works.  Or humming Don't worry 'bout me on a stroll along Moorgate might be soothing.  Ten days and counting.  Sing on Francis Albert.

A VERY BAD POLL

In the Daily Mail this morning.  55-45 in favor of BREXIT.  Mind you it was only a sampling of 2000 people but the effect was immediate: equities all over crashed as did fixed income sovereign yields with the Bund falling to 0.01 amid heavy selling I am told  by the Bundesbank to no avail unless you consider keeping it out of negative territory a success.  Come to think of it maybe it is.

Euro bank stocks were murdered.  It's pretty clear that there is simply no appetite for bank shares in this declining yield environment and we are at the stage now where the viability of certain institutions must begin to be questioned.  With no sustainable earning power one wonders how the continuation of bank restructuring can continue for unlike U.S. institutions, the Euro have hardly washed all of their dirty linen and given the dreadful state of the European economy their credit exposure has hardly improved.  This is a weekend of little joy anywhere Over There with hard questions being asked that have very few answers.

As to the poll itself, a number of my Brit  mates have questioned it's accuracy but the over all view that if it isn't 10 points there is certainly a larger percentage in favor of a pull-out than previously thought and at this stage there well may be a "working majority" as the Brits like to say.  If that is the case with all that has been said and done. Mr. Cameron has a hell of a problem.  Having not convinced a majority by this time, picking off public opinion at this late stage is going to be very difficult.  Further, there is nothing remotely on the horizon that can turn this thing around; indeed, the chances are that an external event will only make things worse for the "stay in" mob.  A terrorist incident would be absolutely devastating and with the European Championships being staged in Paris, the venue is supplied...other than English hooligans getting into punch-ups with anybody in a different strip which has already occurred.  A very difficult weekend indeed.

Over Here, equities crashed, yields crashed and confidence clearly took a hit, but right now this place may be the safe haven.  I can't see yields doing anything but continuing to decline and perversely, equities to rise.  I mean, like, where else?  The next few days up to June 23 are going to be very dicey ones.  This is not looking good...not good at all.

A MOMENT IN TIME

There wasn't any one thing that occurred today that was shocking, but a year from now I want to look back and see whether this moment had any real, lasting effect.

The Treasury's 10 year auction today went just swimmingly.  It was $20 billion and nothing much changed except that it appears to have attracted the highest percentage of foreign bid in history.  The coverage was fine but the participation rate was 73.6% non-American.  The reason is simple.  The 10 year closed today with a yield of 1.70%.  The Bund was at a point in the day yielding 0.035%.  That's right, three basis points.  No maturity up to ten years has a positive yield.  Middle dated Gilts were at 1.24%; the 50-year under 2.00% Surely the 10-year will have to follow suit.  We are reaching a point where it would be far to say that global wealth is declining.

Of course the equity markets are doing just fine with the DOW closing today over 18,000.  It is the only place to be despite record high valuations.  Oil was well up on the day as well as U.S. stockpiles came in lower than expected and more impediments to production emerged.  There is now even some talk in the West Texas Town of El Paso of redeploying some rigs, but huge damage has been done.  The cycle continues.

It is a situation that almost defies an explanation but I guess the World Bank came as close to providing one today with an even more gloomy outlook on global economic development that is not too far from being dismal.  More worrying is the Bank's belief that any shock could put the entire system into recession, and while what that might be was not clearly spelled out surely the British referendum has to be in the forefront of their thinking.  In my view, the Bank is correct but if looking at Europe the more dangerous spot is France, whether the Brits vote to leave or not.  Quietly, and with little notice Over Here, France is facing a crisis such as not occurred in decades.

Frankie Holland's approval rating is somewhere in the high teens.  Unfortunately, his socialist rhetoric that served him so well in attaining the Presidency has come back to bite him in the derriere.  In practise, it hasn't worked (quelle suprise!) with almost 60% of the GDP of the nation being supplied by the government.  Now that's one thing if you're a tiny country like Denmark, but France isn't a tiny country and whilst Denmark and especially Germany have, throughout the past ten years rewritten their labor laws, it's damn near impossible to fire anyone in France creating almost complete job immobility while at the same time one has the specter of the railway workers demanding a 32 hour  work week!  The 35 hours they presently toil is just too hard.  It's little wonder then that a labor tribunal awards 450,000 Euros to the convicted rogue trader at Soc Gen that literally broke the bank!   That, coupled with the dreadful immigration mess and a goodly number of French Muslim citizens living in a state within the State has created the remarkable rise of Madame Le Pen and the Far Right which until the Austrian elections of a couple of weeks ago were given no chance in 2017.  They are now considered almost even money to get enough votes to form a government.  And we think The Donald is way out there?  He's a bureaucrat compared with this gal.

Another problem.  The French have always looked at the EU as the great equalizer.  It never was but it has taken them this long to figure it out.  There is Germany and everybody else.  If the Brits leave, IMHO The clamor in France for a dissolution will be overwhelming and one will be able to write finis to this noble experiment.  It will not and should not survive.  And that, boys and girls, is going to be something to behold.  Tune in June 2017 to see how right--or wrong--I was.

WHAT NOW?

We had a somewhat surprise visit from dear, dear friends from Over There this weekend, hence the absence of a Monday report.  Facinating sets of conversations about Here--they are following this election very closely, and There with the referendum coming up June 23.

These are bright, sophisticated remarkably well-traveled middle aged folks.  They've been together for donkey's years and both had successful careers before retiring. And yet whe the question is put to them in the simplest of tern; are you voting "in" or "out," neither have an answer for the same reasons.  "Bloody Europeans," is the phrase.  "Trying to run everything and doing a lousy job at it," is the gut feeling.  But, "if we go. does that make everything worse" is the "undiscovered country" that ol' Will had the young Dane speak of in that most famous of stage moments.  If I were to guess, they will split their votes and that it appears is just how close this thing is.

That is a bit of a cause for consternation on the part of all but a bit of a life line for our Janet as well.  Clearly having been gob-smacked by the  truly awful jobs number of last Friday Janet had the BREXIT uncertainty to throw out as a reason why the once-certain June rise wasn't so certain anymore without having to put the change in outlook on the shoulders of a lousy job market and a possibly sinking economy.  Certainly not in the face of her pal, Hiliary's increasingly bumpy road to her coronation which could become a lot rockier if he opponant could ever learn to keep his mouth shut.  If they don't move in June, and I do not think they will, they must move in July otherwise bye, bye rate hike until next year.  It appears that in all things financial and political world-wide, uncertainty rules---except at the ECB where Mario is still set on scooping up all the corporate debt he can find starting in a couple of weeks.  So, the Fed tries to go North, the ECB is going South, the Bank of Japan has really no where to go and the Bank of China has seemingly figured out how to devalue it's currency without anyone knowing (and possibly not caring).  What is amusing, however, is the similarity in the statements of the Fed and many of the announcements by the Chinese )not all are in sync) first indicating satisfaction with the status quo and then those which follow taking a 180 degree turn  apparently indicating a return to more "standard" policies.  Then, out of nowhere, a flop back to...if not increased stimilus...a clear desire not to upset the growth scenario...assuming there is one...as we saw yesterday by the Fed and over the past couple of weeks in China.  Only Mario has been consistant..."it's Lousy out there gang and we are going to fix it!"  Of course, depending on what happens on June 23, there my be not much left to fix.

TOO HARSH?

Some have suggested that I was too hard on Billy the Dud yesterday.  I mean, after all, said one caller, the DOW is up damn near 200 (it closed up 220) and the Greeks seem to have a deal!  As the football guy says, "Not so fast my friend."

The DOW was up because oil was up because half of the place where the oil is in Canada seems to be burning.  If anybody can find a long term trend in that, call home quickly.  Traders at work.  As for the Greeks, the Germans today announced...something.  Actually, they were no longer negative on a renegotiation under new terms and conditions that were "being discussed" and which, by the by, the Greeks could never in anybody's wildest imagination, ever meet.  But the whole world belongs to the traders these days and this is what one gets when there is hope--or doom for that matter--in the wind.

Then of course there's Jacob/Jack down in P.R saying all sorts of encouraging things like, "Something must be done."  I'm sure no one had that figured out until his pronouncement, so we can all rest well tonight.  And then there is BREXIT.

The latest poll had this thing dead even at 43%-43% with a remarkable 14% undecided.  Now of course this all started when Mr. Cameron dreamed up the brilliant idea of a referendum a couple of years ago when things were looking a bit bleak for he and his party to counter Labor's threats to get out.  Little did anyone know that Labor, in the general election would stand a fool like Jeremyand proceed to shoot itself in the foot, head and most other place leaving Mr. Cameron the once and future P.M. elegantly regaled upon his own petard and facing a far greater threat to his career in the form of former Mayor of London, Boris Johnson who is stumping all over the country and simply destroying Mr. Cameron in the most mocking terms since his late fellow American Sir Winston (yes, they were both born in America) used to refer to the Labor Minister for health in The Commons as, "The Right Honorable Minister of Disease."  When you have 14% who don't seem to have a clue at this point, their susceptibility to this kind of electioneering is, I suspect, worrisome if you are the P.M.

So, maybe Jacob/Jack should head Over There to sort this thing out and finish the job his boss started...well, do something in any case.  I'd hate to see Billy lose sleep as we get closer to a decision.  He sounded so happy the other day.

I LOVE GOOGLE

Google got mad at me again over the past two days...or maybe I just messed up which could be the case but the result was I could publish nada.  Which perhaps wasn't a bad thing because nothing that I was writing made sense 24 hours later which gave me time to reflect and pause for a moment in my certitude.

Unlike the mystery of the fault--was it me or Google--I'm pretty sure about this: nothing that I  was writing made sense because nothing out there is making any sense at all.  I am completely confused as to what is going on as is I think everyone else.

Take oil:  WTI traded up to $47 a barrel last week and the sentiment on the Street was that the market had stabilized.  Only problem was there was more of a glut last week than ever and there appears to be no end in sight.  The U.S. is importing more oil than in the past two years while production has fallen just 3%.  Why?  Well, according to the WSJ, it is cheaper to store oil in the U.S. than on a ship and surprise, surprise, the U.S. has a great deal of excess storage capacity.  Coulda fooled me, but there ya go and on cue WTI traded down to $43 today.  Now that's a hell of a lot higher than the $26 of a few months back but apparently Iran is pumping and selling so fast it would make your turban spin and selling it at a discount in Europe to buy back market share.  Needless to say, so is everybody else to preserve market share.  See what I mean?  What's going on out there?

Bond yields, after a brief spurt, seem to be indicating that the future is not bright but in regard to the stock market the talking heads have come to the conclusion that equities are "fully priced," either indicating a satisfaction with things or a complete lack of alternatives for investment.  Now if the bond guys are right and the market is fully priced, some people are going to lose a hell of a lot of money pretty soon.  I know about losing money.

Puerto Rico had their first default on Monday worth $400 million and seem to be heading for a second of $1 billion in about a month with the Congress playing politics as to how to solve this problem.  A mess in the muni market one would think?  Nah, nothing moved despite the fact that all the rules of the game could get changed overnight.  It restores faith in humanity.

We had a bank failure in Italy the other Day.  Big Deal?  Not really except that those clever Italians had, in i scuri set up a living will for this institution focusing on it's take-over by Unibanco.  Only problem was when Unibanco popped up to announce that they really didn't think  they were in a position to do that causing the government to institute an immediate bail-out which of course they are not supposed to do.  BUT, not to worry because things are looking up for the Eurozone economy.  Yeah sure.  The largest bank in the third largest economy announces that it doesn't have the where-with-all to fulfill a previously agreed deal and things are looking up?  On top of that, the latest out of the UK has the BREXIT polling just about dead even, tightening considerably in the two weeks post-Obama (gee, did I predict that?) with the referendum barely a month away.  After three months without a government, Spain is about to have a new election and whilst there is little shouting thank goodness, Greece and its creditors are still somewhat at loggerheads.  Buy Euros as suggested?  Sorry can't see it.

And then there is China.  I'm not even going to try.  The latest big thing in China is commodity specu...ah...investing.  Why not.  The government in the first four months of the year pumped about a trillion and a half into the economy.  Heck, you have to spend it somewhere.  Good for the fly-over zone, however.  Live Hogs have been up for a week.  Who says we're not part of globalization.

I could get onto to Japan but that is a chapter in itself.  Besides, the more I write on a wet, miserable day like this the more I get depressed.  I should stop writing.  I wonder.  Did Google have my well-being in mind?  What a lovely thought.