Jobless Claims and The S&P 500 are a Match Made in Bull Heaven

B. I. points out a chart to help cut through all the noise. Keeping your eye on jobless claims might just be the way to determine which way the market is headed.

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Maybe Zervos should quit his job and trying working for Starbucks as a barista.

“Jefferies economist David Zervos has been bullish throughout this whole rally, arguing that Ben Bernanke has had everything under control, keeping markets steady, and providing proper stimulus to the economy.

His latest note to clients is probably one of his most important yet, as it’s addressed to the perma-bears that hate any notion of easy money, the Fed, or stimulus, and who argue that we’re just in a sugar high period that will all come crashing down.

You know who these people are that he’s talking about, even though Zervos doesn’t mention them by name: Rick Santelli, ZeroHedge, Jim Grant, etc.

CNBC screengrab

In his note, Zervos writes:

I actually feel a bit sorry for the bears. They have warned us for years about the dangers of central bank balance sheet expansion and monetary accommodation. And their “elite” have even banded together in the WSJ to sign protest petitions against QE. But the spoo keeps rising, jobs keep getting created and wealth keeps getting generated (at least for those who didn’t follow the bears’ ill-conceived advice). I feel sorry for them because they are simply living in the dark ages of monetary policy theory. They are stuck thinking like witch doctors rather than modern medical doctors.

What does he mean, specifically?

What he’s saying is that these policy bears argue that we need a hard dose of Austrian-economics, Great Depression-style pain to clear out the “rot” from the system. And that after we’ve taken our lumps and inflicted pain on ourselves (sending unemployment to over 10% in the process), then we can start to form a true recovery that’s not built on debt and low interest rates.

But that’s misguided.

Zervos offers a great medical analogy…”

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“Euro-area finance ministers agreed to extend maturities on rescue loans to Ireland andPortugal, easing the terms on two recipients of European bailout aid in a show of support for their commitment to austerity.

The ministers gave no details on the extension. Those will be worked out by the so-called troika that oversees euro-area bailouts and the European Financial Stability Facility, the currency bloc’s temporary rescue fund, the finance chiefs said today. The details will be presented to euro ministers at the same time as the memorandum of understanding underlying a rescue program for Cyprus….”

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“Euro-area finance ministers agreed to an unprecedented tax on Cypriot bank deposits as officials unveiled a 10 billion-euro ($13 billion) rescue plan for the country, the fifth sinceEurope’s debt crisis broke out in 2009.

Cyprus will impose a levy of 6.75 percent on deposits of less than 100,000 euros — the ceiling for European Union account insurance — and 9.9 percent above that. The measures will raise 5.8 billion euros, Dutch Finance Minister Jeroen Dijsselbloem, who leads the group of euro-area ministers, told reporters early today after 10 hours of talks in Brussels. The euro region’s bailout kitty and, possibly, the International Monetary Fund will look to make up the shortfall. A partial “bail-in” of junior bondholders is also possible.

Officials have struggled to find an agreement that would rescue Cyprus, which accounts for just half of a percent of the euro region’s economy, without unsettling investors in larger countries and sparking a new round of market contagion. Policy makers began meeting at 5 p.m. yesterday in a hastily convened gathering, seeking to overcome differences on bondholder losses while financial markets were closed.

Bank Runs

“Further measures concern the increase of the withholding tax on capital income, a restructuring and recapitalisation of banks, an increase of the statutory corporate income tax rate and a bail-in of junior bondholders,” according to a communique released by ministers after the talks. It didn’t specify whether bank or sovereign bond holders could be affected.

The European Central Bank will use its existing facilities to make funds available to Cypriot banks as needed to counter potential bank runs. Depositors will receive bank equity as compensation….”

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“SAC Capital Advisors LP, the hedge fund run by billionaire Steven A. Cohen, will pay a record $616 million to settle U.S. regulatory claims that two of its units engaged in insider trading.

Settlement of the civil allegations against the units doesn’t preclude the Securities and Exchange Commission from pursuing Cohen himself in the future, George Canellos, the agency’s acting enforcement director, said on a conference call with reporters today. The investigation by the SEC continues, as does the criminal case against former SAC portfolio manager Mathew Martoma.

“There is no way of predicting what they intend to do,” saidJacob Frenkel, a former SEC enforcement lawyer who is now a partner at Shulman Rogers Gandal Pordy & Ecker PA in Potomac, Maryland. “When the agency is so obviously pursuing someone, and when we do not know what cooperators are saying, there are just too many unknowns.”

Cohen was linked in November to alleged illegal trades done by Martoma in a case that U.S. prosecutors described as the most-lucrative insider-trading scheme they’ve ever uncovered, with profits and averted losses of $276 million. SAC manages $15 billion out of Stamford, Connecticut, 60 percent of which is Cohen’s and his employees’ money. Cohen hasn’t been sued personally by the SEC or charged with a crime.

Boesky, Milken…”

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“Scientists scanning the human brain can now tell whom a person is thinking of, the first time researchers have been able to identify what people are imagining from imaging technologies.

Work to visualize thought is starting to pile up successes. Recently, scientists have used brain scans to decode imagery directly from the brain, such as what number people have just seen and what memory a person is recalling.

They can now even reconstruct videos of what a person has watched based on their brain activity alone. Cornell University cognitive neuroscientist Nathan Spreng and his colleagues wanted to carry this research one step further by seeing if they could deduce the mental pictures of people that subjects conjure up in their heads.

“We are trying to understand the physical mechanisms that allow us to have an inner world, and a part of that is how we represent other people in our mind,” Spreng says.

Imagining others

His team first gave 19 volunteers descriptions of four imaginary people they were told were real. Each of these characters had different personalities. Half the personalities were agreeable, described as liking to cooperate with others; the other half were less agreeable, depicted as cold and aloof or having similar traits. In addition, half these characters were described as outgoing and sociable extroverts, while the others were less so, depicted as sometimes shy and inhibited. The scientists matched the genders of these characters to each volunteer and gave them popular names like Mike, Chris, Dave or Nick, or Ashley, Sarah, Nicole or Jenny.

The researchers then scanned volunteers’ brains using functional magnetic resonance imaging (fMRI), which measures brain activity by detecting changes in blood flow. During the scans, the investigators asked participants to predict how each of the four fictitious people might behave in a variety of scenarios — for instance, if they were at a bar and someone else spilled a drink, or if they saw a homeless veteran asking for change.

“Humans are social creatures, and the social world is a complex place,” Spreng says. “A key aspect to navigating the social world is how we represent others.”

The scientists discovered that each of the four personalities were linked to unique patterns of brain activity in a part of the organ known as the medial prefrontal cortex. In other words, researchers could tell whom their volunteers were thinking about.

“This is the first study to show that we can decode what people are imagining,” Spreng says….”

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These questions may soon be answered in court. Well-known French lawyer Isabelle Coutant-Peyre has met with Iranian officials planning a lawsuit against the makers and distributors of the controversial film.

Mohammad Lesani, General Secretary of Monday’s Hoax of Hollywood conference in Tehran, announced, “Argo is made by three film-producing companies in Hollywood…the Islamic Republic of Iran is going to sue all those who have been active in the anti-Iran domain, including directors and producers.”

If the makers of Argo are deposed under oath, they may be forced to reveal that their film — like the fictitious film-within-the-film — is a covert operation disguised as a movie. One of America’s leading experts on covert operations believes that Argo is the propaganda project of an intelligence agency or agencies, and that its purpose is to convince the American people to go along with Israel’s plan to drag America into a war on Iran.

That expert, Barbara Honegger, was a Special Assistant to the President as well as White House Policy Analyst (1981-83), and worked for over a decade as Senior Military Affairs Journalist with the Naval Postgraduate School, the premiere science, technology and national security affairs graduate research university of the US Department of Defense. The author of October Surprise, she is one of America’s leading experts on ultra-secretive covert operations or “black ops.”

In a radio interview Tuesday on the Kevin Barrett Show, Honegger stated that filmmaker Ben Affleck might one day be hanged for war crimes and treason – not only for Argo, which she said is designed to pave the road to war on Iran, but also for his role in the 2001 film Pearl Harbor, an earlier intelligence operation designed to pave the road to the 9/11 “New Pearl Harbor.” According to Honegger, Affleck – like his character in Argo – appears to be a covert operator posing as a filmmaker.

At the 2001 Golden Raspberry Awards, Pearl Harbor was nominated for six awards: Worst Picture, Worst Director, Worst Actor (Ben Affleck), Worst Screenplay, Worst Screen Couple, and Worst Remake or Sequel. This pathetic excuse for a movie cost over USD150 million. Whoever invested that USD150 million was not interested in making money – or even making a movie. Pearl Harbor had only one purpose: To spread the “Pearl Harbor” meme in the public mind in preparation for 9/11. In a sense, Pearl Harbor was like Argo’s fictional science fiction film-within-a-film: It was a fake movie, but a real intelligence operation….”

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This 80-minute documentary focuses on the growing “wealth gap” in America, as seen through the eyes of filmmaker Jamie Johnson, a 27-year-old heir to the Johnson & Johnson pharmaceutical fortune. Johnson, who cut his film teeth at NYU and made the Emmy®-nominated 2003 HBO documentary Born Rich, here sets his sights on exploring the political, moral and emotional rationale that enables a tiny percentage of Americans – the one percent – to control nearly half the wealth of the entire United States. The film Includes interviews with Nicole Buffett, Bill Gates Sr., Adnan Khashoggi, Milton Friedman, Robert Reich, Ralph Nader and other luminaries.

Cheers on your weekend!

“With anemic economic growth likely to lead to more losses on loans, risks to the financial stability of the European Union remain “elevated,” and urgent action is needed to adequately capitalize the bloc’s banks and establish a shared system for closing down or restructuring failing institutions, the International Monetary Fund said Friday.

In its first-ever review of the health of the financial system across all 27 EU members, the IMF said the bloc has made some progress in addressing the weaknesses that have exacerbated its fiscal crisis and stalled its economic recovery.

But it said much work remains to be done, with banks likely to face higher losses on loans to households and businesses to add to the losses they have suffered on their holdings of government bonds. The Fund added that low economic growth and low interest rates may also weaken insurance companies and pension funds.

“Risks remain elevated, especially in a context of low growth and fiscal retrenchment,” the IMF’s board of directors said. “Regulatory and policy uncertainty, and gaps in policy frameworks also continue to pose vulnerabilities. Further ambitious steps are thus necessary to rebuild confidence and achieve long-lasting financial stability in the region.”

The Fund recommended that bank regulators quickly review the quality of banks’ assets, “based on harmonized definitions of forbearance and non performing loans.” Since the onset of the euro zone’s fiscal crisis, investors have been skeptical of the self-declared soundness of the bloc’s banks, and that has made them unwilling to provide funding to banks…”

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“WASHINGTON—The Pentagon is preparing to strengthen its missile defense systems on the West Coast in response to increased threats from North Korea and rising tensions on the Korean peninsula.

The U.S. plans to boost its ground-based missile interceptors in Alaska and California by one-third, adding 14 additional systems to the 30 already in place on the West Coast, a senior defense official said Friday. Interceptors are vehicles that are launched to intercept intercontinental missiles in flight.

The expansion in the system was due to be announced by Defense Secretary Chuck Hagel at a news conference Friday.

The decision comes as North Korea has issued a series of threats to attack the U.S. and South Korea over new international sanctions and joint military exercises in the region.

Earlier this month, North Korea threatened to launch a pre-emptive nuclear strike on the U.S. and South Korea. While American officials don’t believe North Korea is capable of launching a long-range attack, the threat is seen as a concerning sign of the nation’s state of mind.

Pentagon officials signaled the possible expansion days earlier. “North Korea’s shrill public pronouncements underscore the need for the U.S. to continue to take prudent steps to defeat any future North Korean ICBM,” James Miller, undersecretary of defense for policy, said in a speech last week at the Atlantic Council….”

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“A cash reserve has been raised in our US ETF accounts. A partial cash reserve has been raised in non-US ETF accounts.  Our clients will see them in the online-access versions of their account statements.

Why did we raise cash?

Stock markets have become extended, particularly in the United States.  Nothing goes straight up or straight down forever.   History shows stock markets can have 3% to 7% corrections at any time.

The present long-term bull market started in March 2009.  It was reaffirmed in November 2012.  It is still intact.  That said, most measures of market movement, sentiment, direction, and momentum have reached levels of intensity that approach extremes.  This is primarily a US phenomenon.

We believe prudence requires a cash reserve as activities in Washington and the rest of the world continue to unfold….”

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“The BRIC nations – Brazil, Russia, India, and China – have been all the rage since Goldman Sachs economist Jim O’Neill coined the term in 2001.

But their luster has dulled a bit recently.

“The BRIC economies have been the brightest stars of the emerging world since the year 2000, contributing nearly two-fifths of global growth,” Mark Williams, chief Asia economist at Capital Economics, writes in a report obtained by CNBC.

More recently, they have been sources of disappointment.”

Capital Economics estimates that the four countries will decrease global growth by about half a percentage point from the International Monetary Fund’s projection of 4.1 percent.

Each country is enduring some economic sluggishness, Williams notes.

Brazil faces a heavy debt burden, weak business investment is curbing Russia’s commodities boom, India is making only slow progress in its efforts for economic modernization and reform, and China hasn’t yet been able to transform into an economy predicated on consumers….”

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“The stock market is a giant bubble being inflated by margin debt, according to economist Steven Keen, author of “Debunking Economics.”

When the level of margin debt begins to fall, the bubble will deflate and investors will be punished, Keen told Yahoo.

“In 500 years’ time people will look back and see this as the biggest debt-financed bubble in human history and ask, ‘why didn’t we realize it,’” Keen said. “But we think it’s normal.”

According to his analysis, there is a relationship between the change in margin debt and the level of asset prices. More specifically, there is a correlation between margin debt acceleration and rising asset prices, Keen said.

Margin debt-to-gross domestic product (GDP) ratios are now 70 percent, meaning a qualified investor with $300,000 can borrow $1 million worth of shares from a broker.

Those levels are close to where they were in 2000 and 2007, Keen said, both of which were followed by serious stock market downturns.

“Nothing can accelerate forever. At some point the acceleration stops, and when it does the market breaks,” Keen told Yahoo.

Keen predicted the U.S. stock market would deflate similar to the way Japan’s did starting in 1989. Japan’s Nikkei averages did not stop falling until 2003.

“I think we’re in a long slow bleed, much longer and slower than the Japanese stock market crash, but there’s similar dynamics,” he said.

Writing in The New York Times, economist Paul Krugman had a simpler interpretation of why the stock market has been rising.

“Stocks are high, in part, because bond yields are so low, and investors have to put their money somewhere,” he said….”

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“International purchases of U.S. stocks, bonds and other financial assets rose less than forecast in January as confidence grew that Europe was emerging from its debt crisis.

Net buying of long-term financial assets totaled $25.7 billion during the month, down from net purchases of $64.2 billion in December, the Treasury Department said today in Washington. Economists surveyed by Bloomberg projected net buying of $40 billion of long-term assets, according to the median estimate.

“The need for a safe haven is slightly reduced as the euro debt crisis is no longer dragging down the world markets, but the U.S. is winning the economic growth race among developed nations and this is attracting capital,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report was released….”

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“Earlier this week, the Data Center of China Internet (DCCI) released a report (h/t Tech In Asia) that showed nearly 35 percent of the Android apps it surveyed were secretly stealing user data unrelated to the app’s functionality. The DCCI, a research institute, looked at 1,400 apps downloaded from different app markets and found that 66.9 percent were tracking users’ private data, with 34.5 percent collecting information that had no connection to the app’s usage.

The DCCI’s findings are yet more signs of how fragmented and chaotic China’s Android market is–and how little control Google has over it, despite the Chinese government’s concerns about its supposed dominance. Just last week, China’s Ministry of Industry and Information Technology issued a white paper that said Google has too much control over China’s smartphone industry via Android and has discriminated against domestic companies, in part by making it difficult for Chinese firms to develop their own operating systems.

But as TechCrunch’s Natasha Lomas wrote last week, even though Android dominates the OS landscape in China, “not all Chinese Android-powered devices are equal since a large proportion of homegrown mobile makers heavily customise Android and do not carry any of the standard Google services such as its Play store.”

Many observers believe that “Chinadroids,” or no-name devices that have been equipped with modified versions of Android, will take over China’s mobile market in the near future. As TechRice notes, sales of these forked devices may be lucrative, but ChinaDroids are also a valuable gateway to content, starting with in-app purchases and then becoming the “terminal of choice” for e-commerce. Google’s absence has created “fierce and chaotic competition to control content delivery channels in China.” …”

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• “Since my departure I have learned of the deceptive conduct by members of the London team, and I was, and remain, deeply disappointed and saddened to learn of such conduct and the extent to which the London team let me, and the Company, down.

Maybe it is time to call back Jamie “This is why I am richer than you” Dimon? ..”

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“U.S. consumer sentiment tumbled to its lowest since December 2011 in early March, hit by dissatisfaction with government economic policies and as fewer Americans expected to see improvements in growth or the labor market, a survey released on Friday showed.

The Thomson Reuters/University of Michigan’s preliminary reading on the overall index on consumer sentiment dropped to 71.8 from 77.6 in February, short of expectations for 78.

(Click here to track the U.S. stock market reaction to the economic report.)

Across-the-board government spending cuts of $85 billion went into effect at the beginning of the month after U.S. lawmakers failed to come to a new deal.

A record 34 percent of respondents made unfavorable references to government economic policies, beating January’s prior record of 31 percent.

“The frustrations expressed by consumers essentially involve how little consideration has been given to how the government’s inability to reach a compromise affects people’s economic situation,” survey director Richard Curtin said in a statement.

The barometer of current economic conditions fell to 87.5 from 89, while the gauge of consumer expectations tumbled to 61.7 from 70.2, its weakest since November 2011….”

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“Chinks are showing in the Italian bond market’s resilience to the political stalemate that followed last month’s election.

Backstopped by the European Central Bank’s bond-buying pledge, Italian yields have been relatively steady at levels well below their all-time highs since the February 24-25 vote which left parties deadlocked over how to form a government.

But some potential signs of market stress are emerging.

Italian bonds paying lower rates of interest have outperformed higher-coupon paper of similar maturity in recent weeks – a phenomenon that occurs in times of heightened uncertainty, when investors take defensive positions.

“It is one of the crisis barometers,” said Commerzbank rate strategist David Schnautz. “When you have stress in the system you see certain dislocations, switches in the curve.”

While yields on the two types of bonds are similar, those offering smaller coupon payments are generally cheaper to buy, reducing the potential loss for the investor if the issuer cannot repay its debts.

A sovereign borrower with liquidity problems would also be more likely to delay coupon payments than not redeem the bond at maturity, analysts say.

The discrepancy in price is most visible at the longer end of the Italian debt curve, where the difference between coupons is also wider.

A bond maturing in August 2023 and carrying a 4.75 percent coupon was priced at 101.53 cents in the euro this week, while a November 2023 bond paying a coupon of 9 percent was priced at 134.87 cents in the euro….”

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“Although blue-chip stocks are hitting all-time high after all-time high, former Fed Chairman Alan Greenspan told CNBC Friday that “irrational exuberance” is the last term he’d use to describe today’s market.

Greenspan said in a “Squawk Box” interview that stocks by historical standards are “significantly undervalued” even considering the recent moves higher. He added that the payroll tax increase didn’t dent spending because of rising asset prices.

Greenspan coined the phrase “irrational exuberance” in 1996, when he was asked a question about soaring stocks at that time. The year 1996 was coincidentally the last time the Dow Jones Industrial Average had its last 10-session winning streak.

Blue-chips will try to make it 11 in a row on Friday. That would be the first such run since late 1991 into 1992. And whether this makes it more or less likely, the Dow has closed higher every Friday so far this year.

Meanwhile, the broader market measure S&P 500 Index is just a couple points away from its all-time closing.

On banks and the concept of “too big to fail,” he argued that it’s the most important regulatory issue of our time, saying the problem is “getting worse, not better.” But he added that the Dodd-Frank Wall Street Reform Law was based on a faulty structure and he doesn’t think it will be fully implemented….”

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“Hungary’s increasingly aggressive moves against media, judiciary and central bank independence will be discussed by European Union heads of states on Friday, raising the possibility that Hungary could be thrown out of the EU.

The European Union is concerned Hungary may be flouting EU rules on human rights, after its parliament voted this week to amend its constitution to allow legislation to bypass approval from the constitutional court. Hungary had defied calls from the European Commission to delay the vote.

The move means European laws designed to protect the freedom of the media and the independence of the judiciary could be compromised, if not violated. Following the vote, the European Commission said it would investigate whether Hungary’s new laws are anti-democratic and violate the bloc’s rules on human rights and EU treaties.

Martin Schulz, president of the European Commission, told CNBC on Thursday evening that a country could be thrown out of the EU if it did not respect European rules and rights, but added that he was wary of passing judgement prematurely.

“Before you blame a country for not respecting the fundamental values of a community to which it belongs, you must have 100 percent safe proof and so far, the proof is not on the table,” he told CNBC, speaking from Brussels, where EU leaders are holding a two-day summit predominately focused on the sovereign debt crisis…”

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