Make No Mistake That De-Dollarization is Chugging Along Underfoot

“While numerous massively indebted administrations around the world hope to divert the attention of what’s left of their struggling middle class away from its daily impoverished existence and distract it with flashing lights and glitzy animations showing another all time market high on a daily basis, a significantly more important shift taking place behind the scenes is appreciated by very few: the ongoing de-dollarization of the world. For the latest example of how increasingly more countries are setting the stage for the final currency war, we go again to Russia where VOR’s  Valentin Mândr??escu explains that slowly but surely the BRICS – that proud Goldman acronym which was conceived to perpetuate the great American way of life by releasing trillions in US-denominated debt in heretofore untapped markets – are morphing into an anti-dollar alliance.

BRICS is morphing into an anti-dollar alliance, From VOR

Before the crucial visit to Beijing next week, the governor of the Russian Central Bank, Elvira Nabiullina met Vladimir Putin to report on the progress of the upcoming ruble-yuan swap deal with the People’s Bank of China and Kremlin used the meeting to let the world know about the technical details of its international anti-dollar alliance.

On June 10th, Sergey Glaziev, Putin’s economy advisor published an article outlining the need to establish an international alliance of countries willing to get rid of the dollar in international trade and refrain from using dollars in their currency reserves. The ultimate goal would be to break the Washington’s money printing machine that is feeding its military-industrial complex and giving the US ample possibilities to spread chaos across the globe, fueling the civil wars in Libya, Iraq, Syria and Ukraine. Glaziev’s critics believe that such an alliance would be difficult to establish and that creating a non-dollar-based global financial system would be extremely challenging from a technical point of view. However, in her discussion with Vladimir Putin, the head of the Russian central bank unveiled an elegant technical solution for this problem and left a clear hint regarding the members of the anti-dollar alliance that is being created by the efforts of Moscow and Beijing:

“We’ve done a lot of work on the ruble-yuan swap deal in order to facilitate trade financing. I have a meeting next week in Beijing”, she said casually and then dropped the bomb: “We are discussing with China and our BRICS parters the establishment of a system of multilateral swaps that will allow to transfer resources to one or another country, if needed. A part of the currency reserves can be directed to [the new system].” (Prime news agency)

It seems that Kremlin chose the all-in-one approach….”

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“NEW YORK (MarketWatch) — Investors have been content to take a summer slumber as central bankers sing easy-money lullabies. But don’t discount the possibility that a strong jobs report could shake traders awake.

It would take a particularly strong U.S. nonfarm payrolls report on Thursday to alter market expectations about the economy. But should it sharply exceed expectations of 215,000 nonfarm jobs and a steady 6.3% unemployment rate, it could force a rethink toward a Federal Reserve that’s less committed to low-rate policies, investors and strategists say.

Wednesday’s report from Automatic Data Processing Inc. provided one surprise:281,000 new private-sector jobs last month, and the most since November 2012. The report is often used as an early indicator of the payrolls number. Despite its mixed record in predicting that part of the official monthly jobs report, it’s the latest in a string of improving data points that many say shows an economy gaining steam.

“The risks are on the upside in terms of the number of jobs created” after that ADP report, said Robert Tipp, chief investment strategist at Prudential Fixed Income.

Think about Fed rate expectations like a trip in the family minivan. Federal Reserve Chairwoman Janet Yellen and her policy committee are in the driver’s seat, slowly and steadily cruising toward the first rate hike. The numbers on employment and inflation are quietly cooperating in the back seat. But if data keep improving more rapidly, that will add to the “are we there yet?” clamors, and Yellen eventually may speed up.

If that happens, the S&P 500 SPX +0.07% , already near record levels, could rise further, Treasury yields10_YEAR -0.04% could climb, and the dollar DXY +0.14% could strengthen against its rivals.

For now, Yellen has been keeping the steering wheel steady…”

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What to look for in the report

Full employment report

 

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“Many financial commentators are concerned about banks loosening their standards on loans, and Bill Gross, chief investment officer at Pimco, is one of them.

“There are bubbly aspects in the terms and conditions of bank loans,” he told CNBC.

Financial institutions are issuing covenant-lite loans at a record pace. Covenants are financial restrictions placed on companies that borrow to give lenders assurance that they will receive their money back. Covenant-lite loans carry fewer of these restrictions.

U.S. cov-lite loan issuance totaled $83.6 billion for 2014 through mid-June, up 41 percent from $59.4 billion in the same period of 2013, according to Dealogic, CNBC reports.

“There can be easy types of covenants and restrictions,” Gross said. “Certainly the Fed sees, and we see as well, that over the past 12 to 18 months those standards have eased and perhaps are a little bit bubbly.”

He maintains that the prices of most risk assets stand at a “normal level if the new neutral [level for federal funds] stays low at 2 percent, which is where we expect.”

The Office of the Comptroller of the Currency, which regulates banks, also is concerned about the easing of banks’ lending policies….”

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“WASHINGTON—The Department of Homeland Security has awarded a $190 million contract to the company accused of methodically defrauding the government while carrying out background checks on millions of people, including former National Security Agency contractor Edward Snowden.

The department’s U.S. Citizenship and Immigration Services hired US Investigations Services LLC to help operate the nation’s immigration system.

USIS was able to win the contract because regulations require agencies to follow strict procurement procedures unless a bidder has been suspended or barred by the government from contracts. Despite questions about its work on background checks, USIS was never blocked from federal work.

Unless a company is suspended or barred, “by law and policy, we have to go with the lowest bidder,” said an official with U.S. Citizenship and Immigration Services.

The Department of Homeland Security said it takes “allegations of wrongdoing against its workforce and contractors extremely seriously,” but “at this time there is no conduct that has resulted in suspension or debarment of USIS.” The agency said the contract decision came after an 18-month review.

The Office of Personnel Management, which oversees background-check investigations, indicated that USIS had addressed concerns raised by the fraud allegations. “At this time we are satisfied with the steps taken by USIS to deal with actions by their employees and previous leadership,” the agency said.

USIS, based in Falls Church, Va., declined to comment on the contract award or its work with the U.S. government. After the fraud allegations, which were brought to the government’s attention in 2011 by a company whistleblower, USIS overhauled its management team and said the accusations were inconsistent with the company’s values.

The new contract, disclosed late Tuesday, is the first major federal award USIS has won since it became the focus of scrutiny last summer over its practices as the government’s largest provider of background checks for security clearances.

The Justice Department has accused USIS in a civil suit of cutting corners while conducting investigations of people seeking clearance for sensitive government jobs. Among those it screened was Mr. Snowden, the former NSA contractor who sought sanctuary in Russia after leaking classified U.S. government secrets.

Federal officials alleged that USIS carried out a flawed 2011 background check of Mr. Snowden before he secured an NSA job in Hawaii, where he collected top-secret documents and later gave them to journalists.

USIS also did a 2007 background check of Aaron Alexis, a military contractor who used his security clearance to bring a gun into the Washington Navy Yard last fall and kill 12 people before being shot dead by security officers.

USIS has defended its work investigating Mr. Snowden and Mr. Alexis and noted that the company provides information to government officials who have the final say over who gets security clearance.

In January, the Justice Department joined a whistleblower lawsuit against USIS and accused the company of defrauding the government. In addition, a federal grand jury launched an investigation last summer into USIS practices, according to people familiar with the situation, while some lawmakers have suggested the company be barred from government work….”

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“After climbing to a 15-month high in May, planned job cuts announced by U.S. companies in June dropped 41 percent to 31,434, the lowest level of the year, according to a report released Thursday by Challenger, Gray & Christmas. So far, the pace of job cuts is down 5 percent from a year ago.

June job cuts were 20 percent lower than the same month a year ago, when employers announced 39,372 job cuts.

The June number was down sharply from May, with 52,961 planned layoffs announced—the largest monthly total since February 2013.

n the second quarter, a total of 124,693 job cuts were announced, up 3 percent from the 121,341 job cuts announced in the first quarter. Second-quarter job cuts also were up 9.5 percent from the same period last year, when 113,891 planned layoffs were announced…..”

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[youtube://http://www.youtube.com/watch?v=3P0kGvvgd3k 450 300]

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Full Video Tutorial 

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“A few notes first off…the US Dollar Index has broken below 80.0, but for this to mean anything, the US Dollar must close below 79.40 on a weekly basis. The critical levels of upper support and resistance are so tight right now, that the volatility we have seen has caused many players to go long when its wrong and go short when they should abort. The trend finally does “appear” as if the 79.40 level will break, but nothing is better than waiting for confirmation than speculation.

If the US Dollar Index does go lower, then this would allow US exports to become cheaper and further enhance the stock market. The note below is very important, so please consider this: a decline in the US Dollar Index from 80.0 to 73.0 represents a loss of 8.75%. If the S&P were to retain its S&P/US Dollar Index valuation, then it would have to rise from 1960 to 2148. So even though the S&P could rise to this level, which remains our longer-term target into August 2015 next year (Please Google Contacting Fibonacci Spiral (CFS) and CFS chiral inversion with my name to get an understanding of this longer-term stock market cycle and its implications for how things unfold into 2020), it merely becomes an extension based upon a declining currency. If the US economy strengthens, then this number could become even higher.

The outcome for such an event if it does unfold as expected (things have been going as expected, just a few bumps in the road have happened) will result in many other regions of the globe experiencing sharp reductions in global GDP and rising energy prices (since oil is primarily priced in US Dollars). Rising energy costs are instrumental in throwing the global economy into a deflationary spiral, coupled to demographics so a sharp spike in energy prices to $150-160/barrel (our target for next year) is seen as the catalyst. Based upon the chiral inversion that the CFS had last year, it is expected the market tops out next year, followed by a series of lower lows in 2016, 2018, 2019 and 2020 (3,2,1,1 to complete the Fibonacci spiral). This would be expected for the broad stock market indices of the US and not necessarily expected for commodities or their related stocks, particularly gold and silver.

A shift into gold and silver as a store of value will happen en masse once people see that governments will do whatever they can to try to steal the wealth of citizens. This will raise their sought value, alongside stocks that mine gold and silver.

The very last few charts of this update provides an update of the Elliott Wave count for the S&P 500 Index. I did not understand how this count was possible because I really doubted it. So far, it seems to be holding out and does have some interesting twists over the next 10-13 months if things continue to unfold in somewhat of an expected fashion, then the period of time between 2015 and 2020 will not be nice.

If we do get a 5 year period of cycling deflation/inflation, with the overall trend being deflationary, then keeping money in cash equivalent funds will be of utmost importance for preserving wealth. For those who can time things right, buying near the coming bottoms and selling near their short-term tops stand to generate significant returns. For those that have pension funds or RRSP’s LIRA’s etc. that are are defined contribution plans (i.e. YOUR money, not money thrown into corporate or unionized pots that are invested for everyone (think pyramid scheme)) the above may work well. In the end, those with defined contribution plans for their own pensions may see government take them over and put them into a pot…this is out of everyone’s control, but one can only do the best to preserve what they have.

Continue to pay down debt and minimally invest money into RRSP’s or LIRA’s as this could be taken over by government. Keep money in on hand investments and of course, continue to accumulate gold and silver bullion. This piece should keep everyone afloat with knowledge for what to expect over the coming 12-14 months out.

Copper Chart

I thought I would include the monthly chart of copper, because today it broke out of this very long diametric triangle structure, that has a measured move up to $4.80/pound if this analysis is correct. Bollinger bands are not providing any indication of trend, but a pop above the upper trend line (which is what has happened today) should provide further bullishness in this metal. Nickel and other base metals are rising, so copper is one of the most critical to confirm this trend. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K beneath the %D in all three instances. Extrapolation of the %K trend in stochastic 1 has yet to rise above the %D, but follow through over the next few months in copper prices would be enough to indicate a change in trend. The latter half of the diametric triangle pattern (not a diametric Elliott Wave triangle) has seen an evermore narrowing of the trading range in price. Given the way everything is expected to occur over the coming year (higher inflation due to a declining US Dollar, which further fans the global economy due to more potential for the US to export goods at cheaper prices), it stands to reason that copper prices head higher. We have one copper stock (producer/explorer) that we follow that trades well below $1/share but has significant opportunity for rising in price, pending it is not bought out beforehand.

Gold Ratios

The daily chart of the gold/silver ratio is shown below, with several price excursions beyond lower Bollinger bands over the past week strongly suggests an oversold condition has been generated, which should see gold outperform silver over the course of the next few weeks. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K above the %D in 1 and beneath the %D in 2 and 3. Although there could be a change in trend with respect to the ratio, weakness could remain in effect, with a longer-term trend being down (i.e. Silver would outperform gold under this scenario).

The daily chart of the gold/oil ratio index is shown below, with the US Dollar Index denoted in black. Bollinger bands are providing no indication of trend, while the %K in all three stochastics are above the %D, indicating gold is likely to continue outperforming oil over the next 5-7 weeks (based upon the depth of the %K in stochastic 3). The ratio is likely to only rise no higher than 14 over the short-term, which would represent 12% higher gold prices than current levels, assuming oil remains fixed around $105/barrel…that would work out to $1484/ounce, which is right in line with the expected high for gold over the course of the next 12-14 months. Since gold stocks generally outperform gold by a factor of 3, that would suggest the HUI tacks on around 36% above current levels, which works out to a move to 320. Things finally appear to be pointing towards higher commodity prices, but remember, THIS IS ONLY A TRADE UNTIL AROUND THIS TIME NEXT YEAR, because from late 2015 and into 2020, a severe global contraction will likely result in a bear market across many fronts. Precious metals are likely to rise in value as fewer people trust government and a rush into tangibles happens.

The weekly chart of the HUI/gold ratio is shown below, with gold denoted in black. This is probably the most important chart in the Universe for those who hold precious metal stocks, because it gives an indication of whether or not shares will outperform gold on a relative basis. Bollinger bands are extremely tight as a base has been built over the past 12 months. Based upon this, a move higher is very likely since lower lows did not happen. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K beneath the %D in 1 and above the %D in 2 and 3. Down trend lines for the %K in stochastics 2 and 3 are included which illustrates the %K in stochastic 3 breaking above its downtrend line. Notice the %K in stochastic 2 was recently repelled by this downtrend line, yet has curled up and appears set to break higher. ….”

 

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“Volatility in the currency market is near a record low, and that has led market participants to bulk up on carry trades, which involve borrowing in a currency with low interest rates to invest in another with high rates of return.

But experts warn that those trades can be quite dangerous if volatility kicks up or interest rates suddenly shift.

The low interest rate environment worldwide has investors scouring the globe for decent returns. “Essentially, ‘carry’ has returned in the pursuit of yield,” Anjun Zhou, head of multi-asset research at Mellon Capital Management, told The Wall Street Journal.

As for the risk of carry trades, “there’s a fear that it’s based on unsustainable market factors, like low interest rates and volatility in both [foreign exchange] and fixed income,” Steven Englander, head of developed-market foreign-exchange strategy at Citigroup, told the paper.

And some experts say it’s too late to place carry trades anyway. “If you haven’t put on the ‘carry’ already, it’s become a harder trade,” Alan Ruskin, head of developed market foreign-exchange strategy at Deutsche Bank, added.

Others agree with Ruskin…..”

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“This week has not been sleepy when it comes to the news. It feels like a firecracker out there just waiting for a match in my opinion. There have been too many issues to cover them all but here are a few TedBits for you:

• Surrender
• GDP collapse
• Explosive divergence between volume and price
• MORAL HAZARD written large
• Leverage peak in stocks?
• SOME People aren’t DUMB
• EU elites pull another FAST ONE   

Surrender

One hundred years ago this week World War I commenced and the specter of World War III is at our doorstep. Secretary of State John Kerry unilaterally surrendered to ISIS in Iraq by stating unequivocally to regional powers that the conflict will not be solved by military means. The very idea that ISIS will sit down at any table and peacefully resolve any issues is a fairytale. The ISLAMIC Caliphate is on a mission from GOD and will not be dealing with infidels in any manner other than their demise or the threat of their own demise. It is as simple as that. As I have said previously: World War III has commenced, it just hasn’t been publically admitted yet. Kerry’s statements are the height of irresponsibility to the American people.

GDP collapse

Yesterday’s revision to GDP was a nightmare on Main Street both on the headline number and internally looking at its components. Originally called at up 2%, then the first report of up .1%, first revision was down 1% and this revision taking it to down 2.9%. We were told over and over it was the weather. NOPE.

Look closely at the HORROR show the revision has been. It was a collapse in healthcare spending as a result of OBAMACARE (healthcare spending down over 6%), a collapse in private investment, a surge in imports (surge in liabilities) and a collapse in exports (collapse in income and sales). FOUR knock out blows to Keynesian linear thinking and highly questionable projections of a recovering economy. The economy is real terms is not recovering, in nominal terms the piles of debt and leverage keep expanding and then called GROWTH.

This is tens of billions of dollars economic activity that has disappeared. It foreshadows the coming bailout of the health insurance industry as its business is collapsing from the GOVERNMENT MANDATED policy cancellations in 2013 that HAVE NEVER RETURNED. Obamacare is higher priced and delivers much less services. Private sector investment will not return as there is no reward for doing so. Why would a company or individual invest when there is no INCOME GROWTH after real inflation? Incomes and revenues must rise for investment to become attractive. It’s why M&A is on FIRE, it is easy to buy existing business and customers rather than BUILD NEW ONES. Why would an entrepreneur risk his hard earned dollars, blood, sweat and tears to get to a level of success over $250,000 dollars a year when he or she can expect the taxman to confiscate it as soon as he reaches success? Washington has removed the incentives to produce. We are its vassals not its master.

Add to this, Dodd Frank restricting credit to the private sector, mandated health care benefits, EPA attacks on affordable energy and the hoax of climate change, the affordable care act and its 20 new taxes, runaway regulations of the small business sectors. Most readers don’t understand the damage done by the regulators. As Cicero once said:

“The more corrupt the state the more it legislates.”

You can extend that to regulation which is a result of the laws. This administration learned its craft at the knee of Richard Daly and the Chicago style of POLITICS. Everything in the United States has been on sale to the highest bidder for the last 6 years since the chosen one was elected in 2008 with supermajorities in Congress. Pay the right price and that business becomes the turf of the crony capitalist who PAID UP. The regulations regulate the demand to their cronies and place impossible hurdles in the path of the entrepreneurs who wish to knock off the crony’s by providing more for less. People aren’t stupid contrary to Washington’s belief. They can spend their money, choose what’s right for themselves and their families in a far wiser manner than a bureaucrat or would be mandarin in the District of Corruption.

So they try and pass a law or regulation removing your ability to choose for yourself. It is an epidemic of INCONSTITUTIONAL government.

The world is unraveling at an astonishing pace. Today I will call it chart porn day. That is a day when we look at charts. Make brief comments and thoughts about them and move on to the next thought and chart.

Explosive divergence between volume and price

The first chart is brought to us by www.Zerohedge.com and it is an overlay of the vix gauge which has become totally disconnected from an perception of risk by options writers and investors complacency levels about negative events impacting the stock market such as the rise of the caliphate in Iraq;

Talk about a bear market in trading volume since the peak before the financial crisis commenced. It should also be noted that as bad as the collapse in participation has been in reality it is much worse as High Frequency traders account for 50 to 70% of the trading on any particular day. I promise you that if the markets start to crash those programs will stop trading and liquidity will be reduced accordingly (50 to 70%). A mighty small door for weak handed investors that have entered late to exit. It doesn’t matter whether it is the bond markets or stocks the exits in event of a moment of panic appears very very small to me.

MORAL HAZARD written large

Moral Hazard and Complacency is at epidemic levels. Investors and Markets are TOTALLY DISCONNECTED from reality and potential risks in the global markets. They believe central banks will do anything NECCESARY to support asset values and stock markets. It is actually a correct assumption in my opinion. This is why the Middle East and ISIS taking over IRAQ dealt no blows to the markets? Let’s keep in mind that between the Federal Reserve and the Bank of Japan 110,000 million dollars is being printed each MONTH. QE is, has and will be the dominant investment theme for the foreseeable future from one central bank or another.

“The best way to destroy the capitalist system is to debauch the currency. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose.” – John Maynard Keynes, 1920

The BIS has reported that Thirty Trillion dollars of new debt (30 million million) has been created since the Global Financial Crisis struck in 2008 and this is a picture of it in ACTION. Powerful medicine for insolvent sovereigns, financial and mortgage markets and that money now sits in accounts around the world looking for YIELD and opportunity. All in short supply in a world where growth is OUTLAWED by socialist governments disguised as DEMOCRACY.

The Federal Reserve has gone to great lengths over the last 3 years EMPHASIZING that financial system stability is firmly one of their mandates along with unemployment and inflation. We inhabit asset backed economies with Reserveless banking systems. A move similar to 2008 will BANKRUPT the biggest financial players in banking, institutions, pensions and insurance. This anomaly and perception of a goldilocks economy and market will get eaten by the three bears before this latest episode in runaway leverage resolves itself. When this leverage fails…. THEY WILL PRINT THE MONEY.

Leverage peak in stocks?

Margin debt has always peaked before major market tops and we are now into month five since the margin peak was seen. This chart was done bywww.dshort.com;

Using data compiled by Lance Roberts of STA wealth advisors. Lance and Doug are some of the finest chart makers on the web and their work must always be kept in mind. Both are Keynesians and accept official numbers as accurate. The message at this time; be afraid, be very afraid…..”

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[youtube://http://www.youtube.com/watch?v=FMF4taqaJRQ 450 300]

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“Financial markets sure did well in the first half of the year, despite an unexpected share of economic disappointments, policy misses and geopolitical drama. They will need better news in the next six months to sustain that performance, and if they succeed it is unlikely that they will repeat those same, broad-based gains.

At the start of the year, few expected the U.S. economy to shrink by a stunning 2.9 percent in the first quarter, Russia to annex Crimea, and Iraq to fall victim to a sectarian insurgency — all of which served to amplify the challenges facing already-weak economies.

More predictable was the series of policy slips such as disappointing progress on Japan’s “third arrow” reforms and a persistently unbalanced macroeconomic stance elsewhere that relied excessively and for too long on monetary tools alone.

Yet you would be hard pressed to point to many markets that suffered any meaningful consequences. Rather than sell off, global equities have gained, as have corporate bonds, commodities and emerging-markets securities.

Historically, such broad-based gains would suggest that the global economy is improving. Not this time. Instead, analysts spent much of the first half not only lowering their growth estimates for 2014 but scaling back their assessment of even longer-term growth for a number of countries — including the U.S.

The answer to this puzzle is found in yet another asset class that did well in the first half — government bonds,including those issued by Germany and the U.S., the benchmark risk-free assets. The fact that government bonds rallied in the first half of the year speaks to the continued influence that central-bank policy wields in financial markets.

Motivated both by long-standing concerns about sluggish growth and newer worries about price deflation, the European Central Bank joined others in committing to a more stimulative monetary policy over a longer period of time…..”

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“MOSCOW—Ukrainian forces used aircraft and artillery against pro-Russian separatists in the east of the country early Tuesday, as fighting intensified after President Petro Poroshenko declared an end to a 10-day unilateral cease-fire that had failed to stop the violence.

“The active phase of the antiterrorist operation resumed this morning,” Parliament Speaker Oleksandr Turchynov, told legislators in Kiev on Tuesday. “Our armed forces are striking the bases and staging areas of the terrorists.”

The decision to use the army represents a gamble by Mr. Poroshenko that Russia won’t send in its troops, massed for months on the other side of the border, and that Kiev’s ragtag forces can oust the increasingly well-armed militants.

Fighting was reported in several areas across the region, including at posts along the Russian border that Ukrainian forces had lost to separatists in recent weeks, as well as near the international airport in Donetsk, the region’s largest city. Separatist officials also confirmed the fighting had picked up across the region.

Four civilians were killed and five wounded in the city of Kramatorsk….”

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Neo Nazis Unleash Hatred  in Ukraine

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“U.S. stock-index futures rose, after the Standard & Poor’s 500 Index posted the longest streak of quarterly gains since 1998, as China’s manufacturing expanded and investors awaited U.S. factory data.

Netflix Inc. (NFLX) advanced 3.4 percent in early New York trading after Goldman Sachs Group Inc. recommended investors buy shares in the world’s largest Internet-subscription service. General Motors Co. lost 0.8 percent, signaling it may decline for a fourth day. Symantec (SYMC) Corp. dropped 1.9 percent after Bank of Montreal downgraded the biggest maker of anti-virus tools to the equivalent of hold.

Futures on the S&P 500 (SPX) expiring in September climbed 0.2 percent to 1,956.9 at 7:30 a.m. in New York. The benchmark equity gauge rose 4.7 percent in the second quarter, a sixth consecutive increase. Dow Jones Industrial Average contracts added 41 points, or 0.2 percent, to 16,781 today.

“I was expecting a good performance into the summer months,” Gerhard Schwarz, the Munich-based head of equity strategy at Baader Bank AG, said by telephone. “I’ve been hoping earnings would be better. That’s what’s still missing, but the odds are quite good. Our call was that we might see some improvement in the economic indicators and that was delivered today with the Chinese PMI. So we’re seeing some recovery.”

Manufacturing Reports

A report today showed manufacturing in China expanded in June by the fastest pace this year. Apurchasing managers’ index rose to 51.0 last month from 50.8 in May, the National Bureau of Statistics and China Federation of Logistics and Purchasing said. The reading matched economists’ median estimate. A similar gauge from HSBC Holdings Plc and Markit Economics advanced to 50.7 from the previous month’s 49.4.

Figures from the Institute for Supply Management at 10 a.m. New York time may show its manufacturing index climbed to 55.9 in June from 55.4 the previous month, according to a survey of economists. That would be the highest reading of 2014…..”

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“The Bank for International Settlements — the Swiss-based financial institution that acts as a counterparty to national central banks — has declared that stock markets are in a “euphoric” state and has urged central banks globally to begin tightening interest-rate policies now while economies are growing rather than wait for another recession, when it will be too late.

Those are scary words coming from a set of economists whose job it is to monitor how capable central banks are of responding to economic conditions with flexible monetary policy.

The subtext (and not so subtext) of BIS’s annual report is that, because many central banks have reduced interest rates to zero — the U.S. and Japan included — they are without weapons to boost the economy should another crisis hit. You can’t go lower than zero, basically.

These words from the BIS ought to terrify anyone who thought central banks were unprepared for the last recession in 2007, when U.S. interest rates were “high” at about 5.3%:

Financial markets are euphoric, but progress in strengthening banks’ balance sheets has been uneven and private debt keeps growing. Macroeconomic policy has little room for manoeuvre to deal with any untoward surprises that might be sprung, including a normal recession…..”

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“Pension funds and other long-term investors are taking ever bigger risks and could be laying the ground for renewed turmoil when money gets more expensive, one of the world’s leading economists told Reuters.

As memories of the financial crisis fade and market confidence soars, policymakers have warned that investors desperate for any return on ultra-cheap money could be creating yet another bubble to go bust.

Now the chief economist of the body bringing together global central bankers has warned that while banks are still repairing the damage of the last crisis, pension funds have cast off their risk aversion in the hunt for profit.

“Things look and feel great but we are storing up a possibly more painful and more destructive reversal,” said Hyun Song Shin of the Bank for International Settlements (BIS).

“The one thing that is different between now and 2006/2007 is that the protagonists … are no longer … the banks. This risk taking is happening through other market players. Long-term investors are also joining in.”

This changing pattern of behavior carries “a potential source of danger,” he said. “We are going into somewhat unfamiliar territory.”

Central banks in the eurozone, Japan, Britain and the United States risk keeping the taps of cheap money open for too long after the financial crisis, he said.

Shin is the economic adviser to a group that brings together policymakers from across the globe, including European Central Bank President Mario Draghi and Federal Reserve Chief Janet Yellen.

He called on regulators to be alert to the new risks…..”

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“Blackstone Group BX -0.30% LP is quietly laying plans to start a hedge fund that will make big, bold bets, an effort it hopes will eventually rival some of the largest firms in the business, according to people familiar with the plans.

The private-equity firm will fund several teams of traders with hundreds of millions of dollars to place a relatively small number of large, highly concentrated wagers, the people said. The strategy is notable now as many hedge funds are shying away from making such outsize bets.

Combined, the teams’ investments will form a multistrategy hedge fund to be pitched to wealthy clients. New York-based Blackstone is confident the firm can hedge the overall risks, according to people familiar with the firm’s plans.

Blackstone is aiming to rival powerhouses such as Millennium Management LLC, which has $23 billion under management; Chicago-based Citadel LLC, which has $22 billion; and the $45 billion Och-Ziff Capital Management OZM +0.22% LLC in New York.

The move fills a gap for the $272 billion-asset manager, which already boasts a lineup of private-equity funds and mutual funds. Blackstone already has the world’s biggest collection of so-called funds of funds that invest in other firms’ hedge funds and is the biggest investor in hedge funds…..”

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“The pace of business activity in the U.S. Midwest fell more than expected in June, a report showed on Monday.

The Institute for Supply Management-Chicago business barometer fell to 62.6 from 65.5 in May. Economists were looking for a reading of 63.0 in the month.”

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“Argentina is poised to miss a bond payment today, putting the country on the brink of its second default in 13 years, after a U.S. court blocked the cash from being distributed until the government settles with creditors from the previous debt debacle.

The nation has a 30-day grace period after missing the $539 million debt payment to seek an accord with a group of defaulted bondholders led by billionaire Paul Singer’s NML Capital Ltd. and prevent a default on its $28.7 billion of performing global dollar bonds. Both Argentina and NML have said that they’re open to talks.

A decade-long battle between Argentina and holdout creditors from the country’s $95 billion default in 2001 is coming to a head. The U.S. Supreme Court on June 16 left intact a ruling requiring the country pay about $1.5 billion to holders of defaulted debt at the same time it makes payments on restructured bonds. Argentina last week transferred funds to its bond trustee to pay the restructured notes, only to have U.S. District Court Judge Thomas Griesa order the payment sent back while the parties negotiate…..”

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