“In its market report for April, the International Energy Agency (IEA) has once again lowered its expectation for global oil demand this year. In theory, that should keep the price of gasoline down.

The International Energy Agency expects 2013 to be the third consecutive year of weak growth in demand, adding only 795 000 barrels per day (795 kb/d), according to the April Oil Market Report (OMR) published today.

Relatively strong demand growth among non-OECD countries of 1.28 million barrels a day (mb/d) will be tempered by a contraction of 480 kb/d in OECD consumption, particularly in Europe, where it will shrink by 340 kb/d. European demand has not been this weak since 1985.”

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“The rebound in the housing market is “eerily familiar to the previous government policy-induced boom that went bust in 2006, and from which the country is still struggling to recover,” says Edward Pinto, who was the chief credit officer at Fannie Mae from 1987 to 1989.

In an opinion article in The Wall Street Journal, Pinto notes that the Federal Reserve’s aggressive policy of quantitative easing has lifted the stock market to record highs and supported strong bond prices. Moreover, he says, housing prices have jumped 8%, the biggest annual gain since 2006.

Pinto, now a resident fellow at the American Enterprise Institute, says that the market value of single-family homes has risen by more than $1 trillion. That “wealth effect” should empower homeowners to spend more, thus boosting the economy….”

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“The Standard & Poor’s 500 Index could drop 40 percent, according to contrarion investor Marc Faber.

“There are some people now calling for Dow Jones 18,000 or 20,000 by year end,” Faber told Newsmax TV in an exclusive interview. “The S&P could then easily drop by 40 percent.”

The editor and publisher of “The Gloom, Boom & Doom Report” said the market “needed the correction” starting in February or March….”

Watch our exclusive video. Article continues below….

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“Instead of the endless procession of “different this time”, “buy-the-dip”, “money-on-the-sidelines” asset-gathering, Muppet-fleecers that CNBC so typically trots out, Sam Zell graced them with his presence and the truth was allowed a voice for a few minutes. Joined by David Rosenberg, who clarifies the insanity that engulfs US equities, explaining in wonderment that it is “not surprising the market rises even in the face of bad ISMs, worse jobs, and worst NFIB data, because Japan and the US are embarking on a gargantuan quantitative easing that is the lynchpin behind the stock market.” It is not about being bullish, or bearish, or agnostic, it is understanding the driver of this market – and that is not the economy, not earnings, “it is the mother of all liquidity-driven rallies.” Maria B, soundbite in hand, is slammed for her “glibness” at not fighting the Fed but it is Sam Zell’s brutal honesty that shocks even the money-honey. “This is a very treacherous market,” Zell explains – thanks to the giant tsunami of liquidity, “the problems of 2007 haven’t been dealt with,” and given the poor macro data and earnings, “we are suffering through another irrational exuberance,” leaving the entire CNBC audience speechless when he concludes, “the stock market feels like the housing market of 2006.”

Maria B:

“So don’t fight the Fed?“

Rosenberg:

“That’s a pretty glib comment for what is going on. You could have fought the Fed in 2000 and 2009 and done quite well… [thanks to the Fed] the market will tend to drift up – until something breaks.”

Zell:

“We’re debasing our currencies around the world.. which ultimately translates into a lot of inflation.”

 

“What we are seeing here is like a giant tsunami of liquidity.”

 

“People look at the market and think things are better. The level of uncertainty has reached a point where people are just throwing money [at risky assets] because they don’t know what else to do with it.”

 

“I would not be adding money to the stock market. This is a very treacherous market.”

 

“Yes, it’s gone up every day. Yes, you’re not supposed to fight the Fed, but sitting on the sidelines is preferable.”

 

“In our businesses, we are not seeing strong conditions.”

 

“The problems leading up to 2007 haven’t been dealt with.” …”

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“(Reuters) – Feeling bolder after a 50 percent jump in Tokyo share prices inflated his stock portfolio in recent months, Akira Otomo surprised his wife with a new kimono and matching traditional obi belt costing more than $8,000.

After a decade and a half of self-imposed austerity, there are signs that wealthier Japanese shoppers are spending more. Confidence is rising, and with it sales of high-end goods and clothes, giving retailers a boost.

“I’d given up on my stock portfolio, but I’m happy prices are finally getting back to where they were before the Lehman crisis,” said Otomo, 56, who runs a human resources training company. “I’m looking to sell, and I’m sure I’ll spend some of the profits,” he added as he left an apparel shop in Tokyo’s upscale Omotesando district.

The trigger has been Japan’s radical gamble to end deflation under Prime Minister Shinzo Abe – a combination of aggressive monetary easing, currency devaluation and promises of reform dubbed “Abenomics.”

Many retailers forecast higher profits for this year on improved sales of luxury goods and clothing. But some retailers and shoppers are unsure if spending will continue once the feel-good factor of higher stock prices fades. For many Japanese, wages remain depressed and employment prospects uncertain.

“The rich have money, but I don’t feel the economy’s getting better,” said Eri Mori, a 42-year-old Osaka housewife. “I don’t see salaries rising.”

PORTFOLIO EFFECT

The stock market rally .T that has given Otomo the confidence to splurge was sparked by Abe’s pledge to overhaul the Bank of Japan so it would ease monetary policy more aggressively. The BOJ delivered last week, agreeing to double the amount of government debt it holds over the next two years.

Abe is counting on the wealth effect from further gains in stock prices, encouraging investors to cash in and spend more.

“The sudden improvement in the stock market has led to a big rise in sales at our department stores for luxury brands and high-end goods like jewelry, precious metals and watches,” said Ryoichi Yamamoto, president of J.Front Retailing Co (3086.T), which operates store chains like Daimaru and Matsuzakaya that do more business in Osaka and Nagoya.

The company sees that higher demand acting as a “tailwind” to drive up operating profit by close to a third to a record 40 billion yen ($404 million) in the year to next February….”

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“Fund manager John Hussman of the Hussman Funds has been hammering on what is probably the biggest risk to future stock performance:

The risk that today’s record-high profit margins will fall, taking corporate earnings down with them.

Those who want stocks to keep charging higher have come up with a list of many reasons why it’s “different this time” and today’s profit margins will keep on increasing. These include:

• Almost half of big corporate profits now come from international operations, so profit-to-US GDP measures aren’t meaningful
• The source of the high profit margins is efficiency and low labor costs, and those gains will continue (labor glut, high unemployment, etc.)
• There is no law that says profit margins HAVE TO drop…

Those points have some merit.

But the idea that it really is “different this time” and that corporate profit margins will now remain at record levels forever seems, at best, dreamy.

After all, this is what profit margins (blue) have done in the past….”

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Not sure how a drop in the participation rate is a gain in unemployment, but never the less some call this a win for improving unemployment.

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“Slovenian political leaders face mounting pressure to solve the nation’s banking woes and avert a fiscal crisis after the European Union’s sternest warning yet that action is needed.

Parliament in the capital, Ljubljana, may debate a plan to place a legal limit on debt as early as today, while a vote may be hastened in the coming days. Prime Minister Alenka Bratusek pledged to continue talks with party leaders to reach a consensus after failing to cobble together a plan last night.

Slovenia’s ailing banks have made it a target for financial markets, with shrinking demand at a debt auction this week signaling investor expectations that the country may be the next domino to fall in the 17-nation euro area. Cyprus became the region’s fifth bailout victim last month when it agreed to a 10 billion-euro ($13.1 billion) rescue.

“It’s time to act in order to break a current devastating cycle,” Saso Stanovnik and Matej Simnic, economists at Alta Invest d.d. in Ljubljana, wrote in a report today. “It’s the new government’s turn to regain confidence by proposing its own scheme to salvage Slovenia, but it has to be concrete and credible and since time for refinancing is short, it also has to be efficient and quickly implemented.”

Bad Loans

Slovenia, whose 35 billion-euro economy is the fourth smallest in the euro area, fell into the crossfire after European creditors and the International Monetary Fund forced losses on bank depositors in the aid package for Cyprus….”

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“Free money” being printed by the Federal Reserve has led to a disconect between soaring stocks and the real economy, according to author and TV host Simon Constable.

“I look at the tremendous poverty that we have,” Constable told Newsmax TV in an exclusive interview. “We have about 50 million people on food stamps,” he said, describing the number as “staggering.”

The host of The Wall Street Journal’s News Hub was asked about the wealth effect created by the stock market.

Watch our exclusive video. Story continues below…”

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“The direction of stocks is still pointed toward the sky, according to Gene Peroni, who predicts the Dow Jones Industrial Average will hit 18,000 before the current bull market ends in 2015.

In a commentary for MarketWatch, Peroni, senior vice president of equity research at Advisors Asset Management, said valuations are appropriate and market sectors are balanced for continued upward momentum.

“Based on the technical qualities of the market’s advances so far this year, the market’s risk/reward ratio remains attractive, both short and longer term,” Peroni wrote. “I see the Dow Jones Industrial Average ending 2013 between 14,750 and 15,100; by the time this cycle ends in 2015, the Dow will be at 18,000.”

Peroni conceded the Dow’s first-quarter advance — more than 11 percent — was “stunning,” and there are valid reasons to expect a pullback. But he suggested investors may do well to ignore such a likelihood.

“Predicting the timing or depth of a decline could prove difficult and may even be distracting, given the broad field of technically attractive stocks at this juncture. The market is being driven by many different and diverse sectors and does not appear vulnerable to any individual micro-thematic event.”

There are several attractive areas investors should focus on, according to Peroni….”

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“Bank of Japan (8301) Governor Haruhiko Kuroda said that while policy makers will continually monitor whether additional stimulus is needed, steps taken last week are sufficient to achieve the bank’s 2 percent inflation goal.

The central bank has taken all “necessary” and “possible” steps, Kuroda told reporters in Tokyo today. While officials will change policy as needed, he doesn’t expect adjustments each month, he said. The BOJ chief reiterated his pledge to take all necessary steps to meet the target for consumer price gains in two years…”

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“The U.S. isn’t broke, and the dollar isn’t in danger of collapse even after unprecedented stimulus measures enacted following the worst financial crisis since the Great Depression, according toCapital Economics Ltd.

Taking into account total domestic assets and liabilities, the U.S. economy’s overall net worth is about 550 percent of gross domestic product in 2011, Paul Ashworth, the chief U.S. economist at Capital Economics, wrote in a research note. That compares with official figures showing U.S. GDP at close to $15 trillion, while national debt has ballooned to $16.8 trillion after nearly tripling since 2001…”

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“Switcheroo! One of the biggest money managers on Wall Street is changing its tune and now advising the Fed to rein in its bond-buying program, and do it now, saying the central bank is distorting markets and risks stoking inflation.

“Fed policy has had a distorting effect on capital allocation decisions of all kinds at virtually every level of the economy. It is a very large and dull hammer for markets,”  Rick Reider, who oversees $763 billion in fixed income investments for BlackRock, told the Financial Times in an interview that published Tuesday….”

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“Nearly half of hedge fund professionals believe their competitors engage in crooked activity, and 35 percent have felt pressure to break the law or engage in unethical behavior themselves, according to a new industry survey.

The study, commissioned by the Hedge Fund Association, Hedgeworld and an industry law firm, found that 87 percent said they would report wrongdoing given the protections of the Securities and Exchange Commission (SEC)’s whistleblower program.

In all, 30 percent of the 127 hedge fund professionals polled said they had personally observed or had first-hand knowledge of wrongdoing the in the work…”

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[youtube://http://www.youtube.com/watch?v=L397TWLwrUU 450 300]

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“Investors should be prepared for up to a 50 percent drop in stocks in the coming decade, according to Jack Bogle, senior chairman and founder of The Vanguard Group.

“When I tell people I think we ought to have a 7 percent return on stocks, doubling your money in 10 years, that’s a 2 percent dividend yield and perhaps 5 percent earnings growth,” Bogle told CNBC.

“But I also tell them they should expect at least a few 25 percent to 30 percent drops along the way, and maybe even a 50 percent drop in the coming decade.”

Bogle noted that he doesn’t worry too much about the annual outlook.

“The market is going to do what it wants,” he explained. “So you’ve just got to keep a stiff upper lip. I think the best strategy is to just do your best to avoid reacting, and it’s hard to do. I have a hard time doing it myself.”

Bogle instead focuses more on the long-term investment horizon.

“If you’re only in for the day, the week or the month, I think you’re in for a lot of unpleasantness,” he stated.

“But if you look out a decade and I think earnings could grow as much as 5 percent a year and that would imply, because they track very closely, a nominal increase of 5 percent a year of [gross domestic product]. That might be high — it might be more like 4.5 or 4 percent, but that’s what we expect in the next 10 years.”

The effort by central banks worldwide to stimulate economic growth could put a damper on Bogle’s forecast.

“We have an enormous fiscal problem around the world,” he said. “The [Federal Reserve] seems to have done one of the best, if not the best, jobs in the world of trying to do some stimulus. All of that austerity they’ve tried in the European Union, Great Britain and Greece … doesn’t seem to be working at all.” ….”

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“Federal Reserve Chairman Ben Bernanke said on Monday the central bank’s periodic bank stress tests have made the U.S. financial system more resilient.

Contrasting the current state of U.S. banks to their tattered condition in 2009 after the historic financial crisis, Bernanke said the sector’s rebound was positive for the broader recovery given the importance of credit to economic growth.

“The resilience of the U.S. banking system has greatly improved since then, and the more intensive use and greater sophistication of supervisory stress testing, as well as supervisors’ increased emphasis on the effectiveness of banks’ own capital planning processes, deserve some credit for that improvement,” Bernanke told a conference on financial stability sponsored by the Atlanta Federal Reserve Bank….”

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