The Big Picture

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• Bull Market Needs One Thing to Keep Going
• Is the Tide Turning Back?
• Intelligence Agencies Have Gone Rogue, With No Oversight
• 10 Mid-Week PM Reads
• Where Would Winter Temperatures Place Your City in the US?
• Attention Suckers: Send Us Your Money!
• 10 Midweek AM Reads
• What Makes Candy Crush So Addictive?
• Sun Rises Over North Pole for 1st time in 6 months

Bull Market Needs One Thing to Keep Going Posted: 27 Mar 2014 03:00 AM PDT Josh explains the world to the lovely Lauren:   Source: Yahoo Finance

Is the Tide Turning Back? Posted: 27 Mar 2014 02:00 AM PDT Is the Tide Turning Back? Globalization & Monetary Policy Institute International Economic Update Dallas Fed March 25, 2014       Enlarge Economic activity improved for the world during the second half of 2013 as year-over-year growth ticked up to 3 percent with acceleration in advanced economies. Advanced and emerging economies contributed evenly (Chart 1).[1] Headline consumer price index inflation increased to 3.4 percent year over year in January 2014 due to a pickup in emerging economies—a 1.4 percentage-point increase from January 2013 to reach 5.6 percent. Inflation in advanced economies excluding the U.S. remains around 1.3 percent year over year. Downside risks to the outlook for 2014 continue. Data released since January have heightened concern over softer-than-expected growth, and geopolitical developments in Ukraine have also increased macro risks. Slowing Growth in China May Hinder Structural Reforms Fiscal problems in China have grown as stimulus has increasingly become dependent on local government investment. China's National Audit Office data indicate that local government debt and guarantees increased to 17.9 trillion yuan as of midyear 2013 from 10.7 trillion at the end of 2010. Total renminbi loan growth (14.2 percent year over year in February) is running well above nominal gross domestic product growth and is possibly contributing to a rise in real estate prices since 2013. Monetary policy has progressively shifted toward moderating credit growth and reducing excessive risk-taking behavior, while gradually removing government controls on the financial system. The reform agenda laid out in the Third Plenum of the Central Committee of the Communist Party (November 2013) is ambitious in scope (Table 1). China has pursued this path incrementally, taking steps to relax the one-child policy and promote rapid internationalization of the renminbi and even proposing the partial privatization of some state-owned enterprises. Table 1 Key Goals of China's Reform Agenda Goal Implementation Measures Financial reform Interest rates, capital account, exchange rate liberalization Fiscal reform Local government funding and revenue-sharing, reduce government intervention Socioeconomic reform Land and pension reforms, household registration ("hukou") system reform, easing one child policy Public sector reform Administrative and judicial reform, state-owned enterprise partial privatization, "decisive role" for markets SOURCE: Authors' assessment based on publicly available reports as of March 17, 2014. Since January, China has expanded its support facilities for the most liquidity-constrained banks in response to recent spikes in interbank rates (Dec. 23 and Jan. 20) and has weakened its implicit guarantee on financial products—even allowing the onshore default of Shanghai Chaori Solar Energy on March 6. Regarding exchange rate policy, China widened the renminbi's intraday trading band against the U.S. dollar to +/-2 percent on March 17, accompanied by a 1.5 percent onshore depreciation since Feb. 17.[2] Economic performance in China has missed expectations in the first two months of 2014 on industrial production, manufacturing purchasing managers indexes, fixed-asset investment and retail sales. The eye-popping export decline of 18.1 percent in February, while partly seasonal, raised warning flags about the strength of the external sector. At a press conference following the recent National People's Congress annual meeting on March 13—at which a 7.5 growth target was set for 2014[3]—Premier Li Keqiang admitted that due to weaker-than-expected data, the Chinese economy faces "challenges" in 2014. Questions have arisen about the direction of macro policy for the year and the speed of reform if economic activity continues to show signs of sliding below the official target. Vulnerabilities Appear Broad Based Among Emerging Economies In some emerging economies, currencies appear under pressure and capital outflows have increased since May 2013, coinciding with the announcement of possible Federal Reserve tapering. Currencies under downward pressure either depreciate or require policy intervention to be sustained. Enlarge Chart 2 illustrates the magnitude of currency pressure buildup using an indicator that accounts for the actual depreciation of the currency and the impact of policy interventions.[4] Historically, episodes of currency stress are preceded by periods of sustained and unusually large current account deficits—current account reversals and large capital outflows can result in large exchange rate corrections. Chart 2 (lower right quadrant) shows that downward currency pressures have also affected some emerging economies with current account surpluses. The combination of external vulnerabilities and broad domestic weakness—such as structural impediments to sustained growth and political uncertainty—in some emerging economies may result in further exchange rate correction to bring about external and internal rebalancing. It could also mean tighter domestic financial conditions if authorities defend their currencies. Financial conditions might be constrained further as advanced economies begin to scale back monetary accommodation, pushing world interest rates upward. Enlarge Structural impediments in many of these emerging economies could partly account for their sluggish growth since the last global recession. Based on the growth rates achieved, lower trend growth during the recovery seems increasingly likely (Chart 3). This has implications for future growth prospects but also means current projections of economic slack could be overstated, which is consistent with the buildup of inflationary pressures that most of these emerging economies have been experiencing. Increased inflation could further erode their external competitiveness and heighten policy risks as emerging economies pursue multiple, often conflicting objectives (sustaining growth, supporting the currency, restraining inflation). Financial Conditions in Advanced Economies Remain a Concern In advanced economies, the monetary policy stance remains accommodative, while fiscal consolidation continues, though at a moderated pace. Downside risks to the outlook in Japan and the euro area come from lower-than-expected inflation. This increases the burden of debt in real terms and raises real interest rates. Japan's bold experiment with monetary easing in 2013 drove the yen down—providing a short-lived economic boost—and helped push up inflation. But concerns remain whether the 2 percent target has been fully incorporated into inflation expectations. Enlarge Across the euro area, private sector credit growth remains weak, partly due to the pullback in nonfinancial corporate lending in both the core (-0.4 percent year over year in January 2014) and the periphery (-7.4 percent) (Chart 4). This has been a restraining factor on inflation, investment and overall growth. Bank lending has been stifled in part by increased regulatory burdens (the implementation of Basel III in 2014) that warranted deleveraging to meet capital and liquidity requirements. The rollout of the Single Supervisory Mechanism in the euro area requires a balance-sheet assessment and stress test of banks—the European Central Bank (ECB) comprehensive assessment—prior to the ECB assuming its full supervisory powers in November 2014. Further efforts to reduce risk exposure, raise capital and deleverage are likely still needed, weighing on the availability of credit and the growth and inflation outlook. Restraints on the Global Economy Developments in Ukraine may have implications for commodities markets, lead to trade disruption and increase macro uncertainty. Downside risks to the outlook also come from the perceived softness in China's economy, developments in emerging economies (such as currency stress and sluggish growth), policy hurdles and low inflation in addition to new regulatory burdens in advanced economies. —Adrienne Mack and Enrique Martínez-García · Update in PDF   Notes Data reported in this international update for the aggregates—world (ex. U.S.), advanced (ex. U.S.) and emerging—come from a representative sample of 40 of the largest economies ranked by their importance as trading partners of the U.S. (G–40)—see “Database of Global Economic Indicators (DGEI): A Methodological Note,” by Valerie Grossman, Adrienne Mack and Enrique Martínez-García, Federal Reserve Bank of Dallas, Globalization and Monetary Policy Institute Working Paper no. 166, December 2013. For the methodology used for dating global cycles, see “A Contribution to the Chronology of Turning Points in Global Economic Activity (1980–2012),” also by Grossman, Mack and Martínez-García, Globalization and Monetary Policy Institute Working Paper no. 169, January 2014. The band was introduced on 2007 at +/-0.5 percent and widened to +/-1 percent in April 2012. Major macroeconomic targets for 2014: 7.5 percent year-over-year real gross domestic product (GDP) growth, 3.5 percent inflation, 13.5 percent growth of M2 (money supply), 2.1 percent of GDP central government deficit and 10 million urban employment growth (increased from 9 million in 2013, while all other targets remain unchanged). The indicator used is the exchange market pressure index (EMPI). See “Contagious Currency Crises: First Tests,” by Barry Eichengreen, Andrew Rose and Charles Wyplosz, Scandinavian Journal of Economics, vol. 98, no. 4, 1996.

Intelligence Agencies Have Gone Rogue, With No Oversight Posted: 26 Mar 2014 06:00 PM PDT "Do You Think That Because I'm Chairman of The Intelligence Committee That I Just Say "I Want It", and They Give It To Me? They Control It. All Of It. ALL of It. ALL THE TIME. I Only Get – and My Committee Only Gets – What They WANT To Give Me." -Jay Rockefeller, Chairman, Senate Intelligence Oversight Committee In 2007, reporter Charles Davis asked then-Chairman of the Senate Intelligence committee – Jay Rockefeller – about clandestine U.S. operations against a foreign government. Here's the exchange (listen to the minute plus recording or just listen to the 20-second money quote): DAVIS: Reports quote administration officials as saying this is going on and it's being done in a way to avoid oversight of the Intelligence Committee. Is there any way— ROCKEFELLER: They'll go to any lengths to do that, as we've seen in the last two days [during hearings on FISA]. DAVIS: Is there anything you could do in your position as Chairman of the Intelligence Committee to find answers about this, if it is in fact going on? ROCKEFELLER: Don't you understand the way Intelligence works? Do you think that because I'm Chairman of the Intelligence Committee that I just say I want it, and they give it to me? They control it. All of it. ALL of it. ALL THE TIME. I only get -  and my committee only gets -  what they WANT to give me. This is shocking … but not new. The NSA was created in secret … and Congress wasn't even notified. During the Vietnam war, the NSA spied on two prominent politicians: Senators Frank Church and Howard Baker.  Church was the chairman of the committee investigating wrongdoing by the NSA and other intelligence agencies. Reuters notes: This power struggle burst into public view during the Church Committee hearings of the  mid-1970s. The Senate hearings stunned the nation with revelations about CIA assassination plots and illegal activities. The result was the creation of congressional committees designed to give the lawmakers greater control over intelligence. In the aftermath of the horrific September 11 attacks, however, President George W. Bush, aided and abetted by his powerful vice president, Dick Cheney, essentially gave the CIA [and all other intelligence agencies] a free pass to fight the  "war on terrorism." *** The battle erupted on the Senate floor on Tuesday when Senator Diane Feinstein (D-Calif.), the intelligence panel's chairwoman and normally a staunch CIA defender, denounced it for allegedly spying on committee investigators and violating the constitutional separation of powers. *** The Senate investigators in that basement had discovered an internal CIA study that appeared to agree with many of the Senate report's critical findings. Senator Mark Udall (D-Colo.) said the internal study "conflicts" with [CIA head] Brennan's rebuttal. CIA officials suspected that the Senate investigators had obtained unauthorized access to the internal study, and yanked the documents from the  basement computers. Feinstein said Tuesday that the CIA had not only searched the committee's computers but had referred the matter  to the Justice Department as a criminal case. The White House has also withheld 9,400 documents from the Senate's CIA torture investigation. The Washington Times reported in 2006 that – when high-level NSA whistleblower Russell Tice offered to testify to Congress about this illegal spying – he was informed by the NSA that the Senate and House intelligence committees were not cleared to hear such information: Renee Seymour, director of NSA special access programs stated in a Jan. 9 letter to Russ Tice that he should not testify about secret electronic intelligence programs because members and staff of the House and Senate intelligence committees do not have the proper security clearances for the secret intelligence. (And see this.) Former high-level NSA executive Bill Binney points out how absurd that statement is: Russ Tice … was prepared to testify to Congress to this, too, and so NSA sent him a letter saying, we agree that you have a right to go to Congress to testify, but we have to advise you that the intelligence committees that you want to testify to are not cleared for the programs you want to speak about. Now, that fundamentally is an open admission … by NSA that they are violating the intelligence acts of 1947 and 1978, which require NSA and all other intelligence agencies to notify Congress of all the programs that they're running so they can have effective oversight, which they've never had anyway. It was widely reported in 2009 the CIA had hidden a major program from Congress. To this day, Congress members get more information about NSA spying from reading the newspaper than they get in classified NSA briefings. Congressman Justin Amash said that the NSA would only divulge information in classified briefings if Congress guessed at the right questions: Amash said that intelligence officials are often evasive during classified briefings and reveal little new information unless directly pressed. "You don't have any idea what kind of things are going on," Amash said. "So you have to start just spitting off random questions. Does the government have a moon base? Does the government have a talking bear? Does the government have a cyborg army? If you don't know what kind of things the government might have, you just have to guess and it becomes a totally ridiculous game of twenty questions." A senior staffer for the Chair of the Senate Intelligence Committee – one of the biggest apologists for NSA spying- confirms Amash's statement: Sen. Dianne Feinstein (D-Calif.), chairman of the Senate Intelligence Committee, said in August that the committee has less information about, and conducts less oversight of, intelligence-gathering that relies solely on presidential authority. She said she planned to ask for more briefings on those programs. "In general, the committee is far less aware of operations conducted under 12333," said a senior committee staff member, referring to Executive Order 12333, which defines the basic powers and responsibilities of the intelligence agencies. "I believe the NSA would answer questions if we asked them, and if we knew to ask them, but it would not routinely report these things, and in general they would not fall within the focus of the committee." In other words, the intelligence agencies are rogue. Congress Not Informed that the Constitution Was More Or Less Suspended But perhaps the most dramatic example of the Executive branch wholly stonewalling Congress occurred when Dick Cheney implemented "Continuity of Government" plans on 9/11.  This created a "shadow government" which largely sidelined Congress and suspended the Constitution.  But Congress wasn't even informed. As CBS pointed out, virtually none of the Congressional leadership knew that Continuity of Government ("COG" for short) had been implemented or was still in existence as of March 2002: Key congressional leaders say they didn't know President Bush had established a "shadow government," moving dozens of senior civilian managers to secret underground locations outside Washington to ensure that the federal government could survive a devastating terrorist attack on the nation's capital, The Washington Post says in its Saturday editions. Senate Majority Leader Thomas A. Daschle (D-S.D.) told the Post he had not been informed by the White House about the role, location or even the existence of the shadow government that the administration began to deploy the morning of the Sept. 11 hijackings. An aide to House Minority Leader Richard A. Gephardt (D-Mo.) said he was also unaware of the administration's move. Among Congress's GOP leadership, aides to House Speaker J. Dennis Hastert (Ill.), second in line to succeed the president if he became incapacitated, and to Senate Minority Leader Trent Lott (Miss.) said they were not sure whether they knew. Aides to Sen. Robert C. Byrd (D-W. Va.) said he had not been told. As Senate president pro tempore, he is in line to become president after the House speaker. CNN reported: Senate Majority Leader Tom Daschle, D-South Dakota, said Friday he can't say much about the plan. "We have not been informed at all about the role of the shadow government or its whereabouts or what particular responsibilities they have and when they would kick in, but we look forward to work with the administration to get additional information on that." Indeed, the White House has specifically refused to share information about Continuity of Government plans with the Homeland Security Committee of the U.S. Congress, even though that Committee has proper security clearance to hear the full details of all COG plans. Specifically, in the summer 2007, Congressman Peter DeFazio, on the Homeland Security Committee (and so with proper security access to be briefed on COG issues), inquired about continuity of government plans, and was refused access. Indeed, DeFazio told Congress that the entire Homeland Security Committee of the U.S. Congress has been denied access to the plans by the White House. (Or here is the transcript). The Homeland Security Committee has full clearance to view all information about COG plans. DeFazio concluded: "Maybe the people who think there's a conspiracy out there are right". University of California Berkeley Professor Emeritus Peter Dale Scott points out that – whether or not COG plans are still in effect – the refusal of the executive branch to disclose their details to Congress means that the Constitutional system of checks and balances has already been gravely injured: If members of the Homeland Security Committee cannot enforce their right to read secret plans of the Executive Branch, then the systems of checks and balances established by the U.S. Constitution would seem to be failing. To put it another way, if the White House is successful in frustrating DeFazio, then Continuity of Government planning has arguably already superseded the Constitution as a higher authority. Postscript: Whistleblowers allege that the intelligence agencies are blackmailing Congress. In any event, the courts don't have any oversight over the intelligence agencies either: A Federal judge who was on the secret spying court for 3 years says that it's a kangaroo court Even the current judges on the secret spying court now admit that they're out of the loop and powerless to exercise real oversight. When these judges raised concerns about NSA spying, the Justice Department completely ignored them

10 Mid-Week PM Reads Posted: 26 Mar 2014 01:30 PM PDT My sick at home reading: • Why is Wall Street so divorced from reality? A psychological explanation. (The Week) • Q&A: Why the Dollar Remains the Reserve Currency (Economix) see also China Banks Drained by 'Vampire' Internet Funds (Bloomberg) • CEO Jackpot (Boston Review) • Pimco Chases BlackRock in ETFs as Money Returns to Bonds (Bloomberg) • Sophisticated gamblers ruin and survival chances (Cornell University Library) • Double Dip: Doctors Paid to Advise, Promote Drug Companies That Fund Their Research (ProPublica) • Eleven (so Far) Worthwhile Reviews of and Reflections on Thomas Piketty's "Capital in the Twenty-First Century" (Washington Center for Equitable Growth) • Wal-Mart manager speaks out about his store's ugly reality (Salon) • What I learned from going blind in space (TED) • New York Fed says large banks have a significant funding advantage (WSJ) What are you reading?   Source: Bloomberg Brief

Where Would Winter Temperatures Place Your City in the US? Posted: 26 Mar 2014 11:30 AM PDT Source: AccuWeather

Attention Suckers: Send Us Your Money! Posted: 26 Mar 2014 08:00 AM PDT   Those almost 10,000 early investors on Kickstarter participated in one of history's most lucrative funding rounds from the perspective of the people receiving the funding: a $2.4 million early-stage investment in what would become a $2 billion business in a year and a half, in return for 0.0% equity." – WSJ’s Corporate Intelligence on Oculus’s crowdsourced 2012 fund-raiser.     Caveat Emptor, baby! With Facebook acquiring virtual-reality company Oculus, one of the all time great sucker plays — the "Jumpstart Our Business Startups Act," signed by President Barack Obama on April 1, 2012 — has been revealed as the massive bait-and-switch it is. (The JOBS Act? Hows that for a misleading title?) It is relatively uncommon for the chairperson of the SEC to object to new deregulation, but when new laws are thought to be anti-investor, it’s no surprise. Regardless of strenuous objections from Mary Schapiro and others, the JOBS Act became law, making it all-too-easy for companies to raise money. It was more of the same radical deregulation that helped cause the financial crisis. This was not about making markets work more smoothly, but rather, an extreme form of "smash & grab" capitalism. Bill Black called it a "recipe for fraud." But Professor Black was wrong — it’s not a fraud, it's a scam. You see, fraud involves something where there is a violation of the law; no rules appear to have been broken here. This is how the JOBS Act is supposed to work: Let people make dumb decisions on their own, without any protection. A scam on the other hand, is when people are legally duped out of their money. Continues here.

10 Midweek AM Reads Posted: 26 Mar 2014 07:00 AM PDT I am home with a nasty headcold, one I hope goes away quickly: • Certamen: A team competition in which contestants answer questions about investing (Reformed Broker) • International trading opportunities (Fidelity) • No business built on teenager demand is sustainable (Digitopoly) • Wal-Mart’s dependence on food stamps, revealed (LA Times) Continues here

What Makes Candy Crush So Addictive? Posted: 26 Mar 2014 05:30 AM PDT It’s a game with more than 500 levels that pulls your emotional triggers. It seduces, provides instant satisfaction, frustrates, amuses and knows how to get you to keep on playing. 32 percent of players say they have ignored family and friends and even left children stranded at school while engaging with those blinking jelly beans. We look at why are so many people are hooked on Candy Crush.   A star is born: Source: Bloomberg, March 26 2014

Sun Rises Over North Pole for 1st time in 6 months Posted: 26 Mar 2014 03:30 AM PDT Its spring even at the South Pole. Can we please end this Winter already?     Source: Know More

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