BIGGER #RATE #HIKES NEEDED TO KEEP #INFLATION UNDER WRAPS

 CNN NEWS

Inflation is so hot the Fed may have to hike interest rates like it’s 1994

By Matt Egan, CNN Business

Inflation is so hot that Wall Street banks are falling over each other to predict the dramatic moves the Federal Reserve will have to make to cool prices off.

Goldman Sachs raised eyebrows earlier this week by forecasting the Fed will raise interest rates by a half a percentage point in each of the next two meetings.

Morgan Stanley and Jefferies quickly endorsed that view, even though the Fed hasn’t done a rate hike of that size at a single meeting since 2000.

Now, Citigroup is upping the ante. Citi economists said Friday they expect the Fed will boost interest rates by a half a percentage point during each of the next four meetings. And Citi left the door open for even more aggressive steps, such as big rate hikes at every remaining meeting this year.

The aggressive call underscores the level of concern about the inflation outlook, which has darkened considerably in recent weeks because of Russia’s invasion of Ukraine and the ensuing spike in food, energy and other commodity prices.

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LOOKOUT HERE COMES THE BIG ONE

Toshiba Japan's Enron - "Leading Innovation In Fraud" & More Top Insights

They're Back!

Toshiba inflated profits by £780 m with bosses' knowledge investigation finds

Disclosure of Japan’s biggest corporate scandal in years could lead to restatement of earnings at computers-to-nuclear firm, plus a board overhaul and big fines.

Toshiba overstated its operating profit by 151.8 bn yen (£780m) over several years in accounting irregularities involving top management of the Japanese technology company, independent investigators said.

The disclosure of the country’s biggest corporate scandal in years could lead to the restatement of earnings plus a board overhaul and potentially hefty fines at the computers-to-nuclear conglomerate.

Toshiba president and chief executive Hisao Tanaka and his predecessor, vice chairman Norio Sasaki, were aware of the overstatement of profits and delay in reporting losses in a corporate culture that “avoided going against superiors’ wishes”, the investigating committee said in a report filed by Toshiba to the Tokyo Stock Exchange.

The overstatement was roughly triple Toshiba’s initial estimate. Sources have said Tanaka and Sasaki would resign in the coming months and most of the board would be replaced.

How Low Can Gold And Silver Go?

On Sunday afternoon, I published a viral piece called “Did A Major Gold And Silver Breakdown Just Begin?” in which I explained that gold and silver may be on the verge of an imminent sell-off if key technical levels were broken. I showed that wedge patterns had formed in gold and silver for the past two years, and these patterns may indicate the resumption of the 2011 to 2013 bear market when broken. Amazingly, when gold and silver opened for trading on Sunday night, they experienced stunning flash crashes that caused them to slice clearly below the $1,130 and $15 technical levels I showed in the piece.

A $2.7 billion notional sell-order in gold futures caused the yellow metal to plunge 4.2 percent or $50 to nearly $1,086 per ounce in just a few minutes, dragging down other precious metals with it. The sell-off originated in the New York and Shanghai markets and was exacerbated by the lower-liquidity conditions due to Japan’s market holiday. 

The weekly gold chart below shows the wedge pattern that formed in the past two years. The key $1,130 level formed the bottom of the wedge, and is now a resistance level since gold fell beneath it on Sunday. The technical breakdown is valid as long as gold is under this level.

How artificial intelligence is changing economic theory 

Machina economicus might better fit the typical economic theories of rational behavior, but we don't believe that the AI will be fully rational or have unbounded abilities to solve problems. At some point you hit the intractability limit—things we know cannot be solved optimally—and at that point, there will be questions about the right way to model deviations from truly rational behavior.

Robots pass 'wise-men puzzle' to show

 a degree of self-awareness 

With the robots, instead of hats, the roboticists programmed the three humanoid robots to "believe" that two of them have been given a "dumbing pill" causing them to become mute, but they did not "know" which of them it was. In actuality, two of them were made mute by pressing a button on their head. The three robots were then asked which of them had not received the dumbing pill. All three robots attempted to respond with an answer of "I don't know" but only one was able to do so, which meant it was the one that had not been muted. Upon hearing itself audibilize a reply, it changed its answer, declaring that it was the one that had not received the dumbing pill.

Pension Shocker: Plans Face $2 Trillion Shortfall, Moody's Says 

In short: America is facing a fiscal crisis at the state and local government level and it appears as though at least one ratings agency is no longer willing to suspend disbelief by allowing officials to utilize profoundly unrealistic return assumptions in the calculation of liabilities.

China Ends Mystery of Gold Hoard to Top Russia’s Holdings 

Gold remains a large part of many central banks’ reserves, decades after they stopped using it to back paper money. Stockpiles of the metal help China to diversify its foreign-exchange holdings as the world’s second-largest economy seeks to raise the international profile of its own currency. The disclosure on gold reserves also assists in that goal.

“China is still pushing for a greater role for its currency globally by having full transparency,” Fu said.

Crushing pension obligations are pushing stressed governments 

What Money?

And the Quakertown Community School District said in June that it would go on a payment strike, of sorts, delaying its next $1.25 million quarterly contribution to the state school retirement system. The goal is to force the state to stop what the board president called an "unjust" rise in districts' pension payments. Pennsylvania school pension payments quadrupled from 2010 to 2014, and are scheduled to double again by 2019, under a law designed to make up for years of underpayment.

#Trumpisms Save The Day

Coming Soon...

More Leading Headlines

1.       New Chicago school leaders to tackle fiscal woes.            
   Bank of Canada seen pushing on a string with rate cuts
        
   .           What does Wayne County's fiscal crisis mean for the rest of the state? 
             
   .           Bond Liquidity Vacuum Spurs Europe’s Investors to Shrink Trades
               
   .           Fed's Fischer says U.S. inflation still too low   
   
   
2. Shadow Lenders Are Pushing IntoRisky Real Estate Deals

Top Weekly Ideas and Insights

An Inconvenient Truth:

What Happens When The Fossil Energy Age Ends?

 EXISTENTIAL REALITY 

End Of Fossil Energy or Archaic Fabrications?

NASDAQ Heading For Worst Market Ever

Stocks derailed by high-flyers; worst day since 2011 for Nasdaq

Kate Gibson | @CNBCKateGibson

U.S. stocks were slammed on Thursday, with high-flying technology and biotech shares leading the declines that had the Nasdaq Composite posting its worst session in more than two years.

"The market is coming to its senses in some of the high-flying tech names; it looked like there were some pretty hefty amounts being paid for the prospect of eventual earnings. Any of us in the market more than 15 years feels the hot breath on the backs of our necks when we see such high prices being paid for tech stocks," said Jerry Webman, chief economist at Oppenheimer Funds.

"One of the interesting ironies is when you see a shift towards stocks with pretty low prices and away from momentum that tends to happen when the underlying economy is still growing," Webman added.

The Nasdaq Composite declined as much as 141 points, and ended down 129.79 points, or 3.1 percent, at 4,054.11, its hardest hit since November of 2011.

Momentum stocks including Tesla Motors Facebook, Google, Priceline Group and Amazon.com declined, along with biotechnology companies, withPacific Biosciences of California, Zogenix and ChemoCentryx among those hit.

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Do these markets smell like a sultry spring of 2000 or the crisp autumn air of 2008? Maybe we should go back to 1987? There is something in the air.

On the one hand, you have Faber calling  "all-in" for a crash, while on the other; Miller says there is not much out there to bring prices down. Hmm. Markets are  based on emotions not always rational. Market momentum is emotional energy conceptually pushing the mass of stocks to new levels.  Who knows when that emotional energy will suddenly turn south?  There is no realistic device to gauge that turn, so we are left with observing conditions that could  possibly change the "emotional or conceptual energy" dramatically.

Let's start with the FBI's crackdown on the "Flashers" who have come to represent about 50% of volumes on both New York and London exchanges. All the new scrutiny could put a damper on their activities. That, in short, translates into a lowering of energy levels. Strike one.

Now let's not just talk about emotional energy, but what about "real energy" ? Here we should keep in mind that we hit peak oil back in about 2005, and sooner or later we are going to see rapid declines in global production. That means less real energy in the economy that lowers activity, GDP, earnings and thus valuations. We are probably past peak global oil production. Strike two.

Then there's that pesky concept of mean reversion sitting on the bench. When it comes to the plate then present value mathematics could clobber values by 50% or more as interest rates rise. The smart money has been shifting out of stocks for months now. That smells. Strike three.

International events do not portray a sense that the global economy is recovering, at all. The Ukraine, Cyprus, Greece, Spain and many other are still out there with the possibility of imploding without notice. Yet, those are small big concerns as the really big problems are China and Japan that are wobbling due to high leverage, falling business activity, shaky real estate and shrinking trade balances. Now we are not talking about hiccups like say Portugal, Ireland or Italy - no rather, they are the second and third largest global economies. Yikes, that's Strike four!

And why could they becoming unglued - well, go back to oil and real energy noted above, then we can start to see scarcities, including raw materials restricting the growth of these nations  - that should also flow into emerging markets. Combine this with a highly inter-connected global banking system that has more aggregate credit leverage than in 2008 - oh my, only two words to come to mind ...Strike Five!  

From the outfield, this brief suggests that the mathematics, energy, activity risks, emerging physical scarcities and credit leverage are all running in the wrong direction, along with the so-called smart money. There are way too many strikes, so Faber's call looks sound. Just one problem; however, ...

... he appears to be overly optimistic!

Investors' Insights 

April 11, 2014 

7:00 am, EST

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