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Key Reports (WSJ):
8:15 a.m. Apr ADP Employment Survey: Previous: -742K.


“Freedom is the right to tell people what they do not want to hear.”

“All political thinking for years past has been vitiated in the same way. People can foresee the future only when it coincides with their own wishes, and the most grossly obvious facts can be ignored when they are unwelcome.”

“During times of universal deceit, telling the truth becomes a revolutionary act.”

“Who controls the past controls the future. Who controls the present controls the past.”

                              George Orwell (a man likely to be expelled from the UK today)

FX Trading – That’s nothing…
John Ross and I were discussing what a “$35 billion funding gap”, as its being report, really meant for Bank of America; JR said, “Heck, that’s like the cost of a McDonald’s cheese burger to our government these days.”  Funny, but sadly true.  Also, true that McDonalds seems one of the few places real people can afford to dine, despite their government having endless supplies of cash. 

But we need not worry little things like “funding gaps” in the midst of all those “green shoots” shoost-up their lovely little heads.  Credit markets are loosening.  Junk bond distributors are back in the game.  China announced this morning they are growing ahead of expectations

Can’t deny or trade against the trend of expectations, for expectations incite real people to move real money.  And when real people looking for some return on capital see prices going their way, they tend to add more money to the trend.  Thus, self-reinforcing it all becomes.  This is the way it is and has to be.  Otherwise how can one ever pretend to define “fundamental value”?  Even the Sage of Omaha seems be have trouble with the Ben Graham model lately–intrinsic value be damned.

I blurted through that to get to this possible point of interest: Fundamental valuation may be an illusion, but fundamentals driving supply and demand are real.  And we have yet to see anything significant across the field of green that implies a change in the US consumer demand, which we have all learned is the same as saying “global demand.”

Oil seems a decent general indicator of real global demand. In the chart below we compare oil to the MSCI Emerging Stock Index–the key risk asset class that’s enjoyed a very nice green shoot inspired run. 

This chart may be telling us: a) oil is about to surge higher on a big rebound in demand; b) emerging markets are overextended precisely because underlying demand hasn’t pushed oil higher; or c) absolutely nothing. 

But, there is another chart that may be telling us even more.  Below is a comparison of McDonald’s stock price to the S&P 500 index:

And we find yet another divergence.  This should make bulls feel good.  If Mickey D tanks, it may mean consumer are back in the game (eating real food again) and that $35 billion so-called “funding gap” is yet another meaningless statistics that makes headlines sound so juicy.