Another day of mixed macro data adds to the confusion of what investors predict the Fed will do. Remember, weaker reports suggest more Kool Aid. This morning we wake up to a research report put out by GS calling for investors to bail out of long term bonds warning that the "sell off" that we have all been waiting for is finally happening - "This US Treasury Sell -Off Is For Real"......warning that Uncle Benny WILL start tapering off his purchases as the economy improves (Is this really new news? We know this - so what is Earth shattering about this proclamation?) .....but wait, the macro data continues to disappoint on a broader scale and they cite "pessimistic growth targets", suggesting a less than stellar argument which would lead you to believe that the Fed isn't going anywhere, so which is it....stronger growth or weaker growth?

The yield on the 10 yr has climbed to 2.17%, a level seen well over a year ago, and they expect it to hit 2.5% by yr end as the Fed cuts back on purchases, as investors bail out of bonds and force pressure on prices - yield go up...simple math - ...in their note they say:

"We estimate that the direct effect of a shift in expectations around the duration and magnitude of QE3 would be relatively contained. But there could be larger effects from a 'present valuing' of the shrinking Fed balance sheet in the more distant future"

Right! I am glad that we cleared that up.....

Yet - last week - Benny said that

"a premature tightening would carry a substantial risk of slowing or ending the economic recovery causing inflation to fall further....the economy remains hampered by high unemployment and gov't spending cuts..."

If investors are bailing out of bonds where is the money going? Well some is going to the market and some is allocated to alternative asset classes. Money out of bonds does NOT mean it all goes into equities...And so we have seen the market do essentially nothing for two weeks - volumes remain subdued on the up days and increases on the down days - suggesting continued underlying nervousness.... We remain entrenched in the 1630/1670 range - churning and churning....looking and aching for direction......Yesterday was no different.....The Dow had been up by as much as 92 pts in the early part of the day but saw much of the rally disappear (again) as we moved into the closing bell, as institutions square ahead of the MSCI rebalancing today as well as tweak their holdings at the end of the month ending the day at 1654.

Eco data yesterday saw the revision to 1Q GDP - it was revised slightly lower from 2.5% down to 2.38%. The change was attributed to a slowing of inventories. And - REAL per capita disposable income was 'adjusted' lower also.....In fact, REAL per capita disposable income contracted during the quarter at an astonishing -9.03% annualized rate, taking it to a level below where it was two years ago – confirming the consumer is getting pinched hard (in contrast to yesterday’s record improvement in consumer sentiment.) The report also detailed more info on corp profits......showing that US corp profits after taxes fell 1.9% - the first negative read since 1Q 2012. (and what's more is that projections call for 2Q profits to be lower.)

So all of this money that central banks are spending to keep rates low along with companies allocating dollars to buy back their stock (to boost earnings) has helped to do what? Well - it has clearly helped the big banks.......

As we know, the newly printed money from the Fed is being used to buy bad mortgage backed securities and long-term treasuries from the big banks....this gives them cash to use as a “reserve” at the Fed as well as to trade stocks - back and forth - helping to drive up the prices of equities.....and it has paid off beautifully in the last 7 months. (mkt +21.7%).

The banking industry " earned" a record $40.3 billion in the first quarter of 2013, according to the FDIC - the highest ever earned for a single quarter by the banking sector and is 15.8% more than the 1Q of 2012 and they did this by actually cutting back on lending - as they have all created tougher standards demanding larger down payments and get this - "proof of employment".

US futures are off this morning....currently down 8 pts at 1645....continue to linger in overbought territory.....today will be an important day as we finish out the week and the month - many technicians will watch where we close....will it be within the weekly range of 1640/1672 or will be break lower? The market has been struggling to hold the 1645 line - a break and close below will set us up for further pressure in June. Supports at 1630 and then the 50 DMA at 1594.

Eco data today includes - Pers Inc. exp of 0.1%, Pers Spending exp of 0%, NAPM Milwaukee exp of 49 and the Chicago Purch Managers Report of 50. (Remember that a sub 50 reports signals contraction on these last two data points).

Overnight in Asia market ended mixed and they cite the rising init jobless claims and lower GDP as reasons for the FED to stay the course.

The Nikkei ends +1.37%, China -0.73%, ASX flat and Hong Kong -0.41%.

In Europe market are under pressure.....Macro data points disappoint.....Eurozone Unemployment at 12.%, Italian unemployment at 12.2% and Italian Youth Unemployment at 40.5%.....Retail sales in Germany fall by 0.4% vs. the exp of +0.2%. French citizens spending a bit more while French prod prices fell 0.9%. Strategists continue analyze all US macro data trying to discern the next move.

FTSE -0.93%, CAC 40 -0.7%, DAX -0.66%, EUROSTOXX -0.74%, SPAIN -0.85% and ITALY -0.75%

Summer Cabbage Salad


Today's recipe come to me from a friend and Morning Thoughts reader. It is a cabbage salad that works well with a number of meals and is a great summer salad (although he does enjoy it year round). As he describes it:

"This is a versatile salad and a nice change of pace if you usually make a lettuce salad. It goes well with among other things, grilled fish, fried oysters and potato fritters with mortadella. It also makes a nice lunch by itself or with some crusty French bread."

For this you need:

Cabbage (red or green or both), kale, onion, dried currants, olive oil, cider vinegar, celery seed, black pepper and dried pumpkin seeds (or sliced almonds) and paprika.

Slice the cabbage and kale thinly, and add it to the salad bowl. This will be the bulk of your salad, so let these ingredients be your guide to quantity. Mince the onion (perhaps a quarter cup) and add to the cabbage mix. Add the seeds or nuts.

For the dressing pour a quarter cup (or so) of olive oil into a bowl. Add a tablespoon or a bit more of the cider vinegar, a teaspoon of paprika, a few grindings of black pepper and a teaspoon of celery seed. If you have a mortar and pestle you can grind the celery seed. Mix the dressing well, and add the currants (a few tablespoons, or more to taste). Let the currants plump up for a few minutes if you have the time. Pour over the cabbage mix, toss and serve.

Versatility.... If you make this often, you might find that there's no need to make it the same way twice. If you want an Asian inspired version, reach for some toasted sesame seeds, a bit of ginger and a splash of low-sodium soy sauce. A little sesame oil is great too. If you want some heat, add a bit of cayenne pepper to the dressing. Try it with Savoy cabbage, or thinly sliced bok choy. For more color and a little sweetness, you can use grated carrot.

Buon Appetito.