Who Invited James to the Party?

A Funny Thing Happened on the Way to the Forum….

This 1962 Broadway musical was inspired by the farce of Ancient Rome and it tells the story of slave names Pseudolus and his desire to win his freedom by helping his young master woo the girl next door. The musical has all of the classic elements of mistaken identity, farce and satire. Essentially - it feels a bit like what life is like these United States at the moment!

Every party has a pooper and this morning it is St Louis Fed President James Bullard....(who invited him anyway?)

US futures are getting creamed in the early morning - Down 19 pts - at 1948 - after James Bullard discusses his views on the current State of the Union - leading investors /traders to think - Are they really the FED's views in disguise?

Is he the chosen one - the one to 'float the idea' that the most recent macro data - impressive job growth - (which is questionable) and the drop in unemployment to 6.1% will fuel the inflation monster - making the case that rates will go higher 'sooner' than many expect?

Look for support to kick in at 1945 ish.....if that does not hold then 1924 should do it (for today anyway). If Janet should come out and calm the nerves - then look for a small bounce - but it is getting to the point where investors will vote and decide what the level of risk is. At that point look for the buyers to take control as the sellers hit the mkt.

Recall - they do this every time - The FED says one thing and then they send out the 'hawks' to say something else to test investor psyche...and when the s**t hits the fan - the doves come out and say....."you all misunderstood....no worries, it's all good"

Bullard said:

"I think we are going to overshoot here on inflation. When unemployment goes into the 5 range, that is going to below the natural rate, or the level at which inflation is neither speeding up or slowing down. Inflation has been unusually low in 2013 and the first part of 2014 because of temporary circumstances such as the European economic weakness. Those special factors are wearing off and the economy is on the upswing and those factors will send the inflation rate above the target in 2015".

OK - my first issue is those 'temporary circumstances such as the European economic weakness' How exactly does he define temporary? It's been 6 yrs of European economic weakness with no end in sight - note today's French macro data! Disappointing causing European mkts to hit the skids all down between 1.5% - 2.5%. Temporary may be like a day or two.....or maybe a month....but 6 yrs is a bit more than TEMPORARY don't you think?

This also flies right in the face of what Snow White & the Seven Dwarfs told us yesterday.

“If the economy progresses along the path as the Fed expects, warranting reductions in the pace of purchases at each upcoming meeting, this final reduction would occur following the October meeting”.

AND she (& the 7 dwarfs) made zero effort to send a CLEAR signal that rate increases are coming by a certain date or any sooner than the
mkts/economists/analysts/strategists expect. Sending the mkt higher once again....She also said that monetary policy will remain 'favorable' in order to promote and support economic expansion.... - READ....RATES TO STAY LOW FOREVER!!

That was followed up with the comment that ' it would be useful for the committee to develop and communicate the 'exit plan' well BEFORE they even begin the plan' Is this the new communication facility? I mean at some point you gotta laugh.....

Now - yes - some of the big banks are tweaking their forecasts - GS for one moving their target from 4Q 2015 to sometime in the 3rd Q 2015....but that is and has been the consensus view all along - so Thank You GS for clarifying.

And in the end yesterday (at least) no one seemed to believe that interest rates were going to rise anytime soon. - In fact Treasuries surged higher sending yields lower.

So what else happened yesterday?

First –Oil, which had been on a tear ever since the Iraqi crisis is now beginning to fall – suggesting that the Iraq conflict ‘premium’ is now subsiding. (That would be bullish).

Next – what did we say yesterday about ‘all that glitters’? That’s right – Gold. The rally continued and is now hitting its head right at resistance - $1330. A breakout – not if but when – appears to be on the horizon and a push up to $1390 just might be enough to cause a surge to $1430.

The Gold rally suggests that the geo-political tensions that continue to simmer have not gone away and could at any moment – boil over and create global investor anxiety.

To review - the main characters are: Israel, Ukraine & Iraq with supporting roles played by Syria and the Taliban with the underlying theme – What will America do now?

First – Israel is getting ready to launch an offensive – and we all know that they don’t fool around with their 'take no prisoner' attitude. This morning's WSJ highlights the fact -

"Gaza Rockets Reach Deeper into Israel" - causing Israel to launch its most aggressive airstrikes in some 2 yrs.... What will America do now?

Second - The Ukrainian military backed by President Poroshenko have agreed on a plan to take back Donetsk – the last remaining stronghold of the pro-Russian separatists. If and when they do – there is some concern over what Vladimir will do. What will America do now?

Third - Iraq continues to circle the drain as the civil war continues to escalate - The 50 bodies that were blindfolded, tied and shot in cold blood in the Shiite village of Khamissiya, just south of Baghdad is not helping matters and Iraqi Prime Minister al-Maliki accusing the Kurds in northern Iraq of providing a safe haven for Sunni insurgents is only causing more anxiety to build. Concern is growing that as the civil war escalates it will ignite further unrest in the region. What will America do now?

So is the this morning's action all about Bullard? Not so much, but traders especially need to hang their hat on something - and his head is as good as any...

Earnings concerns and European macro data disappoints today - Italian Ind Output dropped 1.2% while French Ind Prod plunged and inflation levels disappoint. Banking stocks getting hammered as Portuguese Banco Espirito Santo plunges 12% while the Espirito Financial Group falls 8% on concerns over its financial condition causing traders to paint with a broad brush taking others with it - Banco Popolare -4.6% and Unicredit losing 3%.

FTSE -0.8%, CAC 40 -1.64%, DAX - 1.64%, Eurostoxx -1.91%, Spain -2.6% and Italy -2.54%

Pork Cutlet Milanese

You start by making the Tomato Bruschetta - get some nice ripe plum tomatoes - maybe 7 or 8.......dice and add to a glass bowl.....3 o r 4 cloves of garlic....now crush two of them and then slice the other two - add to bowl.....fresh basil - chopped, s&p, olive oil and diced red onion......(I love red onions so the more the merrier - but you figure it out...) - cover and let marinate...do not refrigerate....

Next the Pork Cutlets – Pound thin then Rinse and pat dry. Beat a couple of eggs and set aside. Prepare a bowl with Italian seasoned homemade breadcrumbs - set aside. Prepare a bowl with flour – set aside. Make the assembly line – Flour, Egg wash then breadcrumbs.

Pour some olive oil in a broiling pan and turn broiler on high..You want enough so that you cover the bottom of the pan – but you do not want the cutlets bathing in oil…...place the rack on the second level below the broiler.

Dredge the cutlet in the flour then dip in the egg wash and then dredge in the homemade breadcrumbs making sure to coat well on all sides. When the oil is hot - place the cutlet in the broiler pan and turn over so that the seared breadcrumbs are now under the broiler. Cook for about 5 mins or until a nice golden brown. Flip the cutlet and broil the other side - another 4 / 5 mins or so. Remove.

Now the presentation.....You need to make a bed of greens on the plate - maybe fresh spinach, or arugula, or Boston bib - you can mix or use just one....Next place the broiled cutlet on top in the middle - looks good no?
Now - using a spoon - add the bruschetta on top of the cutlets - this is a colorful dish...you have the green from the greens and you have the red from the tomatoes.....It is like eye candy.......

Serve with a red wine of your choosing....I like a Chianti Classico with dish - but you can choose whatever makes you happy.


Buon Appetito.