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Import/Export prices gain for the month but slip again on a year ago basis. Financial market manipulation runs deep?

The major averages enter the final hour about even on little domestic news.  Internationally more stimulus is being readied to keep the economic recoveries going in Europe and Asia.  It won’t be long before it’s our turn again soon enough.  But this does beg the question, what type of recovery requires emergency level interest rates and regular large doses of debt funded stimulus to maintain and after 25-years-as is the case with Japan-shouldn’t we call it something else?

Import prices gained .2% in June but fell 4.8% from a year ago.  Export prices increased .8% for the month but fell 3.5% on a year ago basis. Driven by energy and food price increases.  Fed Beige Book on regional economic growth says more of the same modest and no surprises.

Supposedly financial markets are efficient and pride themselves on near instantaneous price discovery amongst other items.  What happens in the face of wholesale government and central bank intervention through Zero Interest Rate Programs, bailouts and Quantitative Easing, aka print money and buy stuff primarily debt securities?  Numerous pundits have noted the long term breakdown in various relationships related to price and fundamentals nearly across the board at this point.  The latest glaring example is the post Brexit vote price rally in unison of both risky assets or stocks and conservative assets or bonds.  This is not a one off “unique” event but it does serve to illustrate the severe breakdown in the market pricing mechanism.  Following the various, or is it endless, Wall Street scandals post dot-bomb period since 2000, it was said that the only thing on the Street that could still be trusted was price.  I suspect that even that is about to have its credibility and accuracy put to the test.  Because distortions like this can’t be maintained forever, as is true with all lies something that has a nasty habit of occurring at the most inopportune of times.

This is Caleb Lawrence Registered Investment Adviser Scotts Valley Drive and Willis Road in the Scotts Valley Plaza, Suite 202 or call me toll free at 888-RICH PIG / 888-742-4744.

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