The King Report M. Ramsey King Securities, Inc.

Friday April 26, 2013 – Issue 4498 “Independent View of the News”

French jobless claims increased to a record high 3.22 million.

Spanish unemployment jumped 1% to a record high 27.2% 9 (Over 6 million).

The latest batch of ugly Euro economic data pushed European stocks higher. The hope that ECB will cut

rates and provide more QE at its meeting next Thursday has generated a 4% rally in the EuroStoxx 600 in

the last three trading sessions. The index is trading at its highest level since June 2008. Be very afraid.

US Initial Jobless Claims declined 19k but analysts note that April is an unreliable month due to spring

vacationing and other seasonal factors.

FTN’s Chris Low: Big swings in April stemmed from layoffs of school vacations and seasonal factors like

Easter. These events are difficult to seasonally adjust because they fall in different weeks from year to

year. But the end of big swings in unadjusted data is in the cards.

We regularly warn that declines in jobless claims are increasingly due to benefit exhaustion. We saw only

one economist (RBC's Porcelli) that noted this after the drop in Initial Jobless Claims on Thursday.

The Department of Labor: The total number of people claiming benefits in all programs for the week

ending April 6 was 5,071,050, a decrease of 81,605 from the previous week. There were 6,683,265

persons claiming benefits in all programs in the comparable week in 2012…

http://www.dol.gov/opa/media/press/eta/ui/current.htm

The BLS CES reports that 1.822m jobs SA have been created over the past 12 months.

http://www.bls.gov/news.release/empsit.t17.htm

Estimates of the number of jobs needed for population growth range from 125k to 185k.

http://www.economicpopulist.org/content/how-many-jobs-are-needed-keep-population-growth

Jobless benefits have decline 1,612,215 over the past 12 months. Job growth for the same period

(1.822m) is about the amount of jobs needed for population growth. An increasing number of Americans

are exhausting their jobless benefits.

Here’s an article that generated Thursday’s stock rally [It smells like a planted story]:

Fed Debate Moves From Tapering to Extending Asset Purchases [Economy tanking, need more QE]

Debate among Federal Reserve policy makers is shifting away from the timing of a reduction in bond

buying to the need to extend record stimulus…

At their meeting last month, several members of the Federal Open Market Committee advocated

slowing purchases and stopping them by year-end. Since then, seven have voiced support for maintaining

the current pace, including five who vote on the policy making panel: Governor Daniel Tarullo, New York

Fed President William C. Dudley, James Bullard of St. Louis, Chicago’s Charles Evans and Boston’s

Eric Rosengren… [All but Bullard have been screaming doves since Noah’s flood.] http://www.bloomberg.com/news/2013-04-25/fed-debate-moves-from-tapering-to-extending-bond-buying.html

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The Fed and other central banks, most notably the BoJ, are conducting the biggest entitlement

program for ‘the wealthy’ in the history of the world.

Central Banks Load Up on Equities [Freely traded markets are an anachronism.]

Central banks, guardians of the world’s $11 trillion in foreign-exchange reserves, are buying stocks in

record amounts as falling bond yields push even risk- averse investors toward equities.

In a survey of 60 central bankers this month by Central Banking Publications and Royal Bank of

Scotland Group Plc, 23 percent said they own shares or plan to buy them. The Bank of Japan, holder of

the second-biggest reserves, said April 4 it will more than double investments in equity exchange-traded

funds to 3.5 trillion yen ($35.2 billion) by 2014. The Bank of Israel bought stocks for the first time last

year while the Swiss National Bank and the Czech National Bank have boosted their holdings to at least

10 percent of reserves. http://www.bloomberg.com/news/2013-04-24/central-banks-load-up-on-equities-as-low-rates-kill-bond-yields.html

The hope of more Fed QE generated the biggest rally in precious metals this year and felled the dollar.

For months, stocks rallied on a lower ¥/stronger $. But that has changed due to hope of more Fed QE.

Record Number of Households on Food Stamps-- 1 out of Every 5

The latest available data from the United States Department of Agriculture (USDA) shows that a record

number 23 million households in the United States are now on food stamps.

The most recent Supplemental Assistance Nutrition Program (SNAP) statistics of the number of

households receiving food stamps shows that 23,087,886 households participated in January 2013 - an

increase of 889,154 families from January 2012 when the number of households totaled 22,188,732.

The most recent statistics from the United States Census Bureau-- from December 2012-- puts the

number of households in the United States at 115,310,000. If you divide 115,310,000 by 23,087,866, that

equals one out of every five households now receiving food stamps…

http://cnsnews.com/blog/joe-schoffstall/record-number-households-food-stamps-1-out-every-5

$2 Trillion Underground Economy May Be Recovery's Savior

The shadow economy is a system composed of those who can't find a full-time or regular job. Workers

turn to anything that pays them under the table, with no income reported and no taxes paid —

especially with an uneven job picture.

"I think the underground economy is quite big in the U.S.," said Alexandre Padilla, associate professor

of economics at Metropolitan State University of Denver. "Whether it's using undocumented workers or

those here legally, it's pretty large."…"Government rules are keeping businesses from hiring."…

http://www.cnbc.com/id/100668336

3M Cuts Outlook as Demand Sputters

Industrial conglomerate 3M Co. joining a host of U.S. companies downgrading expectations for the year,

reduced its forecast for 2013 earnings Thursday but said it would proceed with plans to increase

spending on new factories and research.

The St. Paul, Minn-based company, whose brands include Scotch tape and Nexcare bandages,

reported that first-quarter profit was up just 0.4% from a year earlier, falling short of Wall Street

forecasts, partly because of lower sales of films used in making television and smartphone screens and

other materials for makers of electronic devices…

http://online.wsj.com/article/SB10001424127887324474004578444603582228628.html

While we think that stocks will stay buoyant until the ECB meeting next Thursday, Thursday’s action

was negative for stocks because the hope of more Fed QE produced a huge precious metal and

commodity rally but a moderate stock rally. As we noted in yesterday’s missive and a letter a week or

so ago, inflation-hedge buying late in a cycle often denotes the end of the stock rally cycle.

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Thursday’s moderate stock rally reversed in the late afternoon on the following headline:

Bundesbank rejects OMT in opinion for top court: Handelsblatt

The high court will now rule whether the OMT can be unlimited under German law.

The court will also rule whether conditionality needs to be placed on the OMT program in order

to protect other Eurozone nations.

As some background, the German high court ruling are due to vote on the Eurozone permanent

bailout fund the ESM in June, and will rule whether it is constitutional under German law. This

vote on the OMT will be alongside the vote on the ESM. http://ransquawk.com/headlines/bundesbank-rejects-omt-in-opinion-for-top-court-according-to-handelsblatt-25-04-2013

BN: German Bundesbank comments on the ECB’s bond-purchase program in a confidential opinion

prepared for German constitutional court, Handelsblatt reports in an pre-release of an article to be

published tomorrow.

Bundesbank rejects potential sovereign bond purchases because they would constitute “targeted”

acquisitions of securities of “worse credit standards” and increase risks for the central bank

Bundesbank says outright monetary transactions could undermine independence of central banks

Bundesbank doubts that strong conditionality will be imposed on countries in exchange for aid

Bundesbank says the Greek experience “is reason for concern that the handling of conditionality

within the framework of the OMT rogram, even in questionable cases, won’t protect against

significant purchases and thereby against a redistribution of risks across the balance sheets of the

Eurosystem”

Bundesbank says diverging borrowing costs for companies in different countries may reflect

different fiscal risks of sovereign

German finance minister hits out at Barroso over austerity remarks

German Finance Minister Wolfgang Schaeuble lashed out at European Commission President Jose

Manuel Barroso on Thursday, telling lawmakers the euro zone's woes had nothing to do with strict

budget rules and "somebody should tell Barroso that".

http://www.reuters.com/article/2013/04/25/us-germany-finmin-barroso-idUSBRE93O1E620130425

This is a German election year; and Germans are fed up with bailouts. Ergo, if some EU country

implodes, the bailout options are very limited.

Merkel speech highlights European divide [Germany obliquely warns ECB about rate cuts]

Angela Merkel underlined the gulf at the heart of the eurozone when she waded into interest-rate policy,

arguing that, taken in isolation, Germany would need higher rates, in contrast to southern states that are

crying out for looser monetary policy. Wolfgang Schäuble, the German finance minister, has also broken

the taboo, saying in a recent interview that the ECB should “drain liquidity” from the system...

With unemployment rising across the recession-hit bloc, there have been widespread calls for a further

easing, even though the ECB itself and most economists do not think a quarter-point cut in the main

refinancing rate to 0.50 per cent will have more than symbolic value for borrowers in countries such as

Spain...[Germans believe low rates transfer their (interest) income to European ne’er-do-wells.]

Georg Fahrenschon, president of the savings banks association and a former regional government

minister in the Christian Social Union, the Bavarian sister party to Ms Merkel’s Christian Democratic

Union, has said the ECB’s low-interest policy amounts to an “expropriation” of savers’ assets...

http://www.ft.com/intl/cms/s/0/665e1018-adae-11e2-a2c7-00144feabdc0.html#axzz2RWqGU9N3

GDP figures 'voodoo' conceals northern woes, warns academic

Parts of north have probably slumped into recession as it continues to bear brunt of government cuts…

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The GDP figures were tainted by the more buoyant economic conditions in the south and that parts of

the north were probably in a triple-dip recession, according to a leading Manchester-based academic.

Karel Williams, professor of accounting and political economy at Manchester Business School, dismissed

the figures as voodoo, adding that because they were not broken down into regions "it's possible for the

UK's position to have improved, but for the north and deprived parts of Wales to be in the grip of triple-

dip recession"... http://www.guardian.co.uk/business/2013/apr/25/gdp-figures-voodoo-northern?CMP=twt_fd

Lipper [for week ended on Wed.]: U.S. muni bond funds report $102 Mln outflows; US-Based Taxable

Bond Fund Report $4.76Bln inflow, most in five years; US-Based Stock Funds Report $7.3Bln Outflow,

most since July 2012; US-Based Stock ETFs Report $8.4Bln Outflow, most since July 2012

The 7 Biggest Risks to Financial Stability

The Financial Stability Oversight Council, which features leaders of the Treasury, Fed and other

regulators, highlighted a number of potential risks for the financial system…These are the seven themes

around which the council organized its recommendations and findings:

1) The vulnerability to runs in wholesale funding markets that can lead to destabilizing fire sales;

2) The housing finance system that continues to rely heavily on government and agency guarantees,

while private mortgage activity remains muted;

3) Operational risks that can cause major disruptions to the financial system;

4) The reliance on reference interest rates, which recent investigations have demonstrated were

manipulated, particularly in the case of the London Interbank Offered Rate (Libor);

5) The need for financial institutions and market participants to be resilient to interest rate risk;

6) Long-term fiscal imbalances, as the absence of bipartisan agreement on U.S. fiscal adjustment has

raised questions about whether long-term fiscal problems may be resolved smoothly; and

7) The United States’ sensitivity to possible adverse developments in foreign economies.

http://blogs.wsj.com/economics/2013/04/25/the-7-biggest-risks-to-financial-stability/

JPMorgan's Eligible Gold Plummets 65% In 24 Hours To All Time Low

... according to the Comex, JPM's eligible gold plunged from 402.4K ounces to just 141.6K ounces, a

drop of 65% in 24 hours,and the lowest amount of eligible gold held at the vault on record, since its

reopening in October 2010!... http://www.zerohedge.com/news/2013-04-25/jpmorgans-eligible-gold-plummets-65-24-hours-all-time-low

When the gold smash appeared a week ago, we opined that someone or some group might have instigated

the decline to avoid delivery problems for the very, very important April contract that expires on April 25.

Today – GDP will impact trading. But is good GDP bad or good for stocks and vice versa?...SPMs are

down 3.20 as we write; gold rallied $22 to $1484 on the JPM inventory report but has retreated to $1476.

Expected economic data: GDP 3.0%, Personal Consumption 2.8%, GDP Price Index 1.3%, Core PCE

1.1% q/q, U of Mich Confidence 73.5

Tweet Retreat: Did high-frequency reading crash the market?

Wall Street's algorithms can read fake tweets faster than you can.

In fact, Wall Street's computers have been "reading" the news for a while. Dow Jones and Thomson

Reuters (TRI) both offer services that convert their news articles into a digitized form that can be fed into

computer trading algorithms. They do this by tagging individual words and then assigning a sentiment

ranking to those words. The computers add up those sentiment ranks to determine if the news is negative

or positive for a particular company or the stock market in general. A sentence with the words bombing,

White House, Obama, and injured would presumably get a pretty negative rating. Back in 2009,

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Streambase, a company that provides technology to high-speed trading firms, began giving its clients the

ability to incorporate tweets into their trading programs that decide when to automatically buy or sell...

http://finance.fortune.cnn.com/2013/04/25/twitter-stock-market-crash/

NBC News: Officials say the Boston bombers were planning to come to NYC and detonate the balance

of their explosives in Times Square.

Patrick [Massachusetts Gov] administration refuses to release Tsarnaev brothers' records

Across the board, state agencies flatly refused to provide information about the taxpayer-funded lifestyle

for the 26-year-old man and his brother and accused accomplice Dzhokhar Tsarnaev, 19.

On EBT card status or spending, state welfare spokesman Alec Loftus would only say Tamerlan

Tsarnaev, his wife and 3-year-old daughter received benefits that ended in 2012. He declined further

comment.

On unemployment compensation, labor department spokesman Kevin Franck refused to say whether

Tamerlan Tsarnaev ever collected, saying it was “confidential and not a matter of public record.”

On Dzhokhar Tsarnaev’s college aid, University of Massachusetts Dartmouth spokesman Robert

Connolly said, “It is our position — and I believe the accepted position in higher education — that

student records including academic records and financial records (including financial aid) cannot under

federal law be released without a student’s consent.”

On cellphones, the Federal Communications Commission would not say whether either brother had a

government-paid cellphone, also citing privacy laws.

On housing, Cambridge officials and the family’s landlord ducked questions on whether the brothers

were ever on Section 8 assistance… http://bostonherald.com/news_opinion/local_coverage/2013/04/patrick_administration_refuses_to_release_tsarnaev_brothers

Switzerland shuts the door on EU migrants: A new 'us vs. them' in Europe?

The anti-immigration class across Europe has found many new adherents as of late, especially in the most

economically devastated countries, like Greece and Italy. But now these Europeans might themselves

become the unwelcome migrants, at least in Switzerland…

http://www.csmonitor.com/World/Global-News/2013/0425/Switzerland-shuts-the-door-on-EU-migrants-

A-new-us-vs.-them-in-Europe?nav=87-frontpage-entryNineItem