Welcome back! Time to look at what lies ahead for this week.

The earnings are almost non-existent this week, with PVH Corp. (PVH) being the largest company reporting (on Wednesday).

But we do have some big U.S. economic reports due this week:

TUESDAY: ISM Manufacturing Index
WEDNESDAY: ADP Employment Report
THURSDAY: International Trade Gap Report
FRIDAY: August Employment Report

The S&P 500 levels to watch today:

UPSIDE: 2001-2002 (2 data points), 2005 (August 26th’s high and the all-time high), and 2020 (top of the Bollinger Bands).
LAST CLOSE: 1996, inside the 1993-1998 (5 data points) range.
DOWNSIDE: 1982-1990 (July’s high and 5 data points), 1977 (August 20th’s low), 1971-1972 (2 data points), 1968 (June’s high), 1965 (50 day moving average), 1964 (August 15th’s high), 1959 (20 day moving average), 1958 (August 18th’s low), 1955 (August 14th’s high), 1947-1948 (2 data points), 1944 (August 11th’s high), 1941 (August 15th’s low), 1927-1939 (July’s low and 9 data points and the 100 day moving average), 1924 (May’s high), 1921 (August 4th’s low), 1916 (August 1st’s low), 1909-1913 (3 data points), 1904 (August 7th’s low), and 1898 (bottom of the Bollinger Bands).

S&P 500 Daily Momentum: Bullish (weakening)
S&P 500 Daily Overbought/oversold: Neutral (leaning overbought)
S&P 500 Weekly Momentum: Bearish (weakening)
S&P 500 Weekly Overbought/oversold: Neutral (leaning overbought)
S&P 500 Futures: Positive
Overall: Light volume with only small movement has left the technicals almost stalled this week. Momentum indicators for the S&P 500 seem headed to neutral, while overbought/oversold indicators still read about the same as they did at the beginning of the week.

And now for the news…

The Daily Beast: Why Obama Backed off More ISIS Strikes: His Own Team Couldn’t Agree on a Syria Strategy

After lots of bluster about striking ISIS on Syria, President Obama threw cold water on the idea Thursday, disappointing those who wanted him to take the fight to ISIS in Syria.
After a week of talk of eliminating the “cancer” of ISIS, President Obama said Thursday that he was not planning to significantly expand the war against the Islamic extremist movement anytime soon.

His remarks came after days of heated debate inside the top levels of his own national security bureaucracy about how, where, and whether to strike ISIS in Syria. But those deliberations – which included a bleak intelligence assessment of America’s potential allies in Syria — failed to produce a consensus battle plan. And so Obama, who has long been reluctant to enter into the Syrian conflict, told reporters Thursday that “we don’t have a strategy yet” for confronting ISIS on a regional level.

Only 875 more days of the lamest presidential administration ever…

Yahoo News: Nokia will have its revenge on the smartphone industry

Bobb posted this article yesterday in the comments:

Business Korea has just published a very provocative piece that depicts a monstrous troll attacking its home country’s pride and joy, Samsung. That troll, you’ll be surprised to learn, is Nokia.

The reason for this is easy to understand: Samsung may be forced to pay one of the history’s biggest patent royalty sums to Nokia, and fellow Korean electronics titan LG is not scot free, either.

What unleashed the beast in the Finnish company was its decision to sell its handset division to Microsoft a while back. As long as Nokia was a phone company, it was bound by a web of cross-licensing deals limiting how much it can charge for its thousands of handset-related patents. Nokia needed to use both essential and non-essential patents held by Samsung, Apple, Motorola and other industry giants, which put a rather severe cap on how much it could charge other phone vendors.

But when Nokia got out of handset business, the need for those cross-licensing deals vanished and Nokia emerged as a Non-Practicing Entity (NPE). Or as Business Korea defines the term, a patent troll.

This means the already competitive smartphone business just got a little more expensive.

Bloomberg: Gold-Price Indicator Fading as ETPs Tumble by $71 Billion

Gold-backed funds that heralded record prices in 2011 and last year’s biggest sell-off in three decades are becoming less useful as market predictors.

After a decade of changing mostly in tandem, gold prices and holdings in exchange-traded products backed by bullion have the most-negative correlation since 2004. Investment in ETPs are headed for a fifth straight week of moving in the opposite direction of New York futures, data compiled by Bloomberg show. That would be the longest stretch since 2012, before investors began dumping gold.

Global ETPs that accumulated more bullion than France’s central bank in 2012 saw their influence wane as equities surged and the Federal Reserve took steps to ease economic stimulus, signaling higher interest rates that erode the appeal of gold as an alternative asset. As investors exited the funds, erasing about $71 billion of value, unrest from Ukraine to Gaza this year revived demand for the precious metal as a haven, boosting prices that Goldman Sachs Group Inc. says aren’t sustainable.

“There is a disconnect” because “a lot of money has left,” said Mark Luschini, the chief investment strategist at Janney Montgomery Scott LLC. in Pittsburgh that oversees $65 billion. “For gold, this year has been all about the Federal Reserve and political tension, and at the moment, the rate-increase worries are overshadowing the safe-haven buying.”

The bloom is off the golden rose. That doesn’t make gold ETP’s a “sell”. It just means the actions of retail investors in equity markets is far less relevant to the price of gold now.

Business Insider (via Yahoo Finance): This Illustration Posted By Eric Schmidt Shows How Google Thinks About Innovation

Google is one of the largest, most influential technology companies in the world. But it didn’t start out that way, and it’s not easy to maintain that status. Google Executive Chairman and former CEO Eric Schmidt has shared some insight as to how Google views innovation and the competition.

Schmidt and Google’s former SVP of Products Jonathan Rosenberg are publishing a book next month called “How Google Works.” The book dives into what Schmidt and Rosenberg learned as they helped build Google into what it is today.

Schmidt has been teasing the book by posting excerpts of illustrations and various tips from the book to his Google+ and Twitter page. His latest post emphasizes that tackling the market with different angles rather than simply trying to be better than your rival is crucial for success.

“It’s important to understand what’s going on around you, but the best way to stay ahead is a laser focus on building great products that people need,” Schmidt posted to Google+ along with the illustration.

Yahoo Finance: Rig company Seadrill hit by profit miss and cautious outlook

Seadrill, the world’s biggest offshore driller by market capitalisation, reported second-quarter earnings below forecasts on Wednesday and offered a cautious outlook for the rig market, sending its shares lower.

Seadrill, the crown jewel in shipping tycoon John Fredriksen’s business empire, has been hit like other rig firms by oil companies reining in spending to counter rising costs.

Seadrill’s earnings before interest, tax, depreciation and amortisation (EBITDA) for the quarter came in at $641 million, below forecasts of $663 million in a Reuters poll of analysts and down from the $665 million it posted a year ago.

“The near-term market for ultra-deepwater drilling units continues to be challenging, partly driven by a reduction in exploration drilling that has led to a slower growth rate in overall upstream spending,” the company said in a statement.

…The company intends to prioritise returning cash to shareholders, it said, adding that it can maintain a quarterly dividend of 1 dollar per share well into 2016, even if the rig market fails to make a significant recovery.

While I have not had time to look over their latest financials, the last point is key, since the dividend is one of the top reasons I own SeaDrill shares. The other reason? They were dirt cheap when I bought them. If they drop back down to where I bought them, I might have to add some more. I will take a “wait and see” approach to it.

Financial Times: François Hollande purges government after leftwing revolt

Plas brought this up yesterday:

François Hollande has purged his embattled Socialist government of leftwingers opposed to EU austerity after a revolt led by Arnaud Montebourg, the flamboyant economy minister.

Mr Montebourg quit the cabinet on Monday, delivering a blistering attack on what he called “absurd” austerity policies – supported by Mr Hollande – which had brought about “the most destructive crisis in Europe since 1929”.

The outspoken minister said in a televised statement that the eurozone’s fiscal stance was “the cause of the unnecessary prolongation of the economic crisis and the suffering of the European population”.

The cabinet crisis was triggered by figures this month showing there had been no growth in the French economy in the first half of the year, with unemployment continuing to rise.

The economic gloom alarmed the left, already worried by the deep unpopularity of the government. An Ifop poll at the weekend showed Mr Hollande’s approval rating at just 17 per cent, with prime minister Manuel Valls plunging nine points to 36 per cent.

This presents a unique market situation. On one hand, France moving farther away from Germany politically would destabilize the European Union. On the other hand:

Bloomberg: Draghi Pushes ECB Closer to QE as Deflation Risks Rise

Mario Draghi just pushed the European Central Bank closer to quantitative easing.

With euro-area data this week likely to show the weakest inflation since 2009, the ECB president used a high-powered central-banking conference in Jackson Hole, Wyoming, to warn that investor bets on prices have “exhibited significant declines.”

Stocks rose, the euro fell and bond yields dropped to record lows today as the comments fanned speculation the ECB is finally heading for a form of monetary stimulus it has long avoided. Draghi previously said that a worsening of the medium-term inflation outlook would provide a reason for broad-based asset purchases.

The Aug. 22 speech “was a major event and marked a turning point in ECB rhetoric,” said Philippe Gudin, chief European economist at Barclays Plc in Paris. “We think the recent economic developments have increased the chance of outright QE as the next step.”

From a market perspective, central bank action always trumps politics (contrary to popular opinion). One can argue the ECB should have done this several years ago, although I don’t: As we have seen in the U.S., QE only creates economic window dressing by artificially pumping up markets and allowing banks to sell overpriced assets to the Fed (instead of lending money to truly help the economy). If Europe wants to pursue this, expect European markets to do well.

But what about the U.S.? With the Fed ending QE this Fall, around the same time we will possibly getting ECB action, the effect on the world economy should go like this: Dollar rises in value, euro falls, U.S. exports to Europe fall, European exports to the U.S. increase. However, because most European products tend to be high-end, unless the euro falls through the floor (which would require an exceedingly large QE from the ECB, which is not expected), European exports to the U.S. have limited upside. Overall, I would expect the U.S. exporters to be hurt by this news.

As an aside, I would also expect China to be hurt by this news, being effected in the same way as the U.S. If it hurts the Chinese economy severely enough, we might even see the Chinese de-pegging the yuan from the dollar. But this is speculation on activity at least a year away (more likely several years away). Honestly, it is hard to say what the Chinese may do.

For the week ahead, the big event will be the release of the second guess on 2nd Quarter U.S. GDP, coming Thursday at 8:30 am EST.

For earnings reports, I get Prospect Capital (PSEC) today, and SeaDrill (SDRL) on Wednesday. Both stocks are currently in my 401(k), which I use for long-term holdings.

Bloomberg: Jackson Hole Theme: Labor Markets Can’t Take Higher Rates

Global central bankers led by Federal Reserve Chair Janet Yellen said labor markets still have further to heal before their economies can weather higher interest rates.

Even as they signaled international monetary policies are set to diverge as economic recoveries increasingly differ, officials meeting over the weekend in Jackson Hole, Wyoming, placed jobs at the center of their decision making by saying stronger hiring and wages are still needed to drive demand.

The focus on jobs suggests the Fed and Bank of England will tighten policy within a year as their economies show signs of strengthening. By contrast, European Central Bank President Mario Draghi and Bank of Japan Governor Haruhiko Kuroda acknowledged they may be forced to deploy fresh stimulus.

Making her debut as Fed chief at the annual central bankers’ conclave in the shadow of the Teton mountains, Yellen said while U.S. hiring has improved and the debate at the Fed is shifting toward when “we should begin dialing back our extraordinary accommodation,” there is still a “significant” underuse of the workforce, and the labor market has yet to fully recover from the worst recession since the Great Depression.

Yellen can cry about “job market problems” all she wants, but she is facing an increasingly hawkish FOMC. As QE nears an end in October, those hawks will become louder.

Yahoo News: Iran says it downed Israeli drone over nuclear site

Iran’s elite Revolutionary Guard said it has brought down an Israeli stealth drone above the Natanz uranium enrichment site in the centre of the country.

This news is from Iran, so take it for what it is worth. And I would normally ignore it, except for the fact recent news stories have reasonably speculated at a potential Israeli strike in Iran. If you are dabbling in the oil markets, keep this in mind.

The S&P 500 levels to watch today:

UPSIDE: 1994 (August 21st’s high and the all-time high), and 2001 (top of the Bollinger Bands).
LAST CLOSE: 1992.
DOWNSIDE: 1991 (July’s high), 1988 (August 20th’s high), 1986 (August 21st’s low), 1982 (August 19th’s high), 1977 (August 20th’s low), 1971-1972 (2 data points), 1968 (June’s high), 1964 (August 15th’s high), 1959 (50 day moving average), 1958 (August 18th’s low), 1955 (August 14th’s high), 1951 (20 day moving average), 1947-1948 (2 data points), 1944 (August 11th’s high), 1941 (August 15th’s low), 1927-1939 (July’s low and 9 data points), 1924 (May’s high), 1923 (100 day moving average), 1921 (August 4th’s low), 1916 (August 1st’s low), 1909-1913 (3 data points), 1904 (August 7th’s low), and 1902 (bottom of the Bollinger Bands).

S&P 500 Daily Momentum: Bullish
S&P 500 Daily Overbought/oversold: Neutral (leaning overbought)
S&P 500 Weekly Momentum: Bearish (weakening)
S&P 500 Weekly Overbought/oversold: Neutral (leaning overbought)
S&P 500 Futures: Slightly negative, almost neutral
Overall: With Fed Chair Janet Yellen’s speech today at 10 am EST, the markets are basically on the edge of their seats. But the S&P 500 has already had a big run-up this week, up 1.91%. What can Yellen say to push markets up further? Other than “QE forever!”, there isn’t much that she hasn’t already said. In addition, the technicals are getting dangerously close to overbought levels. One other thing: Have you noticed the Nasdaq hasn’t been participating as much in this week’s run-up? It is only up 1.5%. The Russell 2000, the small cap index, is only up 1.6%. On the other hand, the Dow Jones Industrial Average is up 2.26%. Overall, this tells me the big caps are moving up more than the small caps. A move into big caps is not a positive market sign folks. Be careful out there.

And now for the news…

Bloomberg: India to Unveil First Warship to Deter Chinese Submarines

India will unveil its first home-built anti-submarine warship tomorrow in a move to deter China from conducting underwater patrols near its shores.

Defense Minister Arun Jaitley will commission the 3,300-ton INS Kamorta at the southeastern Vishakapatnam port. The move comes a week after Prime Minister Narendra Modi introduced the largest indigenously built guided-missile destroyer and vowed to bolster the country’s defenses so “no one dares to cast an evil glance at India.”

India is playing catch-up to China, which built 20 such warships in the past two years and sent a nuclear submarine to the Indian Ocean in December for a two-month anti-piracy patrol. The waters are home to shipping lanes carrying about 80 percent of the world’s seaborne oil, mostly headed to China and Japan.

Anybody get the feeling World War III might take place in Asia instead of Europe?

Wall Street Journal: Fed Debates Early Rate Hikes

Federal Reserve officials debated at their July policy meeting whether they might need to raise interest rates sooner than expected in light of a strengthening recovery, but they were restrained by lingering doubts about whether the economy’s gains would persist.

The minutes of the meeting, released Wednesday with their regular three-week delay, show an intensifying debate inside the central bank about when to respond to a surprisingly swift descent in the unemployment rate and a pickup in consumer prices.

Some Fed officials say this long-sought economic progress warrants moving toward tighter credit soon, but they were outnumbered at the meeting by those who wanted more evidence before signaling that rate increases are on the way. The minutes don’t identify participants by name or specify the number who held certain views.

Translation: Markets will continue their “bad economic news is good, and vice versa” for awhile. However, the Fed needs to be watched for signs they aren’t seeing the economy the same way as the markets are.

The search for clues on rate-hike timing now turns to Fed Chairwoman Janet Yellen’s address Friday at a central-bank symposium in Jackson Hole, Wyo. The conference is focused on labor markets and Ms. Yellen will update her views on how they are evolving.

She has argued through her first six months on the job that an abundance of part-time workers and long-term unemployed, in addition to soft wage growth, suggest labor markets and the broader economy weren’t near overheating.

Steven Blitz, chief economist at ITG Investment Research, said he expected Ms. Yellen to revisit these points Friday, to indicate her patience about raising rates. “She doesn’t want the market getting too far in front of the Fed,” Mr. Blitz said.

(hat tip to I Tried Being Tasteful for the pic)

Today is a special day for my Dad, who turns 75 today. I just want to say happy birthday Dad, and thanks for three-quarters of a century of excellence!

The Hill: Obama heads back to vacation after unexplained DC trip

President Obama went back to his vacation on Martha’s Vineyard Tuesday evening following less than 48 hours in Washington, leaving people puzzled over why he came back in the first place.

Obama’s two days in Washington were mostly quiet, and concluded with the president receiving his daily national security briefing in the morning, and joining Vice President Biden to huddle with members of his economic team in the afternoon.

…Judicial Watch estimates the extra roundtrip cost $1.1 million. Only daughter Malia accompanied Obama back to Washington.

Speculation for why Obama returned focused around the possibility of a secret foreign leader meeting or the roll out of a new administration initiative on immigration or corporate taxes.

But no such explanation materialized.

The most unusual deviation from a normal day at the White House was Obama’s dinner Monday night at Sam Kass’s home. The president, joined by deputy chief of staff Anita Breckenridge, spent nearly five hours at the White House chef’s Dupont Circle duplex apartment.

It’s possible that the party may have been a celebration of Kass’s impending nuptials to MSNBC host Alex Wagner. The couple announced their engagement last September. But the White House provided no details of the meal.

Worst…president…ever…

On the bright side, there are only 884 days left in this buffoon’s administration.

Bloomberg: Steve Ballmer Leaves Microsoft’s Board After Departure as CEO

Steve Ballmer resigned from Microsoft Corp. (MSFT)’s board, eight months after his departure as chief executive officer, ending more than three decades of direct involvement in the world’s largest software maker.

Ballmer, 58, remains Microsoft’s top individual shareholder. He had initially remained as a director after handing the top job over to one of his deputies, Satya Nadella, in February. Ballmer recently bought the Los Angeles Clippers for $2 billion and appeared in front of the team and fans this week, vowing to lift the team to “higher heights” and promising not to micromanage.

The former CEO’s departure ends a 34-year association with Microsoft, which he led as CEO from 2000 to February 2014. Revenue tripled under Ballmer’s tenure, even as the Redmond, Washington-based company struggled to compete with Apple Inc. and Google Inc. in areas such as mobile phones, tablet computers and Internet search.

If Ballmer runs the Clippers like he did Microsoft, expect him to put together a dream team. But I wonder how well guys like Michael Jordan, Larry Bird, and Magic Johnson can still play?

Fox News: NFL reportedly asking music acts to pay for playing Super Bowl halftime show

Really?

The Wall Street Journal reported Tuesday that the league has notified Rihanna, Katy Perry, and Coldplay that they are under consideration to perform at halftime of Super Bowl 49 next February. In the process of notifying them, the paper reports that the league has also asked some of the artists to either give a portion of their post-Super Bowl tour proceeds to the league or make some type of financial contribution in exchange for being offered the show.

People familiar with the matter told The Journal that the league’s request received a “chilly” reception from the artists’ representatives. The NFL does not pay the halftime acts, though the league typically covers the performers’ travel and production expenses.

Greed, thy name is NFL…

Bloomberg: Only Rich Know Wage Gains With No Raises for U.S Workers

Call it the no-raises recovery: Five years of economic expansion have done almost nothing to boost paychecks for typical American workers while the rich have gotten richer.

Meager improvements since 2009 have barely kept up with a similarly tepid pace of inflation, raising the real value of compensation per hour by only 0.5 percent. That marks the weakest growth since World War II, with increases averaging 9.2 percent at a similar point in past expansions, according to Bureau of Labor Statistics data compiled by Bloomberg.

Federal Reserve Chair Janet Yellen has zeroed in on faster wage growth as an important milestone for declaring the job market healed and ready to withstand policy tightening, even as other labor measures improve…

Households in the top 20 percent of U.S. socioeconomic groups saw their incomes grow by an average of $8,358 a year from 2008 to 2012, compared with a $275 annual decline for the lowest 20 percent, according to data from the Bureau of Labor Statistics.

If you want to know why the riots in Ferguson, Missouri are happening, look no further than the news above. While the Media might be stoking the racial aspect of the riots, I see the police shooting that took place there as a spark in a tinder box. Before you write that incident off as “blacks being blacks”, consider that every time this country goes through an economic recession or stagnation, blacks always do worse in the employment statistics than other races. The U.S. has serious racial issues, which are only exacerbated by the moat which the upper classes have put around their wealth. When you see the stock indexes hitting new highs with obscene regularity, at the same time the bond markets are flooded with money to the point of paying almost nothing in yield, yet the employment and wages are stagnant, this is clearly an economic disconnect. There is an absurd amount of money being invested, but there isn’t a “trickle down” effect.

On top of the economic flaws, we have a huge education problem, especially in the black community. I would draw your attention to this article, “Did School Integration Fail Black Children?“:

The reality is that black families faced heavier burdens with the desegregation mandate than whites. Black children spent more time commuting, black schools were closed to make desegregation more convenient for whites (and to prevent their flight to the suburbs or private schools), and black teachers and principals were fired when white and black schools were merged. Estimates show that more than 82,000 black teachers provided instruction to a black student population numbering around 2 million in 1954. Within a span of 10 years, around 40,000 black teachers lost their jobs. Ninety percent of black principals lost their jobs in 11 Southern states.

Today, increased public school closings across the nation disproportionately impact black, Latino and poor students who lose their neighborhood schools. Eighty-eight percent of the school closings in Chicago affect black students.

The decimation of black educators has had a long-lasting impact. A study by the National Center for Education Statistics found that among 3.3 million teachers in American public elementary and secondary schools in 2012—where minority students are quickly becoming the majority—they were 82 percent white, 8 percent Hispanic, 7 percent black and about 2 percent Asian. The loss of black teachers means that many students have lost contact with their most impactful role models. As black educator Kevin Gilbert told the Associated Press, “Nothing can help motivate our students more than to see success standing right in front of them.”

As usual with most progressive solutions, desegregation sounded good on the surface, but had horrendously bad results. Unfortunately, because of decades of being the only group willing to deal with the black community, the progressives are the only ones to whom the black community are listening. So when smart people like Kareem Abdul-Jabbar offer solutions, they naturally include progressive solutions like food stamps and welfare, which are temporary crutches, not real solutions.

I won’t offer a solution here, but I will say that any solutions that sound good on the surface need to be viewed with more discerning eyes. And the already failed policies of the progressives need to be thrown out. They have already done enough damage.