Your Future

Project Armageddon: Tullett Prebon "Thinks The Unthinkable"

When noted English financial firm Tullett Prebon releases a report titled "Thinking the Unthinkable", which just happens to be the last part of its Project Armageddon series, you know it will be good. While the report is UK-centric, and focuses primarily on the particulars of the English economy (thus making it required reading for our British-Isle based readers), the overarching observations are more than applicable in any place that has too much debt, too little cash flows, and not enough growth. So basically every "developed world" country. From the executive summary:"Project Armageddon was established to examine the possibility that both sides’ warnings are correct but that neither side’s prescriptions will work. We conclude that Britain’s debts are unsupportable without sustained economic growth, and that the economy, as currently configured, is aligned against growth. Radical solutions are required if a debt disaster is to be averted. All macroeconomic options have been tried, and have failed. The only remaining options lie in the field of supply-side reform. Unfortunately, public opinion may be inimical to the scale of reform that is required." Bingo: this is precisely the same big picture summary of what ails the US right about now. We eagerly await for someone to undertake the creation of Project Armageddon for the US: we are confident it will not be that much different.

 

 

CBO Cuts Forecast Of Cumulative 2012-2021 Deficit By 50%, Admits It Is Probably Dead Wrong

Today, the CBO whipped out its trusty old magic 8 ball, and released its revised forecast of the future. Since there is a substantial difference from the March forecast for the cumulative 10 year deficit over the 2012-2021 period, to the tune of $3.250 trillion, or just about 50% of the last deficit forecast of $6,737 billion, which is now a ridiculous $3.5 trillion, it is about that time for us to, in turn, whip out trusty old history and demonstrate just how worthless and criminally incompetent the CBO's estimates of the future are. Here is what we posted two short weeks ago: "While we reserve judgment for S&P's effectiveness at being accurate in anything they do (they are, after all a rating agency and as such they goal seek results to comply with what their paying groupthink seeking customers demand), we would like to redirect to the modest topic of CBO predictive efficiency (the organization that is at the basis of the current credibility spat between Treasury and S&P, and which, incidentally has created the baseline forecast against which the debt ceiling compromise plan is supposed to cut $2.1 trillion over the next decade), by pointing out according to the same CBO back in 2001, net US indebtedness in 2011 would be negative $2.436 trillion, the ratio of debt held by the public to GDP would be 4.8%, total budget surplus would be $889 billion, and GDP would be $16.9 trillion. We won't comment on the error interval in CBO forecasts when compared to actual 2011 results, and we most certainly won't comment on the idiocy of the Treasury chastising someone, anyone, for erring, or disputing, forecasts." We will comment now: the CBO was off by tens of trillions. And it will be again. Expect massive future revisions to the August CBO baseline, which just cut the future decade cumulative deficit by 50%, however with one caveat: even the CBO admits it will most likely be horribly wrong.

Dozens Of Italian Businessmen Send Letter To Parliament Demanding Imposition Of Capital Controls Instead Of EPS Cutting Austerity

Apparently America's "Patriotic (yet just slightly hypocritical) Millionaires" phenomenon is spreading. In an open letter sent to the Government and to Parliament (we assume the post office can track down the recipients at whatever seaside resort complexes they are to be found), 75 Italian managers, industrialists and professionals, propose what in their opinion is best for the country, which is another way of saying avoiding anything that could potentially crimp their EPS (and take home bonuses) now that Italy is the latest austerity state. And while back in the US, those who are already rich are doing everything in their power to prevent those who wish to be, from becoming so, so in Italy the local upper class is all about instituting countrywide central planning in the form of pervasive capital controls: the one notable proposal is for all cash transactions over €300 to be banned, and to be permitted solely electronically. We can't decide what is more hypocritical: our own pseudo-nouveau riche trying to pass for magnanimous, when everyone can see right though their act, or the Italians, where the cost of a few more years of profitability has to be borne not just be the middle class but by everyone. We just may leave it as a tossup.

Perfectly Forgettable $35 Billion 5 Year Auction Closes Despite Another Record Low Yield

The only memorable outcome of today's $35 billion 5 Year bond auction was that the yield plunged to a new all time low, nearly 30% below the July auction, printing at 1.029% compared to 1.58% before. With the When Issued trading at 1.03%, this was an "on the screws" type of auction with absolutely no surprise at all embedded. The Bid To Cover was modestly week compared to LTM, at 2.71, below the 12 auction average of 2.81. Take down was again skewed toward Direct Bidders, as Indirects accounted for 42.1%, Dealers for 44%, and Directs taking home 13.9% of the total. As yesterday's 2 Year, this was yet another snoozer, allowing the government to fund $35 billion in deficits at a record low cost. And as long as the rates remain here, the Treasury will issue as much debt as it can to prefund trillions of future deficits at the lowest possible price, regardless of what the CBO says.

 

 

Guest Post: Fear And Fear

Correlations are breaking down, and each asset class seems to be trading more and more in its own little world. Sometimes retaining old correlations and other times moving counter-intuitively. Each of those markets now seem to be driven primarily by fear. The markets have been split into two camps, those that are afraid of rallies and those that are afraid of sell-offs. The breakdown of many correlations is making it harder to hedge or to balance portfolios. It is adding the broken feeling in the market.

 

 

Guest Post: US Government Asset Seizures On The Rise

The Wall Street Journal published a disturbing article earlier this week entitled “Federal Asset Seizures Rise, Netting Innocent With Guilty.” You can already imagine the crux of the article. In the United States, there are hundreds of regulations which authorize dozens federal agencies to confiscate private property– homes, cars, bank accounts, gold, company shares, and even personal effects. Ironically, most Americans still think that they live in a country where you’re innocent until proven guilty. Nothing could be further from the truth, and it’s just another clear example of how the US Constitution has become a worthless piece of toilet paper for the federal government. The Fifth Amendment states that “No person shall be… deprived of life, liberty, or property, without due process of law.” Tell that James Lieto, a New York businessman who was relieved of $392,000 when the armored car company used by his check-cashing firm was taken down by the FBI. Lieto was innocent and not implicated in any wrongdoing, but the FBI took his money regardless as it just happened to be in the wrong place at the wrong time.

Will Hurricane Irene Wreck The East Coast?

Earlier today, Hurricane Irene was upgraded by the National Hurricane Center to category 3 as it passed above the Turks and Caicos, preemptively ending the holidays for quite a few Wall Streeters taking a well-deserved break from chasing levered beta. So admitting we know nothing about predicting the weather, we present the following update from Jeff Masters' Weather Underground blog.

 

 

We Can Rally For A While

Admin at Marc Faber Blog - 37 minutes ago

We had rally from the low on the ninth of August at 1,101 on the S&P to almost 1,200. Then we came right down again. Basically we did not make new lows. And now I think we can rally again for a while. I think a lot of people will say the markets formed a double low and we have some technical indicators that are going to turn positive, so we could rally around 1,250, but as I said before, for me, we reached a high on May 2, 2011. 1,370 on the S&P–that we will not go through. My view is you have a lot of people with strategies that are very bullish. They have a yearend target of arou... more » 

Conventional Wisdom

Admin at Jim Rogers Blog - 1 hour ago

Acknowledge the complexity of the world and resist the impression that you easily understand it. People are too quick to accept conventional wisdom, because it sounds basically true and it tends to be reinforced by both their peers and opinion leaders, many of whome have never looked at whether the facts support the received wisdom. It's a basic fact of life that many things "everybody knows" turn out to be wrong. *Jim Rogers is an author, financial commentator and successful international investor. He has been frequently featured in Time, The New York Times, Barron’s, Forbes, Fortu... more » 

Gold unlikely to be sold to ease sovereign debt, Morgan Stanley economist says

 

 

Gallup Poll finds Paul only 2 points behind Obama

 

 

Sturm, Ruger Looks Better Than Gold 

 

 

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