Jim Rogers: Bernanke, Geithner Leading Us Into Fiscal Armageddon 





A Forensic Analysis Of The Great French Bank Run!

Posted by: Reggie Middleton

Post date: 08/12/2011 - 10:09

The European ban on shorts for financial companies was allegedly justified by false rumors. The only thing false that justifies banning is the balance sheets and funding models of many of the banks... 

 

 

 

 

 

Consumer Confidence Plummets To May 1980 Level

UMichigan consumer confidence just printed at 54.9, on expectations of 63.0. This is the lowest since May 1980. And what's worse, inflation expectations were unchanged. Looks like those high inflation expectations are starting to get anchored. In the meantime, with the Chairsatan saying to expect at least two more years of recession, is this really a surprise to anyone?

Fed To Proceed With Reverse Repos Every Two Months

The Fed just announced that going forward it will proceed with reverse repo series every two months. The reason? "The operations have been designed to have no material impact on the availability of reserves or on market rates. Specifically, the aggregate amount of outstanding reverse repo transactions will be very small relative to the level of excess reserves, and the transactions will be conducted at current market rates." With liquidity already being very scarce courtesy of the FDIC assessment, of Europe wreaking havoc with money markets, of repos pulling out of the market at a record pace, of O/N General Collateral trading with the same volatility as the S&P, this will surely have no impact at all on anything, just like all other centrally planned, and carefully thought through actions.

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Guest Post: Consumers Are Confident Of Recession

And that my friends is the nail in the economic "recovery." August consumer sentiment was just reported at 54.9 from 63.7 in July. This is the lowest level since May 1980. The chart below shows the correlation with sentiment and the consumer component of GDP which is about 70% of the economy and why I say the "recovery" is over. In Q2 the consumer component of GDP was 0.07% from 1.46% in Q1. Based on historical correlations and today's sentiment data the Q3 consumer component will contract much further in the (2%) range. This will bleed into the fixed investment and inventory components of GDP causing further contraction.

Guest Post: About Those Permanently Rising Corporate Profits...

The entire "story" of the Bull market is stocks rests on one reed: permanently rising corporate profits. Too bad those profits are set to fall. Like everything else about the "recovery," the "rising corporate profits" story is founded on financial flim-flam, starting with the boost provided by a sinking dollar. To truly grasp the monumental scope of this smoke-and-mirrors game of "profits" rising from currency arbitrage, we have to recall that most of the big U.S. global corporations earn between 50% and 65% of their profits overseas. Since the dollar has weakened about 30% in the Fed's free-money campaign (quantitative easing), then we can guesstimate that fully 15% of all profits from global corporations is phantom: if half their profits are earned overseas, and the dollar declined 30%, then their overseas profits rose by 30%. Since that is half of all profit, then that 30% rise boosts total profits by 15%...The easy money's been made from slashing costs and dollar arbitrage; all four supports of corporate profits are at risk. With these props gone, how are corporate profits going to keep rising? If the "rising corporate profits" story dissipates, so does the Bull market.

A Paradoxical Framework To Restoring The American Labor Force: Much More QE?

Back in May, Zero Hedge penned "With China Forecast To Reach Wage Parity With The US In Five Years, Is A New Manufacturing Golden Age Coming To The US?" in which we predicted that rising labor costs courtesy of the Fed's ongoing exporting of inflation could easily backfire, and force large, profitable multinationals, for whom dollar weakness goes straight to the bottom line, to reorganize and pull offshore workers back to the US. It appears the theory is slowly shifting to practice. As Reuters reports, Conglomerates ranging from Emerson Electric to Honeywell International feel pressure on margins from double-digit wage increases in China. So have toymaker Mattel, fast-food chain Yum! Brands and computer maker Dell, analysts and investors say..."Input cost increases have been a steady headwind to margins for some time now," Fairchild Semiconductor International Chief Financial Officer Mark Frey said last month. "I do believe that labor inflation will continue high for quite a while," Yum CFO Rick Carucci said on the company's earnings conference call. He called commodity prices another "wild card" for the company." Curiously, China is proving far more adept at pushing labor price increases than America's sad, and largely ineffectively unionized labor force: ""A lot of the wage increase is to keep civil unrest at a minimum," said William Blair analyst Nick Heymann, who said suicides at an Apple supplier and the "Arab Spring" protests have alarmed Beijing. "These guys have watched North Africa and the Middle East with a lot of trepidation."" And as we speculated, the perverse outcome of Bernanke's policy to reward only companies at the expense of US Laborers (i.e., middle class) will soon backfire, as more and more companies end seeing their margins cut, in the process being forced to hire ever more people. "Wages are getting large enough that you start to feel the difference," said Hal Sirkin, a BCG senior partner, who said U.S. companies are looking at alternative manufacturing sites. "One of the answers is to start moving back to the U.S." And when they do, they may, just may, start hiring Americans once again.

 

Faces of China: Ghost Cities – Part II

Posted by : Luc Vallee

Post date: 08/12/2011 - 10:57

As I promised earlier this week, today, I am presenting the darker side of a centrally planned economy: The building of total chaos.  

 

 

 

 

Macro Commentary: Risk-on/Risk-off - Welcome To Dyslexic Friday

Markets are currently rallying in reaction to the short-sale bans enacted in Europe. Time will tell if these bans ultimately prove effective seeing as how when the US banned the short-selling of financials in 2008, they proceed to collapse over the next few months. Investors are usually correct in estimating that a trading ban is nothing more than formal confirmation that there is indeed a problem. With banks borrowing more from the ECB in recent days and less from each other, we have yet another sign that European banks are getting nervous of each other’s risk. But at least for today, equities are solidly in the green.

Mimicking central bank yen market rigging is great fun for commercial banks

 

 

Global Grand Policy Failure: Liquidity Traps and Financial Black Holes