Wednesday, November 9, 2011

Bank of America Explains All You Need To Know About The Market: "Down In The Morning; Rally In The Afternoon"

Want to be a consummate stock picker and investor? Forget all you have learned in business school, from fundamental or technical analysis, or from years of trading: the only thing that matters is the position of the sun: if it is rising, sell. If it is setting, buy. Rinse. Repeat. Bank of America explains it just slightly more scientifically.



US Decoupling Over: JPM Cuts Q3 GDP From 2.3% To 1.6%

Earlier today, following the collapse in wholesale inventories, we noted the "the second leg of the stool of main GDP drivers appears to be splintering as Wholesale Inventories dropped MoM for the first time since Dec09 (-0.1% vs +0.5% expectations). We patiently await LaVorgna's GDP downgrade." As it turns out, JPM's Daniel Silver is the first to pull the plug on the blind hope that US GDP is rising despite the rest of the world imploding, and in the process euthanising the latest iteration of the decoupling thesis which always appears to give the bulls some hope that things in the US just may be fine this time around. They never are.



Crude Disconnects As European Close Brings Margin Calls

The last month has been a violent one for stock and bond investors but a look at the forward curve for Crude Oil also tells a story of hugely volatile moves. Oil has shifted from contango to backwardation in the last month but it is today's dramatically disconnected move that has many scratching their heads. As we approached the European close today, oil started to rally and rally fast. Initial rumors of ECB printing were quickly dismissed as gold and silver slid back but crude kept going - all on its own. After being perfectly in sync with BTPs for the last few days, we wonder if traders were short oil as their hedge against European long risk exposures and the LCH margin call forced liquidations and unwinds - idiosyncratically cracking the oil market back over $97.50.

The Next Crisis Is Going To Be Much Worse

Admin at Jim Rogers Blog - 1 hour ago

Last time, America quadrupled its debt. The system is much more extended now, and America cannot quadruple its debt again. Greece cannot double its debt again. The next time around is going to be much worse. - *in* *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, Fortune, The Wall Street Journal, The Financial Times and is a regular guest on Bloomberg and CNBC.* 

This is No Cyclical Recession… It is a Secular DE-pression
Phoenix Capital...
11/09/2011 - 10:56
  To put US household debt levels into a historical perspective, in order for US households to return to their long-term average for leverage ratios and their historic relationship to GDP growth... 
Reggie Middleton
11/09/2011 - 09:38
For years I have warned of the impending European collapse. Now, as it is happening, we still have banks getting away with nonsensical 60% writedowns on essentially worthless debt. LGD > 100+% -... 

Stock Reality Snaps Back As Hope-Based Decompression Ends

Last night we discussed the repeated regime that has occurred in equity markets over the last few days where we ramp in ES away from any other asset class (FX, credit, TSY, commodity) only to fade overnight. This morning's abrupt diminution of hope has once again caused ES to revert back to its CONTEXTual reality - trading more in line with broad risk assets for now. It appears that again and again we are seeing the buy-the-dips beta-chasing that Art Cashin so eloquently pointed out this morning - and that is not working as the overwhelming macro/systemic conditions favor risk-off.

Jim’s Mailbox

Jim Sinclair’s Commentary

Yra’s conclusions are sound. Gold will re-enter the system, about that there is no question.
My conclusions is that a virtual reserve currency will be created that is tradable by central banks only. It will be a super virtual average of all major trading currencies with gold attached by a world sort of M3 against gold, as a price, held in the implied guarantee and/or currency.
The bullish outcome on gold as an end game is a cause of the intact gold trend fought so hard from $248 to present day by media MOPE.

Notes From Underground: When I have Something to Say Sir I Am Going to Say It Now! (Phil Ochs) By Yra
"The news item from the G-20 about Germany not willing to pledge its GOLD reserves to guarantee the EFSF leads me to believe that the use of GOLD to backstop DEBT is on the table. The U.S. has the largest GOLD RESERVES with Germany second and the IMF third. Yes, IMF rules presently prevent the use of its GOLD for collateral but with the G-20 seeking to become more relevant in the current CREDIT CRISIS it would not surprise me if the IMF HEAD Christine Lagarde didn’t find a way to utilize her legal background and circumvent the rules.
If the IMF leveraged it GOLD horde the market may see it as bearish as it may resolve the immediate crisis but ultimately the monetization of the world’s GOLD would lead to a bullish outcome; when and at what price we will let the market tell us? This view may be a fantasy but the German decision to deny Europe its GOLD holdings mean that discussions are taking place. Oh and Italy is also in the Top 10 of GOLD holdings.
When it comes to Europe and finance it is similar to the movie “BANG THE DRUM SLOWLY.” The veteran ball players entice the rookies into a card game called TEGWAR (THE EXCITING GAME WITHOUT ANY RULES). That seems to sum up the international financial system, especially Europe."


In The News Today

Jim Sinclair’s Commentary

The endangered species in the Western World is on two legs – the pensioner.

No pension? You may still owe $30 000 on one- MSN Money
Many economists think the US’s debt, aging population and slow ecnomic growth spell disaster for pensions.
By MSN Money partner on Tue, Nov 8, 2011 4:35 PM
Pension accounts for state and local government workers are underfunded by $4 trillion, according to one recent analysis. If America’s households were to split that tab today, each would have to kick in $34,000.
Don’t have that kind of cash on hand? Another option is to chip away at the shortfall over 30 years starting now. That would cost households $1,400 a year beyond what they pay in taxes today.
A pension, for those who aren’t familiar with one, is like a 401k plan in reverse. With a 401k, or defined contribution plan, a worker knows how much he socks away, but not how much he will have at retirement. That part depends upon investment returns. With a pension, or defined benefit plan, a worker is told how much he will receive in retirement. It’s up to the pension to put aside enough today. To do that, pensions guess about future returns. The higher the returns they assume, they less money they must save today. And therein lies the problem.
Most states assume a yearly return of around 8%, says Kil Huh, who manages fiscal research for the Pew Center on the States, a think tank. "In past decades, when investment markets boomed, they were able to achieve those returns," he says. "Now they’re not even coming close."
Indeed, whether states and local governments have a funding problem under current rules depends on what markets do in coming years. Pensions have two-thirds of their money invested in risky assets like stocks, real estate and hedge fund positions. If the next 20 years could be counted on to resemble the 1980s and 1990s, when stocks returned double their historic yearly average, then states would be flush today.



Sovereign Debt is Everybody’s Problem

By Greg Hunter’s

Dear CIGAs,

The most pressing problem on the planet right now is the European sovereign debt crisis.  It is a gigantic highly leveraged mess caused by greedy reckless bankers.  It was nurtured with the help of regulators who turned a blind eye and allowed the problem to mushroom into an uncontrollable financial cancer.  The European Union is struggling to come up with a plan or bailout fund big enough to truly end the crisis, but there is none in sight.  Every time there is a plan, it is shot down or falls apart.  There was talk of Germany backing the EU bailout fund with its gold reserves, but that was rejected by the Germans.  (Germany is the world’s number two holder of gold with 3,412 tonnes.)  Can you blame them?  It is ironic this so-called bailout fund is looking for tangible backing and that world leaders would turn to the yellow metal.  Didn’t they all have a pact to sell gold not so many years back?  This tells me any country with toxic sovereign debt that wants a bailout better be considering putting up its gold reserves.
The first troubled country that comes to mind is Italy.  It has the fourth largest gold reserve in the world with 2,451 tonnes.  Spain is in just as much debt and trouble as Italy, but only has 281 tonnes of gold.  It ranks around 17th on the list.  These two countries have ten times the sour debt of Greece.  I predict Germany will not be the last country to be asked to put up its gold.  I suspect there is not a country on earth that will elect to give up control of its yellow reserves.  What else is there?  I don’t think Italy would put up the island of Sicily for collateral, no more than the U.S. would post the Hawaiian Islands as security for a loan.
They call this a sovereign debt crisis, but it is the banks that are really at the heart of the problem.  This leaves the EU with very limited options.  They can allow the banks holding this sovereign debt to default, or print money to bail them out.  Laws have been passed in Europe that allow the banks to count toxic sovereign debt as an asset.  It is a novel idea–overwhelming debt that doesn’t have a prayer of being fully repaid counted as a store of value.  (Oh wait, what was I thinking, this is the same thing the American government allows U.S. banks to do!)  That means you can also say the sovereign debt crisis is bank solvency crisis.  If you mark all sour debt for what banks can get for it today, many European financial institutions would be insolvent.  End of story.

The Shadow Superpower--Forget China: the $10 trillion global black market is the world's fastest growing economy -- and its future.

The Municipal Bond Market Is Imploding

"Gigantic Bank Run" Coming, Says Nobel Prize Winner

Fed-up Consumers Planning for "Bank Transfer Day"

Banks Closed In Nebraska, Utah; Total 2011 Failures 87


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