Tuesday, March 13, 2012

Presenting Bridgewater's Weimar Hyperinflationary Case Study


Last month, the world's biggest hedge fund, Bridgewater, issued  a fascinating analysis of deleveraging case studies through the history of the world, grouped by final outcome (good, bad and ugly). As Dalio's analysts note: "the differences between deleveragings depend on the amounts and paces of 1) debt reduction, 2) austerity, 3) transferring wealth from the haves to the have-nots, and 4) debt  monetization. Each one of these four paths reduces debt/income ratios, but they have different effects on inflation and growth. Debt reduction (i.e., defaults and restructurings) and austerity are both deflationary and depressing while debt monetization is inflationary and stimulative. Ugly deleveragings get these out of balance while beautiful ones properly balance them. In other words, the key is in getting the mix right." Of these the most interesting one always has been that of the Weimar republic, as it certainly got the mix wrong.





Goldman's Take On Today's FOMC Statement: There Will Be Inflation

Yesterday we presented the view of JPM's Michael Feroli of what today's FOMC statement may say (one word: inflation). Here is what Goldman believes: "Today's FOMC statement should be relatively uneventful. The committee is likely to acknowledge the stronger labor market data and the upward pressure on headline inflation, which will undoubtedly be characterized as temporary. We also expect a softening of the phrase that “[s]trains in global financial markets continue to pose significant downside risks to the economic outlook,” although we do not expect it to disappear entirely. At the meeting, the staff is likely to give a presentation on additional easing options, followed by an extensive committee discussion. (This will not show up in the statement and will only become visible to the outside world when the FOMC minutes are released three weeks later.) We still think that the committee will announce further easing before the end of the second quarter, when Operation Twist concludes. However, our confidence in this view has fallen on net, partly because of the stronger labor market and slightly higher inflation data and partly because Chairman Bernanke chose not to repeat his very dovish comments from the January 25 FOMC press conference at the February 29 Monetary Policy Testimony." Remember: admitting inflation means no QE any time soon (and also admission that all the other central banks have succeeded in staving off deflation for a few more months courtesy of $2.5 trillion in excess liquidity injections in under 2 quarters).







First…

The Greek Bailout and Germany’s “Plan B”
http://globalresearch.ca/index.php?context=va&aid=29702
The German leadership wants fiscal responsibility. Greek, and other countries, in the EU appear to be leaning towards anti-austerity and more fiscally irresponsibility.  This leaves Germany with two options.
1. Stay with the euro and go down the drain.
2. Leave the euro and get blamed for the Euro failing.
Well, with legislation passing in Germany that would permit Germany to leave the Euro but remain a part of the EU, it looks like option 2 folks.

Between the electric power used and cargo shipments, it now appears that the Chinese economy is expanding only in the low single digits.  Even the positive-looking indicators point to trouble.  At the moment, China is heading to an essentially zero-growth economy however, it is not contracting like some countries in the EU. For instance, the Greek economy has contracted by 13 percent since 2009.

Although not the intended goal of the leaders of Iran, they may actually be helping America. By their actions, they are putting Obama’s wreckage of a foreign policy on display that even the sycophants in the media cannot cover up.  As the situation gets worse and worse, Neville Chamberlain err..  Obama will continue to be ridiculed more and more by the international community and it will not be because of his ears.

Next…
Aircraft Carrier Enterprise Sets Off On Final Journey
http://www.zerohedge.com/news/aircraft-carrier-enterprise-sets-final-journey-direction-iran
The U.S.S. Target err… Enterprise, with its 5500 crew, has set out at warp speed to join 2 other carriers in the Arabian Sea.  Yes folks, nothing says strength like a ship, commissioned in 1961, that is older than vast majority of her crew.

Last year, Bank of America announced, and backed off after public outcry, of a five dollar debt card usage fee. Now, it appears, it is going to add charges that range from $6 to $25 a month.  Looks like Bank of America is running out of assets and is now attacking its last asset…  It’s customers.  When Bank of America goes bankrupt, you can just imagine what is going to happen to that $75 trillion in derivatives.

Next…
Labor Leaders to Apply New Clout in Effort for Obama
http://www.cnbc.com/id/46081168
Union thugs may soon be beating down your door as the leaders of the A.F.L.-C.I.O. prepare to campaign for Obama. Union officials will assert, using $400 million, that the elections this November are vital to keep America on its present course…. You know, over the cliff of insanity. $400 million to reelect the this corrupt failure from the unions who scream loudly that we need to get “corporate money” out of politics. Right!

Next…
Greek Students Fight Stray Dogs and Despair
http://www.bloomberg.com
If a Greek University student claims that a dog at his homework, it may indeed be the truth.  23 percent budget cuts since 2009 means graffiti covered university buildings are not heated during the winter and students studying Swedish with the aim of emigrating.  A preview of things to come to the U.S. folks.

Finally, Please prepare now for the escalating economic and social unrest.  Good Day



Hard Work Pays Dividends

Admin at Jim Rogers Blog - 1 hour ago
Hard work pays dividends. A lot of the problems we're facing today is that people have forgotten how to work hard. It's a generational thing. - *in Gulf News* *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.* more »

 

 

Gold: There`s Significant Support Around 1500, But It Could Drop Lower

Admin at Marc Faber Blog - 1 hour ago
All I'm saying is that, in my opinion, the gold price correction is not yet entirely completed. I see significant support around the 1,500 dollars/ounce level, but it could drop lower. We could have a big correction if global liquidity tightens or they stop printing money. - *in the Middle East Investment summit, Dubai* Related, SPDR Gold ETF (GLD) *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* more »

 

 

Will Portugal Follow Greece Into Debt Relief?

Eric De Groot at Eric De Groot - 2 hours ago
Keep clicking the magic 8-ball until you get As I See It Yes, Without A Doubt, or something similar. Personally, I favor Seek professional help response. If Greece's sovereign or derivative debt fails, all other European debt will be challenged. Once the path of liquidity was chosen for Greece, there's no turning back. Headline: Will Portugal Follow Greece Into Debt Relief? Despite... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] more »

 

 

Taiwan bank made bonanza from gold purchases

Eric De Groot at Eric De Groot - 2 hours ago

They made a bonanza in gold since 2008, but don't plan on reducing their U.S. Treasury holdings to buy more of this risky asset. Yeah right. Do you think the Republic of China which needs the US's support would say anything different? Headline: Taiwan bank made bonanza from gold purchases TAIPEI, Taiwan — Taiwan's central bank governor says the bank has made a bonanza from gold purchases in... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]




VIX Plunges To 5 Year Low


Courtesy of central planning, all is now well - market complacency is back to 2007 levels, when the market hit its all time highs, and nothing, absolutely nothing, could go wrong.






Apple Just $14 Billion Away From Eclipsing Entire US Retail Sector

As Apple gaps open by another 1% at $558, it stands less than $14bn (in market cap) away from being larger than the entire US retail sector. The good news: it still has a ways to go before eclipsing the retail and the semi sectors combined.






Will The 3rd Time Be The Charm For European Credit Bears?

What do European credit markets know that equities don't? For the 3rd day in a row, credit markets snapped higher at the open and have then sold off considerably - diverging bearishly from European equities. At the same time, European sovereigns (most notably the pivot securities of Italy and Spain) are now 20-25bps wider (in spread) from Friday's Greece 'deal' announcement. European financials are underperforming dramatically.





We Will Hit 84 Degrees In NYC Today (Seasonally Adjusted)



There has been a lot of talk lately about “seasonal adjustments” and what they actually mean and do for the data. Reporting today’s forecast in “seasonally adjusted” terms would not be incorrect. Seasonality isn’t bad, and is useful in many ways, but so is the raw data and trying to figure out if the adjustments make sense or need to be modified a lot due to the particular circumstances at the time (like great warm weather). The markets are almost all doing well so far this morning, aside from European sovereign spreads which continue to leak wider (Spain now +20bps post-Greece and Italy +24bps).



Retail Sales Come In Line With Expectations, Rise 1.1% In February

Following several months of retail sales misses, the market was hoping for blow out data- after all consumers have been largely releveraging. What it got was a normal that was in line with expectations at the seasonally adjusted headline level (+1.1%), following an upward revised 0.6% increase in January (0.4% before), and a stripped number ex autos and sales of +0.6%, on expectations of +0.5%. The latter was revised as a decline from the previous 0.6% which was in turn hiked up to 1.0%. Motor vehicle sales, courtesy of the already noted soaring channel stuffing by Government Motors, rose 1.6% in February sequentially. Gasoline stations saw a 3.3% jump sequentially, and 10.3% compared to last year. This even as demand for gas has plunged to all time lows: maybe it has something to do with price. At least people are still eating (+0.8%), and are clothed (+1.8%) even if they are shopping less at General Merchandise Stores (-0.1%) and have less furniture (-1.2%). According to Bloomberg economist Rich Yamarone, the report reflects "broad-based strength," may show "commodity inflation, with building materials sales up 1.4% and gasoline stations up 3.3%." And BBG's Joe Brusuelas adds: "Two-thirds of growth in retail sales due to rising gasoline & auto sales. Gen merch declines 0.1%, due to subs effects caused by inflation." Thank you inflation - may we have another.




The Selling Of (New) Greek Bonds Has Resumed

Second day of trading in the new Greek bonds (GGB2). It took a whopping 24 hours for the selling to resume. Per BNP "Market heavy."





Risk-EURUSD Decouples (Again) - Citi Explains Why
Even as futures cruise happily along well in positive territory, the EURUSD has once again decoupled from risk (funny how that always happens when the EURUSD is sliding, rarely if ever when it is surging on short covering). What is the reason for this latest schism? According to Citi's Steven Englander it has all to do with Europe once again aligning itself with Obama, and against China, which the market has recently been viewing as a white knight for Europe (contrary to repeated evidence otherwise). As a reminder, China made it very clear last September that it will (somehow) save Europe, if however Europe no longer pursues trade actions against it. Well, Europe just announced it would join the US in the WTO case against China on rare earth metals. Sure enough, China is about to pull the carpet from under Europe all over again. End result: EURUSD under 1.3100 and sliding.





Chart Of The Day: The European Commission's Greek GDP Forecast

Reuters has been kind enough to release the "Second Economic Adjustment Programme for Greece" - a 195 page blueprint that Greece has to follow (unlike the first one, which it kinda, sorta ignored) in order for the money to keep flowing (money to bail out Europe's banks that is). We can save you the reading: below is the only chart of note. This is what the European powers expect Greek GDP to do. It needs no further commentary.





Daily US Opening News And Market Re-Cap: March 13

European equity markets are trading higher across the board ahead of the US open, with the financials sector outstripping others and Health Care lagging behind, although still in positive territory. The main news from yesterday’s finance minister’s meeting was instruction to reduce their deficit by a further 0.5% of GDP; this is having an effect on the Spanish spread against the German bund today, underperforming against other European spreads. The main data of the European session so far comes from Germany, with the ZEW survey for Economic sentiment beating expectations for March, as well as the UK trade balance figures showing a record high in the UK’s non-EU exports. As the session progresses, participants will be looking towards the US retail sales data and the latest FOMC rate decision.




Overnight Sentiment Bubbly Ahead Of Retail Sales, FOMC


 While US equity futures continue to do their thing as the DJIA 13K ceiling comes into play again (two weeks ago Dow 13K was crossed nearly 80 times), ahead of today's 2:15pm Bernanke statement which will make the case for the NEW QE even more remote, none of the traditional correlation drivers are in active mode, with the EURUSD now at LOD levels, following headlines such as the following: "Euro Pares Losses vs Dollar as Germany’s ZEW Beats Ests" and 20 minutes later "EUR Weakens After German Zew Rises for 4th Month." As can be surmised, a consumer confidence circular and reflexive indicator is the basis for this Schrodinger (alive and dead) euro, and sure enough sentiment, aka the stock market, aka the ECB's balance sheet expansion of $1.3 trillion, is "improved" despite renewed concern over Spain’s fiscal outlook after better than expected German ZEW per Bloomberg. Next, investors await U.S. retail sales, which have come in consistently weaker in the past 3 month, and unless a pick up here is noted, one can scratch Q1 GDP. None of which will have any impact on the S&P 500 policy indicator whatsoever: in an election year, not even Brian Sack can push the stock market into the red.




Frontrunning: March 13

  • Tainted Libor Guessing Games Face Replacement by Real Trades (Bloomberg) - so circular, self-reported data is "tainted" - but consumer confidence is great for pumping a stock market?
  • Japan Sets up $12 Billion Program for Dollar Loans, Increases Growth Fund (Bloomberg)
  • China Hints at Halt to Renminbi Rise (FT)
  • Spain Pressed to Cut More From Its Budget (FT)
  • Bailout can make Greek debt sustainable, but risks remain: EU/IMF (Reuters)
  • Banks to Face Tough Reviews, Details of Mortgage Deal Show (NYT)
  • U.S. and Europe Move on China Minerals (WSJ)
  • Use of Homeless as Internet Hot Spots Backfires on Marketer (NYT)
  • Obama administration seeks to pressure China on exports with new trade case (AP)

 



gold bar_wd
(Ed note...If you have this much Gold...or Silver...Please consider supporting our efforts to keep you informed...)

Please consider making a small donation, to help cover some of the labor and costs to run this blog.

Thank You

I'm PayPal Verified   


 
Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)