You Ain't Seen Nothing Yet - Part Two

Anyone who hasn’t sensed a mood change in this country since the 2008 financial meltdown is either ignorant or in denial. Millions of Americans fall into one of these categories, but many people realize something has changed – and not for the better. The sense of pure financial panic that existed during September and October of 2008 had not been seen since the dark days of 1929. Our leaders used the initial terror and fear to ram through TARP and stimulus packages that rewarded the perpetrators of the financial collapse rather than helping the middle class who lost 8 million jobs, destroyed by Wall Street criminality. The stock market plunged by 57% from its 2007 high by March 2009. What has happened since September 2008 has set the stage for the next downward leg in this Crisis. The rich and powerful have pulled out all the stops and saved themselves at the expense of the many. Despite overwhelming proof of unabashed mortgage fraud, rating agency bribery, document forgery on a grand scale and insider trading based on non-public information, the brazen audacity of Wall Street oligarchs is reminiscent of the late stages of the Roman Empire.  




Exactly Why This Time IS Different And the Fed Will Be Powerless to Stop What's Coming

Posted by: Phoenix Capital...

Post date: 04/03/2012 - 10:29

In simple terms, this time around, when Europe goes down (and it will) it’s going to be bigger than anything we’ve seen in our lifetimes. And this time around, the world Central Banks are...

The 2013 Fiscal Logjam

With the political season heating up, and tax season upon us, we thought it worthwhile drilling into exactly how painful the potential pre-programmed fiscal tightening in 2013 is likely to be. As Credit Suisse notes, "it ain't over til its over" as the suspicion is that a lame duck session of Congress will forestall some of the tightening but until Congress acts, the economy is still technically in a collision course with the largest fiscal hit in modern times.

Gold Is Going A Lot Higher Over The Next Decade

Admin at Jim Rogers Blog - 1 hour ago

If it got down to $1,200 or $1,300 I hope I’m smart enough to buy a lot more. Gold is going to go much higher — and silver — over the next decade. - *in CNBC* *Related, Gold, SPDR Gold Trust (ETF) (NYSE:GLD), Newmont Mining (NEM), Barrick Gold (ABX), Goldcorp (GG)* *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 »

 

 

In A Money-Printing Environment I'm Reluctant To Short

Admin at Marc Faber Blog - 1 hour ago

In a money-printing environment I'm reluctant to short. But say whereas I recommended investors to increase their positions last October, November, December, now I think that if people are overweight in equities they should reduce positions somewhat...maybe cash. The U.S. dollar is desirable at the present time. - *in Bloomberg* Related, SPDR S&P 500 Index ETF (SPY) *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

 

 

 

 

The Ugly Truth For Northern Europeans

As Europe's exuberance from the LTROs fades (with Italian banks now negative YTD, Sovereigns wider than LTRO2 levels, and financials desparately divided by the LTRO Stigma) Jefferies David Zervos uncovers the sad reality that faces peripheral creditors and Northern Europeans - as we noted a month ago here. The 'success' of the LTRO monetization scheme (as opposed to EFSF/ESM transfer dabacles) is what enabled the Greek restructuring, and as Zervos notes, the losses that the big boys (Spain and Italy) need to take will not be taken via a haircut but a monetization as the number 1 rule is we must always assume that losses will be taken in a way that protects the large northern banks, northern jobs and most importantly Northern politicians. If the loss realization is not managed correctly (and losses there will be), then the ugly truth will escape but the North's large-scale vendor-financing scheme with the periphery will have to continue - even in the knoweldge that the debt will never get paid back.
The income and savings of Northern workers must be ploughed (directly or indirectly) into the rest-of-Europe or the entire structure becomes insolvent and the breaking of that social contract (that they will be looked after when they are old) will inevitably lead to revolt and nasty nationalist political forces being unleashed. The hope to avoid this is the 'wealth illusion' as the workers of the north can never be allowed to realize they have only 50% of their worth in reality. Ireland will be next on the loss-realization-monetization path but as we move from relatively small and containable sovereigns to the big-boys, the idea that Spain and Italy will roll over and accept a decade of austerity in exchange for a haircut is pure folly. These countries hold too much clout in the Eurozone and their threat of exit is a material threat to the northern jobs and hence northern politicians. The only way the northern politicians will be able to save face when it comes to Spain and Italy is through massive monetary policy accommodation. Inflation will rebalance Europe; but let's hope that the process of restating northern wealth and wage rates does not lead to revolt in the northern streets. The politicians will need to carefully execute this trade.

Next Up Spain: OpenEurope Looks At Spanish Banks' Underprovisioned 20% In Toxic Loans

The only European "thinktank" that has been more correct about predicting developments in the continent than any of its peers ("Greece will never default" - nuf said), has released a new briefing, this time looking at the latest European hotbed of trouble (which is not new at all, just the realization that the LTRO benefit has faded has finally set in), Spain, and specifically if its bank will be forced to seek a Eurozone bailout. OpenEurope is diplomatic about it but the conclusion is that all signs point to yes. Furthermore, as recent general strikes across the country, coupled with occasional rioting, showed, Rajoy's agenda of enacting austerity which will be critical to receive German assistance simply to make Spain the latest German debt slave, may have some problems being enacted. Yet the biggest catalyst for the housing-heavy exposed Spanish banks is that, as Open Europe finds, of the €400 billion in loans made to residential sector, €80 billion is toxic. And only €50 billion in reserves are available. Hence the simple math: at least a €30 billion shortfall will need to come from Europe. And this assume no further declines in home price, which however are set for a record price drop this year. So... LTRO 3 anyone as the focus once again shifts to "deja vu Greece?"

 

 

The next leg of gold’s bull run

Eric De Groot at Eric De Groot - 1 hour ago

An individual, group, or country (hint China) not seeking the label of dumb as a post is highly unlikely to announce their intentions to buy gold. Headline: The next leg of gold’s bull run Commentary: Buy the big central banks LONDON (MarketWatch) — Has the great bull run in gold run its course? On the surface it looks as if it might have. After running up close to $2,000 an ounce... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] more »

 

 

The new American household: 3 generations, 1 roof

Eric De Groot at Eric De Groot - 1 hour ago

The definition of normal will change as Americans' standard of living continues to deteriorate. Headline: The new American household: 3 generations, 1 roof NEW YORK (CNNMoney) -- As the economy continues to take a toll on consumers' finances, a growing number of people are discovering that becoming roommates with mom and dad, or a 20- or 30-something son or daughter, helps to ease some of... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] more »

 

 

Myanmar: I Find It Wildly Exciting

Admin at Jim Rogers Blog - 4 hours ago

Fifty years ago, it was the richest country in Asia. Now, it’s the poorest because they closed off. But they’re just now opening up, just as China did 33, 34 years ago. I find it wildly exciting. - *in CNBC* *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 »

 

 

A Bad Economy With Rising Equities

Eric De Groot at Eric De Groot - 4 hours ago

A sharp downward trend in gold adjusted equities prices reflects Faber's description of a bad economy with rising equities. Chart 1: Dow Jones Transportation Average (DJTA) AND DJTA to Gold Ratio (DJTAGOLDR) Headline: 'Massive Wealth Destruction' Is About to Hit Investors: Faber "I think that people should own some gold and I think that people should own some equities, because... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] more »

 

 

Japan May Outperform All Other Markets

Admin at Marc Faber Blog - 5 hours ago

I believe that the Japanese market may outperform all the other markets against all expectations in 2012. - *in Bloomberg* *Related, Nikkei 225 Index, Topix* *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

Which Way Now? As Bonds And Stocks Dislocate Again

The dislocation between 10Y Treasuries and the S&P 500 is once again becoming wide as bonds continued to press 'a sombre reality' and stocks 'a new hope' - whether this is QE-positioning is unclear but we wonder which way the correction will come this time with TSY snapping on March 30th - the last time we dislocated so far so fast.

On The Demise Of European Bank Debt

While the LTROs were supposed to bring European banks back from the edge of insolvency with a warming blast of liquidity, the sad truth, now that the exuberance of fresh money-printing has faded, is that the unintended consequence has crammed down the senior unsecured bank debt holders to the lowest of the low. This realization, that we have discussed a number of times - most recently here - that nothing has been solved - as the LTRO Stigma unintended consequence, is starting to leak back into broader risk premia as now the contagion risks are back on the table and even non-LTRO-facing banks are seeing spreads increase as expectations of either broader forced cram-downs or interconnected vicious cycles rear their ugly head once again among European banks - and implicitly back onto European Sovereign balance sheets. Citigroup's Hans Lorenzen highlights four key reasons for the increasingly binary bifurcation that senior unsecured bank debt has become.

The Latest Parabolic Chart - GM Channel Stuffing

Uh, what is going on here? Is GM trying to stuff its dealers with so many vehicles it makes the AAPL parabolic chart appear flat as a pancake?

Factory Orders Rise 1.3% In February, Miss Expectations, Inventories At Fresh Record

Following the durable goods miss at the end of March, there were some who were expecting another Schrodinger print in today's Factory Orders report, which was expected to post a 1.5% increase (even as the Durable Goods miss was revised from 2.2% to 2.4%, still short of the +3.0% expectation). Alas, no such luck, and instead the weakness from March is spilling over into April as February new factory orders rose 1.3%, missing expectations, but an improvement from January's print which was revised lower to -1.1%. Shipments however declined 0.4% in February, following two consecutive monthly increases. "Transportation equipment, also down following two consecutive monthly increases, had the largest decrease, $1.3 billion or 2.5 percent to $49.2 billion." Finally, and in what will be no surprise to anyone, Inventory stockpiling continues, and is now up twenty-eight of the last twenty-nine months. "This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 0.6 percent January increase." Finally, the inventories-to-shipments ratio was 1.33, unchanged from January. We will likely see some modest downward GDP revisions based on this data.

Simmering Resentment - You Thought Banks Were Unpopular

Presented with little comment except to note that Members of Congress and Lobbyists rank lowest for honesty and ethics with Nurses topping the list and Bankers just below Journalists as the resentment of where the QE funds flow rises ever so slowly at first...

When Will Retail Start Buying Stocks?

So when will retail investors start buying stocks?  One of the final legs propping up this rally is the belief that retail investors will finally pile into stocks.  There is hope that all this “money on the sidelines” will find its way into the stock market.  The S&P at 1,350 was supposed to do the trick.  Certainly 1,400 on the S&P was going to be enough to chase retail investors into stocks.  Basically the argument that retail will capitulate and finally invest in stocks is based on the assumption that higher prices increase demand – aka, a Giffen Good. Retail investors can see that the U.S.  debt has continued to grow and that in spite of lip service to deficit reduction, we are creating a bigger deficit.  They are nervous about what will happen when finally the spending gets pulled in.  They are also very nervous (as are many professional investors) that they will be the last purchase of stocks before the central banks stop pumping fresh money into the system in their never ending attempt to inflate asset prices. Expecting “the masses” to buy just because something is already up 20% seems a little silly, if not downright arrogant. If there is one sector where the upward price movement is sucking in more money it is amongst corporations themselves and if any group has shown an ability to buy high and sell low, it is corporations themselves. It is just wrong to expect individuals to be as frivolous with their money as corporations are.

Previewing The Summer's Distractions: Listing Upcoming Silver Screen Releases

It is no secret that when it comes to attention spans and 'deep thought', Americans would rather be at the movies. After all, for a country which prides itself on its distractability and sales of ADHD medications, the only thing that matters is the line up of entertainment. Perhaps one reason why last summer's debt ceiling fiasco ended up being such a popular thriller with the masses is that the movie lineup at the time was less than inspiring, leading to a 1.4% decline in summer theater attendance. Which begs the question: what is in store for this year? Because as we have noted, we already know that the US debt ceiling will likely be breached sometime in September, leading into the presidential election, and as a result Americans will demand distraction, or else there is an all too real possibility the same market crash as happened in August of 2011, may recur. So what are the distractions in store for the herd? Courtesy of BofA and the Hollywood Stock Exchange, here is the complete summer lineup, coupled with the HSX movie stock price (an indicator of expected revenues). Will it be enough to offset reality setting in with a thud? You decide.

Gold Coins (US Mint) In Q1 2012 Show "No Hysteria And No Bubble"

Dr. Constantin Gurdgiev, a non Executive member of the GoldCore Investment Committee, has again analysed the data of US Mint coin sales in  Q1 2012 and has looked at the data in their important historical context going back to 1987.  He finds that the data regarding gold coin sales in Q1 2012 confirms that there is “no hysteria and no bubble here”.  Dr Gurdgiev finds that while volume of sales in Q1 2012 fell from the quite high levels seen Q1 2009, 2010 and 2011, demand was much stronger than “in the pre-crisis average for 2000-2007.” Also of note is the fact that despite the worst financial and economic crisis the modern world has ever seen being experienced since 2008 demand has remained below the record levels seen in the aftermath of the Asian debt crisis and unfounded Y2K concerns.  Interestingly, Dr Gurdgiev finds that the historic data (since 1987) shows that the "gold price has virtually nothing to do with demand for US Mint coins - in terms of volume of gold sold via coins." He finds that the demand for gold coins has little to do with the price in general and that “something other than price movements drives demand for coins”.

And You Thought The Fed Was Bad

When one cuts out all the noise, the only true purpose of aggressive (or not) central bank asset expansion, is to be a "buyer" of last resort of sovereign debt funding. Think of it as the source of credit money demand (and hence supply) when every other sector is deleveraging, and when a given Treasury authority needs to pump trillions in debt into the market but when nobody can afford to lever up and buy said incremental debt. Call it monetization, call it funding the deficit, call it whatever: that's what it is. And when people think of monetization, they think, first and foremost of the Chairman, who recently was caught praising the fiat system at a university named for a person who said the following prophetic line: "Paper money has had the effect... it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice." Irony aside, when one cuts to the chase, and ignores even further noise about monetization being direct, indirect, sterilized, shadow, etc, there are just two metrics that are relevant: change in sovereign debt and change in Central Bank Assets. In this regard, of the US' $5.5 trillion in sovereign debt increase, the Fed matched Geithner for $2.0 trillion of the total, or 37%. An admirable number and certainly better than the BoE's 29%. Yet who gets the absolute top prize? Why none other than the ECB, which with $2 trillion in expansion (of which about 60% took place under Goldman apparatchik Mario Draghi in just the past 6 months) represents a whopping 63% of total Eurozone sovereign debt expansion of $3.1 trillion!

Daily US Opening News And Market Re-Cap: April 3

European cash equities are trading in the red heading towards the US session, with particular underperformance in the periphery as financials continue to remain the biggest laggard. The EU session so far has consisted of downbeat commentary in regards to both Ireland and Portugal. An EU/ECB report noted that, Portuguese debt is now predicted to peak at 115% of GDP in 2013 and that contraction in 2012 is likely more pronounced than thought. Elsewhere, the Irish Fiscal panel said Ireland may need extra budget cuts to reach its 2012 target and 2012 growth has weakened. In terms of economic releases the UK observed a stronger than expected reading on its Construction PMI hitting a 21-month high, which saw some brief strength in GBP.

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