The "Solution" Is Collapse
We're like a sprawling family bickering over the inheritance:
we'll keep arguing over who deserves what until the inheritance is
gone. That will trigger one final outburst of finger-pointing,
resentment and betrayal, and then we'll go do something else to get by. The "solution" is thus collapse. This model has been very effectively explored in The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilization by
Thomas Homer-Dixon. The basic idea is that when the carrying costs of
the society exceed its output, the whole contraption collapses. The
political adjunct to this systemic implosion is that the productive
people just stop supporting the Status Quo because it's become too
burdensome. The calculus of self-interest shifts from supporting the
bloated, marginal-return Status Quo to abandoning it. So the root problem is the system, human nature, blah blah blah. There are no "solutions" that can fix those defaults. The "solution" is collapse, as only collapse will force everyone to go do something more sustainable to get by.
Market Is More Fragile Now Than Pre-Lehman
The significant rise in global systemic risk that occurred in 2008 remained until mid 2010 when it began to subside a little as Jackson Hole and QE2 seemed to allay fears somewhat. However, in the last year or so, BofA's market fragility index has soared higher alarmingly signaling higher systemic risks than in the peak pre-Lehman era. This confirms the massively elevated signal for global systemic risk that credit markets are also sending.
Live Webcast Of Obama Proposing More Spending As The Solution To All Of America's Problems
Actually,
we are not sure just what the president will discuss in his 10:15 am
address on the economy, but our suggestion that the president will
suggest more spending as the cause
solution to all of America's problems seems like a fair guess. That or
blaming Merkel for the epic NFP miss last Friday. We are not sure what
the shot keyword is today (aside for thingamajig of course), but we know what isn't: $15,734,596,578,458.59. That's
was US Federal debt as of close on Wednesday: another fair guess is
that it will receive exactly zero prominence in Obama's latest sermon.Goldman Cuts Q2 GDP Estimate From 2.0% To 1.8%
Just as predicted earlier, the GDP downgrades begin.Surely this explains why the market is about to turn green.We revised down our Q2 GDP tracking estimate by two tenths to +1.8% (quarter-over-quarter, annualized) from +2.0% previously. The downward revision primarily reflects weaker-than-expected real export growth in April. This was partly offset by stronger than expected wholesale inventories, which increased by 0.6% (month-over-month) in April.
I Think A Global Bear Market Has Begun
Admin at Marc Faber Blog - 1 hour ago
I think a global bear market has begun and we are going to go lower. But if
you look 10 years out, US Treasuries at a yield of 1.60%, that is the
maximum you will earn, whereas companies that have dividend yields of 4 to
7 percent, I think will provide you with higher returns. - *in Bloomberg*
*
*
Related: iShares MSCI Emerging Markets Index (ETF), SPDR SP 500 ETF
(NYSE:SPY);
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
Leaving Chinese Shares To My Grandchildren
Admin at Jim Rogers Blog - 2 hours ago
I always take the opportunity to buy Chinese shares when the stock market
plunges and I‘ll leave these assets in the form of Chinese shares to my
grandchildren. - *in MW *
*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.*
Spain to Request EU Bank Aid on Saturday: Sources
Eric De Groot at Eric De Groot - 3 hours ago
The interconnectedness of capital flows and world markets ensures that
there will be unpleasant consequences if a weaker member withdrawals from
the euro zone. Simply put, the world is not ready for those consequences.
If necessary, liquidity will be provided to all to protect the world’s
financial system a little longer. Headline: Spain to Request EU Bank Aid on
Saturday: Sources Spain...
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I would like to Thank Kevin O. our 7th donor, for his very generous donation.
Who will be our 8th?
Thank You
I'm PayPal Verified
London PM Fixed Gold and GLD (ETF) Total Assets WA Stochastic
Eric De Groot at Eric De Groot - 3 hours ago
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Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal";
mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes;
mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt;
mso-para-margin:0in; mso-para-margin-bottom:.0001pt; ...
[[ This is a content summary only. Visit my website for full links, other
content, and more! ]]
Expect the Unexpected
Eric De Groot at Eric De Groot - 3 hours ago
Ignore the Fed and follow the message of the markets. The junk to high
grade corporate bond spread has been sending the message of risk-off since
May 2012 (chart). Moreover, a series of negative, widening divergences with
stock prices increases the probability of panic and unexpected policy
decision. Chart: Junk to high-grade corporate bond spreads (JHGCR) and S&P
500 Headline: ...
[[ This is a content summary only. Visit my website for full links, other
content, and more! ]]Citi Matrix Outcomes: If "Disorderly Grexit" Then "VIX At 80"
Does A Spanish Bank Bail-Out Give The Vigilantes The Green Light To Move To Italy?
The
biggest news this morning is the talk that Spain's Rajoy will discuss
'how to shore up' his banking system with the EU officials this
weekend. As SocGen noted earlier, EURUSD managed a 30 pip bounce and
then promptly sold off - 'That says it all really'. A 'bailout' of
Spanish banks poses a lot more questions than it answers. Specifically
that this crisis began with Greece and now has spread to Spain. Will
the focus move on again? The market believes that European
officials have yet to put in place contingencies that will stem
contagion and stress on other European countries. Hence the
anemic response from currencies. What is clear is that Greece, and now
Spain, have set the dismal example for their peers: 'Crush the
banks, then get bailed out' which leaves only one course of action it
seems, banks will be shorting themselves to force action from their
overlords in Berlin and Brussels. If we get a risk-on bounce in
Italian banks, on any weekend 'interim' resolution for Spanish banks,
then shorting into that strength seems more than appropriate (or long
credit, short equity as burdens are shared).Europe's Parabolic-est: German TARGET2 Total Hits €700 Billion
Dear German readers: please avert your eyes.
Fed: Crushing The "Smart" Money's Hopes Since 2009
While
the ever-present analogs to the last few years of
crisis-response-improvement-complacency (CRIC), as Morgan Stanley so
clearly described, have provided a clear picture of what to expect, the
treja vu is now starting to fade in one very important market
indicator. As BofA notes, the forward expectations of Fed Funds rates
have finally started to shift from an endless string of 'hope'
for growth and reflation just around the corner and rate hikes any
quarter now (despite the Fed's 'exceptional' chatter) to a much less
sanguine pit of despair that rates will indeed stay low for 'ever'
reflecting a stagnating deleveraging economic reality. At some point
they will be right as the Japanization of rates around the fiat world
becomes the new normal and 'smart/fast-money' traders appear hope-less.From RISK ON To REALITY ON
Perhaps some novel solution is found but this is not the muddling along kind of thing at all. This is the changing of charters kind of thing, the changing of national banking regulations kind of thing; the ceding of power to Europe kind of thing and anyone who thinks that this can all be accomplished in a matter of days is out having tea with Cinderella’ fairy godmother. Yet equities have rallied and bond spreads stopped widening on just this kind of hope but I predict that this will all be short-lived because, on its face, it is irrational. There is nothing wrong with having hopes and prayers but to base investment decisions on irrational interventions of some Divine power where there is not even a door for the Divinity to enter is just poor judgment by this name or any other you may concoct. It is no longer a case of “Risk on/Risk off” but of “Reality on/Reality off” and I advise you to keep pressing the “Reality on” button!Crazy Pills: Here Comes The Refutation Of The Rumor Of The Conference Of The Bailout Of The Broke... And Consultant
Just as we expected earlier, when we suggested that Spain is waiting to see Germany's preliminary response to its (re)newed push for a bailout, Spain has seen the outcome, and does not like it.- SAENZ SAYS KNOWS OF NO `TECHNICAL' MEETING ON SPAIN
- Consultants, IMF to Determine Spain Banks’ Needs
Spain: The Infographic
This should explain it all.
Overnight Sentiment: Nothing New Under The Iberian Sun
That economic data out of Europe was disappointing overnight should come as no surprise to anyone. That Spain is broke, and there is no money to bail it out under the existing framework (and that Germany is unwilling to come up with a new bailout scheme), should also be no surprise. And yet they somehow manage to stun the market... each and every day. Which is why overnight action has now boiled down to a simple algorithmic exercise: is there a short covering squeeze: if yes, then rip, aka Risk On. If not, then Risk Off. So far, the squeeze has not been initiated which is also to be expected, following the biggest short covering squeeze in up to two years. This too may change if repo desks decide to pull borrow as they tend to do during regular hours, to give the impression that the latest and greatest bailout plan is "working." And in other news, which is completely irrelevant, here is the actual news.Frontrunning: June 8
- Obama Seeking Ally on Europe Finds Merkel a Tough Sell (Bloomberg) - but he has an election to win
- China rate cut sparks fears of grim May data (Reuters)
- China faces stimulus dilemma (FT)
- Papademos warns of Grexit vortex (FT)
- China’s Shipyards Fail to Win Orders as Greek Owners Shun Loans (Bloomberg)
- Rajoy Holds Bank Talks With EU Leaders as Fitch Downgrades Spain (Bloomberg)
- Capital Rule Is One Size Fits All (WSJ)... now the modest question of where to get the $3.9 trillion in capital
- Merkel Pokes at Cameron With Backing for Two-Speed Europe (Bloomberg)
- City safeguards set Britain at odds with EU (FT)
- Bernanke says Fed to act if Europe crisis deepens (Reuters)
Germany Responds To (Re)newed Spanish Request For Cash: Please Do, But No Backdoor Bailout
Just as we noted minutes earlier, following the Spanish (re)submission its (still rumored) bank bailout application, the ball was in Germany's court. And sure enough, Germany has just come out with the token response, which was the worst possible outcome for the insolvent country, which may force it pull the unofficial bailout request for the second time. From MarketNews: "The German government on Friday reaffirmed that the European bailout funds were ready to support Spain, if Madrid applies for aid and accepts the conditions tied to it. “The decision is up to Spain. If it makes it, then the European instruments for it are ready,” government spokesman Steffen Seibert said at a regular press conference here. “Then everything will run under the usual procedure: a state makes a request, it will be liable and it accepts the conditions tied to it.” Seibert declined to comment on rumours of a possible Eurogroup teleconference this weekend to consider an aid request from Spain that might be forthcoming." Translated: the framework is in place. As in, no new bailout instruments are being contemplated.Spain To Officially Request Bank Bailout For The First Time... Again
If it seems like it was just yesterday that Spain officially requested a bank bailout, it is because it was. Recall: "Spain Caves, Admits It Needs European Bailout" from June 5. What happened next is confusing, but it essentially appears that Spain retracted the course of action as it was unhappy with two things: i) the market's response to the announcement, and ii) Germany's response to the request for aid. The first, because as ZH first showed, did not soar as there would obviously not be enough money embedded in the current system to fund a full bailout of Spain, and the second, because Germany is not exactly delighted with having one more country on the dole, and has yet to clarify under just what conditions it will save Spain (in retrospect naive rumors that it has dropped all conditionality notwithstanding). Which brings us to this morning, when we are expected to forget that all of this already happened, and to be shocked that Spain is officially requesting a bailout for the first time./.. again... kinda, sorta... Reuters reports: "Spain is expected to request European aid for its ailing banks at the weekend to forestall worsening market turmoil, becoming the fourth and biggest country to seek assistance since the euro zone's debt crisis began, EU and German sources said. Four senior EU officials said finance ministers of the 17-nation single currency area would hold a conference call on Saturday to discuss a Spanish request for an aid package, although no figure had yet been set. The Eurogroup would issue a statement after the meeting, they said. "The announcement is expected for Saturday afternoon," one of the EU officials said." So now we have rumors of statements of conferences of bailouts. Lovely. At least our Belgian caterer long is doing great to quite great.Today’s Items:
As Spain is downgraded by Fitch to BBB,
everyone in the EU is looking for ways to get out the debt pickle;
however, politicians in France have decided they can spend their way to
prosperity by lowering the retirement from 62 to 60. So, how can we
insert the letter “F” into the acronym P.I.I.G.S? Guess we can say F and
P.I.I.G.S.
Wall Street has been waiting with
breathless anticipation as their crack daddy Benji Bernake announced
that the FED could take action if the economy weakens. Translation:
Stocks jumped as everyone is getting ready for more quantitative easing,
or money printing. So, get ready for food, oil, and other commodities
to go up big time.
Next…
The National Debt Isn’t $15 Trillion. It’s $50 Trillion
http://blog.american.com
http://www.economist.com
The National Debt Isn’t $15 Trillion. It’s $50 Trillion
http://blog.american.com
http://www.economist.com
Measuring America’s debt on an accrual, rather than cash basis, grows the current shortfall from $15.7 trillion to over
$50 trillion. Take note that the World GDP in 2011 was about $70 trillion.
$50 trillion. Take note that the World GDP in 2011 was about $70 trillion.
Investors are racing here and there trying
to find out where global markets are headed. Major Banks in both the
Euro-zone and the U.S. are effectively insolvent and are desperate for
capital to cover their casino-like losses. We continue to see money
flowing into government securities as bond yields come down and an
increasing number of people are seeing gold, and other physical
commodities like silver, as a ‘risk-free’ asset. In short, after
preparing, keep stacking.
Well, it may not be any surprise to anyone
with an IQ greater than their shoe size; however, new documents are
emerging showing how Obama, the liar-n-charlatan, hid his close
affiliation with Chicago Chapter of a socialist party controlled by
ACORN. Bet people cannot wait to see what snakes are in Romney’s closet
since he also is secretive about his past.
Next…
10 Things That We Can Learn About Shortages and Preparation From the Economic Collapse in Greece
http://lewrockwell.com
10 Things That We Can Learn About Shortages and Preparation From the Economic Collapse in Greece
http://lewrockwell.com
Here are a few…
1. Food Shortages
2. Medicine shortages
3. Power shortages
4. Water shortages
See a pattern?
1. Food Shortages
2. Medicine shortages
3. Power shortages
4. Water shortages
See a pattern?
In San Diego and San Jose, voters, by
about 70%, approved ballot initiatives that cut retirement benefits for
city workers. Looks like the voters are waking up to the gravy train
that public employees have been on. If only they could cut the spending
at the state level; however, that is not going to happen.
I would like to Thank Kevin O. our 7th donor, for his very generous donation.
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Thank You
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