Thursday, September 20, 2012

Meet Robert Rubin: The Man In Charge

Meet the man, who many say (most of whom correctly) has been running pretty much everything from deep behind the scenes.

The Next Eurozone Crisis

Financialization and the build-out of China provided Europe the illusion that the worker-to-retiree/beneficiary ratio could fall to 2-to-1 and be maintaned indefinitely. Now that the fast-growth phase of China's build-out has ended, and the disastrous consequences of financializing everything under the sun are apparent, the illusion has run aground on fiscal reality. Expectations that have been raised to unrealistic levels for decades are now in the process of being adjusted down to reality, and everyone who felt entitled to promises that cannot be kept is angry, frustrated, disillusioned and seeking a scapegoat for processes that are running entirely independent of the leadership of the moment. How long will this false calm of official reassurances last? Nobody knows, but if crises track an exponential curve like so many natural dynamics, the next phase of the Eurozone crisis will quickly reach escape velocity and accelerate beyond the reach of politicos and PR.

Reality Strikes As Italy Slashes Economic Growth, Hikes Deficit Forecast

For all those who thought the smooth-talking, avuncular Goldman operative Mario Monti would never lie when he said "Italy is fine", we have some bad news. He did:
  • *ITALY REVISES 2012 GDP TO -2.4% FROM -1.2%
  • *ITALY SEES 2012 DEBT AT 126.4% OF GDP, 2013 DEBT AT 127.1%

Financial REALity TV #2 - Bernanke's Bank Bailouts Blow Up The Consumer Discretionary Sector! Boom!!!
Reggie Middleton
09/20/2012 - 09:36
Imagine CNBC/Bloomberg TV like this! What the hell did you think would happen when you divert resources into buying mortgage derivatives to save banks instead of supporting job growth??? People buy...

$62.7 Trillion In Net Worth: Here Is The Latest US Household Balance Sheet

Moments ago, the Fed released its latest Z.1, aka the Flow of Funds, which is the primary source of information of that one component of modern finance which all modern economists continue resolutely to ignore because it blows all their anachronistic theories on monetary theory out of the water: shadow banking data. But more on that later. for now, here is the graphic summary of that most important of conventional data points updated every quarter: the US household balance sheet, and specifically the net worth of the US consumer, which in Q2 declined from a 4 year high of $63 trillion to $62.7 trillion, on a $900 billion drop in financial assets, offset by a $400 billion hike in real estate assets. Most importantly, and the reason why to the CTRL-P operator the only thing that matters is the stock market, of a total of $76.1 trillion in assets, only $24.2 trillion are tangible: i.e., real estate and durable goods. The remainder, $51.9 trillion or 68.2% of total, is Financial assets. It is this number that is the sole target of Bernanke's "monetary policy" and which must be inflated at any and all cost.

Art Cashin's Post Mortem On Japan's Now Failed QE 8

While the US is only now embarking on QE3, on Tuesday night, to much fanfare, the Bank of Japan, in sympathy to the Chairsatan, launched QE 8. As we reported, the entire JPY10 trillion incremental intervention was fully priced in and digested less than 9 hours later, confirming that monetary policy is now completely helpless to do anything but destabilize currencies for a brief period of time (and at every greater dilutions). Here is how this farce of central-planner hubris looked through the eyes of UBS' veteran trader Art Cashin. 
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European Crisis

Admin at Marc Faber Blog - 3 hours ago
I think investors will look back at the European crisis today and think we should have bought equities in 2012. - *in CBS Market Watch* *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

Oil's Flash Crash Focuses On Symptoms Rather Than Intention

Eric De Groot at Eric De Groot - 4 hours ago
In a world where politics (and political interests) and big money are deeply intertwined stable markets such crude oil can take on the appearance of the party game called hot potato. That’s why it's extremely important to follow the actions of the invisible hand in today's volatile markets. For instance, aggressive accumulation while the headlines discuss the meaning of another... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

Video: Economic Conditions Will Worsen

Admin at Jim Rogers Blog - 5 hours ago
*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.* 

Investment Strategies

Admin at Marc Faber Blog - 6 hours ago
In this environment of negative real interest rates we will have a lot of volatility and there are two strategies you can use. One is to aggressively shift from one asset class to another. The other strategy, involves the more passive approach of dividing a portfolio into four equal components — precious metals, equities, real estate and cash. - *in CBS Market Watch* *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

World's Agriculture Powerhouse

Admin at Jim Rogers Blog - 6 hours ago
Russia and the CIS (Commonwealth of Independent States) region have all the ingredients needed to become the world's agriculture powerhouse. - in The Wall Street Journal blog *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.*

Spot The Odd One Out

We are now T+5 from the launch of the good ship QEternity - do you know where your asset classes are?

Popularity Of Greek Neo-Nazi Party Continues Surging

There is a reason why we called the graph of youth unemployment in Europe 'the scariest chart' as quite simply, it is the leading indicator for what most call 'social unrest' - but some would call 'uprising'. In somewhat stunning news today, not only do a majority (54%) of Greeks no longer trust any political party, but the popularity of the ultra-nationalist Golden Dawn has risen dramatically since May. According to Ekathimerini, the popularity of Golden Dawn's leader Nikos Mihalolioakos has risen ten points since May to an incredible 22%. More than 1 in 5 Greeks now support the neo-nazi party as the general disillusionment with mainstream political parties - who are seen as lying to get votes - grows stronger. 85% believe that the new measures planned by the government to take affect them personally or another member of their family and 68% are against the terms of the EU's bailout.

Europe Red As Italy Continues Post-Short-Sale-Ban Slide

Portuguese bond spreads have been weak all week; Spain has been bleeding in the front-end and belly of the curve; and today saw Italian bonds start to lose some gains. What is perhaps more notable is the weakness in Italian stocks (most notably banks) since the short-sale ban was lifted on Friday. FTSEMIB is down 3.5% from pre-FOMC and -5% from post-FOMC spike highs. EURUSD is back below 1.30 (and stands 1.5 sigma rich to swap-spread-implied levels). Meanwhile, Europe's VIX plummets to six-month lows as realized vol plunges - but the volatility risk premium is still high.

Is The Fed's Rate-Volatility-Suppression Sowing The Seeds Of Its Own Destruction?

It would appear the concerns regarding rising rates in the Treasury Bond market are overblown - no matter how much the inflation break-evens spike. Implied volatility for the Interest Rate market is practically at all-time record lows currently as the Fed continues to remove duration and high convexity assets from the market. One thing concerns us though - the velocity of spikes in volatility once it gets down to these levels has empirically been tremendous - though we are sure this time it's different. In fact this time is different, since this time it is the Fed (as majority owner) that faces the pain from the now-marginal Minsky-like seller of Treasuries running away from inflation-flares (or China/Japan tensions) - and what would Treasury do without that pass-through ponzi revenue from the Fed's winnings? Or as Taleb wrote: "There is no freedom without noise - and no stability without volatility."

Philly Fed Posts Fifth Consecutive Negative Print, As Hopium Soars By Most Since 1991

The Philly Fed's current September Business Indicators index, long ignored when bearish and cheered when bullish, came slightly above expectations of -4.5, printing higher from last week's -7.1 to -1.9. This was the fifth consecutive negative print. And while there were no major highlights in the index, whose New Orders rose from -5.5 to 1.0 at the expense of Shipments and Inventories, both of which imploded to worse then -20, the real story is the Six Months expectations index, which exploded from 12.5 to 41.2: this was the biggest spike may not ever, but certainly in the past 22 years! Is there any wonder why everyone is transfixed with hope that Q4 will be the deus ex that saves the US economy. And so we are back to being a hopium driven economy - when reality sucks, there may not be much change, but there is always hope that finally, the central planners will get it right, and the future will be so bright you've gotta wear Made in China shades. One word of caution: if the so very much anticipated and 100% priced in Q4 recovery does not materialize, and with the fiscal cliff and debt ceiling issues still unresolved, get the hell out of Dodge, as the spread between hope and reality comes crashing.

Bad News Is Bad News Again

We explained last week why the initial exuberance from QEternity was likely to fade since it basically removed all suspense from futures FOMC announcements - i.e. that bad news would once again become bad news as opposed to bad news stoking the hopes or more-er QE. Well this morning's bad news - to wit: China PMI, Europe PMI, and US initial claims - has indeed had a detrimental impact on S&P futures as they approach fresh post-FOMC lows.

Tim Pawlenty To Head TBTF Lobby Group

GOP presidential candidate drop out Tim Pawlenty, who until recently was considered a top VP running mate candidate for Mitt Romney, has shown his true colors, and has become the head of the Financial Services Roundtable, a U.S. bank lobbying group that represents JP Morgan Chase & Co and Wells Fargo & Co , among other financial companies, the group said on Thursday. This is also known as the TBTF consortium. From Reuters: "Pawlenty, who dropped out of the White House race early and quickly backed Mitt Romney for the nomination, takes over as president and chief executive office of the industry group on Nov. 1, it said in a statement. As the industry's top lobbyist, he will play a major role in the industry's efforts to make new Dodd-Frank rules, which Congress passed in 2010 in response to the 2007-2009 financial crisis, more favorable for Wall Street as regulators implement the law. The measure - a response to the crisis fueled by risky financial swaps trading at some firms that required multibillion-dollar tax payer bailouts - has yet to be fully enacted. "Few industries have more impact on the entire economy - and on the lives of average Americans - than financial services. I realize there is still work to be done to continue to earn customers' confidence," Pawlenty said in the statement. "Our members will best accomplish that goal by responsibly investing every day in our communities and job creators," he added."

Who Is Bailing Out Whom?

Presented with no comment - except to suggest that perhaps it is time to revise the near-daily "China bails out [insert insolvent "developed" country here]" rumor algorithm...

'Golden Cross' For Gold And Silver Signals Further Gains

We have seen consecutive weeks of bullish strength in the gold and silver markets. Gold has completed what is known as a ‘Golden Cross’ and silver is poised to complete one in the coming days. A ‘Golden Cross’ occurs when not only the current price, but also shorter-term moving averages such as the 50 day moving average “cross” or rise above the longer term 200 day moving average. Gold’s 50 day moving average (simple) has risen to $1,651/oz and is now comfortable above the 200 day moving average (simple) at $1,645/oz and accelerating higher. Silver’s 50 day moving average (simple) has risen to $29.86/oz and will soon challenge the 200 day moving average (simple) at $30.47/oz.

Odds Of Avoiding Recession: One In Thirty

We have seen a number of leading indicators recently (for example, we were first to note the FedEx implications for GDP) that point to a rapidly rising probability of recession. Today, via Bloomberg Brief, is a look inside the Philly Fed state economic indexes. To be specific, we look at the six-month ahead outlook for each state. Only once in the last 30 years did 20 states possess a negative outlook and the overall economy avoid recession.

Initial Claims Print Is So Bad, It Is Actually Good, That Market Sees It As Bad

Today's initial claims print was the 5th week out of 6 in which expectations missed: instead of coming in at the consensus number of 375K, down from last week's 382K, the BLS reported a miss to expectations of 7K, resulting in a seasonally adjusted number of 382K, or what is now once again secular shift higher. But, wait big miss was actually good news: why? Because the ever data-massaging BLS was kind enough to revise last week's print upward (for the 86th week in a row) from 382K to 385K (just as we predicted last week) which in turn led to such farcical headlines as " U.S. weekly jobless claims drop slightly to 382,000" from the WSJ. And so bad news is now great headlines: Orwell would be proud. Here is an alternative and realistic headline: "Initial Claims Rise Post Next Week's Upward Revision."

Today’s Items:

Beijing Hints At Bond Attack On Japan
In response to the increased hostilities between China and Japan, a senior adviser to the Chinese government has called for an attack on the Japanese bond market to precipitate a funding crisis.   At $230 billion, China is Japan’s biggest creditor and could do considerable economic damage to Japan by dumping their bonds.   China’s true colors are shining through as Chinese hackers take down 19 Japanese websites.   This is what the Chinese are going to try on the US after they’re done with Asia.

Russia Expels USAID
The U.S. Agency for International Development, has been told by Russia, they have until October 1st to get out.    Russia no longer wants the US to spend $50 million a year to meddle in their internal politics.    Looks like the Russians have finally become wise on getting ride of outside interference.

Chaos, Inflation, $10,000 Gold and Silver In Triple Digits
Stephen Leeb believes, that despite pullbacks, silver will blow right through $100 and continue higher.    With current events, it is easy to envision everything from very high inflation to even resource wars.    This is going to eventually set off a big boom in commodity prices.   For example, gold rapidly becoming the premier currency of the world and this trend will continue.    So, after preparing, keep stacking physical.

Tungsten Filled 10 Ounce Pamp Suisse Gold Bar
When reputable dealers are finding they have tungsten hidden within 10 ounce serial numbered gold bars, you know things are getting bad.    With the second discovery of tungsten filled gold bars, it is best to have gold and silver that are coins of one ounce, or less.   Even though the FBI and the Secret Service are supposedly investigating, it is relatively easy to imagine who the professional counterfeiters are in this fraud.   It will most likely lead right back to HSBC and their activities with gold and money laundering.    Trust, the essential commodity for a bank’s existence, is being lost by many banks’ own actions.

Obama Wins Right to Indefinitely Detain Americans Under NDAA
A federal judge has, yet again, ruled that the Government, without cause, can detain Americans indefinitely.   Fear and the Middle East riots definitely had a decisive influence in this poorly rendered decision.   Bruce Afran, a co-counsel representing the plaintiffs, suspects the White House has been relentless in this case because they are already employing the NDAA to imprison Americans, or plan to shortly.

DHS Purchases 200 Million More Rounds
The Department of Homeland Insecurity has put out a new order for over 200 million more rounds of ammunition, some of which are designated to be used by snipers.   When filled, the government would have 1.6 billion bullets, or more than 5 bullets to shoot every American.   Don’t you just feel safer?

Debt Warning
Davincij15, one of my first subscribers, makes an excellent point about debt in a financial collapse situation.    Do not put yourself deeper into debt, thinking that the price of gold and silver will pull your backside out of the fire when their value takes off.    Governments, through price controls and other manipulations, will make that very hard at first.    The wise thing is to get out, and stay out, of debt.

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

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