Wednesday, October 10, 2012

The CEO Letter Heard Around The World "Vote Obama; Lose Your Job"

NewsBusters reports on THE letter from David Siegel, the founder and CEO of real estate company Westgate Resorts on Monday threatened to fire some employees if Barack Obama is reelected and carries out his plan to raise taxes on the so-called rich. The following are highlights from an email message sent by Siegel to his staff that was obtained and verified as authentic by Gawker. "The economy doesn't currently pose a threat to your job. What does threaten your job however, is another 4 years of the same Presidential administration. So, when you make your decision to vote, ask yourself, which candidate understands the economics of business ownership and who doesn't? Whose policies will endanger your job?"

BoE Finds Gold Standard Leads To Less Crises Than Fiat Regime

There should be three objectives for a well-functioning monetary system: i) internal balance, ii) allocative efficiency and iii) financial stability. The international financial and monetary system (IFMS) has functioned under a number of different regimes over the past 150 years and each has placed different weights on these three objectives. Overall, this recent Bank of England paper finds that today’s 'fiat' system has performed poorly against each of its three objectives, at least compared with the Bretton Woods System, with the key failure being the system’s inability to maintain financial stability and minimize the incidence of disruptive sudden changes in global capital flows. There is little consensus in the academic literature, or among policymakers, on what are the underlying problems in the global economy which allow excessive imbalances to build in today’s IMFS and/or which impede the IMFS from adjusting smoothly to counteract these imbalances. Critically though, while the fiat money system we are currently does indeed exhibit lower GDP growth volatility (by design), it has dramatically more incidents of banking and currency crises than under a Gold Standard.

Meet The People Behind The Vacuum Tubes In The World's Largest HFT Shop

A rare glimpse inside "probably the world's biggest" 'market-maker' GETCO as it provides estimates of over 20% of 'liquidity' to the daly trading volume on US stocks. Meet the people that stand ready to feed the machines (oh wait) that stand ready at all times (except when most needed) to bid or ask...

Goldman On The Reality Of The Jobs Market

Some prefer to see the 'employment' glass half-full, some half-empty, and others see the glass smashed into a million shards on the keynesian kitchen floor. The zealousness with which the 'number' has been dismissed and praised has generated more questions than answers. Goldman's Jan Hatzius addresses the question of the pace of progress in the labor market, the reasons for the contrast between GDP and employment, the amount of slack left, and the implications for Fed policy.

Energy Higher, Earnings Lower

As we all know, what matters isn't our nominal earnings, it's what our earnings can buy that counts. If it takes an hour of labor to buy four gallons of gasoline, it doesn't really matter if we're paid $1.60 an hour and gasoline costs 40 cents a gallon or we're paid $16 an hour and gasoline costs $4 per gallon. Ditto $16,000 an hour and $4,000 per gallon. What matters is if our hourly wage once bought eight gallons of gasoline and now it buys only four gallons. This is called purchasing power, and rather naturally the Status Quo has worked mightily to cloak the reality that our purchasing power of the bottom 95% of wage earners has been declining for decades. Until oil no longer matters, our real earnings and our economy remain hostages to the cost of oil.

Europe Ends Red With Sovereigns Seeing Selling-Pattern Seven Days-In-A-Row

Between the IMF's European growth expectations and deleveraging needs, it seems reality is sinking in a little in Europe. All equity indices are closing red today with Spain and Italy worst and banks underperforming. The most interesting feature we noticed is that once again - now the seventh day in a row - European sovereign spreads have deteriorated notably from the US day-session open to the European close. Spain and Italy 10Y bond spreads are 15 and 8bps wider (only) on the week but notably Spanish and Italian equities are down 3.2% and 2.8% respectively this week. EURUSD is practically unch at the EU close - up 60 pips from overnight weakness.

Two Charts To Strike Fear In The Heart Of Euro Bulls

  Something changed in the FX market after QEternity was announced. As CitiFX notes, active traders in the EURUSD market had generally behaved as trend-followers throughout the summer - in the lead up to QE3; but in the last few weeks, that pattern has changed dramatically. The heavy selling of EUR which took our positioning indicator from a record high in mid-September to negative territory came despite resilience in spot. Thus investors now appear more inclined to sell into strength from EUR. This could reflect frustration with EUR’s inability to sustain breaks beyond recent ranges and desire among investors to lock in gains among longs. Combine this positioning with the fact that EURUSD is trading over 300 pips rich to its swap-spread-implied fair-value and perhaps trading the range - as opposed to looking for breakouts - is a better bias currently.

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Chicken Little Can't Tell The Difference Between Risk On/Off

Eric De Groot at Eric De Groot - 2 hours ago
Risk on/off Observations: The risk on/off oscillator pushed higher in September (chart 1). This suggests higher prices as long as the oscillator remains above zero. Bulls sentiment as a percentage of Bullish and Bearish sentiment at 50% is not concentrated (chart 2) Intermediate tops tend to coincide extreme bullish sentiment. Smart money rarely stands with the crowd. Gold and silver rally,... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

Video: Market Setting Up for 'Serious Setback'

Admin at Marc Faber Blog - 3 hours ago
*Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

The Chinese Language Is Going To Be The Most Important

Admin at Jim Rogers Blog - 4 hours ago
I want my children to grow up knowing what most other people know. The Chinese language is going to be the most important language in my daughters’ lifetimes. - *in Taipei Times * *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.* 

Markets May Have A Serious Setback

Admin at Marc Faber Blog - 4 hours ago
Basically, I think QE3, which I think is unlimited, and bond purchases by the ECB bailout of countries have been largely discounted by the market, and the markets have been weaking technically, so I believe that we may have here quite a serious setback. -* in CNBC* Related: iShares MSCI Emerging Markets Index ETF (EEM), 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.* 

Health Coverage Requirements Will Generate Unintended Consequences

Eric De Groot at Eric De Groot - 4 hours ago
Looming health coverage requirements will generate unintended consequences as long as owners of capital are able to exercise free will. If free will is challenged, capital and the jobs created by it will vanish. Capital formation is not evil, it's just efficient. Headline: Prepping for Obamacare, Chain Cuts Workers' Hours The owner of Olive Garden and Red Lobster... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

Selling The QEternity News 

After the kneejerk stop-run reaction to the FOMC's announcement of QEternity - that juiced stocks to the year's highs, there has been no follow-through at all among the cyclical or recovery-sensitive sectors. In fact, all the sectors that ran on QE3 hopes have retraced dramatically. With today's further slump in Energy and Materials (as earnings begin to cast doubt on the hope-rally), they are now down over 5% from the post-QE peak.

JOLTS Drop Un-Confirms BLS 'Reality'

As if we needed further confirmation of the un-reality of Friday's BLS data, the JOLTS data just printed with the largest two-month drop in ten months (and the first two-months-in-a-row of falling job openings this year). Of course this is data for August and the unemployment rate was for September - which we are sure makes all the difference...

China To Drown Hard Landing Sorrows In Beer

Whether it is US companies' reporting or Chinese data confirming, times are getting tougher for the world's engine of growth. So, like every well-balanced western nation, instead of turning to meditation and exercise, beer appears the chosen method of stress-relief for the Chinese. As Bloomberg Briefs notes, three of the top six brands of beer in the world are Chinese with the great nation consuming 50 billion liters per year - more than double the US 24 billion. Do not worry though, USA is still #1 at 74 liters per capita per year relative to China's 37 liters. It would seem the start of their recession is perfect timing for them to make a run at increasing that average yearly intake. Already this year, Chinese domestic beer production is up 2% YoY and imports are up 100% - perhaps the only 'rising' data point the nation has seen; and maybe the next great anti-growth indicator.

Plans To Create World's Largest Aerospace And Defense Company Fail As EADS And BAE Shelve Merger Plans

In the beginning there was much hope, especially among M&A ibanker advisors, that the creation of the world's largest aerospace and defense company would be not only a fee bonanza but a statement that even in Europe's ongoing economic depression one can cobble together megadeals. Then things got sour as little by little the realization that the deal may fall through started creeping in. Moments ago, all hope was lost as both parties pulled out of further merger talks. From Reuters: "- EADS and BAE Systems will not ask for an extension to their merger talks on Wednesday, sources close to the negotiations said, calling an end - for now - to a plan to create the world's largest defence and aerospace company. "We will not be filing for an extension. It's over," one of the sources said. The two companies had until 1600 GMT to ask for an extension to the talks, which have come up against fierce governmental opposition as France and Germany sought to maintain control while Britain wanted less state ownership."

Popping The "Black Friday" Myth

And so another urban legend falls, this time of the retail "doorbuster" ploy known as "Black Friday", whose only goal is to get as many gullible US shoppers into retail stores with promises of massive discounts and unbeatable bargains. As it turns out the promises are completely hollow, in based on an analysis by the WSJ, those highly touted Black Friday deals aren't deals at all, and in fact the bulk of the "discounts" are smaller compared to comparable price cuts throughout the year. In fact, the only thing that is true about the day that launches Holiday shopping, is that it is a great demonstration of the herd effect in play, where people line up in droves just because other people line up in droves. In the meantime, everyone else has already managed to snag that much desired purchase long ago and at a lower price. Of course, if this key day that anchors the start of the profitable retail shopping season is relegated to the dustbin of urban legendry, then retailers' already negligible margins will be cut even further, leading to severe adverse economic consequences for a country whose economy is 70% based on consumption, and which is already on the edge as said consumer is largely tapped out and whose credit cards have been maxed out long ago.

Frontrunning: October 10

  • U.S. Military Is Sent to Jordan to Help With Crisis in Syria (NYT)
  • IMF Weighing New Loans for Europe (WSJ)
  • Romney Targets Obama Voters (WSJ)
  • China’s Central Banker Won’t Attend IMF Meeting Amid Island Spat (Bloomberg)
  • Japan Calls China PBOC Chief Skipping IMF Meeting ‘Regrettable’ (Bloomberg)
  • German media bristles at hostile Greek reception for Merkel (Reuters)
  • The End Might Be Near for Opel (Spiegel)
  • IMF sounds alarm on Japanese banks (FT)
  • Cash Tap Stays Dry for EU Banks (WSJ)
  • Goldman in Push On Volcker Limits (WSJ)
  • IMF Vinals: Further Policy Efforts Needed to Gain Lasting Stability (WSJ)
  • King signals inflation not primary focus (FT)

Today’s Items:

The Imploding of the World’s Largest Economy
The largest economy in the world  is not the US or China; but in fact, it is Europe and it is imploding.    Things in Europe continue to get even worse as summit after summit yields the big goose egg.    Greece is about to run out of money…  Again.    Spain is in the midst of the worst housing crash that it has ever seen.   The French economy, with unemployment above 10%, is starting to implode.    It is a matter of time before Italy and France look like Greece and Spain as the laundry list of woes gets longer and longer.

No Currencies Will Survive
Robert Fitzwilson says that various currencies will become the safe haven of the day, but none will survive what lies ahead.     He goes on to say it is imperative to switch out of paper-based assets into real assets such as gold, silver and well-located real estate.    No amount of printing or economic growth can prevent currency destruction and entitlement collapse.   So, after preparing, keep stacking physical.

Mysterious Algorithm
Here we go folks.    We are about to be told that mysterious algorithm, like the one that accounted for 4% of all trades last week, will be the reason that the stock market could crash in not-so-distant future.    We are also told that exchanges are not monitoring high frequency trades; thus, the stock market, like a casino, is ripe for a complete collapse.    It appears that there is no real oversight; thus, it is best to get your money out of stocks yesterday.    With that said, we may have a clue as to who may be responsible…

Prepare for Extreme Market Volatility
Officials at Goldman Sachs have advised their muppets err… investors to expect extreme market volatility.    They go on to say to expect similar conditions as those  experienced in August of 2011.    The fiscal cliff – which would otherwise deduct 5% GDP growth – and the never-ending debt ceiling debate signal a coming market crash.

Military Times Poll
66%, of those wearing the military uniform, would vote for Romney while only 26% would vote for Obama.    55% believe Romney has their best interest at heart compared to 24% for Obama.   15% say neither represent their interests.     49% believe Romney is sincere about his positions compared to 24% for Obama.   16% say both speak with fork tongue.    57% will cast absentee ballots which most likely will not be counted.

Food Assistance Outpaces  Jobs
The number of US households reliant on food stamps increased over 99,000 to about 22.5 million in July.    Assuming an average of 2 people per household, the increase means that more people went on Food-stamps in the month of July than found jobs.    In the same month, the number of disability recipients rose over 20,000.    In short, the US will exist until politicians realize they can bribe the people with the people’s own money.

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

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