Wednesday, November 14, 2012

Chart Of The Day: The Fiscal Cliff For The Rest Of Us

We have discussed the fiscal cliff from many angles: timeline, the potential impact, the scenarios, whether its impact is priced in, why a bounce on success is unlikely, the endgame 'solution', and the long-term fiscal probity of the USA. As it appears everyone is becoming more aware of this pending reality, we note USA Today's great one-stop-shop infographic which simplifies the fiscal cliff impact for the rest of us: A raft of tax and spending changes scheduled to take effect in January will sharply reduce the federal budget deficit, but will also send the economy back into recession if they all happen at once.

China Says It Must Add To Gold Reserves To Promote Yuan Globalization And As An FX Hedge

China needs to add to its gold reserves to ensure national economic and financial safety, promote yuan globalization and as a hedge against foreign- reserve risks, Gao Wei, an official from the Department of International Economic Affairs of Ministry of Foreign Affairs, writes in a commentary in the China Securities Journal today.

China Gold Reserves “Too Small” - Ensure “National Economic and Financial Safety”

China needs to add to its gold reserves to ensure national economic and financial safety, promote yuan globalization and as a hedge against foreign- reserve risks, Gao Wei, an official from the Department of International Economic Affairs of Ministry of Foreign Affairs, writes in a commentary in the China Securities Journal today which was reported on by Bloomberg. China’s gold reserve is “too small”, Gao said and while gold prices are currently near record highs, China can build its reserves by buying low and selling high amid the short-term volatility, Gao wrote. The People’s Bank of China is accumulating significant volumes of gold under the radar of many less informed market participants which is bullish. The Chinese government is secretive about its gold diversification and buying and does not disclose gold purchases to the IMF. Therefore, there has been no official update to their holdings since the barely reported upon announcement four years ago that Chinese gold reserves had risen from just over 500 tonnes to over 1,000 tonnes.

Obama To Demand $1.6 Trillion In Tax Hikes Over Ten Years, Double Previously Expected

If the Fiscal Cliff negotiations are supposed to result in a bipartisan compromise, it is safe that the initial shots fired so far are about as extreme as can possibly be. As per our previous assessment of the status quo, with the GOP firmly against any tax hike, many were expecting the first olive branch to come from the generous victor - Barack Obama. Yet on the contrary, the WSJ reports, Obama's gambit will be to ask for double what the preliminary negotiations from the "debt deficit" summer of 2011 indicated would be the Democrats demand for tax revenue increase. To wit: "President Barack Obama will begin budget negotiations with congressional leaders Friday by calling for $1.6 trillion in additional tax revenue over the next decade, far more than Republicans are likely to accept and double the $800 billion discussed in talks with GOP leaders during the summer of 2011. Mr. Obama, in a meeting Tuesday with union leaders and other liberal activists, also pledged to hang tough in seeking tax increases on wealthy Americans." Granted, there was a tiny conciliation loophole still open, after he made no specific commitment to leave unscathed domestic programs such as Medicare, yet this is one program that the GOP will likely not find much solace in cutting. In other words, all the preliminary talk of one party being open to this or that, was, naturally, just that, with a whole lot of theatrics, politics and teleprompting thrown into the mix. The one hope is that the initial demands are so ludicrous on both sides, that some leeway may be seen as a victory by a given party's constituents. Yet that is unlikely: as we have noted on many occasions in the past, any compromise will result in swift condemnation in a congress that has never been as more polarized in history.

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Late-Day Equity Ramp But European Bonds Ain't Buying It

Between the escalation in the Middle East and Olli Rehn pouring cold-water on the hopes and prayers of an imminent Spanish rescue-request, sovereign bond risk rose notably today. A late-day rampapalooza in EURUSD (another round of end-of-day repatriation?) signaled risk-on in the correlated monkeys and sure enough (in the US and Europe) stocks rose into the European close. The USD is remarkably unchanged on the week - despite the volatility in risk assets in general (zee stabilitee at the 1.27 peg seems the new normal).

I Know Few People Who Have Gotten Rich Off Technical Analysis

Admin at Jim Rogers Blog - 1 hour ago
There are some who speculate mainly on the basis of commodities charts and technical analysis. They swear by various mathematical models and theories. Good luck to them. Frankly, in my experience, I have known few people who have gotten rich off technical analysis. - *in Hot Commodities* * *Related: United States Oil Fund LP (ETF) (NYSE:USO), PowerShares DB Agriculture Fund (NYSE:DBA), ELEMENTS Rogers Intl Commodity Index - Agriculture Total Return ETN (NYSE:RJA), SPDR Gold Trust (ETF) (NYSE:GLD), iShares Silver Trust (ETF) (NYSE:SLV); *Jim Rogers is an author, financial commentator ... more » 

CNBC Video: Global Markets Will Implode

Admin at Marc Faber Blog - 1 hour ago
Video Summary: In this "Squawk Box" excerpt, Marc Faber of the Gloom, Boom & Doom Report, warns investors to prepare for an eventual "'reset" of the global financial system. Related: iShares MSCI Emerging Markets Index ETF (EEM), SPDR SP 500 ETF (SPY) * **Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.*

Fiscal Cliff Most Likely A Non-event

Eric De Groot at Eric De Groot - 2 hours ago
Normal 0 MicrosoftInternetExplorer4 As Jim suggests below, the fiscal cliff despite all the hype will likely be non-event that affords the invisible hand the opportunity to reposition for the 2013 equity market rally to new highs. Nobody can be so irresponsible and crazy that they would walk into this one without at the least a kick of the can down the road in... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

Bart Chilton On Silver Manipulation - Gold and Silver Coiling For a Major Move - The Next Disaster 


Charting The Secular Decline (To Come) In Advanced Economy House Prices

It would appear that Americans are in general an optimistic bunch. The slightest green shoot of economic growth, or market trend-reversal, or Tigers' home run in the World Series and it is instantly extrapolated into "what could be". The US housing market (among others around the world) is just such a glimmer of hope (and homebuilder stock prices surely provide all the proof you need... just like JCP's 12% jump on 9/19? followed by its 46% decline since...). The trouble is, no matter how much you want something to happen; sometimes, there really is no way it's ever gonna happen. To wit, the young/old dependency ratios in the following six major economies of the world suggest whatever 'Eastman Kodak' bounce some housing markets are experiencing will inevitably be short-lived (no matter how much foreign cash is driven back into these advanced economies).

Israel Assassinates Hamas Army's "Chief Of Staff" In Precision Airstrike, Hamas Vows "Infernal" Response

Update: Israel CDS 145/155, +6 bps
In a move that is certain to aggravate the already frayed relations between Israel and the Palestine, not to mention send Brent spiking, moments ago the IAF, in a precision airstrike, assassinated Ahmed Jaabari, the head of Hamas' armed wing - a position that is equivalent to Chief of Staff - together with his son, who were travelling in a car at the moment of the strike. And, as expected, the furious Hamas response has already been logged and promises much more death and escalation in the near term

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Hamas Announces It Is Now In "Open War" With Israel

As expected, the escalation out of Gaza has been fast and furious with Al Arabiya reporting that the Hamas response to the operation that Israel has code named "Operation Pillar Of Cloud", which an IDF spokesperson has clarified Israel is ready to escalate into a ground operation into Gaza if needed, is that "Hamas is now in open war" with Israel. Moments later the organization Islamic Jihad has unsurprisingly, chimed in: "Israel has declared war on Gaza and they will bear the responsibility for the consequences." Stay tuned folks cause this may get very messy quickly. Now if only the US military wasn't currently the functional equivalent of a grotesque reality gong show.

Israel Third Front Escalation Sends Risk Lower

"War (escalation) is good" appears to have been the idiot algos immediate knee-jerk reaction to the post-Israel news jump in oil prices - as correlations rule the world. But once the reality of Gaza being 'the start' of an apparent escalation, and opened up the third Israeli front after Iran and Syria, risk was decidedly off and US equities reverted to their lows of yesterday...and back to early August levels (pre-Draghi).

Profits - Take Some!

As we head into the last of this year and we confront various cliffs; fiscal and European, the threat of rising taxes for individuals and perhaps corporations should not be minimized. My best advice of today is to stop and look at your portfolios and take some profits and re-invest the proceeds or take profits and keep cash to be re-invested after the first of the year when we have either bumbled our way out of our predicament or behaved badly and find ourselves in a morass with all of the markets rolling about on their backside. It makes no difference as to your viewpoint and it takes no socially charged adjectives to reach a correct opinion; our President wants more and increased social programs and he wants those with the money to pay for them. Now you have one and one-half months to make preparations.

Big Miss In Retail Sales Paints Grim Picture For Holiday Shopping

Here we go with the "but, but, Sandy" excuses. The just announced October retail sales tumbled, with their worst miss of expectations since May 2010, and the first sequential decline since June: printing at -0.3% for both the headline and the 'ex autos and gas', on expectations of a -0.2% and +0.4% rise. Ignoring for a second that the Commerce Department said that Hurricane Sandy had both positive (remember those massive lines in various stores ahead of Sandy) and negative impacts on retail sales, it would be truly inconceivable for the sellside Wall Street consensus of diploma'ed PhDs, which knew about Sandy's impact on retail sales well in advance, and thus could adjust its numbers, to actually, you know, adjust its numbers. Either way there is no way to spin the longer term major store sales trend (last chart), which shows that the US consumer, out of money, out of credit, and out of savings is entering the holiday season with little to zero disposable spending power.

Russian Exchange Halts FX Trading Due To "Software Glitch"


Frontrunning: November 14

  • Don't jump to conclusions over general, Pentagon chief says (Reuters)
  • Bad times for generals: Pentagon demotes 4-star General Ward (Reuters)
  • Investors Pay to Lend Germany Money (WSJ)
  • Noda will no longer be watching... watching: Japan PM honors pledge with December 16 vote date, to lose job (Reuters)
  • New China leadership takes shape (FT)
  • Hispanic Workers Lack Education as Numbers Grow in U.S. (Bloomberg)
  • Quest for EU single bank supervisor stumbles (FT)
  • Anti-austerity strikes sweep Europe (Reuters)
  • Amazon faces new obstacles in fight for holiday dollars (Reuters)
  • SEC Expands Knight Probe (WSJ)
  • Singapore’s Casinos Lose Luster as Gaming Revenue Decline (Bloomberg)
  • Amid Petraeus sex scandal, Air Force to release abuse report (Reuters)
  • Geithner’s Money Fund Overhaul Push Sparks New Opposition (Bloomberg)

Europe Is On Strike As Its Economy Continues To Implode, Stock Futures At Highs

If May Day is when Europe celebrates labor and jobs (if any), November 14 is its opposite, bizarro cousin as today Europe wakes up to a dead(er than usual) economy. The reason: virtually every European country is on strike. From BusinessWeek: "Spanish workers staged a second general strike this year as unions across Europe prepared the biggest coordinated protests yet against budget cuts that policy makers say are needed to end the region’s debt crisis. In Spain, unions said most auto and metal workers joined the strike, even as power demand was just 13 percent below usual. One of Portugal’s two biggest labor groups also called a strike, partial walkouts are planned in Greece and Italy, and French unions are urging workers to join protest marches. “This is a strike against the suicidal economic policies of the government,” Ignacio Fernandez Toxo, head of Spain’s CCOO union, told supporters late yesterday." In other words, Europe's economy which is already doing swimmingly, is about to see 1/60th of its Q4 GDP removed as virtually no economic goods or services are produced today.

Today’s Items:

UN Body Vies For Internet Control
The UN’s International Telecommunications Union, is pushing to regulate the control of the internet.   They want to dictate who controls and possibly profits from the use of the internet.   They want users to pay extra for using now free services; such as Skype and email. Speaking of Skype, the company actually gave out information on a WikiLeaks supporter without waiting for a warrant.    In short, we are stepping closer to totalitarian rule.

China Imports 775 Tones of Gold in 2012
John Embry states that China, the biggest producer of gold, will have imported more than 775 tons of gold in 2012. What is more important, is that this is just though Hong Kong only.   This is not the other non-disclosed avenues to obtain gold. In addition, the Turkish Prime Minister is calling for switching from the dollar to gold.   In short, China is quietly becoming the world’s gold superpower.

Silver Price To Increase 400% In 3 Years
Ian Williams, manager of Charteris Treasury, believes that silver is about to enter a sustained bull market that will take the price from the current level of $32 an ounce to $165.   He says that the forecast is based entirely using technical & cyclical analysis.   Guess he never heard of the SLV paper ponzi scheme then.   With that said, Bart Chilton, on Russia Today’s “Capital Account”, has again repeated his belief in silver price manipulation.

8 Middle-Class Tax Breaks on the Chopping Block
For the Middle-Class, what is left of them, their taxes may not go up; however, they could easily see some tax breaks go away like…
1. Child tax credits.
2. Earned Income tax credit.
3. College tuition credits.

Food Stamp Aid Reduced
Now that the election is over, the residents of Ohio, that were critical to Obama’ re-election, are finding out that their food-stamp aid will be reduced by $50 a month.   So, it now appears that there is far less Obama Money. Meanwhile, food banks and others that distribute food assistance are bracing for increased demand.

Wal-Mart and Health-Care
Wal-Mart’s U.S. employees will pay more in premiums for its medical coverage in 2013; thus, prompting 1.4 million to forgo coverage altogether. Officials at Wal-Mart stated that the average costs to its employees will only rise about 4.4% in 2013.   As everyone can clearly see now, Obamacare is causing medical costs to go down…   Not!

Top 10 Items For Emergencies
Here are a few…
1. Candles, Matches, and Lighters.
2. Clothes and Blankets.
3. Portable Stove or Camp Stove.
4. A Medical Kit.
5. Tools like a good knife.

Stripping Citizenship
In response to the petitions to secede, another one has appeared.    This one calls for stripping citizenship and exile for anyone who signs petition to secede.    Hmm…   So far, with this fascist government, I do not see a down side to that.

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

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