What Is More Valuable, The Opinion Of A Major Rating Agency Or The Opinion Of A Blog? Go Ahead, I DARE You To Answer!
12/09/2011 - 11:28
QUOTE OF THE YEAR
*Gold is cheap relative to the idea that you could have a life’s fortune on
a statement from a clearing agent [your brokerage account] and find out
that you don’t have a penny left anywhere. Which should you have had,
physical gold or that clearing house statement? Gold is cheap because of
the condition of other things *
- Jim Sinclair
www.jsmineset.com
Moral Hazard
*There will be no private sector involvement. In other words, the banks are
too big to fail and public sector wealth will be expropriated for the use
of bailing out the catastrophic investment decisions of the wealthy
individuals who operate the world's largest banks*. - Dave in Denver
*Moral Hazard - In general:* Circumstance that increases the probability
of occurrence of a loss, or a larger than normal loss, because of a change
in an insurance policy applicant's behavior after the issuance of policy.
It may be due to the presence of incentives that induce the insured to act... more »
Strong Consumer Expectation Will Setup Gold's Next Advance
Improving outlook for the economy, yeah right? Says who? Individuals come
to support, even blindly believe without proof, an argument because crowd
stands behind it. The crowd says, come join us, if we're wrong, we'll be
wrong together. Crowd behavior, the power of the mob, is a seductive force
that ensures 99% of the investment population will be on the wrong side of
the trade at the wrong...
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Gloomy Outlook: What Do You Invest In?
It’s actually quite gloomy but if you’re very gloomy what do you invest in:
Treasuries, Italian bonds or commodities or equities? I happen to think
U.S. equities are not terribly expensive, so relatively speaking to other
assets, they may for a while actually do quite well. - *in Bloomberg*
*Related, iShares Barclays 20+ Yr Treasury Bond ETF (TLT), iShares Russell
2000 Index ETF (IWM) *
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
I Am Short Stocks
What I am doing with my money is I own commodities and currencies and I am
short stocks. I am short American technology stocks, I am short European
stocks, I am short emerging market stocks. That’s what I am doing but who
knows if I am right. - *in Globe And Mail*
Related, iShares MSCI Emerging Markets Index ETF (EEM), Technology SPDR ETF
(XLK)
*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 gue... more »
What’s the biggest risk to the U.S. economy in 2012?
Probably the Federal Reserve in America because they don’t know what they
are doing. There are other risks: China is slowing down, Europe’s got
serious problems. They don’t know what they are doing or how to solve it,
but I would say the single worst risk is the United States central bank. - *in
Globe And Mail*
*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.*
With Money Printing You Can Hide A Lot Of Things And You Can Postpone Problems
“Postponing problems is not good news, but it is better news than if the whole eurozone falls apart. It gives some time to maybe find better solutions. I doubt they will be found, but with money printing you can hide a lot of things and you can postpone problems as we have seen in the U.S.” - *in Bloomberg TV* *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.*
The Two Charts Showing How The S&P Downgrade Of The US Broke The Market
By
now, most sane market observers and participants understand that
perhaps, just perhaps, everything we believed about neoclassical
economics is not without fault. In fact it is possible that the entire
macro-economic safety net of Keynesian policy has come into question.
One look at the chart below of the changes in US financial stock prices
should be enough to show that when S&P downgraded the mighty USA's credit rating, they proved the impossible is possible.
The market is now entirely paranoid. Investors have fled the market in
droves, as we have discussed endlessly. The banks themselves seem to
question their own existence given the plunge in liquidity, and the huge rise in volatility and correlation appear to suggest the market is indeed terrified of its own shadow.Guest Post: One Alarming Indicator From China
Every year since 2005, more than 50% of China's GDP has consisted of construction-related spending. The law of diminishing marginal returns says this simply cannot continue. It represents a misallocation of the household sector's hard-earned savings on a colossal scale, and I believe it will end badly. Not a day goes by that there aren't riots and protests somewhere in China (including cyberspace) as the downtrodden man in the street reaches his froggy boiling point. Increasingly in China, though, those who see the writing on the wall can see that the days of system stability are numbered. And they're not hanging around.The Top 30 Global Geopolitical Hot Spots for 2012
The Council on Foreign Relations has released their politically-correctly-named 'Preventive Priorities Survey' or put another way - where-in-the-world-is-stuff-going-to-hit-the-fan-next report. The report is designed to help the US policy community comprehend where the next conflict will occur in the world and the relative catastrophe factor.
The 3 tiers of chaos offer a menu of drivers-for-war, likely terrorist
targets, and political tensions. Notably they include such systemic
factors as the European debt crisis, budgetary limits, and Saudi
political instability's impact on oil supplies at Tier 1 (most critical)"Le Snub" - New Cold War In Eurozone Confirmed: Sarkozy Gives Cameron The "Cold Shoulder"
Last night, when headlines hit that
it was the UK's "fault" for vetoing a joint dictatorial Fra-Ger
"compromise" and in essence making the Eurozone summit a total failure
(with a follow up summit scheduled for March), it became clear that a
new cold war has broken out in Europe: between France (not so much
Germany as Germany frankly does not want to bailout Europe if its has to
pay for the bail out) and the UK. We now have official video
confirmation that the latest conflict in Europe is between the countries
just across the Chunnel. The video below of a diminutive Sarkozy
giving David Cameron the proverbial cold shoulder (described in painful
detail here)
will achieve nothing but merely inflame further the animosity between
the two countries: just what Europe can least afford right now.Hopium High As Consumer Sentiment Follows September 2008 Path
Yay
verily, Michigan Consumer Sentiment jumped more than expected and
there was rejoicing all around. Of course, a simple scratch beneath the
surface reveals what many realists suspect, expectations for the future
are the major driver of the headline number. Unfortunately we
have seen exactly this pattern before. Not only are the levels and
changes similar to Q3/Q4 2008 but the underlying events (recessionary concerns, banking liquidity concerns, crisis of confidence) are eerily similar. The we've-been-down-so-long-it-has-to-get-better crowd psychology is intriguing as the rise in hope over the past four months is the largest in over 30 months
as the delta between current reality and the green green grass of next
year drops. While animal spirits are arguably of interest in short-term
macro cycles, we note that the ramps in the hopium index tend to last 4-5 months at most and that is where we are now.In Preparation For Solyndra 2, A/K/A LightSquared: A Humiliated Phil Falcone Gets Wells Notice
Just because Solyndra was not enough of a humiliation for the president, not to mention MF Global where inquiring minds are wondering when the president and vice-president will refund any and all campaign donations received by Jon Comminglerzine, here comes the next public fiasco for the administration, as the broader public shifts its attention to LightSquared by way of owner Harbinger capital, and its flamboyant head (and wife) - Phil Falcone. As has been just released in an SEC filing, Harbinger has received a Wells Notice from the SEC. Now in a time long, long ago, or about three years ago, before market criminality and manipulation became wholly endorsed by the US government, getting a Wells Notice was a death sentence for any hedge fund. Alas, it still is: "The Wells Notices state that the staff intends to recommend or is considering recommending that the Commission file civil injunctive actions against HCP, Harbinger Capital Partners Offshore Manager, LLC, Harbinger Capital Partners Special Situations GP, LLC, Mr. Falcone, Mr. Asali, and Ms. Roger alleging violations of the federal securities laws’ anti-fraud provisions in connection with matters previously disclosed and an additional matter regarding the circumstances and disclosure related to agreements with certain fund investors." And whether the Wells Notice is merely an inquiry into Falcone previous shady hedge fund-dipping practices described here, or a preamble to a full blown public spectacle-cum-humiliation on Harbinger's LightSquared remains to be seen. One thing is certain: Mrs Falcone will milk the newly found notoriety to its full extend, prenup firmly in gold-braceleted hand.Art Cashin Explains Why Obama Is "Terrified" By A European Collapse
Confused why Tim Geithner has seemingly booked a weekly round trip ticket to Brussels to give the Eurocrats their weekly pep talk (much to his endless humiliation as Europe Tells Geithner To Take His Advice And Shove It reminds us)? Art Cashin explains not only this, but why the biggest threat to Obama's reelection chances is not who the GOP candidate is in November, but what happens in the EURUSD as early as today. Lastly, by implication, Cashin shoots down any hope that US decoupling from Europe is even remotely possible... something anyone who actually has seen a full business cycle, which automatically excludes 90% of all traders today, will know too well.ECRI's Achuthan Sticks To His Guns: The US Recession Still Is Happening
While
destroying the myths and biases of the plenitude of long-only
talking-heads seems to have been the mission of Mr.Market for the last
decade or so, Lakshman Achuthan of ECRI does an excellent job of dismissing the coincident indicator trees for the leading indicators forest in an interview with Bloomberg TV. His 'recession is happening' call from September 30 still
stands, proving he does not flip flop like all other so called experts
on every up or downtick in the SPY, and is expecting a formal
recessionary print in GDP within three quarters, though noting that the
recession very likely did not start in Q3. The constant clamoring of
the consensus that we will 'muddle through' or that we are firming in
hopes we repeat the Keynesian love-fest of 2009 (which he rejects as
nothing being indicative of this at all) is eschewed as the
man-with-the-best-name-for-anagrams-in-finance gives Tom Keene a little history lesson on the foibles of minute-by-minute coincident (or short-leading) macro data watching (and prognosticating). The ongoing deterioration in the ECRI index (and leading indicators) combined with his noting that GDP tends to revise/revert towards GDI (even though the two should be the same given their either-side-of-the-same-coin nature) and the previous GDI print was much weaker. He ends on a less than optimistic note pointing out that the pace of each economic recovery since the 1970s has been getting lower and lower and cycle volatility has increased helping to confirm his recession-is-happening call.ESM - A Primer - Not So Big, And Not So "Paid-In"
So the ESM is going to be implemented ahead of
schedule. Or at least that is the current plan, although it seems that
Finland is insisting that it retains unanimous voting and most (all?)
countries still need to ratify it. The ECB will oversee the ESM and
EFSF, which is good as they have more market experience than the EFSF
head, but does mean they will be reluctant to print which is what the
market really wants. The ESM will have an effective lending capacity of
€500 billion. That document states that the lending capacity of €500
billion includes any capacity being used by the EFSF. The EU statement
confirms that. So between EFSF and ESM, the combined lending capacity
is €500 billion. “The ESM will use an appropriate funding strategy
so as to ensure access to broad funding sources”. So the ESM has paid
in capital but it will continue to try and raise money based on
guarantees and commitments. I know this is a detail that people want
to ignore in the rush to proclaim “paid in capital” but the reality is
that the ESM is not so dissimilar from the EFSF... On a side note,
Europeans seem to love night clubs much more than Americans. Maybe that is why they make all these announcements at 5 am? They are used to "table service" shutting down around that time and having to make a decision of what to do next. I can count how many good decisions I've made at 4 am after an all-nighter on one hand. Why will this be any different. It
feels to me like at the end they shrugged their shoulders and decided
to settle because it wasn't going to get any better and they didn't feel
like saying the night had been a waste.
Euro Fudge Distracts From Global Debt Titanic; Intervention in Gold Market?
Gold traded higher after the ECB interest rate cut yesterday, prior to sharp selling that came into the market at 1335 GMT. This led to gold falling 2% on the day and it is now down 1.3% on the week – again outperforming many equity indices. Market News International (MNI) reported that market sources said that the Bank for International Settlements, the Bank of England and the Federal Reserve have been “good sellers of gold” after it had popped to a fresh session high of $1,755.90/oz. The MNI report has not been explored and there have not been any official denials of official selling. From a trading perspective there is at least a ring of truth to the MNI report as the sharp fall in the gold price was counterintuitive given there was no negative gold news and indeed the news was bullish with significant risk ahead of the EU summit and continued ultra loose monetary policies and negative real interest rates. Given the scale of the coordinated intervention in markets by central banks recently one would have to be completely naïve to dismiss the report out of hand. There is of course the historical precedent of the London Gold Pool which ended in failure. However, before jumping to conclusions it would be good if the MNI report was looked at and some questions asked - in the finest traditions of journalism.
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