Eight Simple Truths You Need To Know About 2012

History is full of other examples of once proud nations that, facing problems for decades (or even centuries), completely unwound in a matter of years. The Ottoman Empire. The  Ming Dynasty. Feudal France. The Soviet Union. Bottom line, when the real change comes, it comes very, very quickly. Think about the pace of change these days. It’s quickening. Europe is a great case study for this– when concerns about Greece first surfaced, European leaders were able to contain the damage. There was disquiet, but it soon dissipated. Fast forward to today. We can hardly go a single day without a major, market-rocking headline. And European politicians’ attempts to assuage the damage have a useful half life that can be measured in days… sometimes hours now. Like the Ottomans, the Soviets, the Romans before them, Western civilization is entering the phase where its rate of decline will start looking like that upside-down hockey stick.

Morgan Stanley Issues Shocker With First 2012 Forecast: Says S&P Will Close Year At 1167, Sees Consensus As Too Optimistic

The market has not even opened for regular trading for the first trading day of the year and already predictions for the final print are made. Enter Morgan Stanley, which unlike last year, when it was painfully bullish has come out with an uncharacteristic and quite bearish prediction: "We are establishing a 2012 year-end price target of 1167, representing 7% downside from today’s price. The consensus top-down view has coalesced, with limited variation, around 1350, making our forecast 13% more conservative than the “muddle  through” scenario implied by consensus." And the primary reason for this - a collapse in earnings predictions: "We are launching our 2013 EPS estimate of $103.1, 15% below the bottom-up consensus forecast of $121.1." Time to reevaluate those record corporate profit margin assumptions? That said, make no mistake - just like SocGen, Goldman, UBS and everyone else, the sole purpose of these bearish forecasts is to get the market to drop low enough to give the Fed cover for QE X. Because as Adam Parker, who made the forecast, knows all too well, if the market indeed closes red for 2012, so will Wall Street bonuses.

 

 

 

Exposing American Banks' Multi-Trillion Umbilical Cord With Europe

One of the reports making the rounds today is a previously little-known academic presentation by Princeton University economist Hyun Song Shin, given in November, titled "Global Banking Glut and Loan Risk Premium" whose conclusion as recently reported by the Washington Post is that "European banks have played a much bigger role in the U.S. economy than has been generally thought — and could do a lot more damage than expected as they pull back." Apparently the fact that in an age of peak globalization where every bank's assets are every other banks liabilities and so forth in what is an infinite daisy chain of counterparty exposure, something we have been warning about for years, it is news that the US is not immune to Europe's banks crashing and burning. The same Europe which as Bridgewater described yesterday as follows: "You've got insolvent banks supporting insolvent sovereigns and insolvent sovereigns supporting insolvent banks." In other words, trillions (about $3 trillion to be exact) in exposure to Europe hangs in the balance on the insolvency continent's perpetuation of a ponzi by a set of insolvent nations, backstopping their insolvent banks. If this is not enough reason to buy XLF nothing is. Yet while CNBC's surprise at this finding is to be expected, one person whom we did not expect to be caught offguard by this was one of the only economists out there worth listening to: Ken Rogoff. Here is what he said: "Shin’s paper has orders of magnitude that I didn’t know"...Rogoff said it’s hard to calculate the impact that the unfolding European banking crisis could have on the United States. “If we saw a meltdown, it’s hard to be too hyperbolic about how grave the effects would be” he said. Actually not that hard - complete collapse sounds about right. Which is why the central banks will never let Europe fail - first they will print, then they will print, and lastly they will print some more. But we all knew that. Although the take home is the finally the talking heads who claim that financial decoupling is here will shut up once and for all.

The Matrix of Socialism

Eric De Groot at Eric De Groot - 2 hours ago

A fourth year of declining tax revenue meant deep spending cuts and, in many states, a rethinking of the role of government and the scope of the services it should provide. Unplugging society from the matrix of socialism is a lot easier said than done. State and federal employees, like those of Greece, Spain, Italy, and so on, will fight to protect what they know, understand, and feel is owed to... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

  more »

To Make Forecasts About Free Markets Is Very Difficult. And Today You Have A Manipulated Market.

Admin at Marc Faber Blog - 2 hours ago

To make forecasts about free markets is very difficult. The free market and that perfectly functioning market is a market where no market participant has dominated the market but today you have a manipulated market. It is the governments which intervene continuously to influence the price of money, in other words interest rates and fiscal policies. - *in MoneyControl* *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

  more »

Looking At An Entry Point In Markets Like India Over The Next 6 To 9 Months

Admin at Marc Faber Blog - 2 hours ago

That’s why when I read all the strategies that say - I think we should invest in the US, I say maybe that’s correct for the next three months or so but I would rather be looking at an entry point in markets like India over the next six to nine months. - *in MoneyControl* *Related, iShares MSCI Emerging Markets Index ETF (EEM), WisdomTree India Earnings Fund (ETF) (EPI) * *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

  more »

Eurozone Crisis: They Will Do Something To Make Us Feel Better

Admin at Jim Rogers Blog - 2 hours ago

I suspect (German Chancellor Angela Merkel) and that crowd will do something to make us feel better. - *earlier today on CNBC* *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.*

Biggest Silver Surge In Over 3 Years

Presented with little comment - Silver - having (like Gold) retraced all of last week's losses is seeing a record-breaking move today. This jump of 6.6% is the largest since 11/24/08 - over three years ago.

Risk Leaking Off As Europe Closes

European credit and equity markets rallied today but there was considerable relative underperformance by the former (especially in financials). Sovereign spreads leaked wider all day and started to lose it more rapidly into the close. It looks like Senior versus Subordinated decompression trades were placed in the European afternoon (a bearish trade ion financials) and even with the ECB in the market, BTPs closed above 500bps over Bunds (just shy of 7% all-in yields). Broad risk assets also lost ground as Europe's bid eased off as Oil eased back off its best levels and FX carry came off its highs of the day. US Treasuries are rallying after trying to converge earlier and 2s10s30s is also dragging risk lower for now.

US Re-escalates, Responds To Iran Warning

Earlier today, we reported of Iran's threat to further escalate if the US were to bring back its aircraft carrier (either CVN74 or any other one) back into the Persian Gulf. Now, the US has just decided to call Iran's bluff. From Bloomberg:

• CARRIER DEPLOYMENTS IN GULF WILL CONTINUE, U.S. SAYS
• PENTAGON SAYS NAVY TRANSITS THROUGH STRAIT OF HORMUZ ARE NECESSARY TO SUPPLY U.S. MISSIONS IN GULF REGION
• U.S. MILITARY MOVEMENTS IN PERSIAN GULF `REGULARLY SCHEDULED'
• U.S. RESPONDS TO IRAN WARNING AGAINST FUTURE CARRIER MOVES

And so the fully-armed grenade is now back in Iran's court.

Charting The Extinction Of American Disposable Income

It was the best of times, it was the worst of times. Given today's excitement at a rallying equity market, we are already hearing chatter on raising GDP estimates even though macro data is benefiting from standard seasonal improvements. However, while these good times are rolling for some (who, we are not sure), Sean Corrigan (of Diapason Commodities) points to our real disposable income. The man on the street's spend-ability has seen the worst five years' growth in half a century. For four decades, US real per capita disposable income has risen at ~20% a decade. For the average working man, that is a doubling of disposable income in a typical working life. The last 5 1/2 years, however, have seen no change whatsoever - the worst performance in at least half a century.

Manufacturing ISM Beats Expectations, Highest Since June

The American ability to delay the lag with the rest of the world persists for one more month, as December's ISM printed just better than expectations, coming in at 53.9, on expectations of 53.5, and compared to 52.7 in November. This was the best manufacturing data since June. As it turns out in December virtually every single component of US manufacturing improved, even as Customer Inventories somehow declined contrary to what retailer data has been indicating, and even as Europe went further into its recessionary shell following the 5th consecutive month of PMI contraction, and China saw a dramatic drop in the trade balance. But why bother to debate the numbers: here they are: New Orders rose from 56.7 to 57.6, Employment rose from 56.5 to 59.9, and so on. From the PMI: "The PMI registered 53.9 percent, an increase of 1.2 percentage points from November's reading of 52.7 percent, indicating expansion in the manufacturing sector for the 29th consecutive month. The New Orders Index increased 0.9 percentage point from November to 57.6 percent, reflecting the third consecutive month of growth after three months of contraction. Prices of raw materials continued to decrease for the third consecutive month, with the Prices Index registering 47.5 percent, which is 2.5 percentage points higher than the November reading of 45 percent. Manufacturing is finishing out the year on a positive note, with new orders, production and employment all growing in December at faster rates than in November, and with an optimistic view toward the beginning of 2012 as reflected by the panel in this month's survey." Oh well - the banks will need to get even more apocalyptic with their forecasts if they want the Fed to start printing as +250 DJIA up days will not help the cause.

Commodities Inverse Plunge As Treasuries Catch Up To Stocks

We are 30 minutes into the day session. Do you know where your sanity is? Silver and Oil (over $102) are up 3.5% from last week's close, Copper and Gold up 1.5-2% and the USD down 0.7%. The USD weakness, along with Treasury selling, is enough to juice stocks up nicely as they catch up to yesterday's European extravaganza. European sovereigns are giving back a lot of their gains from yesterday so far but ECB buying chatter is supporting BTPs at the moment. US financials are up 2.8% as the Treasury-Stock disconnect of last week converges rapidly.

And Now The Hangover: Retailers Face Record Returns Of Holiday Gifts

We have heard more than enough about both the "resiliency" of holiday spending and the resurgence of the US consumer as shopping supposedly surprised in the past several months (on nothing else than as Bridgewater's Prince indicated was merely the exhaustion of consumer savings). Now we get the confirmation that this was nothing but a prelude to a tsunami of retail returns as "shoppers" push to complete the other side of the transaction, whereby retailers part with the just received cash, leaving them with even greater inventories, and even thinner margins. As Reuters reports, "With a Christmas season that has seen record e-commerce sales coming to a close, returns should hit an all-time high on Tuesday for United Parcel Service." It is only fair that one record nets off another record. And with it goes away the myth that US consumers had found some mysterious and mystical money growing tree. Until Ben boards Commanche One and starts jettisoning the money sacks, this simply won't happen.

The Bluffing Resumes: Greece Warns Will Leave Eurozone If Second Bailout Not Secured

First Morgan Stanley issued the first market forecast of 2012 before the market has even opened, and now it is Greece's turn to threaten fire and brimstone (aka to leave the Eurozone, but according to UBS and everyone else in the status quo the two are synonymous) within hours of the New Year, if the second bailout, which as far as we recall was arranged back in July 2011, is not secured. Quote the BBC: ""The bailout agreement needs to be signed otherwise we will be out of the markets, out of the euro," spokesman Pantelis Kapsis told Skai TV." And cue several million furious Germans and tomorrow's German newspaper headlines telling Greece bon voyage on its own as it commences braving the treacherous waters of hyperinflation. In other news, the sequel to Catch 22 is in the works, and explains how Greek tax collectors (i.e., people who collect those all important taxes so very needed for government revenues) continues to strike. In it we also learn that the first strike of the year in Athens is already in place, with Greek doctors saying they will treat only emergency cases until Thursday, in protest at changes to healthcare provision. All in all, the complete collapse of the Greek debt slave society is proceeding just as planned.

Please consider making a small donation, to help cover some of the labor and cost for this blog.

Thank You

I'm PayPal Verified