from The Economic Collapse Blog:
The warning signs are all around us. All we have to do is open up our eyes and look at them. Almost every single day there are more prominent voices in the financial world telling us that a massive economic crisis is coming and that we need to prepare for the worst. On Wednesday, it was the World Bank itself that issued a very chilling warning. In an absolutely startling report, the World Bank revised GDP growth estimates for 2012 downward very sharply, warned that Europe could be on the verge of a devastating financial crisis, and declared that the rest of the world better “prepare for the worst.” You would expect to hear this kind of thing on The Economic Collapse Blog, but this is not the kind of language that you would normally expect to hear from the stuffed suits at the World Bank. Obviously things have gotten bad enough that nobody is even really trying to deny it anymore. Andrew Burns, the lead author of the report, said that if the sovereign debt crisis gets even worse we could be looking at an economic crisis that could be even worse than the last one: “An escalation of the crisis would spare no-one. Developed- and developing-country growth rates could fall by as much or more than in 2008/09.” Burns also stated that the “importance of contingency planning cannot be stressed enough.” In other words, Burns is saying that it is time to prepare for the worst. So are you ready?
But of course it isn’t just the World Bank that is warning about these things. The chorus of voices that is warning about the next great financial crisis just seems to grow by the day.
Read More @ TheEconomicCollapseBlog.com
The warning signs are all around us. All we have to do is open up our eyes and look at them. Almost every single day there are more prominent voices in the financial world telling us that a massive economic crisis is coming and that we need to prepare for the worst. On Wednesday, it was the World Bank itself that issued a very chilling warning. In an absolutely startling report, the World Bank revised GDP growth estimates for 2012 downward very sharply, warned that Europe could be on the verge of a devastating financial crisis, and declared that the rest of the world better “prepare for the worst.” You would expect to hear this kind of thing on The Economic Collapse Blog, but this is not the kind of language that you would normally expect to hear from the stuffed suits at the World Bank. Obviously things have gotten bad enough that nobody is even really trying to deny it anymore. Andrew Burns, the lead author of the report, said that if the sovereign debt crisis gets even worse we could be looking at an economic crisis that could be even worse than the last one: “An escalation of the crisis would spare no-one. Developed- and developing-country growth rates could fall by as much or more than in 2008/09.” Burns also stated that the “importance of contingency planning cannot be stressed enough.” In other words, Burns is saying that it is time to prepare for the worst. So are you ready?
But of course it isn’t just the World Bank that is warning about these things. The chorus of voices that is warning about the next great financial crisis just seems to grow by the day.
Read More @ TheEconomicCollapseBlog.com
Must Read...
My Dear Friends,
2011 was a year of confusion among financial leadership, many conversations, much speculation, spectacular MOPE and no action. Europe almost talked the euro to death while the media carefully avoided the epic debt of Great Britain and the insolvency of US States.
2012 is going to be year of action and consequences. Today action by the IMF simply throws more money at the problem, which is treating symptoms. The question now is where are these funds coming from? The US Fed has already provided more than $600 billion via swaps with the ECB, who in turn lend this money to the Euro banks, who in turn buy Euro debt. It is international debt monetization, a thinly bearded global QE3. You can be certain that the creation of funds for the IMF’s eventual one trillion in financial aid will be created as thinly bearded global QE3.
Before 2012 is out, political pressures in the US will bring the Fed out of the closet and full-blown QE3 will actively be pursued in daylight.
Rather than a collapsing euro there will be a collapsing dollar. The economic effect of QE3 will bring on extremely complex factors of monetary science. A contraction in general business activity will be contrary to what will be anticipated.
2012 will be the year of actions and consequences with a range in the price of gold, in my opinion, between $1700 and $2100. This is the absolute opposite of what was generally anticipated just one week ago.
Gold shares were actively depreciated by scheming hedge funds run by young bucks that have no knowledge of the extractive industry. They all will make spectacular recoveries.
Take the most recent transaction in the gold market between Eldorado and Euro Gold as a benchmark. It took place at $271 per pounce average price from inferred to proven. Many of these companies are selling at a discount to wholesale value and all the campaigning by the hedge fund shorts cannot hold the price at such a discount to wholesale value. The unsolicited calls of the concerned stockholder hedge fund trader should be viewed against the size of their put positions before using their hedge long to hammer the market in order to profit from their short via put positions taken listed and as OTC derivatives. These destroyers have no idea of what building entails.
I spent a 12-hour day traveling to New York City meeting with six different major investment funds and firms specializing in precious metals shares. In the last four months I have met with over 100 professional money managers in precious metals and have no intention of letting up slack in my activities. We discussed the economics of gold and gold shares. I can guarantee you that the change, when it comes for bullied and forced lower price gold shares, now in many cases below wholesale value of the entities, gold resources will move violently to the upside.
The cash and willingness to act is there. All that is needed is a catalyst and the upside move will be as or more vicious than the calculated manipulation was by young destroyers to the downside.
2012 will be the year of consequences for actions, more so than just in the price of gold and the unexpected dollar weakness of the 2nd half. It will be payback time.
Respectfully,
Jim
Hi Jim,
Consumer credit was up a whopping 10% in November to the tune of $20 Billion—the biggest monthly gain in ten years!
Some economists interpret that as a sign of growing confidence in the economy!
It seems more likely that when consumers run out of cash, they follow Uncle Sam’s example.
Best regards,
CIGA Black Swan
Stat of the Week: Consumer Credit Up 9.9%
It’s the largest surge since the post-9/11 recovery month of November 2001 Jan 18, 2012, 1:34 pm EST
By Louis Navellier, Editor, Blue Chip Growth
Last Monday, the Federal Reserve announced that November consumer credit surged 9.9%, the fastest monthly increase in 10 years — since the post-9/11 recovery month of November 2001. Credit-card debt rose 8.5%, the biggest monthly jump since 2008, while nonrevolving debt (such as auto loans) rose 10.7%.
This surge in consumer credit should contribute to a rise in fourth-quarter GDP growth since consumer spending represents about 70% of GDP growth. Some economists have now revised their fourth-quarter GDP estimate to an annual pace of 3.4% in the wake of the Fed’s report. In addition, vehicle sales rose 1.5% in December and 8.8% in 2011, while overall retail sales increased by a very healthy 6.5% in 2011.
The sentiment indexes are also turning up. On Tuesday, the National Federation of Independent Business reported that small-business optimism rose to 93.8 in December, up from 92.0 in November. That index has now risen 5.7 points in the last four months. Another good sign is that the Fed’s latest Beige Book survey reported that economic conditions improved in all 12 Fed districts during the last six weeks of 2011. And then, on Friday, the University of Michigan/Reuters’ January preliminary consumer sentiment index rose to 74, up from 69.9 in December — a point higher than economists’ consensus estimate of 73.
More…
Jim Sinclair’s Commentary
One upsmanship!
A $2M Bet on Gold
Jan 18, 2012
The Grandich Letter’s Peter Grandich argues that gold will continue to rise based on lower value of global currencies.
Click here to watch the video…
By Greg Hunter’s USAWatchdog.com
Dear CIGAs,
In a new poll, out yesterday, 7 out of 10 Republicans and right leaning independent voters believe Mitt Romney will be the GOP nominee for President. (Click here for that poll.) Does that mean it’s over for Congressman Ron Paul? I think it is safe to say it is probably a long shot he will be the Republican nominee, but what about a third party run? Can Ron Paul win as a third party candidate? I say that is much less of a long shot, and here’s why.
Let me first say, Dr. Paul has repeatedly said that he has no interest in running as a third party candidate. I do not know (or have talked to) anyone in his campaign. This is my objective analysis and nothing more. Ron Paul as a third party candidate would be much different than the third party candidates of the past. Conservative presidential candidate Ross Perot of the 1992 and 1996 elections predominantly took votes away from the Republican candidates. In 1992, national exit polls had Perot splitting the Republican and Democrat vote equally, but it was not split equally in every state. (Click here for more on this.) A president is voted in by winning each state’s Electoral College votes. It’s a winner take all game, so every state gives a certain number to the winner of each state. Also, Perot spent millions hammering Bush in the 1992 primaries; so, Perot mostly had a negative effect on the Republicans. The ultra-liberal Ralph Nader’s third party campaign in 2000 took votes away from Al Gore, the Democrat. More than 97,000 voted for Nader in Florida alone. Gore would have easily won the election and Florida if Nader would have not run.
Then there is Ron Paul. He would, no doubt, run on a Libertarian type ticket. Paul would take votes from Republicans that think Romney is not conservative enough. After all, he has, so far, come in second in the caucuses and primaries, but that is just with the GOP. He would take a large percentage of the 40% of people who call themselves “Independent” voters. Paul also does well with young voters. In Iowa and New Hampshire, nearly half of all GOP voters under 30 voted for Dr. Paul. He would probably do well with Democrats in the same group. He may be booed in South Carolina by the old guard for his anti-war policies, but the young, who would have to fight the wars, think his message is on target.
More…
While
the news that Mitt Romney has joined Warren Buffet in the "my
secretary makes more than me" 15% tax club has come and gone, even as
America appears largely confused or dismissive that Romney, at least on
paper appears to be precisely the puppet that Wall Street wants
put in charge, we are not so sure how it will react to discovering
that in addition to all of the above, Romney also holds a substantial
of his assets deep offshore, in the much maligned recently Cayman
Islands. As a reminder, it has long been Obama's "tax-policy" to force
repatriation of virtually all individual tax holdings held abroad, both
legally and illegally, much to the detrimental collapse in the UBS
business model. Yet apparently when it comes to potential future
presidents, loopholes are quite welcome. Especially when as ABC
reports, "the offshore accounts have provided him -- and Bain
-- with other potential financial benefits, such as higher management
fees and greater foreign interest, all at the expense of the U.S.
Treasury." As a reminder: "Rebecca J. Wilkins, a tax
policy expert with Citizens for Tax Justice, said the federal
government loses an estimated $100 billion a year because of tax
havens." But who needs taxes when America can just print all
the money it will need to fund its deficit in perpetuity. Just ask the
Neo-Keynesians. Perhaps all these are questions that the candidate that
so hard is trying to channel Ronald Reagan and so far failing, can
finally address once and for all, before he moves into one of his
patented Obama bashing subject changing routing.
Dear CIGAs,
In a new poll, out yesterday, 7 out of 10 Republicans and right leaning independent voters believe Mitt Romney will be the GOP nominee for President. (Click here for that poll.) Does that mean it’s over for Congressman Ron Paul? I think it is safe to say it is probably a long shot he will be the Republican nominee, but what about a third party run? Can Ron Paul win as a third party candidate? I say that is much less of a long shot, and here’s why.
Let me first say, Dr. Paul has repeatedly said that he has no interest in running as a third party candidate. I do not know (or have talked to) anyone in his campaign. This is my objective analysis and nothing more. Ron Paul as a third party candidate would be much different than the third party candidates of the past. Conservative presidential candidate Ross Perot of the 1992 and 1996 elections predominantly took votes away from the Republican candidates. In 1992, national exit polls had Perot splitting the Republican and Democrat vote equally, but it was not split equally in every state. (Click here for more on this.) A president is voted in by winning each state’s Electoral College votes. It’s a winner take all game, so every state gives a certain number to the winner of each state. Also, Perot spent millions hammering Bush in the 1992 primaries; so, Perot mostly had a negative effect on the Republicans. The ultra-liberal Ralph Nader’s third party campaign in 2000 took votes away from Al Gore, the Democrat. More than 97,000 voted for Nader in Florida alone. Gore would have easily won the election and Florida if Nader would have not run.
Then there is Ron Paul. He would, no doubt, run on a Libertarian type ticket. Paul would take votes from Republicans that think Romney is not conservative enough. After all, he has, so far, come in second in the caucuses and primaries, but that is just with the GOP. He would take a large percentage of the 40% of people who call themselves “Independent” voters. Paul also does well with young voters. In Iowa and New Hampshire, nearly half of all GOP voters under 30 voted for Dr. Paul. He would probably do well with Democrats in the same group. He may be booed in South Carolina by the old guard for his anti-war policies, but the young, who would have to fight the wars, think his message is on target.
More…
On Mitt Romney's Millions In Cayman Island Offshore Tax Havens
While
the news that Mitt Romney has joined Warren Buffet in the "my
secretary makes more than me" 15% tax club has come and gone, even as
America appears largely confused or dismissive that Romney, at least on
paper appears to be precisely the puppet that Wall Street wants
put in charge, we are not so sure how it will react to discovering
that in addition to all of the above, Romney also holds a substantial
of his assets deep offshore, in the much maligned recently Cayman
Islands. As a reminder, it has long been Obama's "tax-policy" to force
repatriation of virtually all individual tax holdings held abroad, both
legally and illegally, much to the detrimental collapse in the UBS
business model. Yet apparently when it comes to potential future
presidents, loopholes are quite welcome. Especially when as ABC
reports, "the offshore accounts have provided him -- and Bain
-- with other potential financial benefits, such as higher management
fees and greater foreign interest, all at the expense of the U.S.
Treasury." As a reminder: "Rebecca J. Wilkins, a tax
policy expert with Citizens for Tax Justice, said the federal
government loses an estimated $100 billion a year because of tax
havens." But who needs taxes when America can just print all
the money it will need to fund its deficit in perpetuity. Just ask the
Neo-Keynesians. Perhaps all these are questions that the candidate that
so hard is trying to channel Ronald Reagan and so far failing, can
finally address once and for all, before he moves into one of his
patented Obama bashing subject changing routing.Watch Out For 2013
There are 40 elections in 2012. Everybody is going to do their best to get
us through the election. Watch out for 2013. - *in Economic 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.*
World War III Will Occur In The Next 5 Years
World War III will occur in the next five years. That means the Middle East
will blow up. New regimes there will be less Western-friendly. The West has
also figured out it can't contain China, which is rising rapidly and will
have more military and naval power in Southeast Asia. The only way for the
West to contain China is to control the oil tap in the Middle East. - *in
Israel National News*
Related, United States Oil Fund (USO), iShares MSCI Emerging Markets Index
ETF (EEM)
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and future... more »
Gold clears $1650; looks firm
Gold has now managed two consecutive closes above chart resistance near
$1650 and is looking firm at this hour. It has a very good shot at testing
resistance at $1675- $1680 where it should experience some fairly heavy
selling. If the bulls can break through that line, we should see a handle
of "17" in front of the metal.
Weakness in the Dollar is aiding the progress of the metal higher.
Downside support comes in near $1640 - $1635 initially followed by $1620.
Silver is benefitting from risk trades being put back on as it and copper
are both seeing decent inflows of investment money... more »
Penetrating Insights On Why The Market Feels Like A Colonoscopy
Amid the best start of the year for the S&P 500 since 1987,
Nic Colas of ConvergEx offers some deep thoughts on how behavioral
finance concepts can help us understand the dichotomy between last
year's derisking and this year's rerisking in terms of market
participant psychology. Between delving into whether a short-sharp or
long-slow colonoscopy is 'preferable' Nic reflects (antithetically) on 10 bullish perspectives
for the current rally and how the human mind (which still makes up
maybe 50% of cross-asset class trading if less in stocks) processes
discomfort in very different ways. Critically, while it sounds
counter-intuitive to him (and us), focusing on the pain of recent volatility is actually more conducive to investors' ability to get back on the horse
especially when the acute pain is ended so abruptly (intervention). As
studeis have found, "subjects who actually focus on a painful experience
while it is happening are more willing to immediately undergo further
pain than those who performed some distracting task"Kodak Files For Chapter 11 Bankruptcy
Headlines for now but the inevitable has become well 'evitable' as EK goes BK...headlines via Bloomberg:- *KODAK FILES FOR BANKRUPTCY IN NEW YORK
- *EASTMAN KODAK SECURES $950M IN DEBTOR-IN-POSSESSION FINANCING
- *KODAK TO MONETIZE NON-STRATEGIC INTELLECTUAL PROPERTY :EK US
- *EASTMAN KODAK SAYS NON-U.S. UNITS NOT INCLUDED IN U.S. FILING
- *KODAK SAYS CHAPTER 11 A `NECESSARY STEP', `RIGHT THING TO DO'
- *KODAK EXPECTS TO PAY EMPLOYEE WAGES-BENEFITS :EK US
Bank Of America Beats EPS Estimates, Misses Net Of One Time Items, Reports Could Be Underaccrued By Up To $5 Billion
The just reported Bank of America top and bottom line numbers were better than expected, coming in at $24.89 billion compared to estimates of $24.5 billion, and EPS of $0.18 vs $0.15. The actual Net Income number number was $2.0 billion and $2.7 billion pre tax. So far so good. But a quick skim through the presentation (attached below), indicates that the $0.18 number may be grossly inflated. Because when one excludes the various selected one time items highlighted in the quarter, which are as follows: Gain on sale of CCB shares-$2.9; Gains on exchanges of trust preferred securities - $1.2; Gains on sales of debt securities - $1.2; Representations and warranties provision - ($0.3); DVA on trading liabilities- ($0.5); Goodwill impairment - ($0.6); Fair value adjustment on structured liabilities - ($0.8); Mortgage-related litigation expense ($1.5), all of which it appears are part of the pretax number, the final EPS comes in at a much less impressive $1.3 billion pre tax, which at the company's indicated tax rate, would have been $1.0 billion after tax, or $0.10 EPS, a notable miss. Which likely means that the Revenue "beat" on an apples to apples basis would also have to be pro forma'ing a bunch of items, and likely would be a miss. But for that we will need to go through the several hundred page 10-Q, something which management is hoping the machines which will send its stock much higher in the pre-market session, will never do. Another notable item is that for the first time in a long time, the company's average deposit balances declined by 1.2% in Q4 from Q3, from $422.3 billion to $417.1 billion (as the rate on deposits fell from 0.25% to 0.23%). Not a good trend, but certainly to be expected following the snafu with the company's electronic banking website last quarter. Also troubling is that in Q4, the company's Home Equity Non-Performing Assets increase for the first time in years, from $2.4 billion to $2.5 billion: it seems the improvement in housing has plateaued. Finally, and most troubling, is that BAC reported that "Estimated range of possible loss related to non-GSE representations and warranties exposure could be up to $5B over existing accruals at December 31, 2011." The reason: a surge in New Claims in Q4 "primarily related to repurchase requests received from trustees on private-label securitization transactions not included in the BNY Mellon settlement." Which means another $5 billion out of Net Income due to underreserving. Because how much did BAC provision for Reps and Warranties in Q4? Why a 'whopping' $263 million. And how much is the potential full notional value of underreserved contingent liabilities? Why $755 billion only.Frontrunning: January 19
- The Fed's HFT price manipulation code stolen? U.S. Charges Programmer With Stealing Code (Reuters)
- One million homeowners may get mortgage writedowns: U.S. (Reuters)
- In MF Global, JPMorgan again at center of a financial failure (Reuters)
- China's Money Rates Slump After PBOC Injects Money (Reuters)
- Athens closes in on bondholder pact (FT) - or not
- Hedge Funds May Sue Greece If Loss Forced (NYT)
- China Said to Weigh Easing Constraints on Banks as Growth Slows (Bloomberg) - But wasn't a rate cut already priced in on Monday?
- Obama Under Attack Over Keystone Rejection (FT)
- Chinese Economy Heads for Soft Landing in 2012 (China Daily) - don't really expect "China Daily" to tell you otherwise
- Brazil Cuts Interest Rates Further to 10.5% (FT)
- India to Launch $35bn of Public Investments (FT)
Gold Rises for Fourth Day - IMF $500 Billion Hopes Create Concerns
The duty hike in India has decreased gold prices by 1% in Mumbai as the rupee gained 0.5% against the dollar. Some jewellers think the recent duty may slow down demand and may result in a decrease in imports from the official channels of about thirty banks. The increased tax may also lead to a tertiary market where people trade amongst themselves and not through dealers. Traders still do not see the hike dampening the demand for the yellow metal. India is the world’s largest importer of gold and its households have the largest holdings of the metal, according to data from the World Gold Council, although Chinese households appear to be catching up in their purchases of gold.Economic Data Flood Summary: Claims, Housing Noisy, CPI May Return "Disinflation" Talk At FOMC Meeting
First, Initial Claims - the new yoyo.Initial claims drop from revised 402K (as expected) in last week, to 352K this week, 50K swing in one week, on expectations of 384K. All in the seasonal adjustment, which tries to compensate for the 124K drop in Non Seasonally Adjusted claims. Fired bankers and everyone else no longer registers to the B(L)S. This number was below the lowest Wall Street estimate of 363K. Continuing claims: 3.432MM, below expectations of 3.590MM, previous revised naturally higher from 3.628MM to 3.647MM. The reason? People on EUC and Extended benefits in last week: +105,000. More and more people move away from 6 month support to extended 99 week cliff. Housing Starts and Permits: Largely irrelevant, as crawling at a bottom, but starts at 657K, below expectations of 680K, and down from 685K previously; Permits in line with expectations at 679K, down from 680K before. Fed “clearly concerned with the return of disinflation;” watch for “talk of further central bank action to support the economy” at next week’s FOMC meeting, says Brusuelas
Rick Perry Out
And then there were four.- RICK PERRY MAY DROP OUT OF PRESIDENTIAL RACE TODAY, CNN SAYS
Of course, everyone is now expecting tonight's impromptu ABC "Career ending" interview with Mrs. ex-Gingrich, which may make it a trio. That may happen even despite Perry's imminent enrosement.
Sliding Greek Bond Reality Challenges "Debt Deal" Hopium
We
have been rather vociferous in our table-pounding that even if a Greek
PSI deal is achieved (in reality as opposed to what is claimed by
headlines only to fall apart a month later), then Greece remains mired
in an unsustainable situation that will likely mean further
restructuring in the future. JPMorgan's Michael Cembalest agrees and
notes that Debt/GDP will remain well above 100% post-deal but is more
concerned at the implications (just as we noted earlier
in the week) of the process itself including ECB preferred credit
status, retroactive CACs (law changes), and CDS trigger aversions. In
his words, the debt exchange is a bit of a farce and we reiterate our note from a few days ago - if this deal is so close, why is the 1Y GGB (AUG 2012) price trading -8.75% at EUR 28.75 (or 466% yield)
and while longer-dated prices are rallying (maybe bear flattener
unwinds), the moves are de minimus (-17bps today on a yield of 3353bps?)
as selling pressure is clearly in the short-end not being rolled into
the long-end as some surmise.Despite Revision, Philly Fed Misses Expectations As Outlook Nears Cyclical Peak
As usual benchmark revisions have saved the day for the headlines on the Philly Fed print. Expectations for the data was a 10.3 and it came at 7.3, a definitive miss to expectations,
but of course thanks to revisions this rise to 7.3 (from 6.8 revised)
is heralded (in a short-lived manner) as evidence of improvement. Under
the covers though, things aren't so rosy. New Orders and Shipments
dropped notably, number of employees was merely flat and while
restocking seems to be occurring modestly (inventories improved) they
still printed negative. On the six-months ahead outlook, expectations
are for lower prices received but everything else reflects the
hope-infused perception of steady growth - especially the notable rise
in capex. Initial market reaction is negative to the miss.
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