On The Verge Of The "Ultimate Death Cross"

From Albert Edwards: "I want to share with you news that the S&P is on the verge of an “ultimate” death cross (see chart below). This is where a 50-month moving average (currently at 1152) falls below the 200-month average (currently 1145). The Trend blogspot (link) tries to make some sense of this very rare event. They note that the averages came close to crossing in 1978 towards the end of the 1965-82 secular bear market, but just held. By contrast Japan suffered a monthly death cross in 1998 and 14 years later we are still in the firm embrace of the bear. Watch this space."

Big Retail Sales Miss In Longest Collapse Streak Since 2008 Recession, Confirms US Consumer Zombification

Today's advance retail sales for June was simply abysmal, printing at -0.5% on the headline, and -0.4% ex autos. Expectations were for a print of +0.2% on the headline and unchanged less autos. Gas was not the culprit either as ex autos and gas the miss was -0.2%, on expectations of a +0.2% print. This was the third consecutive drop in a row: the longest since December 2008, when the US economy was flat out imploding. Expect furious Q2 GDP revisions imminently once the sellside community plugs this number into bean counter abaci. Goldman will likely cut its recently downgraded Q2 GDP from 1.3% to 1.1% or even sub 1.0%, which is essentially stall speed. Finally, today's number confirms our biggest worry: the spike in May consumer credit was not for discretionary purchases: it was for staples. Do the math. Finally, building material & garden eq. & supplies dealers down 1.6%, the biggest sequential drop aside from gas stations. At least housing has "bottomed." Of course, EURUSD spiking on expectations of more imminent NEW QE.

IMF Says Japan And Spain Are Done, "Debt Ratio Will Never Stabilize"

The IMF believes that advanced economy deficits will decline by about 0.75 percentage points of GDP this year which 'strikes a compromise between restoring fiscal sustainability and supporting growth". However, continued focus on nominal deficit targets runs the risk of compelling excessive fiscal tightening if growth weakens. In addition, there is a risk in the United States of political gridlock that puts fiscal policy on autopilot and results in a sharp and sudden decline in deficits—the “fiscal cliff.” What is more troubling is the significant upward revision to all of the peripheral European nations (with Greece now at 171% Debt/GDP in 2013 versus 160.9% forecast only 3 months ago). While the average debt-to-GDP ratio among advanced economies is projected to continue to rise over the next two years, surpassing 110 percent of GDP on average in 2013, debt ratios will by then have peaked in several advanced economies - though rather explosively they do not see debt ratios for Spain and Japan stabilizing.

IMF 'Bath-Salts' Everything As "Global Recovery Showing Signs Of Further Weakness"

The IMF just took a bucket of bath-salts to world economies as it slashes growth expectations for every major global economy (and emerging nations suffer too). Noting that Q1's upward surprise was "partly due to temporary factors", they reduce 2012's overall global growth to 3.5% adding that developments during the second quarter have been worse. Job creation has been hampered - with unemployment high in many advanced economies, especially among the young in the euro area periphery; but incoming data from the US also suggests less robust growth than forecast previously. While distortions to seasonal adjustment and payback from the unusually mild winter explain some of the softening, there also seems to be an underlying loss of momentum. Growth momentum has also slowed in various emerging market economies, notably Brazil, China, and India. This partly reflects a weaker external environment, but domestic demand has also decelerated sharply in response to capacity constraints. The baseline projections in this WEO Update incorporate weaker growth through much of the second half of 2012 in both advanced and key emerging market economies, reflecting the setbacks to the global recovery. Downside risks to this weaker global outlook continue to loom large. The most immediate risk is still that delayed or insufficient policy action will further escalate the euro area crisis. How long before those Q4 hockey-stick earnings forecasts get reduced?

Putting The Corn Harvest In Drought And Flood Context

By now, everyone is aware of the incredible increase in the price of corn thanks in large part to the almost unprecedented drought levels across the country. Up another 5% today at over $777, the 30-day run has seen prices up over 41%. However, while this is an unbelievable move to record high prices, on a trailing 12-month basis, this price move has merely mean-reverted to the average gain of the last 10 years. From 2002-2011, the average price rise from July-to-July was around $55 and the current July-to-July price rise is only around $75. While things do not look set to improve any time soon for the weather, some longer-term context for Corn may well be worth considering. Furthermore, as Goldman notes the lack of rainfall and extreme warmth has shifted corn yields to the second-largest yield-loss since 1950 (noting that the current 24% rise in the Ag complex is still well below the 35% rise in the 'drought' summer of 1988) and the implications for global inflation are gravely concerning as hopes of China stimulus are impaired.

US Ship Mistakenly Fires On Friendly Boat Off Dubai, As Russia Condemns Saudi Treatment Of Religious Protesters

Those trigger happy US sailors are causing some diplomatic headaches again for Hillary Clinton who this time has no Syrian anti-aircraft missiles to blame, by firing on a friendly ship, killing one and injuring three, off the coast of Dubai. Per the AP: "A U.S. Consulate official in Dubai says an American vessel has fired on a boat off the coast of the United Arab Emirates, killing one person and injuring three. The official gave no further details, but it appears the boat could have been mistaken as a threat in Gulf waters not far from Iran's maritime boundaries. An Emirati rescue official confirmed the casualty toll. The officials spoke on condition of anonymity because of the sensitivity of the incident between the two allies. The U.S. Navy's 5th Fleet, which is based in Bahrain, said it was investigating the Monday shooting. The U.S. Embassy in Abu Dhabi had no immediate comment." So far so bad, but where it gets even worse is that over the weekend, Russia finally decided to make its own voice heard in the middle east, and after over a year of the west condemning Syrian "eradication" of its own insurgents and keeping Russia on the defensive, Russia has decided to shine a light on none other than America's favorite regional ally: Saudi Arabia, which as we reported recently, has once again taken to quelling religious protests in Qatif and other eastern cities. Apparently Russia has had enough of this one-sided reporting of regional "insurgencies."

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The Markets Are Very Volatile And It Takes A Lot Of Courage To Be Short

Admin at Marc Faber Blog - 16 minutes ago

The markets are very volatile and it takes a lot of courage to be short. I don't want to be short on copper because copper can, like other markets, be manipulated because there are not that many players in the copper market, and so we could see a rally in copper prices, we could see a rally in gold prices and so forth and so on. - *in Yahoo Finance* Related: Copper Futures, Freeport McMoran (FCX) *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

 

This Major Fed Move Is About To Create An Explosion In Gold

Eric De Groot at Eric De Groot - 3 hours ago

Liquidity is the only tool left in the policy bag that can combat the forces of deflation. How long can the Fed stare down market forces before the vicious, self-reinforcing cycle of deflation takes hold and cannot be reversed? If Pento is right in that “I believe the cyclical period of deflation that I warned about several months ago is now close to an end.” the invisible hand's net long... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

 

The World Has A Serious Food Problem

Admin at Jim Rogers Blog - 4 hours ago

The world has got a serious food problem. The only real way to solve it is to draw more people back to agriculture. - *in Money Morning * Related: PowerShares DB Agriculture Fund (NYSE:DBA), ELEMENTS Rogers Intl Commodity Index - Agriculture Total Return ETN (NYSE:RJA), John Deere (DE), Potash (POT) *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.* 

 

Video: Chinese Slowdown

Admin at Marc Faber Blog - 4 hours ago

Latest video interview, CNBC. Related: iShares MSCI Emerging Markets Indx (ETF), iShares FTSE/Xinhua China 25 Index (ETF), SPDR SP 500 ETF (NYSE:SPY), iShares MSCI Brazil Index (ETF); *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.*

Here Is Why The Fed Will NOT Cut IOER, In Bernanke And Goldman's Own Words

From Goldman: "Cutting the IOER rate down to zero could be harmful to market institutions. Chairman Bernanke made this argument himself in Q&A at the July 2010 Humphrey-Hawkins testimony: “The rationale for not going all the way to zero has been that we want the short-term money markets like the Federal funds market to continue to function in a reasonable way, because if rates go to zero, there will be no incentive for buying and selling Federal funds overnight money in the banking system. And if that market shuts down, people don’t operate in that market, it will be more difficult to manage short-term interest rates when the Federal Reserve begins to tighten policy at some point in the future.”

This Is The Note That Has Led To A Modest, If Transitory Bounce, In The Market

The reason for the ramp in risk as attributed by various buyside desks as to what recently has become the trademark of more hope, prayer and magic from Jefferies' (yes, Jefferies is driving the market for once, who wouldathunk it) David "SPOOS" Zervos, whose latest note that the Fed will follow the ECB and cut its overnight excess reserves rate to -0.25% has picked up some traction, and is causing a modest rise in risk markets. Here is the problem: the Fed will NOT do this, and certainly will not do this for months and months as not only would it destroy the US money market, general colalteral, unsecured and virtually every other overnight market instantaneously (and not even Ben is that dumb to trade a few trillion in private sector overnight funding for 10% in the S&P), but even as Zervos says this is nothing short of a thought experiment in what may happen: "Whether it happens or not is not the point. The issue is that we are not priced for it AT ALL." Correct David: they are unprepared because it will not happen. The Fed will do much more LSAP, and even that other flow-based lunacy, NGDP targeting, before it decides to blow up overnight markets (not to mention destroy the entire Primary Dealer risk analytics system all of which is based on positive flow from Reserves). Because if the Fed telegraphs it is ending the inflows from reserves experiment started 3 years ago, we better be having 4% GDP growth. Reality check: we have 1.1% Q2 annualized GDP. Finally, that whole ECB experiment with negative Deposit Rates led to... absolutely nothing... correction: it led to yet another plunge in Spanish and Italian yields: something the Fed is quite aware of.

The Real Libor Scandal

Can a declining economy offset the impact on inflation of debt creation and its monetization, with the result that inflation falls to zero, thus making the low interest rates on government bonds positive? According to his public statements, zero inflation is not the goal of the Federal Reserve chairman. He believes that some inflation is a spur to economic growth, and he has said that his target is 2% inflation. At current bond prices, that means a continuation of negative interest rates. The latest news completes the picture of banks and central banks manipulating interest rates in order to prop up the prices of bonds and other debt instruments. We have learned that the Fed has been aware of Libor manipulation (and thus apparently supportive of it) since 2008. Thus, the circle of complicity is closed. The motives of the Fed, Bank of England, US and UK banks are aligned, their policies mutually reinforcing and beneficial. The Libor fixing is another indication of this collusion. Unless bond prices can continue to rise as new debt is issued, the era of rigged bond prices might be drawing to an end. It would seem to be only a matter of time before the bond bubble bursts.

European Bank Spreads Jump To Worst Of Year

While European and US equity and credit market seem somewhat asleep this morning (despite quite significant moves in FX, Treasury, and Commodity markets), there is some stirrings in Italian and Spanish Senior and Subordinated debt markets. No matter how much de Guindos denies-denies-denies, the fact is the market has been increasingly pricing in subordinated bank debt impairment and now senior bank debt is inching wider also after the ECB's 'suggestions' came to light this weekend. Subordinated Italian and Spanish bank debt is at its worst since mid-December and the decompression trade we suggested is moving slowly on our direction.

Goldman Cuts Its Q2 GDP Estimate Again To 1.1%, Just Above "Stall Speed"

Just as we speculated less than an hour ago, here comes Goldman with its take of retail sales and its impact on GDP: "Retail sales decline more than expected in June. We revised down our Q2 GDP tracking estimate by two tenths to +1.1%. The Empire manufacturing survey rebounded somewhat in July although the details were mixed."

QE-On As Retail Sales Disappoints

Once again the reflexive response that bad is good is occurring in risk markets. No ssoner had the dismal retail sales number printed than we are seeing Treasury yields tumble (within a basis point or two of record lows), the USD snap lower, and Gold snap higher. It seems the relatively sanguine nature of stocks this morning was the target for gold and USD's move but ince again we remind any and every dip-buyer that NEW QE can't come when everyone expects it and asset values are at least primed for a little jump (not within mult-year highs) as the deflationary threat Bernanke is primarily concerned with is clearly not evident.

The Battle Of Berlin

In what has become a typical pattern; Europe has a summit, everyone says this, that, their own variation of that and the other to appease their citizens and it is not until days later that some sort of reality begins to be released to the Press. Not only has this become the pattern but it generally comes over the weekend when the markets are not open and when no one is paying much attention. It is a purposeful scheme and useful I suppose for dampening effects and it allows the bliss to continue. In the meantime there is no ESM in place, only $65 billion left in the EFSF after Spain and Cyprus are funded and the German Constitutional Court declared over the weekend that there would be no ruling on the ESM until September 12. The Golden Rule lives on; “He that has the Gold rules.”. For those that believe in the usefulness of firewalls, which would not include me, you are now staring at bricks to build dollhouses and it is not just the flank but the center that is fully exposed and vulnerable. This is Vichy reborn and Anschluss déjà vu and the takeover of Poland just accomplished on a different battlefield. The weapon is money and not armaments and while the stench is more polite the demand for victory has not lessened.

Citigroup Q2 Earnings Summary And Presentation

Here are the key highlights from the just released Citigroup Q2 earnings:

• Net Income of $0.95 or $1.00 excluding CVA and one time loss; Exp $0.86
• Citigroup Net Income of $2.9 Billion; $3.1 Billion Excluding CVA/DVA and the Loss on Akbank;
• Citigroup Revenues of $18.6 Billion; $18.8 Billion Excluding $219 Million of CVA/DVA and the $424 Million Loss on Akbank; Exp. $19.01 Billion
• Where the bottom line beat came from: Loan Loss Reserve Release of $984 Million in Second Quarter, or 35% of pretax net income.
• Complete freeze in capital markets:
  
  • Fixed Income markets revenue plummets from $4.7B in Q1 to $2.8B in Q2 (and down 4% Y/Y from $2.9 billion)
  • Equity Markets revenue slides 39% sequentially from $776MM to $550MM, down 29% Y/Y from $776MM. It's a zombie zone out there
• Total Securities and Banking revenues slide 22%, yet Expenses decline just 4%
• And just like JPM, Americans can't wait to hand over their deposits to Citi: Citigroup Quarter-End Deposits of $914 Billion, 6% Above Prior Year Period
• This compares to total Loans of $655 billion or a $259 billion mismatch; we know that this surplus is what JPM uses as funding for its Treasury/CIO group. Does Citi also use the excess deposits to fund its internal hedge fund?

Spanish Bank Borrowings From ECB Soar By €50 Billion In June, Hit Record €337 Billion

Contrary to popular delusions, money flows in Spain are once again deteriorating rapidly, with the country's bank borrowings from the ECB soaring by €50 billion in June according to the Bank of Spain, the second highest ever, to a record €337 billion. While this is bad for Spain, it is good for Italy, which saw its June ECB borrowings rise by only €9 billion, to a record €281 billion, although well below Spain's total - something Italy, which led Spain in ECB borrowings since mid-2011 will be delighted to hear. What however, is rather curious, is that the Spanish TARGET2 net liability soared to €371 billion (-€40 billion in autonomous factors accounting for the lower total number), forcing the ongoing implicit German bailout of the periphery to accelerate to a record €729 billion as noted previously. As a result, for the first time ever, Spanish TARGET2 liabilities represented over half of total Germany TARGET2 claims. Just as we predicted several months ago, German funding of peripheral current account balances is the only "source of capital" for these countries in what is rapidly becoming the latest 'flow of funds' mercantilist scheme, one which can only sustain for so long by definition. In the meantime, now that we are in the exponential phase of the TARGET2 blow out, expect the next German update to indicate well over €2 billion per day in implicit European bailout spending.

Are Rajoy’s Broken Campaign Promises Delegitimizing His Government?

The debate on how to deal with false or misguiding campaign speech is neither new nor likely to be resolved soon, but as Europe’s economic crisis continues to deepen, and as social and political tensions rise, elemental questions of democracy once limited to seemingly distant European Union institutions are now spilling over to national governments. In the case of Spain, broken campaign promises coupled with the notion that Brussels and Berlin may have de facto hijacked the national political process are seeding the ground for an imminent political crisis. Indeed, Spanish Prime Minister Mariano Rajoy’s systematic adoption of policies that are in complete breach of the promises which took him to power only a few months ago are casting doubts on the legitimacy of his political leadership.

Frontrunning: July 16

• Looks like the troops won't be steamrolled: JPMorgan Blaming Marks On Traders Baffles Ex-Employees (Bloomberg)
• The Goldman "Huddle" goes to Blackrock - Surveys Give Big Investors an Early View From Analysts (NYT)
• At least housing has bottomed: London House Prices Plunge As Supply Rise Adds To Lull (Bloomberg)
• Christine Lagarde and Nicolas Sarkozy embroiled in new corruption inquiry (Telegraph)- at least that fraud they created: Others helped them create it.
• Heat Leaves Ranchers a Stark Option: Sell (NYT)
• Merkel Gives No Ground on Demands for Oversight in Debt Crisis (Bloomberg)
• The euro skeptics have the best lines again (FT)
• Wen Says China’s Economic Recovery yet to Show Momentum (Bloomberg)
• Europe’s Banks Face Tougher Demands (FT)
• Madrid Region To Sell 100 Office Buildings Amid Austerity (Bloomberg)
• China eases taxes for foreign companies (FT)

Key Events In The Coming Week And... Bonds, PIIGS Bonds

Via Goldman, here are the key economic events to look forward to in the coming relatively quiet week. And out of DB, we get a list of the key PIIGS bond auctions and bailout events in the immediate and near-term future.




 

Today’s Items:

First…
US Is Building Criminal Cases in Rate Fixing
http://www.cnbc.com
http://dealbook.nytimes.com

As U.S. regulators, covering for the Federal Reserve, ramp up their global investigation into the manipulation of interest rates, as a CYA, the Department of Injustice are identifying some fall guys, at big banks, to fall on the proverbial sword.   Authorities may, or may not, file charges against at least one bank later this year, after the election of course.   Expect a presidential pardon on all bankers who have contributed to Obama later this year, and those who contributed to Romney in January.

Next…
PFG Founder Admits: I Forged Bank Statements for 20 Years
http://www.cnbc.com

Russell Wasendorf – wasn’t that the pledge from Animal House? founder of PFG, was arrested.   He tried to commit suicide when it was discovered that over $200 billion, that he was managing, just vaporized.   For those with money in banks under bank managers…   Think your money is safe?

Next…
COMEX Swap Dealers Net Long Gold for Third Time Ever
http://www.gotgoldreport.com

For only the third time in six years, Swap dealers are net long on gold.   Swap Dealers are commercial derivatives traders who primarily trade in the form of swaps in other markets and then hedge those sophisticated positions using futures contracts.  Sounds like a bookie.    So, if they are see gold going up in the future, where do you think the price of gold is going up.   That’s right….   Up…   Therefore, after preparing, keep stacking physical.

Next…
Why is the UK Preparing for War, Instead of the Olympics?
http://humansarefree.com  1st link
http://humansarefree.com   2nd link

The Olympics start on July 27th; however, with all of the military assets around London, one would get the uneasy feeling that they are readying for war, and not the games.   The company, G4S, that was responsible for security at the games, has essentially admitted that their work is a failure.   It might be wise to say outside of London during the games.   Besides, you would get a better view from the televised version anyway.

Next…
Identifying Voter Fraud
http://townhall.com
http://www.fortreport.com

A judge has bitch-smacked Obama’s attempt to keep Florida from identifying ineligible voters.   While Florida’s method may not be perfect, it has at least identified over 2600 ineligible voters.   So, how many are still out there that are convicted felons or still residents of other states, like New York?   Perhaps ACORN will be given the contract to assist Florida with voter identification.  The level of illegal voting in November will be astounding.

Next…
Convicted Bank Robber Gets 1,256 Years in Prison
http://www.gazette.com

After serving part of a six-year sentence for a 2003 bank robbery, Daryl Keener, got out and robbed another bank.   This time this “habitual offender” was sentenced to 1,256 years in prison; however, one can expect him to be released in about six years – three if good behavior.  Of course, the best, and legally sanctioned, way to rob a bank, to to own one folks.

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

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