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COMMENTARY for all articles by
Gordon T Long
EXTEND & PRETEND: Stage I Comes to an End!
The Dog Ate my Report Card
Both
came to an end at the same time: the administration’s policy to Extend &
Pretend has run out of time as has the patience of the US electorate
with the government’s Keynesian economic policy responses. Desperate
last gasp attempts are to be fully expected, but any chance of success
is rapidly diminishing.
Before we can identify what needs to be done, what the administration is
likely to do and how we can preserve and protect our wealth through it, we
need to first determine where we are going wrong. Surprisingly, no
one has assessed the results of the American Recovery & Reinvestment Act
2009 (ARRA) which was this administration’s cornerstone program to place
the US back on the post financial crisis road to recovery.
We can safely conclude either:
1-
The administration completely under estimated the
extent of the economic crisis, even though we were well into it when the
ARRA was introduced.
2-
The administration was unable to secure the
actually required stimulus amount which was likely 4-5 times that
approved.
3-
The administration failed to implement the program
in a timely manner.
4-
The administration failed to diagnose the problem
correctly and that in fact it is a structural problem versus a cyclical
and liquidity problem, as they still insist it to be.
I personally believe it is all four of the above.
READ MORE |
|
SULTANS OF SWAP: BP Potentially More Devastating then Lehman!

As
horrific as the gulf environmental catastrophe is, an even more
intractable and cataclysmic disaster may be looming. The yet unknowable
costs associated with clean-up, litigation and compensation damages due
to arguably the world’s worst environmental tragedy, may be in the
process of triggering a credit event by British Petroleum (BP) that will
be equally devastating to global over-the-counter (OTC) derivatives. The
potential contagion may eventually show that Lehman Bros. and Bear
Stearns were simply early warning signals of the devastation lurking and
continuing to grow unchecked in the $615T OTC Derivatives market.
What is yet unknowable is what the reality is of BP’s off-balance sheet
obligations and leverage positions. How many Special Purpose Entities
(SPEs) is it operating? Remember, during the Enron debacle Andrew Fastow,
the Enron CFO, asserted in testimony nearly 10 years ago that GE had
2500 such entities already in existence. BP has even more physical
assets than Enron and GE. Furthermore, no one knows the true size of
BP’s OTC derivative contracts such as Interest Rate Swaps and Currency
Swaps. Only the major international banks have visibility to what the
collateral obligations associated with these instruments are, their
credit trigger events and who the counter parties are. They are
obviously not talking, but as I will explain, they are aggressively
repositioning trillions of dollars in global currency, swap, derivative,
options, debt and equity portfolios.
READ MORE |
READER ROADMAP
- 2010 TIPPING POINTS aid to
positioning COMMENTARY
|
|
1
SOVEREIGN DEBT PIIGS |
EU BANKING CRISIS |
BOND BUBBLE |
STATE &
LOCAL GOVERNMENT |
CENTRAL & EASTERN EUROPE |
BANKING CRISIS II |
RISK REVERSAL |
|
COMMERCIAL REAL ESTATE |
CREDIT CONTRACTION II |
RESIDENTIAL REAL ESTATE -
PHASE II |
EXPIRATION FINANCIAL
CRISIS PROGRAM |
US FISCAL IMBALANCES |
PENSION CRISIS |
CHINA BUBBLE |
|
TODAY'S TIPPING POINTS UPDATE
Last Update:
07/15/2010 09:19 AM
|
RED ALERT |
AMBER ALERT |
ACTIVITY |
MONITOR |
|

Click to Enlarge

|
|
POSTS: THURSDAY 07-15-10
GEO-POLITICAL TENSIONS - ISRAEL / KOREA / IRAN
IRAN
Oxford Research Group Concludes Israeli Attack On Iran Would Start Long
War ZH
"An Israeli attack on Iran would be the start of a protracted
conflict that would be unlikely to prevent the eventual
acquisition of nuclear weapons by Iran and might even encourage
it. Long-range strike aircraft acquired from the United States,
combined with an improved fleet of tanker aircraft, the deployment
of long-range drones and the probable availability of support
facilities in northeast Iraq and Azerbaijan, all increase Israel's
potential for action against Iran." According to the report, it
might take three to seven years for Iran to develop a small
arsenal of nuclear weapons if it decided to do so. Also, the
report wisely states that an Israeli strike would be focused not
only on destroying nuclear and missile targets but would also hit
factories and research centers and even university laboratories to
damage Iranian expertise. Shockingly, this would cause many
civilian casualties.
Oxford believes Iran's retaliation would
include - withdrawing from the nuclear Non-Proliferation Treaty and
the - production of nuclear weapons to deter further attacks.
- missile attacks on Israel, - closing the
Strait of Hormuz to push up oil prices and - paramilitary or missile
attacks on Western oil facilities in the Gulf. Fun bedside
reading. |
ISRAEL
KOREA
SOVEREIGN DEBT & CREDIT CRISIS |
Debt brakes for Euroland: Strengthening the stability pact
with national debt rules
DBR
GREECE
SPAIN / PORTUGAL
Spain 'relying on short-term funding' as councils go bust
Pritchard
Portugal, Italy auctions garner solid market response
Reuters
FRANCE
GERMANY
ITALY
Italy prepares to pass austerity package FT
UK
Excuse Me Again But Britain's Public Debt Doubled Again Overnight
to Now £4 TRILLION Prudent Investor
ICELAND
Post-Crisis Iceland: Miracle or Illusion?
CFR
JAPAN
CHINA
China growth slows in second quarter FT
Economy grew by 11.1% in the first half of the year
USA
Sales at U.S. Retailers Fell for a Second Month in June
BL
Census
Federal budget gap tops $1 trillion through June
AP
Mohamed El-ErianStress test is no short-cut to stability
FT
Fed
Officials Saw No Need for More Stimulus, Trimmed Forecasts
BL
Fed
Minutes
Fed cuts its 2010 growth forecast FT
US central bank considers more stimulus measures
Rosengren: Growth Slowing, Deflation Is Emerging Risk
WSJ
Jim Grant Is Confident QE 2.0 Is Just Around The Corner
ZH
Jim Grant, one of the most respected voices in the financial
industry, joins Zero Hedge and others, who see that the only
choice the Federal Reserve has now that the temporary and shallow
reprieve from the clutches of the deflationary depression is over,
is to print more money in the form of another iteration of QE.
Whether this will be another $2.5 trillion, like last time, which
was the price of an 18 month delay of the inevitable, or a $5
trillion concerted global effort, as
Ambrose Evans-Pritchard believes, is irrelevant: the only
option the central printers, pardon, bankers, have left is to
flood the market with yet more worthless paper (keep an eye out on
the doubling in the price of gold the second QE2 is publicly
announced, which will also double as the obituary for all fiat
paper). In an interview with Bloomberg TV, Grant says that the
first order of business tomorrow when the Fed's new additions
officially join their new groupthink perpetuating employer will be
"to try once more to print enough dollars to make something happen
in the U.S. economy.” The ever-sarcastic Grant manages to
completely skewer Janet Yellen, Steve Diamond and Sarah Bloom
Raskin, to ridicule the Fed's 100% track record of not only
focusing on the wrong thing time after time, but getting the
response consistently wrong with 100% precision, and also manages
to makes fun of the Fed's credentialed
WSJ lackeys, who courtesy of the Fed's "editorial" control
over the reporting process, get a direct line into
leakable Fed strategy. |
In an interview on Tom Keene's Bloomberg
radioshow today, Nouriel Roubini
"The government must maintain fiscal stimulus in the near term
before gradually reducing spending and raising revenue to rebound
from the longest U.S. economic slump since the Great Depression,
said Roubini, 52. A value-added sales tax is probably “the best
idea on the table” to contain the federal deficit once the
recovery gains momentum, according to Roubini.
Making a
commitment to a fiscal plan will prevent markets from “getting
spooked,” said Roubini, who in August 2006 predicted a “painful”
U.S. recession that came to fruition in December 2007." |
&
State
tax revenues rise -- finally!
CNN
PDF
File
Uh-Oh- Illinois Just Passed Iceland On The List Of Government Default
Risks BI
HUNGARY
DODD FRANK ACT
Lies Divide, Truth Unites Dylan Ratigan
The good news in America today is that many of lies from our
leaders and media no longer seem to be working.
Four out of five people view the current proposed financial
reform as ineffectual. Many in Congress who
voted for socialism for the rich now look like they will be
voted out for continuing those giveaways.
Now the only way those Banksters can survive is to
pretend
that their
corporate communism is working even in the face of
overwhelming
evidence to the contrary. Most recently,
they
decided that instead of taxing complicit financial
institutions the cost of their "Financial
Reform-In-Name-Only", they will instead use what I call the
Big Tarp Lie to pander for the vote of Senator Scott Brown and
others.
The mainstream media rarely fights back against this lie,
either by an inability to understand, a desire to
protect their access to these same Politicians and Bankers or
an unwillingness to go up against the very same financial
institutions that are often
the only thing between them and the unemployment line.
However, we the people have to fight back against these lies -
and thankfully we own the truth.
This
lie
must be beaten back by all of us like whack-a-mole every time it
rears its ugly head. Please help me by sending this
information to any Politician, Media Figure, Banker, Neighbor or
Robot that you find repeating it - they can take our money, but
they don't own the truth.
Let's break it down:
1. TARP itself hasn't even made
money. AIG alone still owes us
$75.6 billion. However,
they
always add the caveat "Other than AIG..." when they say that the
bailouts were "profitable".
But the AIG money was
DIRECTLY PAID to many of these same banks that "paid back
their TARP" at an outrageous
100 cents on the dollar!
Mind you, this was done by government officials that were
the
former employees and current shareholders of the very banks
they were helping. Let's make the banks like
Goldman Sachs, Bank of America and Societe Generale pay back the
$105 billion of stolen taxpayer money before we let anyone say
"TARP was paid back."
2. TARP is a tiny little
part of a massive amount of
taxpayer support. TARP is actually
less than 10% of
your tax dollars that have been handed to the banks. And now
the banks "paid back" the tiny slice that is TARP with OUR money
and you are supposed cheer them for savvy. At this very
moment, the taxpayer is still owed
$2.02 Trillion dollars for the bailout by our Politicians and
Banksters, and that number is
growing every day.
Never mind the money that these same banks make getting endless
0% interest loans from the Federal Reserve (aka You) while
either they lend it back to you at
14% or just
lend it right to back the government and pocket the yield.
Never mind the
multitude of benefits they get from being Too Big Too Fail.
But you're not supposed to pay attention to that; you're
only supposed to notice how
fast they paid back TARP!
So instead of these Politicians looking for the only
obvious place to find the money -
clawbacks from the people who continue to steal it - we are
now being subjected to outright lies as they once again pick the
banksters over the people who voted them in. But don't let
them, or anyone in the media, get away with it without
hearing from
you.
|
HAVING READ THE ABOVE
JPMorgan quarterly profits soar 76%
JP Morgan Blows Out Earnings, US Futures Tear Higher
BI
RATING AGENCIES
Growth fears hit appetite for riskier assets FT
The
accidental CMBS recovery
Fortune
RRESIDENTIAL REAL ESTATE - PHASE II |
EXPIRATION FINANCIAL CRISIS PROGRAM
|
PENSION & ENTITLEMENTS CRISIS
|
Fears
grow as millions lose jobless benefits
Reuters
During the Senate impasse, from the week ended June 5 to the week
ended July 10, more than 2.1 million Americans lost their
benefits. Another million will join them by July 31 |
70% Majority See More Jobless
White House - jobs “saved or created”
Updating its estimate of the impact the controversial new law
has had, the White House now projects that the vast spending act
has created or saved between 2.5 million and 3.6 million jobs.
That's up from the estimate of 2.2 million to 2.8 million jobs
that was released in the first quarter of the year from the White
House Council of Economic Advisers. The new estimate says the act
is on track, if it hasn't already reached, the promise that the
stimulus act would save or create 3.5 million jobs by the end of
2010.
The White House analysis estimates that every $1 spent as part
of the stimulus bill is matched by $3 in private money.
|
GOVERNMENT BACKSTOP INSURANCE |
BBP - British
Petroleum
US moves to block new BP oil leases FT
Law would hit further offshore development
Yet Again- Faulty Leak Equipment Delays BP Well Integrity Test
BI
BP forced to halt critical oil spill test FT
Nearly 3 weeks ago in
SULTANS OF SWAP: BP Potentially More Devastating then Lehman!
we estimated $32B with a worry over
the punitive damages We were highly criticized by the
mainstream as being extremist Now we read the following:
A Guide To How BP Will Spend $38 Billion On The Oil Spill
BI
Two impressive figures: $38.5 billion and $41.6
billion.
The first is how much Citigroup thinks BP will
ultimately spend on the
oil spill. The second is an estimate for BP's
cashflow in 2011 (via
FT Alphaville). In other words, BP will have
enough cash to pay for the disaster, but it will
be painful.
BP's biggest estimated cost is damages -- those
thousands upon thousands of lawsuits --
followed by EPA fines. Stopping the leak is
comparatively cheap at $0.5 billion.
Here's Citi's 'Costometer':
Citi acknowledges a large degree of uncertainty
in these numbers, especially for EPA fines:
As far as clean water fines are concerned, we
are in new territory since the largest fine the
EPA has handed out to date was $34m to Colonial
Pipelines in 2003. The often-quoted penalty range
is $1,100-4,300 per barrel spilled. However, the
EPA has a certain amount of discretion around this
range and the Colonial Pipelines fine was below
$1,000/barrel. In our ‘Costometer’, we have
assumed BP is penalized at c$3,500 per barrel
spilled.
And here's BP's cashflow
|
Assets that BP could sellong>
FT
|
OTHER TIPPING POINT CATEGORIES NOT LISTED ABOVE
FLASH CRASH - HFT - DARK POOLS
MARKET WARNINGS
GOLD MANIPULATION
VIDEOVIDEO TO WATCH
On JP Morgan
INTERESTING ARTICLES - GENERAL
QUOTE OF THE WEEKQUOTE OF THE WEEK
"In a market, the cumulative
expenditure of the modestly endowed easily trumps the expenditure
of the rick. And even the rich are ultimately answerable to the
market: They became rich by satisfying customers, and will remain
rich only so long as they (or their investments) continue to
satisfy consumers. Consumer sovereignty is far more powerful a
constraint on the rich than political sovereignty. Indeed, even
the erosion of the rich by democracy is ultimately self-defeating,
for it eliminates that class of men and women in public life who
are under no financial pressure to remain at their posts, pursuing
policies in which they no longer believe. It is no coincidence
that the democratization of politics has been accompanied by a
decline in resignations on points of principle or of honor. The
vast majority of modern politicians simply needs the money.
But even the restoration of a rentier political class
would not be enough to restore the blessings of good government.
As long as politicians must compete for votes, they cannot govern
honestly, or even disinterestedly. They cannot reverse decisions or
policies that have proved unworkable. They must persist, even in
intellectual error, and cannot escape a certain narrowness of
vision. To release politicians from this predicament, a
revolution is required. That revolution must be one not
of blood, but of constitutional and political ideas. It must put
an end to democracy without limits, before the prosperity of the
species is destroyed and liberty extinguished...The only lasting
solution to the plague of unlimited democracy is to attack
democracy at its moral foundation: the political equality of the
citizen."
Dominic Hobson Editor-in-Chief Global
Custodian magazine |
ZH - Zero Hedge - Business Insider,
WSJ - Wall Street Journal, BL -
Bloomberg, FT - Financial Times |
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Gordon T Long is not a registered advisor and
does not give investment advice. His comments are an expression of opinion
only and should not be construed in any manner whatsoever as
recommendations to buy or sell a stock, option, future, bond, commodity or
any other financial instrument at any time. While he believes his
statements to be true, they always depend on the reliability of his own
credible sources. Of course, he recommends that you consult with a
qualified investment advisor, one licensed by appropriate regulatory
agencies in your legal jurisdiction, before making any investment
decisions, and barring that, we encourage you confirm the facts on your
own before making important investment commitments.
© Copyright 2010 Gordon T Long. The information
herein was obtained from sources which Mr. Long believes reliable, but he
does not guarantee its accuracy. None of the information, advertisements,
website links, or any opinions expressed constitutes a solicitation of the
purchase or sale of any securities or commodities. Please note that Mr.
Long may already have invested or may from time to time invest in
securities that are recommended or otherwise covered on this website. Mr.
Long does not intend to disclose the extent of any current holdings or
future transactions with respect to any particular security. You should
consider this possibility before investing in any security based upon
statements and information contained in any report, post, comment or
recommendation you receive from him.
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TODAY'S NEWS
THURSDAY
07-15-10
JULY
ARCHIVAL |
SOVEREIGN DEBT PIIGS |
EU BANKING CRISIS |
BOND BUBBLE |
STATE & LOCAL
GOVERNMENT |
CENTRAL & EASTERN EUROPE |
BANKING CRISIS II |
RISK REVERSAL |
|
COMMERCIAL REAL ESTATE |
CREDIT CONTRACTION II |
RESIDENTIAL REAL ESTATE - PHASE II |
EXPIRATION FINANCIAL CRISIS PROGRAM |
US FISCAL IMBALANCES |
PENSION CRISIS |
CHINA BUBBLE |
|
CHRONIC UNEMPLOYMENT |
INTEREST PAYMENTS |
|
US PUBLIC POLICY MISCUES |
JAPAN DEBT DEFLATION SPIRAL |
US RESERVE CURRENCY. |
GOVERNMENT BACKSTOP INSURANCE |
SHRINKING REVENUE GROWTH RATE |
FINANCE & INSURANCE WRITE-DOWNS |
RETAIL SALES |
CORPORATE BANKRUPTCIES |
US DOLLAR WEAKNESS |
GLOBAL OUTPUT GAP |
CONFIDENCE - SOCIAL UNREST |
ENTITLEMENT CRISIS |
IRAN NUCLEAR THREAT |
OIL PRICE PRESSURES |
FOOD PRICE PRESSURES |
US STOCK MARKET VALUATIONS |
PANDEMIC |
US$ RESERVE CURRENCY |
TERRORIST EVENT |
NATURAL DISASTER |
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