POSTS: TUESDAY 07-27-10
GEO-POLITICAL TENSIONS - ISRAEL / KOREA / IRAN
IRAN
ISRAEL
KOREA
SOVEREIGN DEBT & CREDIT CRISIS |
GREECE
SPAIN / PORTUGAL
FRANCE
GERMANY
ITALY
UK
DUBAI
Abu Dhabi Feels Dubai Chill as Emirate Accepts Money Is Scarcer
BL
JAPAN
CHINA
USA
Economists dispute effect of US stimulus
FT
After Expectations A Modest Improvement, Dallas Fed Manufacturing
Index Crashes To -21, From -4 Prior, Exp. Of -2.5
ZH
Confirmed- U.S. Fiscal Woe Is Worse Than Greece
Reading the annual
Long Term Budget Outlook by the
Congressional Budget Office (CBO) has become an increasingly
depressing experience in recent years. This year seems even more
so than ever.
The latest projection puts the federal debt
rising to 62% of the nation’s Gross Domestic Product (GDP) by the
end of the year (from 40% pre-crisis), the highest percentage
since just after World War. (See Graph)
Despite the gloomy projections, many economists seem to agree
that a Greek style debt crisis is unlikely to take place in the
U.S. due to the size of the economy, the single currency structure
and dollar prestige. After all, Greek debt totals 120% of
GDP--twice the US figure--plus a comparison of the long-term bond
yield, seem to suggest that the U.S. is in much better fiscal
shape. Or do they?
In
a Financial Times op-ed
dated July 25, Laurence Kotlikoff, economics professor at Boston
University, contends due to the “labeling problem”--governments
can describe receipts and payments in any way they like--we are
essentially “in a fiscal wonderland of measurement without
meaning.”
Kotlikoff believes a better benchmark of fiscal
fitness is the fiscal gap, or the present value difference between
all future expenditures and receipts. His calculations
reveal Greece future expenditure at 11.5%
of the value of future GDP, after incorporating the new austerity
measures.
The US figure, based on the CBO projections--12.2%--is
worse than that of Greece, but not by too much.
However,
Kotlikoff says the U.S. is in much worse shape than the 12.2%
figure suggests, because the CBO’s projections assume “a 7.2% of
GDP belt-tightening by 2020,” with "highly speculative”
assumptions, such as a substantial rise in tax receipts and wage
growth.
A separate analysis by the
New York Times also put the U.S.
debt--measured by medium term deficit as a percentage of
GDP--higher than that of Greece. (See chart) Furthermore, in a
roundabout way, Kotlikoff and
Da Gong, the largest credit
rating agency in China, seem to be in agreement as to the fiscal
position of the United States; although many have dismissed Da
Gong’s objectivity when it downgraded the U.S. from AAA to AA.
Will America have a Greek style debt crisis? Probably not,
given the country’s resources and resilience. However, it is a
matter of political will to make tough choices between strategic
vs. tactical spending and taking necessary measures to put the
fiscal house in order.
With the current
bond market willing to overlook debt for
an economic recovery, tactical spending should take priority in
order to give more immediate boost to jobs and to sustain a tepid
recovery. Cramming strategic spending during a recession, as with
the first stimulus, most likely will only saddle the nation with
more debt while impeding growth and recovery.
Meanwhile,
the current trajectory would suggest a different kind of debt
crisis could manifest sooner or later, and over-confidence,
a "Too-Big-To-Fail” mentality some of the nation's leaders seem to
have adopted, will only lead to a dangerous path of no return.
Dian L. Chu, July 26, 2021
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Jim Rogers: Stress Test Is a PR Exercise
CNBC
Not Realistic, Roubini Says
JPMorgan Shreds The Stress Tests, Says 54 Banks Should Have Failed
BInside
Latest Big Mac index suggests the euro is still overvalued
Economist
Euro Bears Vanish
German DZ, WGZ Banks Confirm They Only Passed Stress BS Due To
"Mark To Maturity" Loophole ZH
Deutsche Bank yields over sovereign holdings FT
Debate rages about effect of government spending
US Inc plays on caution to issue bonds
FT Low cost of
borrowing spurs companies to issue more debt
On the Cusp of a Global Bond Hiccup ZH
GMO's James Montier On The Rise Of The Aust(e)rians- "Any
Deflationist Victory Would Result In The Rapid Arrival Of QE2"
ZH
US recovery elusive amid fiscal gaps FT
States face further deficits as federal stimulus ends
US state deficits FT
US states’ budget crises FT
HUNGARY
Basel
bank plans eased after heavy lobbying
Reuters
Bank regulators reach deal on liquidity FT
Basel Committee Softens Bank Capital Rules, Sets Leverage Cap
BL
The Basel Committee on Banking Supervision softened some of its
proposed capital and liquidity rules while introducing new
restrictions on how much lenders can borrow in order to rein in
their risk-taking.
|
Applying A Basel III Tier 1 Stress Test Threshold Implies E2.6
Trillion Of Assets In 39 Banks Impaired By Equity Undercapitalization
ZH
Basel III Gutted, Delayed As Even Existing Regulatory Regime Too
Burdensome For An Insolvent Banking Industry ZH
In light of recent bombastic statements by priests of
Keynesian fundamentalism that European banking is one big,
non-dysfunctional, even healthy family, it would have been the
logical thing that the Basel Committee on Banking Supervision
would if not tighten terms on proposed Basel III implementation,
then at least keep them as is. Why is why news that the recently
proposed adjustments to Basel III which not only delayed
implementation of the "regulatory" framework by many years,
allowing banks sufficient time to blow themselves up under
thecurrent regime, but also to soften liquidity requirements of
all global banks, is merely an indication that global regulators
realize that the last free for all, in which every bank is allowed
to steal as much as it possibly can before all hell breaks loose,
in many times with as little as a penny in the mythical risk
reserve concept known as Tier 1 Capital, levered a few hundred
billion times, is finally here. And yes, aside from the fact that
even the existing massively lax regulatory rules of Basel II need
to be toned down is irrelevant: all European banks are
healthydammit, and just like in the US, bank failures will
continue until credibility returns.
ANALYSIS OF BASEL III
INCLUDED |
DODD FRANK ACT
RATING AGENCIES
RRESIDENTIAL REAL ESTATE - PHASE II |
Second
Housing Crisis? Another $1T in Mortgages Backed by Taxpayers
FOX
New
Home Sales Up, but Sales remain Slow
AP
PDF
Atrocious New Homes Sales Data
So June new home sales come in at 330,000 on expectations of
310,000: a decent beat by 20k or so, and a "record" increase from
the May revised 267k. However, this "beat", and massive 23.6% MoM
surge only occurred due to prior downward (of course) revision
which took away 57k from the past two months! The May number was
revised down from 300k, or by 33k, to the lowest sales number on
record of 267k. And April, not to be undone, two months after the
initial release, has received its second downward adjustment, this
time down by 24k from 446k to 422k. So let's get this straight:
this was the worst June on record, following the worst month on
record in new home sales ever, the beat was completely drowned out
by 57k worth of prior revisions, the average new home price slid
another 1.4% to $213,400, yet just because the new home supply is
down to "just" 7.6 month from 9.6 in May it is enough to push
stocks to the moon (of course this completely ignores that
existing homes sales are back to 9 months, and shadow inventory is
more than double that. Who cares - machine language does not add,
it only multiples). Another day, another insane day in stocks,
which are now programmed toignore reality, and just focus on the
propaganda headline spin. |
Report- Foreclosures Reduce Home Values by 27% WSJ
Supply of Homes Set to Grow WSJ
Sales of new homes are near 47-year lows, yet the supply of new
and existing homes is expected to grow in the months ahead as
construction ramps up and a wave of foreclosed homes hits the
market.
In June, new-home sales were running at a seasonally adjusted
annual rate of 330,000 units, the Commerce Department said Monday.
While that was up 23.6% from the all-time low of 267,000 in May,
the June figures were the second lowest on record.
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EXPIRATION FINANCIAL CRISIS PROGRAM/font>
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PENSION & ENTITLEMENTS CRISIS
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Why Is
US Employment So Weak?
Berner
United Technologies to cut another 1,500 job cuts AP
GOVERNMENT BACKSTOP INSURANCE |
OTHER TIPPING POINT CATEGORIES NOT LISTED ABOVE
Credit
Card Fees Transfer Wealth to Rich: Study
Reuters
MAP OF THE DAY- Another Decade Of Summers Like This Will Devastate
American Agriculture BI
FLASH CRASH - HFT - DARK POOLS
MARKET WARNINGS
Stock
Short Sales at 2-Year Low, Data Explorers Says
BL
Crawford calls 'Cardinal Climax'
Brimelow
NEW YORK (MarketWatch)
-- Is "all hell" about to break loose? One veteran letter thinks
so -- and it predicted the Crash of 2008.
Unlike almost everyone else, Arch Crawford's Crawford
Perspectives had a fabulous 2008. (
See Jan. 9, 2009, column.) And when I last checked in with it
in early 2010, Crawford was predicting a mid-summer massacre (
See Jan. 14 column.)
Now, in its monthly issue published in early July, Crawford
predicts "ALL HELL BREAKS LOOSE" -- beginning, as a matter of
fact, on Monday July 26, 2010. Crawford means it. The letter has
been 200% short since June 7, with stops at 11,466 on the Dow
Jones Industrial Averag
Well, the problem is that Crawford is an astrology letter. This
sends many readers (and some editors) into foaming fits. My
impeccably scientific attitude: We should just look at its
results.
But the opening of Crawford's July issue is definitely the sort
of thing that upsets people: "NEVER SEEN ANYTHING LIKE JULY! We
mean, of course, the planetary pictures in the sky which are
developing towards the tightest harmonic alignments in the most
potent areas of the zodiacal circle ever recorded in Earth's
written history. These portend increasing and maximizing
intensity and rapidity of 'change' on every level of existence:
mineral, vegetable, animal, human and spirit. Will Capitalism
survive? Will Democracy survive? Will our markets survive? Will
governments survive? Will humanity survive? Will Earth survive?
"We don't know, but we'll be SHORT for it!"
Crawford -- along with other astrologers, who however are
merely worried about nuclear war, the end of the world etc. -- is
impressed with an imminent unusual alignment that apparently
involves five key planets.
He writes: "Astrologers call it the 'Cardinal Climax.' It is
considered to be the most powerful and important planetary
alignment of the modern era. Perhaps it heralds the beginning of
the real 'Aquarian Age' or the end of the 'Mayan Calendar.' (After
all, what's a few months in a 25,600-year cycle?) These energies
actually maximize from July 30 through August 3. There have
been 'shadows' preceding and will be echoes afterwards for quite
some time." Crawford adds: "This huge alignment will be followed
by a Full Moon on the Fall Equinox and a Lunar Eclipse on the
Winter Solstice. We expect the depth and scope of dislocations
during this period to exceed anything we have ever witnessed, both
in otherwise civilized interaction among nations, and likely our
fill in natural disasters."
"We continue to recommend extreme caution and proper emergency
measures such as extra food, water, medicines and cash over the
next 24 months in particular. Do NOT wait any longer!!"
Let the record, show, however, that Crawford's last issue also
repeatedly allowed for what it described as "some attempts to
correct an oversold market sometime in July."
What are Crawford's results? Over the year to date through
June, the letter is down 0.4% by Hulbert Financial Digest count,
definitely better than the negative 5.8% of the
dividend-reinvested Wilshire 5000 Total Stock Market Index.
Crawford did underperform the market in 2009. (
See Dec. 24, 2009, column.) But even so, over the past three
years the letter is up 9.42% annualized versus negative 9.36%
annualized for the total return Wilshire 5000. Over the many years
that it has been followed by Hulbert, Crawford's record has been
checkered but interspersed with occasional bursts of eerie
prescience. Which is it this time?
Crawford Perspectives usually publishes on the first Monday of
each month. But its next issue is delayed until August 9 --
possibly to save mailing costs if the world ends
|
Marc Faber- Relax, This Will Hurt A Lot ZH
From 70% To 35% To 75% Net Long In Under A Month- Ultra High Frequency Day
Trader Extraordinaire Barton Biggs Flip Flops... Again... And Again
ZH
GOLD MANIPULATION
VIDEO TO WATCH
QUOTE OF THE WEEK
In
a Financial Times op-ed
dated July 25, Laurence Kotlikoff, economics professor at
Boston University "Due
to the “labeling problem”--governments can describe receipts
and payments in any way they like--we are essentially “in a
fiscal wonderland of measurement without meaning.”
|
ZH - Zero Hedge - Business Insider,
WSJ - Wall Street Journal, BL -
Bloomberg, FT - Financial Times |