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COMMENTARY for all articles by
Gordon T Long
INNOVATION: What Made America Great is now Killing Her!

What made America great was her unsurpassed ability to innovate.
Equally important was also her ability to rapidly adapt to the change that
this innovation fostered. For decades the combination has been a self
reinforcing growth dynamic with innovation offering a continuously
improving standard of living and higher corporate productivity levels,
which the US quickly embraced and adapted to.
This in turn financed further innovation. No country in the world could
match the American culture that flourished on technology advancements in
all areas of human endeavor. However, something serious and major has
changed across America. Daily, more and more are becoming acutely
aware of this, but few grasp exactly what it is. It is called Creative
Destruction.
It turns out that what made America great is now killing her!
Our political leaders are presently addressing what they perceive as an
intractable cyclical recovery problem when in fact it is a structural
problem that is secular in nature. Like generals fighting the last war
with outdated perceptions, we face a new and daunting challenge. A
challenge that needs to be addressed with the urgency and scope of a
Marshall plan that saved Europe from the ravages of a different type of
destruction. We need a modern US centric Marshall plan focused on growth,
but orders of magnitude larger than the one in the 1940’s. A plan even
more brash than Kennedy’s plan in the 60’s to put a man of the moon by the
end of the decade. America needs to again think and act boldly. First
however, we need to see the enemy. As the great philosopher Pogo said:
“I saw the enemy and it was I”.
READ MORE |
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SULTANS OF SWAP: Gold Swaps Signal the Roadmap Ahead
SLIDE REFERENCE PAGE:
Shadow Banking
The
news rocked the global gold market when an almost obscure line item in
the back of a 216 page document released by an equally obscure
organization was recently unearthed. Thrust into the unwanted glare of
the spotlight, the little publicized Bank of International Settlements
(BIS) is discovered to have accepted 349 metric tons of gold in a $14B
swap. Why? With whom? For what duration? How long has this been going
on? This raises many questions and as usual with all $617T of murky
unregulated swaps, we are given zero answers. It is none of our
business!
Considering the US taxpayer is bearing the burden of $13T in lending,
spending and guarantees for the financial crisis, and an additional $600B
of swaps from the US Federal Reserve to stem the European Sovereign Debt
crisis, some feel that more transparency is merited. It is particularly
disconcerting, since the crisis was a direct result of unsound banking
practices and possibly even felonious behavior. The arrogance and lack of
public accountability of the entire banking industry blatantly
demonstrates why gold manipulation, which came to the fore in recent CFTC
hearings, has been able to operate so effectively for so long. It operates
above the law or more specifically above sovereign law in the un-policed
off-shore, off-balance sheet zone of international waters.
Since President Richard Nixon took the US off the Gold standard in 1971,
transparency regarding anything to do with gold sales, leasing, storage or
swaps is as tightly guarded by governments as the unaudited gold holdings
of Fort Knox. Before we delve into answering what this swap may be all
about and what it possibly means to gold investors, we need to start with
the most obvious question and one that few seem to ask. Who is this Bank
of International Settlements and who controls it?
READ MORE
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POSTS: THURSDAY 08-19-10
1
SOVEREIGN DEBT PIIGS |
EU BANKING CRISIS |
BOND BUBBLE |
STATE &
LOCAL GOVERNMENT |
CENTRAL & EASTERN EUROPE |
BANKING CRISIS II |
RISK REVERSAL |
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COMMERCIAL REAL ESTATE |
CREDIT CONTRACTION II |
RESIDENTIAL REAL ESTATE -
PHASE II |
EXPIRATION FINANCIAL
CRISIS PROGRAM |
US FISCAL IMBALANCES |
PENSION CRISIS |
CHINA BUBBLE |
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TODAY'S TIPPING POINTS UPDATE
Last Update:
08/21/2010 04:57 AM
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RED ALERT |
AMBER ALERT |
ACTIVITY |
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08-19-10
GEO-POLITICAL TENSIONS - ISRAEL / KOREA / IRAN
SOVEREIGN DEBT & CREDIT CRISIS |
Western profits wilt on China's surging wages
Pritchard
Rising wage and production costs in China are eating into the
profits of Western companies and may soonset off an exodus of
multinational companies to cheaper locations |
Foxconn to Hire 400,000 China Workers Within a Year
BL
What Happens When China Stops Playing the Music
ZH
What if we told you there was a
trade that was appealing, obvious, talked about daily and
yet you hadn't heard of it? Would you be interested?
What if we told you there are fixed income instruments
being bought with a higher yield than US treasuries in
currencies that are undervalued; and there is a high
probability these currencies will soon appreciate; and the
yields on the bonds will decline?
What if we told
you the same institution that is buying the bonds controls
the timing of the bond's underlying currency appreciation
and is directly responsible for the current undervaluation
of the currency, and the higher yield offered?
What if we told you the institution was China? |
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The US Economy- A Canadian Leading Indicator
ZH
Derailed Capitalism, which will focus primarily on the Canadian financial
and economic situation.
The US Economy: A Canadian
Leading Indicator
Canada’s economic soundness has garnered
renewed interest amongst foreign investors. The country was
fortunate to escape the economic crisis unscathed, unlike the rest
of the world. It boasts one of the strongest financial systems on
the globe, ranking best in the world by the World Economic Forum.
While it appears that the Canadian economy remained unscathed
throughout the financial crisis of 2007-2008, further
deterioration of public finances combined with declining exports
while commodity prices remain high may put further pressure on the
Canadian economy. With the global economic recovery in doubt,
Canada’s resilient economy is beginning to mimic that of the
United States in 2006-2007:
- -Unemployment is now moving upwards, 170,000 full-time
jobs were shed in June
- -High reliance on exports to the United States, United
Kingdom, and Japan
- -Foreigners continue to divest of Canadian securities
- -Canada’s trade balance is now negative
- -Public finances, including federal and provincial, are in
terrible condition
- -Unfunded liabilities continue to grow in Medicare, CPP,
and OAS
- -Home sales have begun to fall off a cliff, down 30% since
implementing HST
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Philly Fed Plunges To -7.7 on Expectations Of 7.0, Previous 5.1
ZH
Philly Fed comes in at -7.7, trouncing expectations of 7.0,
and is the lowest number since August 2009, and first contraction
since July 2009. Was the number even in the range of bearish
expectations?
|
Quarterly Report on Household Debt and Credit
FRBNY
Debt and America’s Decline
Project-Syndicate
David Rosenberg- There's No Evidence Of A Housing Bottom, And
Strong Industrial Production Is A Mirage BI
Some characteristically bearish thoughts from
David Rosenberg of
Gluskin-Sheff this morning, riffing on yesterday's two big
numbers: housing starts and industrial production.
First on
Industrial Productioni, which was
generally regarded as a good number:
A seemingly positive economic report was the July
industrial production report, which blew away consensus
expectations, coming in at 1.0% MoM versus 0.5% expected.
Production in the manufacturing sector rose 1.1% on a
spectacular 9.9% jump in motor vehicle production.
Here’s why we called it a “seemingly” positive report.
Remember that July has been a strange month for seasonal
factors, especially related to the auto shutdowns (GM kept
most of its plants open this year and the government’s
seasonal-adjustment models don’t account for this). We saw
wild swings in the weekly initial jobless claims partly due to
seasonal-factor adjustments (claims dropped by 10% in the
first two weeks only to increase by 10% in the third week of
July, to give you a sense of the volatility).
We think
something similar was going on with the seasonally-adjusted
motor vehicle production numbers — in other words, the
seasonal factors may have artificially boosted the data. In
fact, when we adjust the seasonal factors, total IP would have
been 0.4%, according to our calculations, not the 1.0%
reported. We could see a significant pullback in August as
part of the July increase is reversed. On top of this, the
back revisions to the actual data were negative — the +0.1%
gain in June was turned into a -0.1%. So the underlying
increase over June and July would be in the 0.2% range, hardly
inspiring.
And as for Housing Starts,
which were not so hot:
Yesterday’s U.S. housing starts report was disappointing,
especially in the wake of the soft NAHB report on Monday.
Total starts rose 1.7% MoM in July, slightly missing the 2.0%
increase expected by the consensus. That was probably the best
news of the report.
Downward revisions to the June data
were harsh with the -5.0% initial estimate being taken down to
-8.7%. Another way of putting it, if it weren’t for the
downward revisions, the headline would have been negative.
The increase in total starts was driven by a huge jump in
the very volatile multi- family component — up 33% after a 33%
decline in June. A better gauge for underlying demand is
single-family housing starts, which dropped 4.2%, the third
monthly decline in a row, falling to the lowest since May
2009. The YoY rate fell to -14%, the second month in negative
territory and the weakest print since August 2009 — it really
doesn’t seem like things are getting any better. To put it
into perspective, single-family starts has been essentially
range-bound since the end of 2008, languishing near record
lows— even after all the government stimulus.
Forward-looking components of the report were weak as well,
with building permits falling 3.1%, the third decline in four
months. Note that total permits go into the index of leading
economic indicators and our tally so far suggests a flat July
monthly print for LEI, at best.
Again, single-family
permits were soft, down 1.2%, the fourth consecutive monthly
decline — pointing to more weakness in starts in the coming
months. Multi-family permits fell 8% suggesting that the 33%
increase in multi-starts will be partially reversed in coming
months.
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Richard Koo- The Global Slowdown Is Getting Worse
BI
|
Demand
strong at Germany and Portugal debt auctions
Reuters
Do US Bonds Resemble Dot Com Stocks?
Ritholtz
What made the dot com situation so pernicious was that anyone
who was judged on relative performance (i.e., Mutual fund
managers), were all but forced into these names in order to keep
up. Very few people — Buffett and Grantham come to mind — manged
to both avoid both chasing these names and losing their client
base.
Tobias Levkovich, Citigroup’s chief U.S. equity strategist,
mentions something quite similar in the Bloomberg Chart of Day:
“U.S. bonds may be just as vulnerable to a
plunge as stocks were a decade ago, when the Internet bubble
burst, according to Tobias Levkovich, Citigroup Inc.’s chief U.S.
equity strategist.
The CHART OF THE DAY depicts how an index of monthly returns on
10-year Treasury notes since 2000, as compiled by Ryan Labs,
compares with a total-return version of the Standard & Poor’s 500
Index from 1990 through 2005. The latter gauge peaked in August
2000 and tumbled 38 percent in the next two years.
About $561 billion has flowed into bond funds since the
beginning of last year, according to data from the Investment
Company Institute. Stock funds, by contrast, had a $42 billion
outflow during the period.”
|
Treasuries Rise as Slowdown Fuels Fed Purchase Speculation/strong>
BL
Moody's says clock is ticking on fiscal reform
Fortune
“A potential interest rate shock is the biggest single threat to
the debt affordability of Aaa governments” |
Time is running out for the West
Analysis: For local governments housing crisis keeps hitting
Reuters
New
Jersey Slept While Selling $26 Billion in Bonds
Mysak First
state ever accused by the SEC of violating federal securities laws
SEC
Sues New Jersey Over Bond Offerings
WSJ
&
Schwarzenegger Orders Furloughs After Top Court Rules
BL
HUNGARY
BASEL III
ET ANOTHER BIG "EXTEND & PRETEND" WIN FOR THE BANKS
US banks receive Basel III boost FT
Rewrite of rules could cut in half new capital required
The analysis by BarCap’s debt capital markets group estimates
that the 35 largest US banks will have to come up with half as
much new capital as had been expected following last month’s
rewrite of proposed requirements by
the Basel Committee on Banking Supervision.
Analysts at Nomura calculated earlier this month that the top
16 European banks would also gain a sizeable, though slightly
smaller, benefit. The numbers are likely to revive complaints that
the reforms have been softened too much in the face of lobbying by
banks.
The committee in July made significant changes to the
definition of what banks could count toward highest-quality “tier
one” equity capital and effectively trimmed the amount of liquid
assets they would be required to keep on hand.
The banks had argued – and some regulators agreed – that a
tougher package could impede the still-patchy economic recovery by
crimping new lending.
Two separate studies released on Wednesday by
the Basel Committee and the Financial Stability Board,
however, concluded that tightened capital and liquidity rules
would have only a modest impact on world economic growth patterns
if they were phased in over time, as planned.
A one percentage point increase in bank tangible equity capital
– capital that cannot be withdrawn in the event of a crisis –
would lead to a 0.2 per cent average decline in global output, the
studies found.
Commentators on both sides of the Atlantic see the July changes
to the Basel proposals, commonly known as Basel III, as a big
victory for lenders.
BarCap, for example, estimates that the 35 largest US bank
holding companies will need to come up with $115bn in new equity
or retained earnings to bring the ratio of their equity tier one
capital to risk-weighted assets – a key measure of financial
strength – to 8 per cent under the revised rules.
That is about half the $225bn in new capital the biggest US
banks would have had to raise under a tougher draft of the rules
circulated in December, said BarCap’s Tom McGuire, whose unit did
the calculations.
Similarly, Nomura analyst Jon Peace calculated that the top 16
European banks would need to raise €200bn ($257bn) to restore
capital removed by the reforms, down from €300bn under the
December rules.
The difference comes from a series of compromises allowing
banks to keep tax credits, mortgage servicing agreements and other
assets in their calculation of their tier one capital.
Should regulators decide in the autumn that banks need to meet
a 6 per cent ratio rather than 8 per cent, the 35 US banks would
need to raise just $8bn, BarCap said.
|
Banking reform- Suspense over FT
Basel banking reforms VIDEO FT
|
Four U.S. banks face big losses on repurchases/strong>
Reuters
DODD FRANK ACT
RATING AGENCIES
Key Leading Indicator Of Commercial Real Estate Shrinks As Market Is
"Paralyzed" By Uncertainty BI
This index is a leading indicator for new Commercial Real
Estate (CRE) investment.
The Business Times
reports that the American Institute of Architects’
Architecture Billings Index increased to 47.9 in July from 46 in
June. Any reading below 50 indicates contraction.
'We continue to receive a mixed bag of feedback on the
condition of the design market, from improving to flat to
being paralysed by uncertainty,' said AIA Chief Economist
Kermit Baker.
This graph shows the Architecture Billings Index since 1996.
The index has remained below 50, indicating falling demand, since
January 2008.
Note: Nonresidential construction includes
commercial and industrial facilities like hotels and office
buildings, as well as schools, hospitals and other institutions.
According to the AIA, there is an "approximate nine to twelve
month lag time between architecture billings and construction
spending" on non-residential construction. So there will probably
be further declines in CRE investment into 2011. |
|
RRESIDENTIAL REAL ESTATE - PHASE II |
US
Home Refinancing Demand at Highest in 15 Months
Reuters
EXPIRATION FINANCIAL CRISIS PROGRAM
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PENSION & ENTITLEMENTS CRISIS
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R. Eden Martin- Unfunded Public Pensions—the Next Quagmire
WSJ
A federal bailout would cost trillions and prevent necessary
reforms. But there are several ways states can rationalize their
workers' retirement benefits. |
GOVERNMENT BACKSTOP INSURANCE |
OTHER TIPPING POINT CATEGORIES NOT LISTED ABOVE
GENERAL INTEREST
Some stores finding deep discounts aren't enough
AP
Dwindling mines spell hot times for copper
FT
With demand set to outstrip supply, prices can only move higher
Washington to enforce health reform
FT
Unlocking the language of structured securities
FT
&
FLASH CRASH - HFT - DARK POOLS
MARKET WARNINGS
Click to Enlarge
GOLD MANIPULATION
VIDEO TO WATCH
Paul Craig Roberts: America is
Truly being Destroyed by Design
The Alex Jones Show 1/3
PART 1 Below
PART 2
PART 3
|
QUOTE OF THE WEEKtable style="width: 500px">
“It ain’t what you don’t know that gets you into trouble. It’s what
you know for sure that just ain’t so.” – Mark Twain |
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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
08-19-10
AUGUST
ARCHIVAL
TIPPING POINTS |
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 |
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INTEREST PAYMENTS |
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US PUBLIC POLICY MISCUES |
JAPAN DEBT DEFLATION SPIRAL |
US RESERVE CURRENCY. |
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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 |
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