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COMMENTARY for all articles by
Gordon T Long
INNOVATION: America has a Structural Problem
 I
gave President Barrack Obama six months to roll-out his doomed
Keynesian policies, twelve months to discover they were flawed and
eighteen months to realize that the solution to America’s problems
must lie within a different economic framework. I had hoped by the end
of twenty-four months to see new policies closer to an Austrian
economic philosophy emerge. I was wrong.
Though, even the Wall Street Journal recently featured an article on the
re-emergence of the Austrian School of Economic philosophy, it would
appear that President Obama’s administration still neither gets it, nor I
am afraid ever will.
Key defections by his leading economic advisors, talk of the need for QE
II and a Stimulus II, and a political collapse in public confidence
suggests a growing awareness that Keynesian policies are not working, as
many predicted they wouldn’t. Obama's exciting rhetoric of Hope and Change
has left myself and the majority of recent polled Americans disillusioned
and disappointed. What I see the administration failing to grasp is
twofold:
I-America has a Structural problem, not a cyclical business cycle problem.
Though the cyclical business cycle was greatly worsened by the financial
crisis, I would argue that the structural problem facing the US is
actually a contributor to what caused the financial crisis.
II- America has a Credit demand problem, not a Credit supply problem. It
isn’t that the banks won’t lend, but rather that few can any longer afford
or qualify (on any reasonably and historically sound basis) to borrow.
READ MORE
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PRESERVE & PROTECT: Mapping the Tipping Points
The
economic news has turned decidedly negative globally and a sense of
‘quiet before the storm’ permeates the financial headlines. Arcane
subjects such as a Hindenburg Omen now make mainline news. The retail
investor continues to flee the equity markets and in concert with the
institutional players relentlessly pile into the perceived safety of
yield instruments, though they are outrageously expensive by any
proven measure. Like trying to buy a pump during a storm flood, people
are apparently willing to pay any price. As a sailor it feels
like the ominous period where the crew is fastening down the hatches
and preparing for the squall that is clearly on the horizon. Few crew
mates are talking as everyone is checking preparations for any
eventuality. Are you prepared?
What if this is not a squall but a tropical storm, or even a hurricane?
Unlike sailors the financial markets do not have the forecasting
technology to protect it from such a possibility. Good sailors before
today’s technology advancements avoided this possibility through the use
of almanacs, shrewd observation of the climate and common sense. It
appears to this old salt that all three are missing in today’s financial
community.
Looking through the misty haze though, I can see the following clearly
looming on the horizon.
Since President Nixon took the US off the Gold standard in 1971 the
increase in global fiat currency has been nothing short of breath taking.
It has grown unchecked and inevitably became unhinged from world
industrial production and the historical creators of real tangible wealth.
READ MORE
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Last Update:
09/10/2021 02:46 AM
SCHEDULE: 1st Pass: 5:30AM EST, 2nd Pass: 8:00 AM, 3rd Pass 10:30
AM. Last Pass 5:30 PM
Complete Legend to the Right, Top Items below.
Articles with
highlights, graphics and any pertinent analysis found below.
|
1
1-SOVEREIGN DEBT |
2-EU BANKING CRISIS |
3-BOND BUBBLE |
4-STATE &
LOCAL GOVERNMENT |
5-CENTRAL & EASTERN EUROPE |
6-BANKING CRISIS II |
7-RISK REVERSAL |
|
8-COMMERCIAL REAL ESTATE |
9-RESIDENTIAL REAL ESTATE -
PHASE II |
10-EXPIRATION FINANCIAL
CRISIS PROGRAM |
11-PENSION CRISIS |
12-CHRONIC
UNEMPLOYMENT |
13-GOVERNMENT BACKSTOP
INSUR. |
14-CORPORATE
BANKRUPTCY |
|
TODAY'S TIPPING POINTS UPDATE |
RED ALERT |
AMBER ALERT |
ACTIVITY |
MONITOR |
|

Click to Enlarge

|
09-09-10
GEO-POLITICAL TENSIONS - ISRAEL / KOREA / IRAN
IRAN
ISREAL
KOREA
1-
SOVEREIGN DEBT & CREDIT CRISIS |
GREECE
Beware of Greeks Bearing Bonds Vanity
Fair (Lewis)
As Wall Street hangs on the question “Will Greece
default?,” the author heads for riot-stricken Athens, and
for the mysterious Vatopaidi monastery, which brought down
the last government, laying bare the country’s economic
insanity.
Q&A: Michael Lewis |
Greek lender to fortify balance sheet
FT
GERMANY
Second-Quarter Real GDP Growth - Germany vs. the U.S.
Kasriel
UK
King Mulls `Second Wave' of BOE Bond Purchases as Rebound
Loses Momentum BL
Pawnbrokers: middle classes flock to cash in their
valuables Telegraph
CANADA
Bank of Canada increases overnight rate target to 1 per
cent BofC
IRELAND
Ireland breaks up Anglo Irish as EMU debt jitters return
Telegraph
European Crisis Flares Up in Ireland
WSJ
Ireland's troubled banking system became the latest
flash point in Europe's continuing economic crisis, as the
government said it would split up the weakest of its major
banks to stave off a run by depositors. |
Dublin in move to split Anglo Irish Bank
FT
Separation of property loans and retail deposits
JAPAN
Record Japan debt held Shanghai Daily
Japan hints at measures to halt yen
Reuters
|
Consumer Credit Report - Fed Fed
Consumer Credit in U.S. Fell $3.6 Billion in July
BL
Is Anything Going To Stop The Decline Of Consumer Credit Card Usage
BI
We mentioned the fall in revolving consumer
credit (credit cards) earlier, but this chart really
drives home the point. There's no bottoming happening at
all (yet) The question is: Will anything actually turn
this around? |
Consumer Credit Declines Less Than Expected As Federal Government Is
Once Again Biggest Lender ZH
Consumer credit (SA) came in at $2,418.9 billion, a
decrease of $3.6 billion from a revised June number of
$2,422.5 billion. The decline came exclusively from
revolving credit totals, which dropped from $832.2 billion
to $827.8 billion, even as Non-Revolving credit increased
yet again, as the government is making auto loan almost as
easy as taking out a 150% LTV loan from the bankrupt FHA.
And speaking of the government, take one guess which
holder of consumer credit was the only one to see another
sizable increase in the month of July.... Correct: the
Federal Government, which increased (once again) from
$222.6 billion to $227.0 billion, even as all other
holders of consumer credit declined (especially the Pools
of Securitized Assets category as the shadow economy
continues to shrink), or were flat, as shown on the chart
below. So far the government is able to force
(non-revolving) credit down the throats of consumers.
Soon, even that will end.
The chart below shows monthly (NSA) changes in consumer
credit by holder from April through July.
|
Fed Banks: `Widespread Signs of a Deceleration' in Economy
BL
Beige Book shows slow pace of recovery FT
Fed Banks Saw ‘Widespread Signs of a Deceleration’
BL
Exports Are Sending Out Worrying Signals WSJ
U.S. exports have undergone the kind of V-shaped
recovery that has so far eluded the broader economy. Now,
even this bright spot may be starting to dim. |
Economists Slash U.S. GDP Forecasts Yet Again
BI
|
The Man Responsible for Saving the Euro
Spiegel
The leaders of the 16 member states of the euro zone expect
him to intervene with bailout money should the euro run into
serious trouble in the next three years... |
Basel Capital Ratio Compromise Reached, Zeitler Says
BL
ECB steps up eurozone bond buying FT
Shift From T-Bonds And Into Commodities and Gold? Dorsch
On value of treasuries Econompicdata
4- STATE
& LOCAL GOVERNMENT |
5-
CENTRAL & EASTERN EUROPE |
Big bank bloodbath fears. They're ba-ack! La Monica
Smaller Lenders Struggling to Rally WSJ
While big banks are showing signs of recovering from the
financial crisis, the outlook is worsening for many of the
country's smaller community banks. |
Wall Street Firms to Cut 80,000 Jobs in 18 Months, Whitney Says BL
Gold eyes record high as risk appetite retreats Reuters
Stocks stable but risk appetite remains muted FT
Asian shares encouraged by Fed’s Beige Book report
8-
COMMERCIAL REAL ESTATE |
U.S. Retail Space Availability to Drop in 2011, CB Richard Says
BL
9-RESIDENTIAL REAL ESTATE - PHASE II |
The Bears and the State of Housing NYT (Leonhardt)
Of all the uncertainties in our halting economic recovery, the
housing market may be the most confusing of all. |
Subprime 2.0 Is Coming Soon to Suburb Near You BL
White House Launches New Foreclosure Program To Those 'Underwater' AP
Housing Inventories Rise for Eighth Straight Month WSJ
Financial crisis hits condo associations MW
California Property Tax Rolls Shrink 1.8% in `Historic' Slump BL
Homebuilders Revive Stalled U.S. Projects as Banks Unload Lots
BL
10- EXPIRATION FINANCIAL CRISIS PROGRAM
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11- PENSION & ENTITLEMENTS CRISIS
|
The bleak truth about unemployment Pearlstein
13- GOVERNMENT BACKSTOP INSURANCE |
FDIC Keeps Selling ZH
14- CORPORATE BANKRUPTCIES |
Deflation: The power to destroy weak business FT
Deutsche Bank- Here's The Surge In Corporate Profits That Almost
Guarantees More Hiring Is
Coming
BI
Corporate profits have risen at an astounding 39.5%
cumulative rate since Q4 2008, the fastest in U.S. history,
according to Deutsche Bank. And what that means is a surge in
hiring is coming (emphasis ours).In the past, a rising
share of profits to workers has always
been a good gauge of hiring. Faster job gains are inevitable,
provided the economy does not suffer a negative exogenous
shock. But it's not all good news. Corporate
profits are likely to fall at some point, and it seems to have
already happened, if Deutsche Bank's analysis of corporate
taxes is correct (emphasis ours). According to our
calculations, corporate tax receipts were up 30.9% as of
September 3rd. While this is down from a peak rate of 45.5% as
of May 31, the current growth rate is
clearly robust and would be consistent with at least another
double-digit sequential gain in corporate profits again this
quarter. So even the bad news is good news. Deutsche
Bank suggests the continuing strength in corporate profits is
a sign we won't enter a double dip (emphasis ours). Importantly, the
continued strength in corporate profits should quell concerns
about a double-dip in output, because the economy has never gone into recession when corporate
profits have been growing as strongly as they have been.
Take a look at the rate of corporate tax
increases, a sign of the massive
profit boom: |
China ‘Tightening' Speculation Follows Property Surge BL
“The key drivers of the property bubble are excess liquidity
and lack of investment alternatives, which are still largely in
place” |
China’s young officers and the 1930s syndrome Pritchard
U.S., China Avoid Touchy Issues in Talks WSJ
U.S. and Chinese officials wrapped up three days of high-level
talks with bullish statements about their relationship, reflecting
the determination of both to keep relations on an even keel. |
19- PUBLIC POLICY MISCUES |
STIMULUS II
Republican academics praise Obama’s new proposals Reuters
Obama unveils new stimulus plans FT
Obama surrenders on jobs FT
Obama Launches Fall Fight WSJ
Obama capped a rollout of new economic
policies with a combative speech that tipped the Democratic plan
for the fall campaign: attack the Republicans' policies and try to
monopolize the economic message until Election Day. |
Here's How President Obama's Public Infrastructure Bank Might Work
BI
To The President- URGENT ZH
The President's economic team doesn't seem to know how to fix
the economy. Here are some immediate things he can do to turn it
around, quickly. But he has to ignore his advisers. |
OTHER TIPPING POINT CATEGORIES NOT LISTED ABOVE
19-US PUBLIC POLICY MISCUES
24-RETAIL SALES
26-GLOBAL OUTPUT GAP
31-FOOD PRICE PRESSURES
32-US STOCK
MARKET VALUATIONS
CENTRAL BANKING MONETARY POLICIES, ACTIONS & ACTIVITIES
------------
ECR Research Says That The Point Of Recognition Is Approaching As
The World Realizes Ben Bernanke Is Naked ZH
In recent decades, we have become increasingly
accustomed to central banks coming to the rescue when
stock prices and the economy slide too far. Despite the
fact that economies everywhere have been stimulated
fiscally and monetarily on a large scale since the
outbreak of the credit crisis, the recovery has only been
modest. Worse still, the recovery in the US has already
clearly declined again and it looks as if this will
shortly happen in Europe, too. On the basis of experience
over the past few decades, the assumption is that central
banks will come to the aid once more. Especially as it is
evident that we cannot expect much further help from the
fiscal quarter. In theory, central banks are certainly
capable of helping. In practice, however, in our view they
no longer have much room to maneuver. After all, the
concern is that if monetary policy is loosened much
further confidence in the central banks will be lost. That
swiftly leads to a currency crisis and soaring long-term
interest rates. In other words, a disaster for the
economy.Assuming that there, indeed, turns out to be
little room left for the monetary authorities, then we
foresee the S&P 500 index rapidly falling below the
crucial 1,010 level. In our view, this will be accompanied
by EUR/USD falling over the coming months to quarters
towards approximately parity. We then also envisage yields
on 10-year US and German Treasuries falling further by
around 0.75% before soaring due to fears of further
deteriorating public finances. - ECR Research |
|
GENERAL INTEREST
U.S. Falls in Competitiveness Ranking WSJ
FLASH CRASH - HFT - DARK POOLS
'Flash
crash' may be sparking stock fund withdrawals
USAT
SEC
probes "quote stuffing" practices: Schapiro
Reuters
MARKET WARNINGS
Retail Capitulation- Stock Outflows Surge By Over $7.5 Billion In 18th
Consecutive Week Of Record Stock Market Boycott ZH
This is getting really ridiculous. In the week ended September
1, domestic equity mutual funds saw a near record $9.5 billion in
outflows: the biggest one week outflow in 2010 since the $13.4
billion redeemed in the Flash Crash week. The trend developing is
simple: retail investors withdraw increasingly greater numbers in
weeks in which the market is down even a little, and withdraw just
a little in weeks in which the low-volume melt up presents them
with an opportunity to get out at a better price level. Of course,
the common thread is that as we have said for 18 consecutive
weeks, retail just wants out. And now that, courtesy of Mary
Schapiro, retail has finally put two and two together, and knows
that even the regulators are concerned about redemptions, which
are perceived by the SEC as being a function of distrust in market
structure, we now fully expect more and more redemptions. Year to
Date the total pulled out is a whopping $64 billion, incidentally
with both inflows and the market having peaked at the same time in
April. On thr other hand, if the market were tracking mutual fund
redemptions (whose net liquidity is now down to just 3.5% of
assets and getting worse by the day), the S&P would be in the 900
range. Once the destructive impact of the Fed's daily meddling in
the stock market is eliminated, it will get there. The longer
stocks are artificially held up at current artificial levels, the
greater the crash when reality and anti-gravity finally meet. |
Worst Quarter In Years Shaping Up For Hedge Funds Formerly Known As Bank
Holding Companies ZH
The third quarter will close in 16 market days and
unfortunately for the TBTFs this means that Q3 will be the most
disappointing quarter in years, unless market volume picks up
dramatically in the next 3 weeks. Alas, due to the double whammy
of the flattest yield curve in years, and the wholesale
dereliction of stock trading by retail and other investor classes,
the recently key profit drivers for Wall Street banks will be most
disappointing. Since M&A has not picked up, banks will be hoping
that underwriting advisory can fill in the hole. Alas, IPOs never
managed to get out of the gate, which means the fate of EPS
targets being met lies in IG and HY bond issuance proceeds.
However, with underwriting proceeds of just 1% in the case of the
former, it will take a lot for this category to recoup even a
small portion of lost revenue in the much more profitable market
making/flow/prop category. Lastly, the old trick of reducing NPL
provisions will not work this time. All in all, if you run into
your banks CEO/CFO/COO, stay out of their way: most likely they
are not having a good day.
The chart below shows the ridiculously low volume on the NYSE
over the past two years. Note the ever declining volume, and also
the Q3 average volume which is about 20% lower than a year ago.
The same is most certainly true for cash and CDS trading, as many
hedge funds have already thrown in the towel.
|
MARKET &
GOLD MANIPULATION
VIDEO TO WATCH
QUOTE OF THE WEEK
To paraphrase Oscar Wilde
Investors
know the price of everything but the value of nothing.
Author Unknown
In therapy, you have to accept a mistake to move on.
At times, this realization will be painful but in the end
it is better for you. Right now Wall Street is in
complete denial and trying to pretend all is well.
Their profits are up but all that is happening is a wealth
transfer from taxpayers to this unproductive group.
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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.ont>
© 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
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09-09-10
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TIPPING POINTS |
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CREDIT CRISIS |
2-EU BANKING CRISIS |
3-BOND BUBBLE |
4-STATE & LOCAL
GOVERNMENT |
5-CENTRAL & EASTERN EUROPE |
6-BANKING CRISIS II |
7-RISK REVERSAL |
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8-COMMERCIAL REAL ESTATE |
9-RESIDENTIAL REAL ESTATE -
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10-EXPIRATION FINANCIAL
CRISIS PROGRAM |
11-PENSION CRISIS |
12-CHRONIC
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13-GOVERNMENT BACKSTOP
INSUR. |
14-CORPORATE
BANKRUPTCY |
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18-INTEREST PAYMENTS |
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24-RETAIL SALES |
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26-GLOBAL OUTPUT GAP |
27-CONFIDENCE - SOCIAL UNREST |
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31-FOOD PRICE PRESSURES |
32-US STOCK MARKET VALUATIONS |
33-PANDEMIC |
34-S$ RESERVE CURRENCY |
35-TERRORIST EVENT |
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Book Review- Five Thumbs Up for Steve Greenhut's
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