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COMMENTARY for all articles by
Gordon T Long
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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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READER ROADMAP
- 2010 TIPPING POINTS aid to
positioning COMMENTARY
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Last Update:
09/12/2021 05:49 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.
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1
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1-SOVEREIGN DEBT |
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2-EU BANKING CRISIS |
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3-BOND BUBBLE |
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4-STATE &
LOCAL GOVERNMENT |
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5-CENTRAL & EASTERN EUROPE |
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6-BANKING CRISIS II |
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7-RISK REVERSAL |
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8-COMMERCIAL REAL ESTATE |
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9-RESIDENTIAL REAL ESTATE -
PHASE II |
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10-EXPIRATION FINANCIAL
CRISIS PROGRAM |
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11-PENSION CRISIS |
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12-CHRONIC
UNEMPLOYMENT |
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13-GOVERNMENT BACKSTOP
INSUR. |
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14-CORPORATE
BANKRUPTCY |
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TODAY'S TIPPING POINTS UPDATE |
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RED ALERT |
AMBER ALERT |
ACTIVITY |
MONITOR |
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Click to Enlarge
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09-11-10
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1-
SOVEREIGN DEBT & CREDIT CRISIS |
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Wholesale inventories rise 1.3 percent in July
AP
PDF
| In the monthly CMBS Market Trends update from Fitch we read that the hotel
delinquency rate has just passed the psychological 20% delinquency threshold for
the first time. As of August, 20.80% of all hotel-backed loans is in some stage
of delinquency (up from 18.64% in July): that means that one in five (and
rising) hotel-backed loans will likely never be repaid and proceed to
liquidation. These and such are the ways, when underlying assets refuse to
generate enough cash flow to satisfy interest requirements, let along create
equity value... Which should explain why publicly-traded REITs are trading at
near record highs. |
Goldman's Roadmap Of The Progressive Economic
Deterioration ZH
Click to Enlarge
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Trichet Says Will `Take Time' to Wean Banks Off ECB Emergency
Liquidity BL
Deutsche Bank fires first shot in rush for capital Reuters
El-Erian Says Bond Inflows Too Much of Good Thing BL
Where have all the direct bids gone? FTA
Thursday’s US 30-year Treasury auction proved more telling than might have been
expected.As Reuters reported (our emphasis):
NEW YORK, Sept 9 (Reuters) – An auction of $13 billion of reopened 30-year bonds
met with comparatively soft demand on Thursday,
rounding out this week’s sales of $67 billion of U.S. government coupon-bearing
securities.The auction “tailed,” with a high yield of 3.82 percent — above
where the comparable securities were trading on the open
market and indicating bidders moved aggressively to cheapen
the bonds going into the sale.
Primary dealers, the large banks and investment firms that do business
directly with the Federal Reserve, also had to take home about 56
percent of the paper, which is the highest share since October 2009.
Direct bidders took 8.3 percent, which was the lowest since January.
Unsurprisingly, long-term yields sold off on the lacklustre
demand for the auction:
And what was really interesting was the low level of
direct bids — those struck by non-primary dealers bidding on
their own accounts, i.e. institutional investors like hedge funds
or bond funds — which averaged 8 per cent versus a 22 per cent
average.
What’s worse, as Reuters’ IFR Markets points out, it’s likely
that the 8 per cent represented bids from aspiring primary dealers
anyway, meaning the Street probably ended up swallowing as much as
64 per cent of the auction:
Oh what a difference a day, or better said an auction makes as treasuries seemed
to lose their luster one minute after the $13 bln 30-year auction deadline.
Indeed the Direct bid, the bulk of which is generally real
money investment funds, absolutely plummeted from an average
of 22% to just over 8% while Indirects only were able to
muster an average 36% take-down.
Even worse the 8.3% Directs was likely spot on the
average take for aspiring dealers (average about $1.2 bln),
thus the Street swallowed almost 64% of this auction (vs
closer to an average of 53% when adding in aspiring dealers).
The rather dismal result means that the last six treasury coupon auctions
(2s,5s,7s plus 3s,10s and 30s) are now all underwater and that more than a few
on the Street are looking for a chair lest the rally music has stopped.
Which, needless to say, suggests some changing sentiment despite on first glance
a very average and respectable 2.73 times cover for the auction.Although, according to Barclays Capital, the weak final investor interest may
have been driven by relatively stronger economic data and low absolute yield
levels.
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4- STATE
& LOCAL GOVERNMENT |
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5-
CENTRAL & EASTERN EUROPE |
BASELL III
Tough Bank Rules Coming WSJ
| International banking regulators meet this weekend in Basel,
Switzerland, to hammer out the details of a pact that will have
lasting consequences for the world economy. |
Why
New Bank Capital Rules Could Make Things Worse CNBC
German Push to Delay Basel Capital Rules Meets U.S. Opposition BL
Bank investors get the jitters over Basel III FT
|
8-
COMMERCIAL REAL ESTATE |
One In Five Hotel-Backed Loans Is Now Delinquent ZH
| In the monthly CMBS Market Trends update from Fitch we read
that the hotel delinquency rate has just passed the psychological
20% delinquency threshold for the first time. As of August, 20.80%
of all hotel-backed loans is in some stage of delinquency (up from
18.64% in July): that means that one in five (and rising)
hotel-backed loans will likely never be repaid and proceed to
liquidation. These and such are the ways, when underlying assets
refuse to generate enough cash flow to satisfy interest
requirements, let along create equity value... Which should
explain why publicly-traded REITs are trading at near record
highs. |
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9-RESIDENTIAL REAL ESTATE - PHASE II |
Fixing America’s Broken Housing Market Stiglitz
Is this your grandfather’s mortgage crisis? Lessons from the 1930s VOX
Why You Should Blame Your Grandparents For The Mortgage Crisis
BI
Here's Why A 9% Fall In Property Prices Is Coming In 2010 BI
| We believe an ambitious destruction
of credit-bubble debt investments would and will allow the economy
to roar back to life. This camp says the creative destruction of
debt following a credit bubble is the silver bullet, the radical
magic, the Holy Grail, the gift of life. |
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10- EXPIRATION FINANCIAL CRISIS PROGRAM
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11- PENSION & ENTITLEMENTS CRISIS
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13- GOVERNMENT BACKSTOP INSURANCE |
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14- CORPORATE BANKRUPTCIES |
U.S. Corporate Bonds: Default Rate Downtrend Nearly Over?
BCAR
SEC Will Weigh Rules Aimed at Preventing Companies From Concealing Debt
BL
Congress Yuan Action May Spark China Treasuries Sale, Roach Says BL
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The U.S. House Ways and Means Committee is set to hold hearings on
one such bill next week that might levy trade sanctions against
China... |
Yuan Completes Biggest Weekly Gain Since June on U.S. Pressure BL
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“China’s move today amounts to political theater, a movement meant
to keep the U.S. happy at a time when Geithner, the European Union
and International Monetary Fund are all calling foul” |
China's trade surplus narrows sharply Dow Jones
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But its surplus with the US made up 90 per cent of the total and
widened from two thirds in July. |
Empty Flats Spell Trouble Xie
|
Measuring the size of the property bubble in China by reference to
the number of empty flats has become a hot topic of discussion. |
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19- PUBLIC POLICY MISCUES |
The Full List Of How Obama Spent $792 Billion On Fiscal Stimulus
BI
OTHER TIPPING POINT CATEGORIES NOT LISTED ABOVEOTHER TIPPING POINT CATEGORIES NOT LISTED ABOVE
19-US PUBLIC POLICY MISCUES
24-RETAIL SALES
26-GLOBAL OUTPUT GAP
31-FOOD PRICE PRESSURES
Sowing Seeds of Fear WSJ
| Traders, food companies and aid agencies are taking a keen
interest as Russian farmers plant the next wheat crop, amid fears
that the world could face a food shortage next year. |
32-US STOCK
MARKET VALUATIONS
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CENTRAL BANKING MONETARY POLICIES, ACTIONS & ACTIVITIES
------------
Bernanke conundrum is Obama’s problem Reuters
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GENERAL INTEREST
The
Significance of Consumer Deleveraging Comstock
|
For some time it has been our view that the recent recession,
unlike all other post-war recessions, was caused by a credit
crisis, and that it would therefore be followed by a series of
weak recoveries and frequent recessions until consumers
successfully deleveraged their exceedingly heavy debt loads.
That scenario now seems to be happening in accordance with our
projections. A statistical economic recovery that was
already far weaker than average has decelerated even further and
the ECRI weekly leading indicator index strongly suggests that
another recession may be in store.
Consumers have only begun to cut back on their severe debt
burdens, and the process will take a number of years.
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Debt, financial crisis hurt U.S. competitiveness WP
Nancy Pelosi heads to Canada to shut down America's next big oil source
BI
Look How Much Poorer We Are Than Three Years Ago BI
| With asset prices having fallen dramatically since 2007, Americans have seen
their total net worths plummet.Household net worth is still far below the starting quarter of the recession,
and the pace in which it is growing lags every other recession back to 1969.This chart shows just how far we need to go to get back to zero, via
Mark Thomas
And with many of those assets now underwater, it's pretty clear Americans are
spending their hard earned pay (or unemployment checks)
deleveraging from a period of financial profligacy that led to this
recession.Mark Thoma argues this is just the reason we need to see tax cuts increase,
to avert a Japanese scenario.Japan made the mistake of allowing balance
sheet problems for both households and banks to linger and the
result was a prolonged recession. We seem to have gotten the
message about banks, though not fully — the problems are not being
resolved as fast as I’d like to see — but the message that
households need just as much attention seems to be harder for
policymakers to get.
Maybe
they're starting to understand now?
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FLASH CRASH - HFT - DARK POOLS
MARKET WARNINGS
Why Nobody Trades During Regular Hours Any More (And How Prop Funds Just
Stop Trading When Volatility Spikes) ZH
| For those who follow our periodic updates on intraday stock
volume, today's article by the Wall Street Journal which focuses
on the dramatic decline in activity during regular working hours
will come as no surprise. In a piece looking at prop trading shop
Briargate (oh so witty anagram of arbitrage), founded by several
former NYSE specialists, we learn that at least one firm (and
likely many more) now no longer does any trading during the hours
of 11 to 2. As this creates a feedback loop of inactivity, pretty
soon the core of daily stock market activity will merely be the
half an hour of action at the open, and the dark pool-ETF-open
exchange rebalance at the very close, with everything inbetween
deemed obsolete. Of course, what this will do, is create even more
volatility in trading, force an even greater decline in stock
trading volumes (and pain for Wall Street firms), and a further
divergence between stocks and fundamentals, as momentum trading
gains an even more prominent role in determine "price discovery."
|
The Death of Equities Charlie Fell
Zimmermann: ‘Tracking every turn that occured in 1930” CNBC
Rumors About The Demise Of US Equity Culture, Premature Trader’s
Narrative
No Bull: The Public Won't Come to Market Barron’s
Whitney Tilson- "We've Never Had More Conviction" In A Short BI
Liquidnet Lays Off 12% Of Workforce As Plunge In Stock Trading Volumes Now
Causing Widespread Pain ZH
MARKET &
GOLD MANIPULATION
IMF Resumes Direct Gold Dumping, Sells 10 Tons To Bangladesh Zero
Hedge
IMF
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
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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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ACCEPTING
PRE-ORDERS
|
TIPPING POINTS |
|
1-SOVEREIGN DEBT &
CREDIT CRISIS |
|
2-EU BANKING CRISIS |
|
3-BOND BUBBLE |
|
4-STATE & LOCAL
GOVERNMENT |
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5-CENTRAL & EASTERN EUROPE |
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6-BANKING CRISIS II |
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7-RISK REVERSAL |
|
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8-COMMERCIAL REAL ESTATE |
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9-RESIDENTIAL REAL ESTATE -
PHASE II |
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10-EXPIRATION FINANCIAL
CRISIS PROGRAM |
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11-PENSION CRISIS |
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12-CHRONIC
UNEMPLOYMENT |
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13-GOVERNMENT BACKSTOP
INSUR. |
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14-CORPORATE
BANKRUPTCY |
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15-CREDIT CONTRACTION II |
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16-US FISCAL IMBALANCES |
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17-CHINA BUBBLE |
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18-INTEREST PAYMENTS |
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19-US PUBLIC POLICY MISCUES |
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20-JAPAN DEBT DEFLATION SPIRAL |
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21-US RESERVE CURRENCY. |
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22-SHRINKING REVENUE GROWTH RATE |
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23-FINANCE & INSURANCE WRITE-DOWNS |
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24-RETAIL SALES |
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25-US DOLLAR WEAKNESS |
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26-GLOBAL OUTPUT GAP |
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27-CONFIDENCE - SOCIAL UNREST |
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28-ENTITLEMENT CRISIS |
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29-IRAN NUCLEAR THREAT |
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30-OIL PRICE PRESSURES |
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31-FOOD PRICE PRESSURES |
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32-US STOCK MARKET VALUATIONS |
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33-PANDEMIC |
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34-S$ RESERVE CURRENCY |
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35-TERRORIST EVENT |
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36-NATURAL DISASTER |
Book Review- Five Thumbs Up for Steve Greenhut's
Plunder! Mish
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