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COMMENTARY for all articles by
Gordon T Long
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CURRENCY WARS: Debase, Default, Deny!
 In
September 2008 the US came to a fork in the road. The Public Policy
decision to not seize the banks, to not place them in bankruptcy court
with the government acting as the Debtor-in-Possession (DIP), to not split
them up by selling off the assets to successful and solvent entities, set
the world on the path to global currency wars.
By lowering interest rates and effectively guaranteeing a weak dollar, the
US ignited an almost riskless global US$ Carry Trade and triggered an
uncontrolled Currency War with the mercantilist, export driven Asian
economies. We are now debasing the US dollar with reckless spending and
money printing with the policies of Quantitative Easing (QE) I and the
expectations of QE II. Both are nothing more than effectively defaulting
on our obligations to sound money policy and a “strong US$”. Meanwhile
with a straight face we deny that this is our intention.
Though prior to the 2008 financial crisis our largest banks had become
casino like speculators with public money lacking in fiduciary
responsibility, our elected officials bailed them out. Our leadership
placed America and the world unknowingly (knowingly?) on a preordained
destructive path because it was politically expedient and the easiest way
out of a difficult predicament. By kicking the can down the road our
political leadership, like the banks, avoided their fiduciary
responsibility. Similar to a parent wanting to be liked and a friend to
their children they avoided the difficult discipline that is required at
certain critical moments in life. The discipline to make America swallow a
needed pill. The discipline to ask Americans to accept a period of intense
adjustment. A period that by now would be starting to show signs of
success versus the abyss we now find ourselves staring into. A future
that is now massively worse and with potentially fatal pain still to come.
READ MORE |
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CURRENCY WARS: Misguided Economic Policy
 The
critical issues in America stem from minimally a blatantly ineffective
public policy, but overridingly a failed and destructive Economic
Policy. These policy errors are directly responsible for the opening
salvos of the Currency War clouds now looming overhead.
Don’t be fooled for a minute. The issue of Yuan devaluation is a political
distraction from the real issue – a failure
of US policy leadership. In my
opinion the US Fiscal and Monetary policies are misguided. They are wrong!
I wrote a 66 page thesis paper entitled “Extend
& Pretend” in the fall of 2009 detailing why the proposed Keynesian
policy direction was flawed and why it would fail. I additionally authored
a
full series of articles from January through August in a broadly
published series entitled “Extend & Pretend” detailing the predicted
failures as they unfolded. Don’t let anyone tell you that what has
happened was not fully predictable!
Now after the charade of Extend & Pretend has run out of momentum and more
money printing is again required through Quantitative Easing (we predicted
QE II was inevitable in
March), the responsible US politicos have cleverly ignited the markets
with QE II money printing euphoria in the run-up to the mid-term
elections. Craftily they are taking political camouflage behind an
“undervalued Yuan” as the culprit for US problems. Remember, patriotism is
the last bastion of scoundres
READ MORE
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READER ROADMAP
- 2010 TIPPING POINTS aid to
positioning COMMENTARY
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List
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Last Update:
10/30/2010 02:46 AM
SCHEDULE: 1st Pass: 5:30AM EST, 2nd Pass: 8:00 AM, 3rd Pass 10:30
AM. Last Pass 5:30 PM
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EU leaders back limited treaty change |
FT |
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EU Leaders Agree to Plan Permanent Bailout Fund |
WSJ |
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The Euro Is Sliding And PIIGS CDS Are Blowing Out Again |
BI |
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Irish, Spanish Banks Fail to Reduce Dependence on ECB
Funding- Euro Credit |
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EU Bows to Germany's Call for Permanent Debt Mechanism,
Snubs Vote Curbs |
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Martin Wolf Britain has gone climbing without a rope |
FT Wolf |
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Japanese industrial output slumps |
FT |
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Japan Output Slide, Deeper Deflation Are `Negative Surprise'
for Economy |
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Japan 'Totally Behind' in Fighting Deflation as Fed Gears Up |
Bloomberg |
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Bank of Japan hot on the Fed's heels |
Barr |
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EU 'haircut' plans rattle bondholders |
Prichard |
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This Is The Emerging Market Bond Bubble |
BI |
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The scary actual U.S. government debt |
G&M |
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Investors in Riskier Bonds May Not be Coming Back |
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Chicago debt rating downgraded |
FT |
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College Tuition Goes Parabolic |
BI |
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Volcker on His 'Rule'- Keep It Broad |
WSJ |
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Bond Investors to Complain Over Bearing Costs of
Robo-Signing |
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Managing U.S. Mortgages Makes Desoer Besieged at Bank of
America |
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Foreclosure Freeze Cuts Sales, Supply in Hardest-Hit U.S.
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Warning- Retirement Disaster Ahead |
WSJ |
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Roach calls U.S. China-bashing 'pathetic' |
Fortune |
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Bonds Suggest China Central Bank's Inflation Battle to Heat
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A presidency heading for a fiscal train wreck |
Roubini |
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U.S. Midterm Elections, Obama and Iran |
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Upcoming Elections |
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| BP OIL |
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Halliburton and BP knew risk before spill |
FT |
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Investigators pose uncomfortable questions |
FT |
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Contractor's Work on BP Rig Faulted |
WSJ |
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CENTRAL BANKING & MONETARY POLICY |
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Is More QE in Sight? |
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Employment is Main Focus of Fed Policy |
N Trust |
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The Federal Reserve Stirs Poltergeist Of Hyperinflation,
Weimar Collapse |
Forbes |
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Buck stops with Bernanke in QE2 debate |
FT |
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GENERAL INTEREST |
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What Would Ludwig von Mises Do? |
EPJ |
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317 years old and still going strong |
Hulbert |
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Foreclosures, capital and sickening cures |
Saft |
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Buy & Sell: The recovery illusion |
Financia Post |
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MARKET WARNINGS |
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This Level Of Bullishness Is Horrible For Stocks, Unless |
BI |
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| G20
MEETING |
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G-20 Urges IMF to Offer Loans to Ailing Regions |
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CURRENCY WARS |
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Currencies to Dominate Asia Summit |
WSJ |
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Gold Will Outlive Dollar Once Slaughter Comes |
Hathaway |
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| Q3
EARNINGS |
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Nomura's Quarterly Net Plunges as Commissions, Trading
Decline |
Bloomberg |
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Microsoft's Profit Jumps 51% |
WSJ |
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& GOLD MANIPULATION |
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'Inside Job': A damning indictment of greed in the financial
meltdown |
Philly |
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Silver Short Position Could Cost JP Morgan Billions in
Losses |
NIA |
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JPMorgan, HSBC Accused of Manipulating Silver Futures |
Bloomberg |
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| VIDEO
TO WATCH |
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‘Fault Lines’ wins the Financial Times and Goldman Sachs
Business Book of the Year 2010 |
FT |
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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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10-29-10
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1-
SOVEREIGN DEBT & CREDIT CRISIS |
|
| time (et) |
report |
period |
Actual |
Consensus
forecast |
previous |
| FRIDAY, Oct. 29 |
| 8:30 am |
GDP |
3Q |
|
2.1% |
1.7% |
| 8:30 am |
Employment cost index |
3Q |
|
0.5% |
0.5% |
| 9:45 am |
Chicago PMI |
Oct. |
|
57.0% |
60.4% |
| 10 am |
Consumer sentiment |
Oct. |
|
68.5 |
67.9 |
|
EU 'haircut' plans rattle bondholders Pritchard
This Is The Emerging Market Bond Bubble
BI
|
This chart doesn't need much explanation. It's
the amount of assets held by emerging market bond funds. As
Bank of America put it in a presentation on quantitative easing
and the hunt for yield, this is one of the "Unintended
Consequences" of QE. It's a stark visualization of the mad dash to
lend money to anyone that will pay you one iota of yield.
Presenting, the emerging market bond bubble. Hope your hunt for
extra yield goes better than every other time folks have pursued
the same strategy.
|
The scary actual U.S. government debt G&M
Investors in Riskier Bonds May Not be Coming Back
WSJ
|
4- STATE
& LOCAL GOVERNMENT |
Chicago debt rating downgraded FT
College Tuition Goes Parabolic BI
|
The college education bubble may be one of the
few asset bubbles left in the United States unscathed by the
recession. It is, in many ways, an interesting bubble, because the
underlying asset is human capital. But you can't foreclose on a
human, and that human also can't declare bankruptcy on their
student loans. But the value of that human can plummet in an
unemployment crisis (earnings) or if their career is in decline
(real estate developer). But, like the real estate bubble
before it, easy capital from the U.S. government is spurring it
forward. Access to government loans and low interest rates make
the high up front costs of education seem plausible.
But all of that easy money is driving up the
cost of education across the country, as colleges and universities
pile it into
professor salaries,
new
construction,
football coaches, and
land grabs.
Tuition continues to rise, according to the College Board's
latest survey, even though the country is in its deepest downturn
since the great depression.
Check out the full College Board presentation here
|
|
5-
CENTRAL & EASTERN EUROPE |
Volcker on His 'Rule'- Keep It Broad
WSJ
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Former Fed Chairman Paul Volcker is telling administration
officials they should avoid writing narrow regulations that banks
can seek to exploit or evade.
|
|
8-
COMMERCIAL REAL ESTATE |
|
9-RESIDENTIAL REAL ESTATE - PHASE II |
Bond Investors to Complain Over Bearing Costs of Robo-Signing
BL
Managing U.S. Mortgages Makes Desoer Besieged at Bank of America
BL
Foreclosure Freeze Cuts Sales, Supply in Hardest-Hit U.S. States
BL
|
10- EXPIRATION FINANCIAL CRISIS PROGRAM
|
|
11- PENSION & ENTITLEMENTS CRISIS
|
Warning- Retirement Disaster Ahead WSJ
|
Don't let the rally in the stock and bond markets fool you.
Many Americans are still hurtling towards a retirement disaster.
Few realize it. Even many of those running the big pension funds
don't know.
That's the conclusion of John West and Rob Arnott at Research
Affiliates, an investment management firm, in Newport Beach,
Calif. In their latest report, "Hope
Is Not A Strategy," they have some numbers to back it up.
|
|
13- GOVERNMENT BACKSTOP INSURANCE |
|
14- CORPORATE BANKRUPTCIES |
Roach calls U.S. China-bashing 'pathetic' Fortune
Bonds Suggest China Central Bank's Inflation Battle to Heat Up
BL
|
19- PUBLIC POLICY MISCUES |
A presidency heading for a fiscal train wreck
FT (Roubini)
U.S. Midterm Elections, Obama and Iran
Stratfor
Upcoming Elections Wells Fargo
OTHER TIPPING POINT CATEGORIES NOT LISTED ABOVE
24-RETAIL SALES
26-GLOBAL OUTPUT GAP
31-FOOD PRICE PRESSURES
32-US STOCK
MARKET VALUATIONS
GENERAL INTEREST
What Would Ludwig von Mises Do? EPJ
317 years old and still going strong Hulbert
Foreclosures, capital and sickening cures Saft
Buy & Sell: The recovery illusion Financial Post
| The hedge fund manager believes the United States, Japan, most
of Europe, and potentially even Canada will go back into recession
in the next three to six months. |
FLASH CRASH - HFT - DARK POOLS
MARKET WARNINGS
This Level Of Bullishness Is Horrible For Stocks, Unless BI
Unless it's 2003 (i.e. a real recovery year) all over again.
See,
earlier we noted that the AAII sentiment index is officially
in uber-bull territory, with optimism hitting a two-year high.
This is of concern to BTIG's Mike
O'Rourke, who has been turning cautious everytime this
sentiment index jumps.
But.. Despite the flat performance of the Equity market, it was truly a mixed day. One key negative
was the 70.34% Bullish reading on the AAII sentiment survey. After the very pessimistic reading
in early July, we noted that we expected the July 1st low to be the equity market low for 2010.
We frequently mention that we think very highly of this indicator and that a reading above 70%
Bullish is a “sell signal.” This is the first such sell signal since February 23, 2007. This reading is
not enough to shift us out of the Bullish camp, but it makes us cautious. As we have noted in
the past, 2003 serves is the caveat for adhering to the sell signal when economic data begins to
show signs of improvement (chart below). If economic data begins to exhibit signs of recovery
as it did throughout 2003, the market can continue to rally despite AAII being in sell territory
most of the year. That leads into the positive news of the day, which was the Initial Jobless
Claims report. Today’s reading of 434,000 claims was the second lowest of 2010, and you have
to go back to the summer of 2008 to see consistently lower readings. As we have advised since
August, if we continue to follow similar patterns to last year, there is a high likelihood that Initial
Claims will break below 400,000 before year end. |
G20
G-20 Urges IMF to Offer Loans to Ailing Regions WSJ
|
The Group of 20 leaders are likely to ask the International
Monetary Fund to devise new ways to lend to countries in distress
during a financial meltdown.
|
CURRENCY WARS
Currencies to Dominate Asia Summit WSJ
|
Asia's sharply rising currencies and an upcoming election in
military-run Myanmar are set to dominate an annual regional summit
in Vietnam this weekend, with Southeast Asian nations already
pushing for fresh efforts to prevent sudden foreign-exchange
swings from undermining their export-driven economies.
Analysts say countries such as Thailand and the Philippines
will find it difficult to convince China to let its closely
controlled yuan rise more freely, a move they hope would relieve
some of the upward pressure on their currencies, which have been
driven higher in recent months by a surge of global investment
flows away from dollar-denominated assets.
|
Gold Will Outlive Dollar Once Slaughter Comes BL (Hathaway)
The world’s monetary system is in the process of melting down
Q3 EARNINGS
Nomura's Quarterly Net Plunges as Commissions, Trading Decline
BL
Microsoft's Profit Jumps 51% WSJ
|
Microsoft's quarterly profit climbed 51% as it benefited from a
strong demand for its Windows 7 operating system and Office 2010,
despite concerns about consumer demand for computers.
|
MARKET &
GOLD MANIPULATION
'Inside Job': A damning indictment of greed in the financial meltdown
Philly
Silver Short Position Could Cost JP Morgan Billions in Losses NIA
JPMorgan, HSBC Accused of Manipulating Silver Futures BL
AUDIO / VIDEO
‘Fault Lines’ wins the Financial Times and Goldman Sachs Business Book of
the Year 2010 FT
| One of the few economists to see the financial crisis coming
has won the Financial Times and Goldman Sachs Business Book of the
Year award. Raghuram Rajan collected the £30,000 prize for 'Fault
Lines' in New York on Wednesday, and afterwards talked to Andrew
Hill, City Editor, about who's to blame for the financial crisis
and how the financial system remains fractured. |
QUOTE OF THE WEEK
|
"The global financial system continues to be unsound in
the same way that a Ponzi scheme is unsound: there are not
enough cash flows to ultimately service the face value of all
the existing obligations over time. A Ponzi scheme may very
well be liquid, as long as few people ask for their money back
at any given time. But solvency is a different matter -
relating to the ability of the assets to satisfy the
liabilities."
John Hussman
No Margin
of Safety, No Room for Error
|
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BUY ANY BOOK
GET 2 MONTH SUBSCRIPTION TO MONTHLY
MARKET COMMENTARY |
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PROMOTION DETAILS |
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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.
|
READING
THE RIGHT BOOKS? NO TIME?
WE HAVE IT ANALYZED
& INCLUDED IN OUR LATEST RESEARCH PAPERS!
ACCEPTING
PRE-ORDERS
|
TIPPING POINTS |
|
1-SOVEREIGN DEBT &
CREDIT CRISIS |
|
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 |
|
|
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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 |
|
20-JAPAN DEBT DEFLATION SPIRAL |
|
21-US RESERVE CURRENCY. |
|
22-SHRINKING REVENUE GROWTH RATE |
|
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 |
|
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
|
