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POSTS: WEDNESDAY 11-24-10
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Last Update:
11/25/2010 02:36 PM
SCHEDULE: 1st Pass: 5:30AM EST, 2nd Pass: 8:00 AM, 3rd Pass 10:30
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KOREA |
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S. Korea vows 'stern retaliation' against N. Korea's attacks |
Yonhap |
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Japans Calls For Attack On North Korea, Tensions Mount After
Shelling |
Intel Hub |
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Unpredictable (Korean) geopolitical risk, illustrated |
FT Alpha |
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US to send aircraft carrier to South Korea |
FT |
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Obama Promises `Unshakable' Support for S. Korea |
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Fears of Domino Effect Pervade Europe |
WSJ |
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Greece Will Need `Extra Effort' to Meet 2011 Deficit, EU-IMF
Say |
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I.M.F. Clears Latest Installment of Aid to Greece |
NY Times |
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The Complete Guide To The Oncoming Spanish Debt Crisis That
Everyone Is Terrified Of |
BI |
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Is The Bond Wolfpack Going To Skip Right Over Portugal And
Start Feasting On Spain |
BI |
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Spanish 10 Year Bond Spreads Hit All Time Wides |
ZH |
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IRELAND |
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The underwhelming Irish bailout |
Salmon |
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Markets: Ireland bail-out a failure |
Telegraph |
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Ireland's sacrifice may well sink eurozone, not save it |
Prosser |
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Irish P.M.'s own party rebels, plans to replace him |
AP |
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Who are the bond holders we are bailing out? |
Golem XIV |
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Ireland's Banks Are All For Sale: Central Banker |
Reuters |
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IMM positioning: Euro longs unwound ahead of Irish bail-out |
Danske |
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What Will Happen To Ireland (And Various MNCs) When Ireland
Is Finally Forced To Hike Tax Rates |
ZH |
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Irish political turmoil complicates financial-system fix |
Washington Post |
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Japanese rushing to Shanghai for better jobs |
Asahi |
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The greying of Japan |
Economist |
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USA |
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U.S. Jobless
Claims Decline to 407,000, Lowest Since July 2008 |
Bloomberg |
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U.S.
Consumer Spending Rises for Fifth Month as Incomes Rebound |
Bloomberg |
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Orders for
U.S. Durable Goods Unexpectedly Dropped in October |
Bloomberg |
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October new
home sales drop 8.1 pct., prices fall |
AP |
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There Are Massive Risks In Emerging Markets Too |
BI |
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Munis Yielding More Than Treasuries for First Time Since
Crisis Amid Sales |
Bloomberg |
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United STRAITS of America: The Muni Bond Crisis Is Here |
EW |
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Muni-Bond Issuers May Face Default `Crunch' as Stimulus
Ebbs, Lehmann Says |
Bloomberg |
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Residential construction in United States: Will 2011 be
another year to write off? |
NBF |
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Fannie
Mae, Freddie Mac and the Coming Wave of Foreclosure Buybacks |
Reality Trac |
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'Shadow Inventories,' a Dark Cloud Over Housing |
Barron's |
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Some States Weigh Unthinkable Option: Ending Medicaid |
WSJ |
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Kamikaze Capitalism: GOP out to destroy |
Farrell |
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GOP Puts the `Lame' Back in Lame-Duck Session |
Baum |
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REMAINING |
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Yuan begins trading against the rouble |
China Daily |
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Fed Trims Outlook on Growth, Jobs |
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CENTRAL BANKING & MONETARY POLICY |
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Fed's power of the press hits limit |
MSN (Fleck) |
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Japan's Tale of Caution On Fed Monetary Policy |
WSJ |
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Does the Fed Create Money? |
Pento |
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Robert Prechter Explains The Fed, Part II |
EW |
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Time to revamp the Fed’s flawed mandate |
Roach |
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Bernanke Admits QE2 May Fail, Requests Fiscal Stimulus Now |
Lenzner |
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Fed Critics In Strange Position: Defending The Fed |
Huffington Post |
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Fed Adopts Political Tactics on Critics |
NY Times |
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GENERAL INTEREST |
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A recession to remember: Lessons from the US, 1937-1938 |
VOX |
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MARKET WARNINGS |
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Is A Dropping VIX Masking Rising "Fear" In Most Other Asset
Classes... And Does Hedge Fund SPY Pair-Hedging Explain The
Market Melt Up ZH |
ZH |
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CURRENCY WARS |
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China Inflation May Be Too Hot for Controls Amid Cash Glut |
Bloomberg |
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Q3
EARNINGS |
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MARKET
& GOLD MANIPULATION |
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How the 'experts' get the insider info |
Fortune |
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While The U.S. Prints And Spends, Russia Loads The Boat With
Gold |
Golden Truth |
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VIDEO
TO WATCH |
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Complete Legend to the Right, Top Items below.
Articles with
highlights, graphics and any pertinent analysis found below.
|
LATEST RESEARCH PUBLICATIONS |
RSS
 |
COMMENTARY for all articles by
Gordon T Long
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 |
|
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
|
|
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

|
11-24-10
GEO-POLITICAL TENSIONS - ISRAEL / KOREA / IRAN
KOREA
S. Korea vows 'stern retaliation' against N. Korea's attacks
Yonhap
“I think enormous retaliation is going to be necessary to make
North Korea incapable of provoking us again.” |
Japans Calls For Attack On North Korea, Tensions Mount After Shelling
Intel Hub
The Intel Hub
Debkafile is now
reporting that Japanese Prime
Minister Naoto Kan called Obama and demanded that the United
States, Japan, and South Korea attack North Korea!
Prime Minister Naoto Kan called President Barak Obama
urgently in the wake of the North Korean artillery attack on
South Korea’s Yeonpyeong island near the Yellow Sea border
early Tuesday, Nov. 23 and demanded a US-South Korean-Japanese
military reprisal. Two
South Korean marines were killed and 17 injured in the attack.
He also demanded that the UN
Security Council be
convened immediately on the crisis. He put the same demands to
South Korean President Lee Myung-bak in another call. Naoto
Kan then ordered his ministers to prepare for “unexpected
events.”
Washington said it is watching the situation but is not
militarily involved after strongly condemning the attack and
calling for an end to belligerence.
debkafile’s military sources
report that the Korean
clash has prompted a special alert in the US Seventh Fleet
headquarters at Yokosuka in Japan, together with the naval
forces stationed there including the USS George
Washington aircraft carrier
|
Unpredictable (Korean) geopolitical risk, illustrated FT
Alphaville
US to send aircraft carrier to South Korea
FT
Obama Promises `Unshakable' Support for S. Korea
BL
1-
SOVEREIGN DEBT & CREDIT CRISIS |
Things in Europe are getting worse. Here is a brief
summary of all the events in the increasingly troubled
continent.
- 1- Sinn Fein Says Irish PM Has No Support:
The opposition party has tabled a motion of
no confidence in Irish Prime Minister Brian Cowen (source)
- 2- Wolfgang Schaeuble admits the end is
near: The Irish debt crisis is putting the
euro at risk, German Finance Minister Wolfgang
Schaeuble warned Tuesday. "We are currently in a
difficult international and European environment,"
Schaeuble said in a budget speech in parliament. (source)
- 3- General weakness in European credit:
CDS indices are mixed with Xover 6 basis points wider
at 465bps, HiVol 4bps tighter at 154bps and Europe
2bps wider at 104bps. Holders of 92% of the current
outstanding E750 million of Anglo Irish subordinated
debt yesterday agreed to accept just 20% nominal value
for the paper which will be exchanged for government
guaranteed securities (source)
- 4- Very poor Spanish 3-6 month bond
auctions, with yields and Bid To Covers
jumping, and the country selling (€3.2 billion)
compared to the auction goal of €4-5 billion: Spanish
3-month auction for €2.091bln, BTC 2.34 vs. Prev. 2.77
(yield 1.743% vs. Prev. 0.951%); Spanish 6-month
auction for EUR 1.165bln, bid/cover 2.6 vs. Prev. 2.08
(yield 2.111% vs. Prev. 1.285%). Spanish CDS about 20
bps wider as vigilantes consider speeding up the
process of collapsing Europe
- 5- Persistent rumor of Moody's downgrade
of Portugal: probability 0.01%.
- 6- CHF intervention needed but nobody
willing to take on Fed: The head of the Swiss
National Bank on Tuesday sounded the alarm on the
strength of the swiss franc and tied it to the
financial turmoil across Switzerland's borders in the
Eurozone. Current exchange rate developments are a
"major challenge" for Swiss exporters, SNB governing
board chairman Philipp Hildebrand said. (source)
- 7- 3 Month Euro LIBOR, which recently
passed above the ECB's 1% key refi rate, and was seen
as an improvmenet, is now back lower: When 3
month Euribor broke above the European Central Bank's
key 1% refi rate last month it was heralded as a sign
of a return to normality, but it has fallen back over
the past eight trading sessions. Three month euro
LIBOR failed to make the 1% level and is now declining
again. On Tuesday, three month euro LIBOR fell 0.25
bps to 0.97375%, sterling 3 month LIBOR fell 0.125 bps
to 0.73875% and dollar 3 month LIBOR held steady (source)
Elsewhere, three month Euribor fell for the eighth
consecutive day Tuesday, with the pace of decline
accelerating as it dropped 0.4 basis point to 1.035%
from 1.039% Monday. The 3 month Euribor/OIS spread
widened 1.25 bps with the banking sector under
pressure amidst heightened concern over euro zone
peripherals (source)
- 8- Lastly, the ECB drained €66.0Bn In a
1-week term deposit tender, to sterilize the
money used for sovereign debt purchases. The amount
drained matched the total volume of government bonds
purchased by the ECB and settled as of last Friday and
was up from the €65 billion drained previously. On
Monday, the central bank reported that it had
purchased €713 million in sovereign debt on the
secondary market during the week ending November 19. (source)
|
Fears of Domino Effect Pervade Europe
WSJ
With the unraveling of Ireland's coalition government
Monday, contagion is back on the minds of investors.
Portugal reported on Monday that its 10-month budget
deficit widened from a year ago. Tuesday, Spain issued
short-term debt at a significantly higher cost than a
month ago.
"I think that's the market's
realization; that these are systemic problems that are
going to need a (European) systemic solution, this is not
a one-off problem with an individual country."
Brian Yelvington, fixed-income
strategist at Knight Capital.
Rising spreads have hit one country after the
other, moving from Greece to Ireland and now to Portugal
and Spain. The worry is that those rising borrowing
costs eventually may prove prohibitive, forcing countries
to seek some sort of bailout.
"People that are betting on
contagion are probably making the right bet here,there's
not really anything to stop the markets from pushing the
next domino over."
David Gilmore, a strategist at
Foreign Exchange Analytics. "
|
GREECE
Greece Will Need `Extra Effort' to Meet 2011 Deficit,
EU-IMF Say BL
I.M.F. Clears Latest Installment of Aid to Greece
NYT
SPAIN
The Complete Guide To The Oncoming Spanish Debt Crisis
That Everyone Is Terrified Of BI
Is The Bond Wolfpack Going To Skip Right Over Portugal And
Start Feasting On Spain BI
Spanish yields are at record highs this morning. The
main event may coom sooner than people are expecting.
|
Spanish 10 Year Bond Spreads Hit All Time Wides
ZH
GERMANY
FRANCE
UK
IRELAND
The underwhelming Irish bailout
Salmon
Markets: Ireland bail-out a failure
Telegraph
“Rescue or no rescue, Ireland and the other peripheral
nations face some difficult times ahead.” |
Ireland's sacrifice may well sink the eurozone, not save
it Prosser
Irish P.M.'s own party rebels, plans to replace him
AP
An effort that could trigger a snap election and delay
a massive EU-IMF bailout of Ireland. |
Who are the bond holders we are bailing out?
Golem XIV
Ireland's Banks Are All For Sale: Central Banker
Reuters
IMM positioning: Euro longs unwound ahead of Irish
bail-out Danske
What Will Happen To Ireland (And Various MNCs) When
Ireland Is Finally Forced To Hike Tax Rates
ZH
Irish political turmoil complicates financial-system fix
Washington Post
What is needed now is an immediate general election so
that a new government, with a clear parliamentary
majority, can prepare the four-year economic plan,
complete negotiations with the E.U. and IMF and frame a
budget for 2011," Kenny told reporters in Dublin.
While European governments may have dealt with the
immediate crisis facing Irish banks, the greater challenge
for European governments will be ensuring that no nation
defaults on its debts or drops use of the euro, the common
currency.
|

JAPAN
Japanese rushing to Shanghai for better jobs
Asahi
The greying of Japan Economist |
time (et) |
report |
period |
Actual |
Consensus forecast |
previous |
Wednesday, Nov. 24 |
8:30 am |
Jobless claims |
11/20 |
407,000 |
435,000 |
441,000 |
8:30 am |
Personal incomes |
Oct. |
0.5% |
0.3% |
0.0% |
8:30 am |
Consumer spending |
Oct. |
0.4% |
0.4% |
-0.1% |
8:30 am |
Core PCE price index |
Oct. |
0.0% |
0.0% |
0.0% |
8:30 am |
Durable-goods orders |
Oct. |
-3.3% |
-0.2% |
5.0% |
9:55 am |
Consumer sentiment |
Nov. |
71.6 |
69.8 |
69.3 |
10 am |
New-home sales |
Oct. |
283,000 |
310,000 |
308,000 |
10 am |
FHFA home prices |
Sept. |
-0.7% |
N/A |
0.0% |
U.S. Jobless
Claims Decline to 407,000, Lowest Since July 2008
BL
Mass Layoffs
U.S.
Consumer Spending Rises for Fifth Month as Incomes Rebound
BL
BEA
Orders for
U.S. Durable Goods Unexpectedly Dropped in October
BL
PDF
October new
home sales drop 8.1 pct., prices fall
AP
PDF
|
There Are Massive Risks In Emerging Markets Too
BI
One of the interesting things that's happened over the last
couple years is that investors have begun to perceive emerging
markets as not only faster growing, but also safer thanks to less
indebtedness and central banks that aren't perceived to be pumping
like crazy (that's not exactly accurate, but it's the belief).
|
4- STATE
& LOCAL GOVERNMENT |
Munis Yielding More Than Treasuries for First Time Since Crisis
Amid Sales BL
Investors withdrew $3 billion from open-end municipal bond
mutual funds in the week ended Nov. 17, the most in almost 19
years... |
United STRAITS of America: The Muni Bond Crisis Is Here
EW
This November, the whole world tuned in as the greater part of
the U.S.A.'s 50 states turned red -- and no, I don't mean the
political shift to a republican majority during the November 2
mid-term elections. I mean "in the red" -- as in, financially
fercockt, overdrawn, up to their eyeballs in debt.
Here
are the latest stats: California, Florida, Illinois, and New
Jersey now suffer "Greek-like deficits," alongside draconian
budget cuts, job furloughs, suspensions of city services, and the
growing "rent-a-cop" trend of firing city workers and then hiring
outside contractors to fill those positions.
Next is the
fact that the municipal bond market has been melting like a snow
cone in the Sahara desert. According to recent data, 35 muni bond
issues totaling $1.5 billion have defaulted since January 2010,
three times the average annualized rate going
back to 1983. Also, in the week ending November 19, investors
withdrew a record $3.1 billion from mutual and exchange-traded
funds specializing in municipal debt, triggering the largest
one-day rise in yields since the panic of '08.
In the
words of a recent LA Times article "It's a cold, cold
world in the municipal bond market right now." |
Muni-Bond Issuers May Face Default `Crunch' as Stimulus Ebbs,
Lehmann Says BL
5-
CENTRAL & EASTERN EUROPE |
8-
COMMERCIAL REAL ESTATE |
9-RESIDENTIAL REAL ESTATE - PHASE II |
Residential construction in United States: Will 2011 be another
year to write off? NBF
Fannie Mae,
Freddie Mac and the Coming Wave of Foreclosure Buybacks
RealtyTrac
'Shadow Inventories,' a Dark Cloud Over Housing
Barron’s
10- EXPIRATION FINANCIAL CRISIS PROGRAM
|
11- PENSION & ENTITLEMENTS CRISIS
|
Some States Weigh Unthinkable Option: Ending Medicaid
WSJ
13- GOVERNMENT BACKSTOP INSURANCE |
14- CORPORATE BANKRUPTCIES |
19- PUBLIC POLICY MISCUES |
Kamikaze Capitalism: GOP out to destroy
Farrell
GOP Puts the `Lame' Back in Lame-Duck Session
Baum
OTHER TIPPING POINT CATEGORIES NOT LISTED ABOVE
21-US RESERVE CURRENCY.
Yuan begins trading against the rouble China Daily
“The pace of internationalizing the yuan is accelerating”
22-SHRINKING REVENUE GROWTH RATE22-SHRINKING REVENUE GROWTH RATE
Fed Trims Outlook on Growth, Jobs
WSJ
Fed officials downgraded their assessment of the economy at a
November meeting as they debated the benefits and costs of bond
purchases, minutes showed.
Long Slog
Federal Reserve officials' new forecasts for unemployment:
2010: 9.5%-9.7%
2011: 8.9%-9.1%
2012: 7.7%-8.2%
2013: 6.9%-7.4%
'longer run': 5%-6%
|
24-RETAIL SALES
26-GLOBAL OUTPUT GAP
31-FOOD PRICE PRESSURES
32-US STOCK
MARKET VALUATIONS
GENERAL INTEREST
A recession to remember: Lessons from the US, 1937-1938
VOX
MARKET WARNINGS
Is A Dropping VIX Masking Rising "Fear" In Most Other Asset Classes... And
Does Hedge Fund SPY Pair-Hedging Explain The Market Melt Up ZH
As the trading year draws to a close, and as the QE2 driven
melt up shows little sign of relenting (or breaching the 1,200 S&P
level), the ever popular VIX, or "fear index" continues to plumb
new depths. For many this is a superficial sign of complacency and
lack of risk of any major moves within stocks. However, as BNY's
Nicholas Colas demonstrates, this is far from the truth as to what
is happening below the surface. While highlighting the grind lower
in the VIX, Colas observes that "the options market has been busy
pricing in higher levels of perceived risk across a variety of
asset classes, most notably investment grade bonds, silver, and
emerging markets. In fact, of the 20 asset classes and industrial
sectors for which we track risk pricing in the options market,
15 show heightened levels of investor concern for the
upcoming 30 day period." How does Colas explain this
remarkable divergence? "I am tempted to say that the sector IVs
are actually better representatives of the market’s take on future
volatility, and the lower expected volatility of the market as a
whole comes from macro investors who think the next month will be
smooth sailing.
Conversely, those traders who use sector ETFs and their
options to hedge specific single stock positions see a different
and potentially more volatile story developing." We tend
to agree with the second explanation, which also leads to another
surprising conclusion...
As most hedge funds now tend to hedge idiosyncratic risk using
broad systemic hedges, most notably the SPY, which continues to be
the most shorted (and "longed") hedge fund ETF, which, due to its
being the most actively traded (or, some would say, churned)
security by volume on US capital markets, in turn feeds the HFT
relay to force robots to believe that due to daily pressure
pushing the key market ETF higher or lower, the prevailing move in
stocks should be higher (via forward feedback loops), when in fact
hedge funds are shifting increasingly more bearish (short
individual stocks, and net SPY buying) thereby explaining the
constant move higher in stocks, and lower in the VIX. Is hedge
fund pair trade hedging (now that everyone is terrified of
shorting individual stocks as pair trade hedges) with ETFs solely
responsible for the daily move higher? We will likely not know
with certainty until a forensic analysis of the market can be
conducted after the next mega-crash, although recent observations
of market moves lead us to believe that this could be one possible
explanation. Then again with all modern-day feedback loops which
have no formal start or end, in a market in which one
wing-flipping butterfly can cause a market flash crash, who really
knows...
We hope to revisit this most fascinating emerging feedback loop
theory at a later date, but for now, here are Colas' complete
observations on why anyone trading purely on a dropping VIX may be
in for a rude awakening.
If the Boys Want to Fight, You’d Better Let Em
Only 36 shopping days left until Christmas, and 29 more
trading days left in 2010. The S&P 500 is up some 7.5%
year to date, and the most recent prices on the CBOE VIX Index
come in just shy of 20. The options specialists at ConvergEx don’t
like it when I call that the “Fear Index,” but since that’s the
shorthand many on the Street use to describe the VIX we’ll use it
here. Just for today – I promise. I will go back to “Expected
price volatility/cost of insurance” with the next installment of
these monthly assessments of the options market and risk pricing.
The bottom line on the VIX is that both in terms of its
absolute level and general trend, there just doesn’t seem to be
any real fear in the U.S. equity markets. If the market
is metaphorically a gathering place of buyers and sellers, then
the current environment resembles a Seattle coffee shop. A quiet
murmuring crowd. The low hiss of the milk foamer. Maybe someone
playing Jewel covers on an acoustic guitar in the corner. The VIX
is below 20 and has been moving lower in a calm collected manner
since May. Over the last month, for example, the Fear Index
(sorry, options guys) has come in from 20.6 to less than 19
yesterday.
Other parts of the options market, however, look more
like a roadside bar on Hells Angels initiation night.
The VIX is down over the last month, yes, but just look at our
accompanying graph with 19 other industrial sectors and asset
classes. That exhibit shows what is essentially the “VIX of…”
these groups. You will notice that expected volatility in large
cap U.S. stocks (S&P 500) is in the distinct minority when it
comes to declining levels of fear. Here are a few examples of
where the options market clearly sees more reason for near term
concern:
Among asset classes outside of stocks, the options
market has seen incremental concern in Investment Grade Bonds,
Silver, Emerging Markets, Junk Bonds, International Stocks, and
Gold. You might at this point ask how we calculate these
changes. The answer is that the proliferation of Exchange Traded
Funds tracking diverse asset classes has led to an active listed
options market for these securities and the asset types they
track. From there you simply calculate the Implied Volatility for
the options associated with the ETF in question. We use
www.ivolatility.com as
our source for the data presented here.
Most of the sectors within the S&P 500 are seeing
higher levels of expected near term volatility, even though the
VIX itself is down. This includes Energy, Consumer
Staples, Materials, Tech, Health Care and Consumer Discretionary.
When you think about it, this is an oddball observation. How can
the expected volatility of the index decline if the individual
sector IVs are increasing? Low price correlations might explain
the difference, except correlations are quite high at the moment.
I am tempted to say that the sector IVs are actually better
representatives of the market’s take on future volatility, and the
lower expected volatility of the market as a whole comes from
macro investors who think the next month will be smooth sailing.
Conversely, those traders who use sector ETFs and their options to
hedge specific single stock positions see a different and
potentially more volatile story developing.
The last point I would like to make is on Gold.
There has been some concern of late that the yellow metal has
topped out for the year and perhaps for good. Looking at the data
from the options market, the “Gold VIX” doesn’t show either
extreme complacency or extreme worry. It is exactly in the middle
of its historical range of 15-25, with a current reading of 20.
Maybe that puts Gold in the coffee shop rather than the roadside
bar, but it does seem that the risk pricing in the options market
does not support any overly positive or negative call.
|
CURRENCY WARS
China Inflation May Be Too Hot for Controls Amid Cash Glut BL
Q3 EARNINGS
MARKET &
GOLD MANIPULATION
How the 'experts' get the insider info Fortune
While The U.S. Prints And Spends, Russia Loads The Boat With Gold
Golden Truth
This chart is sourced from Casey Research, Ed Steer's Gold and
Silver Daily. The Russian Central Bank purchased another 600k ozs
of gold in October (some is purchased on the open market, some is
purchased from internal mining production). I think the message
of this chart, combined with China's demure announcement about
accumulating a lot more gold, is pretty clear: get ready for some
kind of gold-based currency standard at some point down the road.
Year-to-date Russia has accumulated 4.6 million ounces.
That's roughly 131 tonnes. That's a lot of gold, especially
considering that the ECB sold barely any of the 400 tonnes
permitted under the Washington Agreement. Now we know why the IMF
decided to unload 404 tonnes. Think about where the price of gold
might be if the IMF had not supplied the world this year.
I
mentioned earlier in this week in the comment section that it was
my belief that, other than France, the EU Central Banks are
largely out of gold - either via leasing or outright sales.
Anyone who has studied this topic thoroughly, of course, knows
that it is likely that most if not all of the U.S. gold is either
sold or leased. Given the aggressive and large-scale accumulation
underway by China, Russia, Iran, et al, 2011 should prove to be a
very interesting year for anyone who has already positioned
themselves ahead of what will inevitably be a substantial move
higher in the price of gold, especially as valued in U.S. dollars. |
AUDIO / VIDEO
QUOTE OF THE WEEK
“Have politicians got the courage to make those who earn money
share in the risk as well? Or is dealing in government debt the
only business in the world economy that involves no risk?”
Merkel
“The thought that you can create a prosperous economy by
inflating is an illusion”
Volcker
“We sure have to maintain some confidence in the dollar or
none of this would work"
Volcker
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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.
|
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 |
|
15-CREDIT CONTRACTION II |
16-US FISCAL IMBALANCES |
17-CHINA BUBBLE |
18-INTEREST PAYMENTS |
|
19-US PUBLIC POLICY MISCUES |
20-JAPAN DEBT DEFLATION SPIRAL |
21-US RESERVE CURRENCY. |
22-SHRINKING REVENUE GROWTH RATE |
23-FINANCE & INSURANCE WRITE-DOWNS |
24-RETAIL SALES |
25-US DOLLAR WEAKNESS |
26-GLOBAL OUTPUT GAP |
27-CONFIDENCE - SOCIAL UNREST |
28-ENTITLEMENT CRISIS |
29-IRAN NUCLEAR THREAT |
30-OIL PRICE PRESSURES |
31-FOOD PRICE PRESSURES |
32-US STOCK MARKET VALUATIONS |
33-PANDEMIC |
34-S$ RESERVE CURRENCY |
35-TERRORIST EVENT |
36-NATURAL DISASTER |
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Book Review- Five Thumbs Up for Steve Greenhut's
Plunder! Mish
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