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Published November 2009
EXTEND & PRETEND

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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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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 |
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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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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 |
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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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TODAY'S TIPPING POINTS UPDATE |
RED ALERT |
AMBER ALERT |
ACTIVITY |
MONITOR |
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Click to Enlarge

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12-18-10
GEO-POLITICAL TENSIONS - ISRAEL / KOREA / IRAN
KOREA
North Korea warns Seoul against military exercises
CNN
Russia calls on SK to halt drills
Reuters
1-
SOVEREIGN DEBT & CREDIT CRISIS |
The rise in bond yields does not solve a long-running dilemma
ButtonWood
4- STATE
& LOCAL GOVERNMENT |
After Running Out Of Money, Chicago May Open Casino
BI
5-
CENTRAL & EASTERN EUROPE |
SEC Subpoenas Goldman Sachs, JP Morgan, Citi, BofA and Wells Fargo
Over Foreclosures BI
Will 2011 mark the return of market risk, and the IMF?
Whalen
8-
COMMERCIAL REAL ESTATE |
9-RESIDENTIAL REAL ESTATE - PHASE II |
10- EXPIRATION FINANCIAL CRISIS PROGRAM
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11- PENSION & ENTITLEMENTS CRISIS
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Unemployment Rises in 21 States in Weak Job Market CNBC
Won’t Help 99ers WSJ
13- GOVERNMENT BACKSTOP INSURANCE |
14- CORPORATE BANKRUPTCIES |
Chinese version of Windows in pipeline
Shanghai Daily
Beijing admits it is building an aircraft carrier Asahi
19- PUBLIC POLICY MISCUES |
U.S. House Passes Tax-Cut Extension, Sends to Obama BL
Special Report: Is America the sick man of the globe? Reuters
Geithner says bailout will cost less than $25B AP
Obama's double bubble WT
Lax lending policy could blow up housing market again
Budget Brawl Looms in Congress WSJ
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
Keeping
the Good News in Perspective Leonhardt
The Coming College Education Bubble Forbes
Emerging Markets Briefer - December 2010 Danske MARKET WARNINGS
Market Is Overbought, Overextended and Overvalued Comstock
After an 86 percent gain in 21 months the market looks overbought, overextended
and overvalued.
Furthermore, despite the implementaion of QE2 and the
passage of the tax compromise, the economy is not likely to grow fast enough to
to be self-sustaining. Although the combination of QE2 and the White
House/Congressional compromise on the tax extension issue is being touted as the
great elixir that will spur economic growth we think that growth will be subdued
and temporary. Indeed QE2 is already looking like a failure in its early
stages. No matter what the "experts" say now, it was chrystal clear from the
get-go that the Fed's intention was to lower long rates, not raise them. As it
stands today the sharp rise in the 10-year Treasury bond is likely to further
weaken an already dead housing market by enough to offset any additional growth
that QE2 could have provided. Furthermore, the combination of QE2 and the big
projected increase in the budget deficit caused by the compromise tax bill has
helped spur another jump in commodity prices that will reduce real consumer
income and negate much, if not all of the intended boost to consumer spending.
In addition economic growth will be tempered by:
1- the
temporary nature of the stimulus, 2- continuing high unemployment, 3- a
moribund housing sector, 4- the dire condition of state and local finances,
5- a lack of readily available credit and 6- the ongoing fragility of a
banking sector that is still loaded with toxic assets that are significantly
overvalued on banks' balance sheets. 7- Another major headwind to growth is
the ongoing need to reduce household debt to normal levels after the credit
binge of recent years. Consumer credit excluding student loans continued its
year-long slide in October, falling by $32.5 billion, and the unwinding has
barely started. Although consumer spending has perked up recently, we note that
a national survey indicated that the percentage of people saying that they used
their credit cards over the Thanksgiving day weekend was the lowest (17%) in the
27-year history of the survey. According to major credit card companies, the
use of personal credit cards dropped 11% in the 3rd quarter from a year
earlier. Does all of this sound like a consumer ready to spend freely? We
think not. 8- As if all of the above weren't enough, the chances of
financial and economic crises overseas, particularly in Europe, China and Japan
are exceedingly high. The turmoil in the European Union is not a temporary
crisis that will be cured with the wave of a wand. A number of the weaker EU
nations are basically insolvent, and their debts, sooner or later will have to
be restructured. The New York Times and Wall Street Journal recently
highlighted the exposure of German, French, British and Spanish banks to the
debts of Greece, Ireland and Portugal. The IMF has warned that if the EU
doesn't come up with a permanent solution the EU economy could go off a cliff.
Meanwhile the austerity measures being imposed on the troubled countries will be
a drag on the EU economy for some time to come. As for China and Japan, we'll
leave that for future comment. |
In light of these problems we believe
that investors are overly optimistic. An 86% market rise in 21 months has
already discounted a lot of good news----some of which will not happen. The
market looks overbought and overextended, and is showing signs of an imminent
top with:
1- lagging breadth, 2- a lower number of new highs, 3-
overenthusiastic sentiment, 4- higher-volume down days and 5- a more
frequent number of late-day selloffs.
At this juncture we think that
potential upside progress is limited while downside risk is high.
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Sentiment has taken turn for the worse Hulbert
Investors cautious as volumes wind down FT
Breadth Remains Weak BeSpoke
Now Bullishness Is At Its Highest Level Since 2007 Pragmatic
Capitalist
"Investors are beginning to feel more
confident in the economic recovery and believe that equity prices
have but one direction to move." |
CURRENCY WARS
Loonie may be in 'death grip,' Carney should act: CIBC G&M
Dollar Rises After Moody's Downgrade of Ireland AP
Gold: Currency Wars and China ING
The Dollar Threads a Needle Browne
China faces exchange rate dilemma Reuters MARKET &
GOLD MANIPULATION
Stocks Up 17% Since Bernanke Disclosed QE2 Disarms Fed Critics BL
AUDIO / VIDEO
QUOTE OF THE WEEK
"Gold as money is incompatible with
unlimited majority rule and scoffs at the idea that money is just
'credit'. It negates any rationale, however farfetched, for the
existence of central banks. It precludes 'fractional reserve
banking' or any other method of debasing its utility as a medium
of exchange. Last and most important, it SEVERELY curbs the power
of government to interfere in the lives of its citizens. No
assembly of national “leaders” brought together to “modernize” a
financial system will ever agree to its use as money. But let one
nation anywhere implement it, and the lid blows off."
William A Buckler Publisher:
The
Privateer
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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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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 |
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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 |
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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