THESIS 2011: Beggar-Thy Neighbor -(Open Access- 37 Pages of 217)

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DECEMBER 2011: MONTHLY MARKET COMMENTARY -(Subscription Plan II - 24 Pages)

The European financial markets in the six weeks since the last EU Summit, have had a complete, unofficial and unreported implosion in the bond and credit markets .

1. Wholesale Lending is now completely frozen,
2. Sovereign yields have reached unfundable levels as even sovereign yield curves have inverted,
3. Collateral Contagion is running rampant,
4. Banks runs are quietly occurring,
5. Shadow Banking Dis-intermediation is under distress,
6. The Euro-Yen Carry trade unwinding is rapidly accelerating,
7. The Shadow banking system is seizing up,
8. European banks have nearly stopped lending, sopped interbank lending, have been repatriating funds globally and are now increasingly depositing funds at central banks for safe keeping.
9. The Credit rating have placed 15 EU sovereign countries on negative credit watch includes EU Core countries.
10. The EFSF yields have soared and foreign funding sources dried up

The current agenda of the upcoming EU Summit does nothing to fundamentally address the underlying causes. MORE>>

DECEMBER 2011: GLOBAL MACRO TIPPING POINTS -(Subscription Plan III - 140 Pages)
The global slowdown we have been warning about has now become clearly evident. Liquidity is quickly evaporating across Europe.The initial EU bailouts are now being found to insufficent because of slow austerity implementatiosn and rapidly de-accelerating economic conditions. Despite rumors of dramatic increases in the firepower of the EFSF and the IMF, nothing yet has happened. The markets will now call the politicos bluff - The end of 'kicking-the-can-down the-road' is fast approaching. Expect a coordinated global response by Central Bankers and G20 finance ministers. Do not be fooled. It will not be a solution but simply one last desperate attemtp to 'kick the can' again. The best we can expect is a year end rally that will fail miserably in the new year.    MORE>> EXPANDED COVERAGE INCLUDING AUDIO & MONTHLY UPDATE SUMMARY

MARKET ANALYTICS & TECHNO-FUNDAMENTAL ANALYSIS

DECEMBER 2011: MARKET ANALYTICS & TECHNICAL ANALYSIS - (Subscription Plan IV - 165 Pages)
The market action since March 2009 is a bear market counter rally that has completed a classic ending diagonal pattern. The Bear Market which started in 2000 will resume in full force when the current "ROUNDED TOP" is completed. We presently are in the midst of of a "ROLLING TOP" across all Global Markets. We are seeing broad based weakening analytics and cascading warning signals. This behavior is typically seen during major tops.  This is all part of a final topping formation and a long term right shoulder technical construction pattern.

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DECEMBER 2011: TRIGGER$ (AVAILABLE FOR SUBSCRIBERS - Plan V - 36 Pages)

TRIGGER$ publications combine both Technical Analysis and Fundamental Analysis together offering unique perspectives on the Global Markets. Every month “Gordon T Long Market Research & Analytics” publishes three reports totalling more then 380 pages of detailed Technical Analysis and in depth Fundamentals. If you find our publications TOO detailed, we recommend you consider TRIGGER$ which edited by GoldenPhi offers a ‘distilled’ version in a readable format for use in your daily due diligence. Read and understand what the professionals are reading without having to be a Professional Analyst or Technician.

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>> LONGWave >> GOLD & SILVER: CRISIS or OPPORTUNITY?? December 15th, 2011

>> LONGWave >> VOLUME & VOLATILITY December 12th, 2011

>> LONGWave >> BEWARE OF EURO WEAKNESS October 25th, 2011

>> Under The Lens >> US ECONOMIC UPDATE October 22nd, 2011

>> Under The Lens >> EU FRENCH-GERMAN DISAGREEMENT October 21st, 2011

EURO EXPERIMENT :  ECB's LTRO Won't Stop Collateral Contagion! Released December 27th, 2011
I would argue that the problem short term is a shortage of real collateral and that US dollar cash, versus 'encumbered' cash flow, is now king. It is clear that the rampant advancing Collateral Contagion will quickly eat the futile LTRO attempt like ravenous wolves. A well circulated Tweet from PIMCO bond king Bill Gross said it all: " What does LTRO stand for? 1- A shell game; 2-Cash for trash; 3 Three-card Monti; or 4. All of the above." Here is the stark reality of what forced the ECB to offer unprecedented three year loans at absurd rates and most alarmingly, the acceptance of collateral that no other financial institutions will accept. The ECB has sacrificed its balance sheet in yet another EU "kick at the can". MORE>>

CURRENCY WARS:  EU: A FLAWED FOUNDATION, BUT A BRILLIANT STRATEGY Released May 31st, 2011
It was the perception of getting something of value without any meaningful sacrifice that initially fostered the EU Monetary Union. Though the countries of Europe were fiercely nationalistic they were willing to surrender minor sovereign powers  only if it was going to prove advantageous to them.  They were certainly  unwilling to relinquish sufficient sovereignty to create the requisite political union required for its success. After a decade long trial period it is now time to pay the price for Monetary Union.  I suspect that the EU membership is unwilling to do so. Though they likely will see the price as too high to do so, the price to not do so has become even greater.  They have unwittingly been trapped by a well crafted strategy. MORE>>

CURRENCY WARS:  The Economic Death Spiral Has Been Triggered Released May 27th, 2011
For nearly 30 years we have had two Global Strategies working in a symbiotic fashion that has created a virtuous economic growth spiral. Unfortunately, the economic underpinnings were flawed and as a consequence, the virtuous cycle has ended.  It is now in the process of reversing and becoming a vicious downward economic spiral. One of the strategies is the Asian Mercantile Strategy.  The other is the US Dollar Reserve Currency Strategy. These two strategies have worked in harmony because they fed off each other, each reinforcing the other. However, today the realities of debt saturation have brought the virtuous spiral to an end. MORE>>

CURRENCY WARS:  Debt Saturation & Money Illusion Released April 27th, 2011
Most of the clearly evident financial problems that surround us today stem from one cause - Debt Saturation. Most, intuitively, sense this to be a correct assessment but few can either prove it or articulate it to the less sophisticated. Let me arm you to be the "Nostradamus" amongst your friends and colleagues in explaining the problem and what the future therefore foretells. However, let me make it very clear, this will not make you popular. Smart maybe, but highly likely to make you unwanted at the social gatherings of the genteel. MORE>>

S&P downgrades France and Austria - Eurozone debt crisis reignited as Italy, Spain and Portugal also hit

• Europe Hit by Downgrades 01/14/12 WSJ France and eight other euro-zone countries suffered ratings downgrades on their sovereign debt Friday, sparking renewed worries over Europe's ability to bail itself out of crisis.
• Downgrade Hurts Euro Rescue Fund 01/14/12 WSJ France's downgrade weakens the ability of the euro zone's bailout fund to help the bloc at a time when Greece needs support.

Greek debt default threat grows - Talks falter as lenders take tough stance on restructuring

• Greek Talks Break Down 01/14/12 WSJ

European Exodus in Search of Jobs Economic distress is driving tens of thousands of skilled professionals from Europe, and many are being lured to thriving former European colonies in Latin America and Africa, reversing well-worn migration patterns

ECB Says Credit Crunch Averted; Yet ECB Overnight Deposits Again Hit Record High; Skyrocketing ECB Balance Sheet

• Credit Crunch Averted 01/14/12 BL
• ECB to hold interest rates at 1% BW
• Euro Suffers Longest Losing Streak Since 2010; Record High Speculative Short Positions; Big Specs vs. Currency Movements; Not Timing Devices 01/08/12 Mish
• ECB Overnight Deposits Again Hit Record High 01/13/12 WSJ
• Swelling ECB Balance Sheet Brings Relief, Poses Risk For Euro WSJ
  
  

‘Unpalatable’ pension reforms revisited Proposal to reduce emphasis on inflation protection in private sector schemes

• Quarter of "Final-Salary" Schemes (Retirement Pensions) were now shut to new staff and to future contributions, up from 3% of schemes in 2008.
• Government considering reforms to scrap "limited price increases" which currently boost pension income by at least 2.5% to protect against inflation.

Foreigners Sell Record $85 Billion In Treasurys In 6 Consecutive Weeks - Time To Get Concerned? as of today's H.4.1 update, the outflow has increased by yet another $8 billion to a new all time record of $85 billion, in 6 consecutive weeks, which is also tied for the longest consecutive period of outflows from the Fed's Custody account ever. This week's sale brings the total notional of Treasurys in the Custody account to just $2.66 trillion (down from a record $2.75 trillion) and the same as April of last year. And since the sellers are countries who have traditionally constantly recycled their trade surplus into US paper, this is quite a distrubing development. So while the elephant in the room could have been ignored 4, 3 and 2 weeks ago, it is getting increasingly more difficult to do so at this point, especially with US bond auctions mysteriously pricing at record low yields month after month. But at least the mass dump in Treasurys explains the $100 swing higher in gold in the past month.

Total Collapse In Rail Traffic To Start The Year Overall intermodal traffic was down -9.3% while carloads declined -3.7%. ….More from the AAR

China's Forex Reserves Drop Beijing's huge stockpile of foreign-exchange reserves showed its first quarterly decline in more than a decade, partly because of capital outflows amid global economic uncertainties and worries over slowing growth. The nation's foreign-exchange reserves totaled $3.181 trillion at the end of December, a drop of $20.55 billion from the third quarter, data from the People's Bank of China showed Friday. The decline compared with a $4.2 billion increase in the third quarter over the second quarter. The previous drop in 1998 came amid the Asian financial crisis, when economies around the Asian region were battered by waves of capital flight. Mr. Zhang said the latest decline reflected large capital outflows in the fourth quarter, as investors worried about China's slowing economy and started to question how much more the yuan could keep appreciating. China's economy has been growing at a slower pace as the authorities tighten monetary policy to rein in inflation and contain property-market speculation.

• China Reserve Changes Weighed 01/13/12 WSJ China may eventually invest more of its $3.2 trillion foreign-exchange reserves in stocks, enterprises and other assets as it looks for ways to boost returns on its reserves, according to Jiang Jianqing, chairman of China's largest state-owned bank

EARNINGS

• JPMorgan earnings drop on weak trading Bank reports 23% fall in profit to $3.7bn on $22.2bn revenues
• Tesco plunges on profit warning - UK’s leading retailer suffers disappointing Christmas 01/12/12 FT
• Earnings growth falters for S&P 500 Slowest rate of increase in two years hits profits 01/09/12 FT

ECB

• ECB must do more to prevent euro collapse: Fitch

Barclays Estimates ECB Losses On Bond Purchases At €30 Billion, Or Nearly Half Of Eurosystem Capital 01/09/12 Zero Hedge

Greece Bank Run Shows No Sign Of Stopping: Deposit Outflows Continue In November The year is not over yet, and already Greece's banks have lost €36.7 billion of their deposit base in 2011, and a whopping €64.6 billion since the beginning of 2010, which is down from €233 billion to €173 billion in under two years. In October another €3.5 billion was withdrawn from Greek banks and likely either redeposited somewhere deep in the heart of Switzerland, or converted to various inert metals and buried somewhere in the back yard. The good news: the outflow is just over half of October's record €6.8 billion. The bad news: at this rate of outflows, Greek banks will have zero deposits in around 4 years. Which at the end of the day is all the matters, because while the Troica can keep funding capital shortfalls indefinitely, all faith in the country's banks has now been lost and Greece is officially a zombie economy. The fact that the country's deficit as a % of GDP is about to be re-revised even higher is no longer even meaningful: the Greek economy and its banking sectors are now officially dead. We merely feel bad for anyone who still has cash in banks as, just like gold in 1930s America, any residual cash may soon be "sequestered" for national security purposes. After all there are bankers who need record bonuses, and Military sales from Europe and the US that have to proceed using what will likely soon be "commingled" deposit cash.

PONZI BONDS

• European Companies Are Now Funding European Banks And The ECB - Is "Investment Grade" Cash Really Just Italian Treasurys? it appears that over the past several months the primary marginal source of cash in the ultra-short term secured market in Europe are not banks, the traditional "lender" of cash (for which banks receive a nominal interest payment in exchange for haircut, hopefully, collateral) but the companies themselves, which have inverted the flow of money and are now lending cash out to banks (with assorted collateral as a pledge - probably such as Italian and Greek bonds), cash which in turn makes its way to none other than the ECB (recall that as of today a record amount of cash was deposited by European "banks" with Mario Draghi).
• Exclusive: Borrowers turn lenders as banks tap firms for cash 01/09/12 Reuters "Blue-chip names like Johnson & Johnson, Pfizer and Peugeot are among firms bailing out Europe's ailing banks in a reversal of the established roles of clients and lenders. One source with knowledge of the so-called repo deals or short-term secured lending, said the two U.S. pharmaceutical groups and French carmaker were the latest to sign up for them."

Companies are stuck holding on to record amounts of cash, although what has not been clear is why? Now we know, and it is precisely for this reason: corporate treasurers have known very well that sooner or later the deleveraging wave will leave banks cashless, and corporates themselves will have to become lenders of last resort, especially in a continent in which the central bank is still rather concerned about sparking inflationary concerns.

GERMANY - Negative Yields - "Investors Pay Berlin to Loan Money"

The fact that the ECB deposit facility, already at a new record is not enough for banks to parks cash is grounds for alarm bells going off: the solvency crisis in Europe is not getting any easier, confirmed by the implosion of UniCredit which is down now another 11% this morning and down nearly 50% since the atrocious rights offering announced last week.

• Germany should beware negative yields
• Germany Issues Bills With Negative Yields As Economists Agree Country Is In Recession Germany just sold €3.9 billion in 6 month zero-coupon Bubills at a record low yield of -0.0122% (negative) compared to 0.001% previously. The bid to cover was 1.8 compared to 3.8 before. 01/09/12 Zero Hedge
• Germany issues debt with negative yield Agence,France-Presse Investors pay Berlin to park cash for six months 01/09/12 FT German short-term debt has traded at negative yields in the secondary market for some weeks with three-month, six-month and one-year debt all below zero. Bills for six-month debt hit a low of minus 0.3 per cent shortly after Christmas...The German auction marks the start of another busy week of debt sales across Europe. France and Slovakia are also selling bills on Monday, with Austria and the Netherlands selling bonds on Tuesday. Germany will auction five-year bonds on Wednesday, while Thursday sees sales of Spanish bonds and Italian bills. Italy finishes the week with a sale of bonds on Friday
• Germany Is Now Officially Getting Paid To Borrow Money 01/09/12 BI This is how desperate European investors are for a safe-haven: They're paying Germany to "borrow" money. Essentially Germany is a bank, where the depositor pays to warehouse money. If you're worried that no other institution will stay solvent during that time, it obviously makes tremendous sense to pay Germany.

On this background Germany continues to be a beacon of stability, yet even here the consensus is that recession has arrived. As Bild writes, according to a bank economist survey, Germany's economy is expected to shrink in Q1, with wage increases remaining below 3%. And as deflation grips the nation, potentially unleashing the possibility for direct ECB monetization, look for core yields to continue sliding lower, at least on the LTRO-covered short end.

EURO

• Meet Your New Carry-Trade Host Body: The Euro
• Credit Suisse offers trades for eurozone shorting Products for hedge fund clients track leading indices 01/12/12 FT
• Euro Weakens as Fitch Adds to Debt Crisis Concern; Pound Drops 01/11/12 BL
• Falling currency gives eurozone a lift 01/11/12
• EURO CARRY TRADE EMERGING: Euro shift highlights revival in carry trade Borrowing of currency to invest in assets rises 01/10/12 FT
• Euro slides as dealers back dollar on growth 01/10/12 FT
• Something's Changed About The Euro It used to be, of course, that the Euro was a risk currency that would rise whenever equities would rise, and so on. But that's not been the case for awhile now. 01/09/12 BI

  JP MORGAN: "A weak euro doesn't have to be negative for stocks any more - for most of the summer, domestic equities and the euro were positively correlated.  Movements in the euro were taken as expressions of investor sentiment towards the region's debt crisis (i.e. a higher euro signaled less fear of "tail" chaos and stocks benefited, and vice versa).  However, over the last couple months the two have started to be less correlated (US stocks are sitting near recent highs while the euro is close to recent lows).  Perceptions are starting to shift, w/a weaker euro now responding more to massive ECB accommodation/balance sheet expansion and less to sovereign fears.  According to data out in late Dec, the ECB balance sheet soared to a record EU2.73T (and balance sheet is up >EU550B in just the last few months http://bloom.bg/u0jkro).  A bunch of recent commentaries/articles have talked about how the ECB has become very accommodative lately (Bill Gross called the 36m LTRO a "tidal wave of QE" Wed morning http://bit.ly/A0RDHx, Barron's this weekend called the "LTRO a far more powerful signal to the markets than many suspect" http://on.barrons.com/t90srD, and the WSJ's Marketbeat blog on Wed talked about "evidence pointing to the ECB running backdoor QE after all" http://on.wsj.com/yw9a19).  The trend of weaker euro has been in place for a couple months now (really since Draghi was named president and esp as the ECB balance sheet has started to explode in size) and is being driven more by easier CB policies (which is positive for risk assets) and less by sov credit fears.
  

• The fact of the matter is that the Euro has always been a mediocre proxy for anything, even tensions in the Eurozone. Now though, it's clearly doing its own thing.

ITALY

• UniCredit cash call to hit core investors - Abu Dhabi and Libya stakes set to be heavily diluted

• The Mafia Is Now "Italy's Largest Bank" 01/12/12 Zero Hedge
• Italian Bonds Surge To Early November Wides 10Y Italian bonds (BTPs) ended the day at their second-widest closing spread to Bunds ever (at 533bps). Only November 9th saw a wider closing print and of course we saw margin hikes at LCH CC&G. 10Y yields are at 7.16%, their highest since just after Thanksgiving but we do note that 2Y yields have stabilized at around 5.00% yields (having peaked near 8% during thin Thanksgiving trading). It seems apparent that perhaps traders front-running LTRO's impact have compressed the 2s10s term structure but much clearer to us is Mr. Market's obvious desire for more money-printing now as BTPs are pushed to unsustainable levels once again - and the banking-to-sovereign vicious circle transmission of insolvency cranks up. 01/10/12 Zero Hedge
• Italian Banks Plunge On Capital Raise Concerns 01/09/12 Zero Hedge While headlines are reeling with the almost-50% drop (and 8 halts today alone!) in UniCredit's stock price since the start of the year (as it tried and 'succeeded' to raise capital from clearly risk-averse investors), the rest of the Italian banking sector is now 'crashing'. With bank stocks down 12-20% year to date across the board, the clear fear is that the cost of raising real equity capital (not finding some short-term funding crisis solution) remains extremely high. If the EUR7.5bn capital raise caused a 40% sell-off in UniCredit, how is the market going to cope with the EUR115bn more that is needed? 01/10/12 Zero Hedge

The Coercive Greek Restructuring Is Now Imminent: UBS Explains What It Means For Europe (Hint: Nothing Good)

• Hedge Funds Now Hold Future Of Europe Hostage 01/11/12 Zero Hedge "Hedge funds are taking on the powerful International Monetary Fund over its plan to slash Greece's towering debt burden as time runs out on the talks that could sway the future of Europe's single currency. The funds have built up such a powerful positions in Greek bonds that they could derail Europe's tactic of getting banks and other bondholders to share the burden of reducing the country's debt on a voluntary basis."
• Greece’s private sector deal unlikely to be final act 01/11/12 FT

CHINA

• China's Debt Maturity Problem Has Arrived Incredibly, no Chinese company has defaulted on its domestic debt since the country's central bank started regulating the market in 1997, according to Moody's but as Bloomberg notes, there is some 2 trillion yuan of bank facilities set to mature in 2012, compared to 33 billion yuan of bonds - leaving a very crowded-out market of shorter-dated debt rolls soaking up what little credit is willingly available. With Dim-Sum bond yields (based on our index of sizable issues) up over 30% (80bps) from early September and European-based USD strength slowing any CNY-FX decay these holders hoped for, we agree with Gao Zhanjan (of Citic Securities), via Bloomberg, that "there will slowly be more substantive defaults in the future".

• China Enters The Danger Zone, SocGen Presents The Four Critical Themes 01/12/12 Soc Gen Presentation

CHINA

• China trade surplus falls to six-year low (Data released as Geithner set to arrive in Beijing)
• China Trade Surplus Unexpectedly Rises As Non-EU/US Imports Spike; Crude Imports Relentless 01/10/12 Zero Hedge China's December trade data, which experienced a surprising jump in its trade surplus from $14.5 billion in November to $16.5 billion in December, even if exports broadly slowed down and grew at the slowest pace in 10 months. This number was quite odd as it represents almost double the consensus forecast $8.8 billion, predicated by a matched slow down in imports which were up only 11.8% Y/Y, the smallest rise since the October 2009 decline of 6.4%.
• The Making Of China's Epic Hard Landing 01/09/12 Zero Hedge

• Is a Chinese economic slump on the horizon? 01/09/12 Samuelson Whatever happens, China’s economic model is reaching its limits...
• Debt fears for China banks if economy worsens Standard
• China Money Supply Growth Exceed Estimates 01/09/12 BL

Protests Put Cities on Alert Leaders Are Proposing New Laws to Minimize Violence at High-Profile Events.

IRAN

• Use of force tops agenda on Iran
• Japan pledges to cut Iran oil imports Tokyo will take ‘concrete action’ after US prompting 01/12/12 FT
• Guest Post: Iran: Oh, No; Not Again 01/12/12 Zero Hedge
• 2nd Carrier Arrives: CVN 70 Carl Vinson Joins CVN 74 Stennis In Arabian Sea, Off Straits Of Hormuz 01/12/12 Zero Hedge

"In the last 200 years the population of our planet has grown exponentially, at a rate of 1.9% per year. If it continued at this rate, with the population doubling every 40 years, by 2600 we would all be standing literally shoulder to shoulder." says Professor Stephen Hawking as reported by Edward Morgan in Looking at the New Demography.

Suffice to say the rate of population growth will not continue, and Morgan makes the case we are already in stage 5 of The Demographic Transition Model

HOUSING - Federal Policy Change & Programs Coming

• Pimco Doubles Down On All In Bet Fed Will Monetize MBS

• Fed Pushes Refinancing, But Obstacles Abound Critics see the Fed’s foray into housing policy as an irresponsible deviation from the central bank’s mission of managing interest-rate policy. Supporters of more aggressive action to stabilize the housing market argue that the Fed is playing a valuable role in pushing the Obama administration and regulators to do more. 01/11/12 WSJ
• Several Major Housing Policy Changes That Could Be Coming Soon 01/09/12 BI It appears there are several major housing policy changes coming in the next two to three months, and that the overall goal will be to reduce the large backlog of seriously delinquent loans while, at the same time, not flood the housing market with distressed homes. Currently, according to LPS, there are 1.81 million loans 90+ days delinquent and an additional 2.21 million loans in the foreclosure process.
• Calls for US taxpayers to bear housing costs 01/09/12 FT
• NEW FED PLAN: Sell Foreclosed Properties To Investors To Rent Out 01/09/12 CNBC: The Obama Administration, in conjunction with federal regulators and led by the overseer of Fannie Mae and Freddie Mac, are very close to announcing a pilot program to sell government-owned foreclosures in bulk to investors as rentals, according to administration officials. There are currently about a quarter of a million foreclosed properties on the books of Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) and millions more are coming. Late stage delinquencies still in the pipeline number close to two million, according to a new report from Lender Processing Services. Foreclosure starts outnumber foreclosure sales by two to one, and, "the trend toward fewer loans becoming delinquent, which dominated 2010 and the first quarter of 2011, appears to have halted," according to LPS.
• Fed Targets Mortgage Servicers 01/09/12 WSJ A Fed official called on mortgage servicers to fix "deceptive" practices, the latest salvo in the central bank's campaign for action to fix the housing market.
• Fed: How Fannie and Freddie Are Hurting the Housing Market 01/04/12 CNBC
• Everything You Need To Know About The Housing Market And Why It Has Bottomed 01/09/12 John Burns Real Estate Counsulting

Banks Overhaul for Leaner Era The investment-banking industry, notoriously prone to cyclical hiring and firing during booms and busts, is in the midst of a retrenchment that may be more far-reaching.

• BofA Ponders Retreat 01/13/12 WSJ Bank of America has told U.S. regulators that it is willing to retreat from some parts of the country if its financial problems deepen.

• Novartis to Cut 1,960 Jobs Novartis said it will cut 1,960 jobs as it restructures its U.S. business, reflecting the patent loss of heart drug Diovan in the U.S. and the recent failure to turn high-blood pressure medicine Rasilez into a blockbuster.

Swaps dominate pension deals LONGEVITY SWAPS: Schemes Offload the risk of their members living longer than expected. There is no exchange of assets required upfront. This means schemes do not need to sell assets to pay to the insurer if markets are depressed. This contrasts with buy-ins and buy-outs, where insurers take over some or all the liabilities for a price. Buy-outs were rare in 2011 as insuring non-pensioners is expensive and most pesnion schemes are in deficit.

Carmakers must merge, says Fiat chief Marchionne warns of fight against overcapacity

• China car sales slow (as US roars back?)
• Peugeot Predicts Worsening Europe Car Market 01/12/12 BL
• Grinding to a halt More eurozone shock will dent emerging-market growth 01/12/12 FT

The Cost Of Recoupling: 235 S&P Points

Since late November and more so mid-December, the US equity market (and broad risk drivers) have decoupled from Europe's woes. The fundamental unreality (as we discussed here, here, and here) of this lagging performance and over-enthusiastic economist extrapolations has pushed the S&P to over 235 points over a 'fair-value' of 1050 (based on EURUSD's price). Even on a conservative basis - from the last real-decoupling point on 12/21, the S&P still stands almost 150 points 'rich' to a global-slowing European recession-dragging USD-based-earnings crushing 1.27 EURUSD.

Medium-term dislocation...

Something Has To Give Here 01/12/12 BI

CORPORATOCRACY -Crony Capitalism

More Firms Enjoy Tax-Free Status The number of companies organized as nontaxable corporations, including some publicly traded companies, is on the rise. The percentage of U.S. corporations organized as nontaxable businesses has grown from about 24% in 1986 to about 69% as of 2008, according to the latest-available Internal Revenue Service data. The percentage of all firms is far higher when partnerships and sole proprietors are included. By some estimates, more than 60% of U.S. businesses with profits of $1 million are structured as pass-throughs, the highest rate among developed countries. Their popularity is one big reason why federal corporate tax collections amounted to just 1.3% of GDP in 2010, well below their mark of 2.7% in 2006 and far beneath their peak of 6.1% in 1952.