THESIS 2011: Beggar-Thy Neighbor -(OPEN ACCESS - 37 Pages of 217) >> GO

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MARCH 2012: MONTHLY MARKET COMMENTARY - (Subscription Plan II)

The European Central Bank's (ECB) unprecedented use of a three year, low cost LTRO (Long Term Repurchase Agreement) policy initiative may have removed some of the short term pressures from the EU Banking crisis, but like the Greenspan PUT, the unintended consequences are not yet fully understood. One is the moral hazard which is fostering financial "games" to be played with reckless abandon. Some of the mischievous and cunning games are frankly questionably as being even legal! But then, nothing is illegal if the regulators and those organizations charged with surveillance are not bothering to investigate. Extend > Pretend > Bend is the new approach. MORE>>

MARCH 2012: GLOBAL MACRO TIPPING POINTS -(Subscription Plan III)

The Obama Budget is A Campaign Budget. Nothing changes until after the fall election and precisely on december 31st, 2012. Suspect budget assumptions and and the outcome on this date will make a $5T difference over 10 years. The markets will not wait and be hedl hostage to the outcome. The World Economic Forum's 2012 Risks Report, the IMF's Global Financial Stability Report and our proprietary Aggregated Global Risk Level Index (AGRLI) all suggest that like the US, global macroeconomic risks are increasing. The consensus findings are that the center of gravity of Global Macro issues are a combination of Chronic Fiscal Imbalances and a Global Governance Failure. We submit the US Budget as evidence of the later.   

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MARKET ANALYTICS & TECHNO-FUNDAMENTAL ANALYSIS

MARCH 2012: MARKET ANALYTICS & TECHNICAL ANALYSIS - (Subscription Plan IV)

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

CHINA - Record Trade Deficit

China Trade Deficit Spurs Concern 03/12/12 WSJ The weekend report of a $31.5 billion trade deficit in China for February was substantially larger than most analysts expected and followed a string of other disappointing economic data, including weak growth in car sales, industrial production and retail sales, and the continuation of a steep fall in property sales. The only bright economic star was that inflation slackened more rapidly than expected.

• China Posts A Record-Shattering Trade Deficit For February 03/12/12 BI
• Tough medicine and a hard landing for China 03/12/12 Credit Writedowns China Posts Biggest Trade Deficit Since 1989 As Crude Imports Surge- Is China Recycling Export Dollars Solely Into Oil 03/12/12 Zero Hedge

COLLATERAL CONTAGION - Balance Sheet Encumberance

Why Europe Is Running Out Of Assets - Encumberance 03/12/12 Zero Hedge By demanding collateral for their bottomless pit of low-interest loans, the ECB has not only reduced banks' necessary deleveraging needs (and/or capital raising) but has increased risk for all bond-holders (and implicitly equity holders, who are the lowest of the low in the capital structure remember) as the assets underlying the value of bank balance sheets are now increasingly encumbered to the ECB. Post LTRO, Barclays notes that several banking-systems (PIIGS) now have encumbered over 15% of their balance sheets but LTRO merely extends a broader trend among European banks (pledging collateral in return for funding) and on average (even excluding LTRO) 21% of European bank assets are now encumbered, and therefore unavailable for unsecured bond holders, ranging from over 50% at Danske (more a business model choice with covered bonds) to around 1% for Standard Chartered. As the liquidity-fueled euphoria starts to be unwound, perhaps this list of likely stigmatized banks is the place to look for higher beta exposure to the downside (especially as we see EC B margin calls start to pick up).

Whether it be their direct actions with Greece (specifically subordinating the world) or their indirect actions with LTRO collateral needs, the systemic risk of Europe's banking/sovereign credit system is far higher now than it was before (and credit markets have already begun to adjust to this new reality - senior spread decompression, recent sovereign underperformance, and LTRO-Stigma - even if equities remain dumbstruck with the implicit print-fest - though very recently European financial equities have joined the credit drop more closely).

US DEBT - Non-Financial Bond Dash

Non-financials dash to the bond markets 03/12/12 FT

• Dollar bond rush sets record pace for deals 03/12/12 FT
• Corporate bond trading volumes pick up 03/12/12 FT
• Corporate Debt 03/12/12 FT
• Bond Opportunity Amid Debt Debacle 03/12/12 WSJ

FINANCIAL REPRESSION - Carmen M Reinhart

Financial Repression Back to Stay: Carmen M. Reinhart 03/12/12 BL Unlike income, consumption or sales taxes, the “repression” tax rate is determined by factors such as financial regulations and inflation performance, which are opaque -- if not invisible -- to the highly politicized realm of fiscal policy.

FINANCIAL REPRESSION - A "Nominal Policy" Vehicle

The Fed's Manipulation Of The Market Is Driving TrimTabs' Charles Biderman "Even More Nuts Than He Already Is" 03/10/12 Zero Hedge - "Individuals are net sellers of US equities and have been for years, probably because they need to pay bills and stuff. So how are they able to do that and get decent prices without the stock market cracking. Well simple the Federal Reserve has been printing huge amounts of money and that ultimately has been boosting the value of US equities, and therefore the sellers can sell.

STATISM - Is Democracy Working?

Scientists say America is too dumb for democracy to thrive 03/12/12 San Francisco Chronicle - Work by Cornell University psychologist David Dunning and then-colleague Justin Kruger found that “incompetent people are inherently unable to judge the competence of other people, or the quality of those people’s ideas,” according to a report by Life’s Little Mysteries on the blog LiveScience.

According to Dunning-Kruger, no matter how much information is provided, the unsophisticated would:

1. be incapable of recognizing the wisdom of such a plan;
2. assume they know better; and
3. have no idea of the extent of their inadequacy.

What’s worse is that with incompetence comes the illusion of superiority. In other words, stupid people are too stupid to know how stupid they are. It would appear then that democracy dooms us to mediocrity and misinformed choices.