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MAY 2012: GLOBAL MACRO TIPPING POINT - (Subscription Plan III)

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APRIL 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>>

MARKET ANALYTICS & TECHNO-FUNDAMENTAL ANALYSIS

MAY 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.  - The "Peek Inside" shows the detailed coverage available this month.

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	PART I - Understanding FINANCIAL REPRESSION
	PART II - FINANCIAL REPRESSION in Europe
	PART III - FINANCIAL REPRESSION in the US & ASIA
	PART IV - Preparations for FINANCIAL REPRESSION

Password: macro

CHRONIC UNEMPLOYMENT - False Realities

The Hidden American Economic Depression 05/14/12 Lance Roberts

• There is a hidden economic depression running along the underbelly of the country. High levels of unemployment have kept pressures on wages even as work hours have lengthened.
• The burgeoning labor pool and demand for work is suppressing wages as companies opt for increasing productivity and streamlining employment to protect corporate profit margins. 
• The cost of living is affected by the rising food, energy and healthcare prices without a compensatory increase in incomes - more families are forced to turn to assistance in order to survive.
• For a large portion of America the issue of unemployment and underemployment remains an everyday concern. Without government largesse many individuals would literally be living on the street.

• Social security, Medicaid, Veterans' benefits and other social benefits have continued to rise. The government "safety net" is already under tremendous strain as the number of "workers" supporting the system has fallen markedly over the last 30 years. With more than 78 million "baby boomers" rolling into retirement the Social Security Administration has already warned they will begin paying out more than they take in by 2017 and will be insolvent not long thereafter without real reforms to the system.
• For the average person these social benefits, however, are critical to their survival as they make up more than 22.5% of real disposable personal incomes.
• With 1/5 of incomes dependent on government transfers it is not surprising that the economy continues to struggle as recycled tax dollars used for consumption purposes have virtually no impact on the overall economy

• Astoundingly the total benefits in 2011 rose above $71 Billion which was a 107% increase from 2008. Yet we are told the economy is improving?
• this huge increase in demand on "welfare" support in its various forms does not include the more than 46 million Americans which are dependent on the Supplemental Nutrition Assistance Program (SNAP), or more affectionately known as "food stamps."

• As the ability to source income from traditional support programs becomes limited or exhausted - individuals can become very creative. Two of the most interesting areas that have been tapped to support basic consumption needs since the beginning of the "great recession" is student loans and disability insurance

DISABIITY GAME

• What is most notable, however, is when the surge of individuals claiming disability began - exactly two years from the beginning of the financial crisis. This is when the 2 years of extended unemployment insurance began to run out. Well, it is either that, or the work place has become extremely hazardous over the last couple of years. Today, more than 28 million Americans who are of working age have a disability - a level higher than at any other time in recorded history.

GOING BACK TO "SCHOOL"

• However, if you cannot claim disability why not just say you are going back to school.
• We are told that we should pity the youth of America who are graduating college but so indebted that they can not service their debt or have a fair start at life.
• However, forgiving student loan debt when it wasn't used for education, but a new iPad instead, is another issue.
• The chart shows only the federal student loan program which has surged 400% since the end of the last recession and is now the federal governments largest financial asset comprising 31% of its balance sheet.
• However, in reality, student loan debt in total, which including private label loan programs, has now reached $1 trillion.
• Either I am correct about the real uses of student loan debt, or, we are about to embark upon the great educational renaissance

CORPORATE CASH & EQUIVALENTS/TANGIBLE ASSETS - Why So High?

Why Corporate Balance Sheets Just Don't Matter In The New ZIRP Normal 05/11/12 Zero Hedge

• Under ZIRP, when every basis point of debt return over 0% is praised, and an epic scramble ensues among hedge for any yielding paper no matter how worthless, the balance sheets of companies just do not matter. In other words, for companies that have massive leverage, high interest rates, negative cash flow, which all were corporate death knells as recently as 2008, the capitalization structure is completely irrelevant.
• the Fed, due to its policy of destroying the cost of capital as an indicator of corporate health, has forced lenders to agree to less protections in exchange for preserving a comparable cash interest stream
• It allowed corporations to minimize secured creditors as a class and therefore the corporation will no longer have to preserve EBITDA and Free Cash Flow over a certain level, nor will it have to engage in prudent hedging.
• EXAMPLE: Chesapeake just announced, following today's epic drubbing, that it is refinancing its secured debt facility (with its numerous restrictive covenants) with $3 billion in brand new Libor+7.00% unsecured paper (courtesy of Goldman and Jefferies). In doing so, CHK just got at least a one year reprieve.

It's An Interconnected World After All 05/14/12 Zero Hedge

BOND MARKET - 10 year Yield Hits New Lows - Flight to Safety, New Highs.

Treasury yields drop back to 7 month lows and a spectacularly awful 1.77 handle

The USD rose further and EURUSD dropped back below 1.29 for the first time in 4 months but perhaps AUD losing pairty with the USD was the bigger news - back to 5 month lows.

GERMANY - Assesses Greek Exit Impact to Germany

ECONOMIST 2 YEARS AGO	WEEKEND DER SPIEGEL

GERMANY HAS THROWN IN THE TOWEL ON GREECE & AUSTERITY

• Crushing Defeat for Merkel's CDU Party in German Elections as Voters Reject Austerity; Crown Prince Turns Into Frog 05/13/12 Mish
• Merkel's CDU Trounced In Most Populous State Elections Over Austerity; Pirates Strong 05/13/12 Zero Hedge
• Another Huge Setback For Angela Merkel 05/13/12 BI
• German voters reject austerity in key poll 05/13/12 FT

GERMANY WAVES THE WHITE FLAG ON INFLATION

• Schäuble ready to tolerate German inflation 05/13/12 FT
• Germany Has Waved The White Flag And Will Allow Printing And Inflation 05/13/12 John Mauldin

GERMANY SEES THE COSTS

Germany Begins Quantifying The Cost Of A Greek Exit (And Discovers Contingent Liabilities Are All Too Real) 05/12/12 Zero Hedge

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EUROSIS - Costs of Greek Exit

JPMorgan Estimates Immediate Losses From Greek Exit Could Reach 400 Billion 05/14/12 Zero Hedge

It is possible that necessary fiscal transfers are not politically feasible or that Germany is eventually far too different from the rest to coexist in a monetary union. In this case the horrific scenario of a break up becomes more likely. We would like to make two observations: 1) it is less painful and makes more economic sense for Germany rather than periphery to leave. See above discussion on consequences of a Greek exit for Greece, 2) the cost of a breakup is rising exponentially over time. Bundesbank TARGET2 balance reached a new high of €644bn in April.

CHINA - Joins 'Reflation Race'

In Much-Anticipated Move, China Cuts Reserve Requirement Ratio, Joins Reflation Race 05/12/12 Zero Hedge

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FINANCIAL REPRESSION - Can You Believe this Headline?

House Votes to Cut Food Stamps to Avoid Defense Reduction 05/12/12 BL

FINANCIAL REPRESSION - MAcroPrudential Polices for Germany

Moody's Germany's Macroprudential Steps To Be Credit Positive for Bank Bondholders, Sovereign 05/13/12 wsj

The ratings firm said that although details still need to be finalized, macroprudential instruments may include:

1. Anti-cyclical capital buffers,
2. Systemic-risk buffers, and
3. Increased risk weights for asset classes