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 JUNE 2012: GLOBAL MACRO TIPPING POINT - (Subscription Plan III)
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06/14/2012 3:12 AM |
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"BEST OF THE WEEK " |
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TIPPING POINT or 2012 THESIS THEME |
HOTTEST TIPPING POINTS |
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JP MORGAN - Better Odds Than A Casino!
Ahead Of Tomorrow's Dimon Hearing, Presenting JP Morgan's 93.5% Historical Winning Trade Perfection 06/13/12 Zero Hedge
Can someone explain how it is possible that a firm that over the past 9 quarters has disclosed a total of 41 days on which it has lost money trading, and 546 days on which it was profitable, or a 93.5% win rate of the total 587 days in the past 2 years and 1 quarter.
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06/13/12 |
Zero Hedge |
CRONY CAPITALISM |
CRONY CAPITALISM - The Illusion of Choice!
These 10 Corporations Control Almost Everything You Buy 04/25/12 BI

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06/13/12 |
BI |
CRONY CAPITALISM |
CRONY CAPITALSIM - The Bilderberg "Old Boys" Network
This Chart Shows The Bilderberg Group's Connection To Everything In The World 06/12/12 BI
The Bilderberg Group is 120-140 powerful people who meet each year to discuss policy. The meetings are closed to the public. This graph we found on Facebook shows the members' connections to a ton of corporations, charities, policy groups and media. Everyone from Eric Schmidt to George Soros is a member. There are tons of conspiracy theories about the group, including that they control the world economy. We took the findings with a grain of salt--after all, it's easy to trace an individual to a corporation and the graph doesn't specify what influence the member wielded.
But perhaps it's a compelling argument for why the meetings should be public.

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06/13/12 |
Facebook |
CRONY CAPITALISM |
CORPORATE PROFITS - Doesn't Get Any Better Than This (and still be legal?)
THE MOST IMPORTANT STORY IN AMERICA: Family Net Worth Collapses 40% In 3 Years 06/12/12 BI
Corporate profits just hit another all-time high. These are more than just "up". They are through the roof!

Corporate profits as a percent of the economy also just hit an all-time high. Profits are now VASTLY higher than they've been for most of the last half-century
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06/13/12 |
BI |
CRONY CAPITALISM |
FALLING STANDARD OF LIVINGS - Down 40% in 3 Years
THE MOST IMPORTANT STORY IN AMERICA: Family Net Worth Collapses 40% In 3 Years 06/12/12 BI

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STANDARD OF LIVING |
FINANCIAL REPRESSION - Income Inequality
Fed's Survey of Consmer Finances 06/12/12 BI
Income inequality has gotten so extreme here that the US now ranks 93rd in the world in "income equality." China's ahead of us. So is India. So is Iran.

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06/13/12 |
BI |
FINANCIAL REPRESSION |
MOST CRITICAL TIPPING POINT ARTICLES THIS WEEK - June 10th - June 16th, 2012 |
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EU BANKING CRISIS |
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EU BAILOUTS - The Most Important factor Lost => No Public nor Investor Confidence
Charting The Simple Reason Why Every 'Bailout' In Europe Will Be Faded 06/11/12 Zero Hedge
The bailout bullishness half-life is shrinking - dramatically - as it appears traders have become more aware of reality (and unreality). As we have noted again and again, the self-referencing, self-aggrandizing, self-pleasuring European government and banking systems are becoming more and more symbiotically linked. As JPM CIO Cembalest notes for Spain, Plan A was the 2010 announcement of government austerity targets. Plan B was the 2011/2012 ECB lending program to Spanish banks - to the point where Spanish banks now own around 50% of Spanish government debt. Neither plan worked and so on to Plan C - recap Spanish banks to cover the expected losses forthcoming. Recapitalization of the banks versus funding the sovereign is of course a semantic issue given the nature of the interplay. As Credit Suisse noted this weekend... "Portugal cannot rescue Greece, Spain cannot rescue Portugal, Italy cannot rescue Spain (as is surely about to become all too abundantly clear), France cannot rescue Italy, but Germany can rescue France.” Or, the credit of the EFSF/ESM, if called upon to provide funds in large size, either calls upon the credit of Germany, or fails; i.e., it probably cannot fund, to the extent needed to save the credit of one (and probably imminently two) countries that had hitherto been considered 'too big so save', without joint and several guarantees." Spain's reach-around is clear...

CHART: Eurozone Bailouts Are Horrible At Lowering Local Government Bond Yields 06/11/12 BI
Anyone who thought the Spanish bank bailout announcement would be followed by a rally in risk asset prices and a collapse in local government borrowing rates may have been a little too optimisitic. Indeed, borrowing costs in Spain surged today leaving many wondering if the bailout was doomed to fail. Indeed, 3 of the last 4 eurozone bailout announcements were followed by an extended period of higher interest rates relative to the German rate. From Thomson Reuters chart god Scott Barber:

Here's a look at how the Euro banking sector stocks performed during those same periods

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06/12/12 |
Zero Hedge |
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1- EU Banking Crisis |
SPANISH BANK BALIOUT - Shows That Major Banks Are Now Running the EU
The following comprehensive walk-thru appeared in the DB literature on Friday, before the formal announcement, it is quite clear that none other than Deutsche Bank, whose "walk-thru" has been adhered to by the Spanish government and Europe to the dot, was instrumental in defining a "rescue" of Spain's banks, which had it contaged, would have impacted the biggest banking edifice in Europe by orders of magnitude: Deutsche Bank itself.
The Spanish Bank Bailout: A Complete Walk Thru From Deutsche Bank 06/10/12 Zero Hedge
From DB: Spain: the mechanics of “recap only” loans
The guidelines for an EFSF bank recap are quite precise. There will be no conditionality on fiscal policy or structural reforms. The loan will also sit on Spain's balance sheet, meaning the volume of recapitalisation – to be established after a new, independent stress test – will be crucial: it needs to be big enough to convince the market that Spain's banking issue, which has been festering for three years, is addressed in a credible manner, while not being so large as to jeopardize Spain's public debt sustainability. We model possible trajectories for Spanish public debt for various recapitalisation volumes. In an intermediate recap scenario of EUR80bn, Spain could realistically, in our view, keep public debt below 95% of GDP at peak and bring it back below 90% by 2020.
- What would Spain need to do to access the "recap only" EU loan?
- As a first step, a country triggering a "recap only" loan will submit to the EU a list of "institutions in distress".
- Second, the amount of capital needed would be determined by a stress-testing exercise, which will be conducted by the national supervisor (i.e. the Bank of Spain), but also involving the EBA and "national experts from supervisory authorities from other member states".
- The conditionality attached to the loan would be limited to the recapitalised institutions themselves and financial system reforms in the beneficiary country.
- The monitoring of Spain's compliance with the conditionality to such a package would be the responsibility of the European Commission, the ECB and the EBA.

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What would be the consequences for Spain?
- The current rules are unambiguous: “The beneficiary member state will remain the ultimate liable counterparty”. In our opinion, ideally such a provision should be changed, to help stopping the “sovereign/banks loop”. This means that in any case the receiving country would still have to stomach an increase in its contingent liabilities.
- A figure above EUR 120bn for the recapitalisation need could become an issue for the “recap only” approach, since the guidelines make it clear that the size of the loan should remain consistent with a “sound fiscal position” for the receiving country.
- ESM loans – except for the countries currently under program – are senior.
- Since ordinary investors could be spooked by the “subordination risk” post-ESM funded recap, it would make sense for Madrid to hurry.
- It may take a few more months of sluggish credit origination to prompt the central bank into more action.
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06/11/12 |
Zero Hedge |
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SOVEREIGN DEBT CRISIS [Euope Crisis Tracker] |
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SPAIN - Real Problem is Banking and Competitiveness
Europe's Core / Periphery Imbalances Going Parabolic 06/04/12 EconompicData

George Soros' recent speech on what created the Euro bubble (and how it will need to play out) is making the rounds (although he deleted the speech from his personal site for some reason, a pdf version is here). While I strongly suggest reading the whole thing, a key takeaway is that:
The authorities didn’t understand the nature of the euro crisis; they thought it is a fiscal problem while it is more of a banking problem and a problem of competitiveness.
The result is that the issues have not been addressed and problems have only gotten worse.
The real economy of the eurozone is declining while Germany is still booming. This means that the divergence is getting wider. The political and social dynamics are also working toward disintegration. Public opinion as expressed in recent election results is increasingly opposed to austerity and this trend is likely to grow until the policy is reversed. So something has to give.
Which can be easily seen in a variety of metrics, including unemployment which is shown in the below chart and is simply unbelievable. It shows the current unemployment rate of Spain (currently an unreal 24.3%) divided by Germany's (less than half 2005's level at 5.4%) going back to 2000. It was only 5 years ago that Spanish unemployment was actually lower than Germany's (though that employment coincided with a massive housing bubble in Spain funded by cheap German financing from excess German savings).
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06/11/12 |
Econompic Data |
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2- Sovereign Debt Crisis |
RISK REVERSAL |
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CHINA BUBBLE |
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JAPAN - DEBT DEFLATION |
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GEO-POLITICAL EVENT |
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BOND BUBBLE |
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US TREASURY YIELDS - UST Lowest in 120 Years. What is This Telling US?
Dividend vs. Treasury Yields 06/05/12 Econompic Data
The dividend yield of the S&P 500 is above that of the ten year Treasury for the first time since the financial crisis. Before that we have to go all the way back to the 1950's to find a time when this was the case.
The kicker... stock dividends have only made up about 45% of total S&P composite stock returns over the past 100 years, while Treasury bond coupon payments have made up north of 96% of Treasury bonds returns over that same period (see below). What this means for an investor is unless you think dividends will be cut and/or capital appreciation will be negative (i.e. corporate America will shrink in terms of nominal value), stocks are poised to outperform. Stocks appear to be very cheap relative to bonds for investors with a long-term investment horizon, while near term investors need to be careful as we seem to be in a world that is likely to have binary outcomes (i.e. either a boom or an absolute collapse).

The remaining 55% of S&P stock returns have been in the form of capital appreciation, which has become increasingly important since the 1950's (see above), as corporations reinvested earnings back into their businesses / bought back shares (vs paying out dividends), while investors evaluated the relative merits of equities relative to bonds (see the much tighter relationship to bonds, which ratcheted up P/E multiples). Source: Irrational Exuberance
Treasury Yields Break Out of Range; Head Toward 1% 05/31/12 AlphaNOW
It’s clear that in a market environment dominated by fear and uncertainty, investors’ hunger for safe havens will trump their reasoned analysis about whether these yields represent real value or not. And that fear and uncertainty is unlikely to evaporate any time soon.


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06/11/12 |
Econompic Data |
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8- Bond Bubble |
STATISTICS - Is It any Wonder There is No New Business Growth in America?
23% of Small Business Owners (Approximately 6.21 million) Report "No Pay for a Year" 06/12/12 Mish
As of 2010, D&B estimates, there were about 23 million small businesses in the United States, employing nearly 81 million workers. Between 60% & 80% of all new jobs created in our country can be attributed to Small Business
Here are some interesting highlights.
- Over the past few years, business owners report that they have, at one time or another, taken less profit (78 percent), worked more hours than usual (70 percent), and used their own money to help the business survive (69 percent).
- 54 percent of respondents say they have gone without a paycheck in order to keep the business running.
- 23 percent of owners have gone without pay for one year or more.
- More than one-third of owners (38 percent) said their employees worked overtime without pay
- 18 percent of owners said employees either missed paychecks or had paychecks delayed.
- Access to financing doesn’t come up in the top five most important issues among small businesses. Instead, business owners cite lack of sales and consumer confidence.
Crunching the Numbers
If there are 27 million small business owners and 23% have not received any pay for a year, there are 6.21 million business owners who received no paycheck for at least a year.
Notes About Unemployment
Bear in mind, that making money or receiving a paycheck is irrelevant to the BLS when they compute the unemployment rate. If you work as little as 1 hour, whether you collect a paycheck or not, you are considered employed.
In addition to the 6.21 million business owners with no paycheck, factor in those selling trinkets on EBay out of desperation and collecting a few dimes in the process.
Also factor in factor in all those starting multi-level marketing schemes and calling it a business. How many get sucked into that losing proposition every year? Yet, to the BLS, it's a job if you worked any hours.
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06/12/12 |
Mish |
10
10 - Chronic Unemployment |
TO TOP |
MACRO News Items of Importance - This Week |
GLOBAL MACRO REPORTS & ANALYSIS |
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US ECONOMIC REPORTS & ANALYSIS |
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FALSE PRIVATE SECTOR GDP
Obama " Private Sector Doing Fine" 06/11/12 Angrey Bear

many of the comments about the private sector economy are based on an erroneous calculation of private sector real GDP. They seem to think that one can estimate private sector GDP by subtracting government consumption from total GDP. But that is not correct. Remember, we do not directly estimate output. Rather the GDP data measures consumption and adjust that for changes in trade and inventories to indirectly estimate output. For example if Boeing builds a 747 or Ford builds a truck it does not show up in GDP as output. It shows up in the GDP accounts in one of five ways.
1. If they sell it to an individual it is recorded in personal consumption expenditures.
2. If they sell it to a business it shows up as business fixed investment.
3. If they export it is recorded in the trade account.
4. If they do not sell it , the jet or truck is counted as an increase in inventories.
5. If they sell it to the government it is recorded as government consumption.
But if the jet or truck or some other good or service is sold to the government it still counts as private sector output just the same as if they had exported it or sold it to an individual or a business. In the GDP accounts, government consumption includes two types of transactions. One is government employment like a policeman or a soldier. The other is government purchases of goods or services from private business. So to correctly estimate private sector GDP you need to subtract only government employment but not government purchases from total GDP. This makes a big difference in the size and growth of the private economy. Every quarter that government purchases grow faster than private sector output it causes the estimate of private GDP derived by subtracting government consumption from total GDP to understate private GDP. This method of estimating private GDP generates a highly biased estimate. For example,using the correct methodology shows that over the past decade private sector real GPD expanded almost 20% while the estimate derived from subtracting all government consumption from total real GDP concludes that private sector real GDP contracted some -16%. |
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US ECONOMICS |
CENTRAL BANKING MONETARY POLICIES, ACTIONS & ACTIVITIES |
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Market Analytics |
TECHNICALS & MARKET ANALYTICS |
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SELL SIDE ANALYSTS - Careful With How You Interpret the Data
SocGen: This Could Be The Best Opportunity To Buy Stocks Since 2009 06/11/12 Soc Gen

Top equity strategists have pointed to elevated equity risk premiums as a great reason to buy stocks. When equity risk premiums are high, stocks are either really cheap or bonds are really expensive. Or something in between. Societe Generale's Global Asset Allocation team led by Alain Bokobza note that equity risk premiums have just hit levels that we haven't been seen since March 2009, when the S&P 500 hit that historic low of 666.
Should history repeat itself, this could prove to be a good entry point for equities from an extreme valuation standpoint. Over the last two decades, the US risk premium reached 6.8% on two occasions: in December 2008 and March 2009. The latter turned out to be a good entry point for equities, but four months earlier the S&P 500 index was still 17% above its bottom. Should history repeat, we would be close to an opportunity for long-term investors. Note that the last leg of the downward correction in March 2009 was followed by a V-shaped recovery, one so steep that two weeks after the bottom the S&P 500 had fully recovered.
But this time around, they note some differences that make stocks a little less attractive than they were back in 2009.
However, US equity is not outright inexpensive: the Shiller P/E ratio (cyclically adjusted valuation measure) was at 13.3x in March 2009 versus 20x currently. The extremely high risk premium is essentially reflecting the rich valuation of “safe haven” government bonds (1.5% yield now compared to 2.9% in March 2009).
Chart of the Week: Equity Valuations Look Like They Have Landed in the Bargain Basement 06/11/12 Scott Barber - Reuters
Interest rates in the United States and Germany are at such astonishingly low levels that it may be impossible for investors not to contemplate re-allocating some cash into the very cheap world of equities, as we saw last week. But it may take many more weeks of that kind of valuation discrepancy, coupled with strong fundamental news (such as better than expected earnings announcements at the end of the second quarter) and an absence of anxiety-generating headlines, to propel stock market valuations toward their 10-year highs once more. |
06/12/12 |
SocGen |
ANALYTICS |
COMMODITY CORNER |
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THESIS Themes |
FINANCIAL REPRESSION |
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CORPORATOCRACY -CRONY CAPITALSIM |
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GLOBAL FINANCIAL IMBALANCE |
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SOCIAL UNREST |
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STATISM |
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CURRENCY WARS |
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STANDARD OF LIVING |
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GENERAL INTEREST |
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TO TOP |
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