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

The Global Markets have reached the point of what can be best labeled as "Elevated Risk". Analytics measurements including Fundamenal Analysis, Techncial Analysis and Risk Anlysis all are independently signalling this along with warnings. This months report lays out the Risk Assessment, Risk Levels as determined by our proprietary aggregated Global Financial Risk Index, changes in Tipping Points and the Macro Risk-On, Risk-Off Drivers.  - The "Peek Inside" shows the detailed coverage available this month.

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MAY 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

JUNE 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

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.

CRONY CAPITALISM - The Illusion of Choice!

These 10 Corporations Control Almost Everything You Buy 04/25/12 BI

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CRONY CAPITALSIM - The Bilderberg "Old Boys" Network

This Chart Shows The Bilderberg Group's Connection To Everything In The World 06/12/12 BI

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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

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

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.

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

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

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.

SPAIN - Real Problem is Banking and Competitiveness

Europe's Core / Periphery Imbalances Going Parabolic 06/04/12 EconompicData

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).

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.

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.

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%.

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

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.