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 AUGUST 2012: GLOBAL MACRO TIPPING POINT - (Subscription Plan III)
MONETARY MALPRACTICE : BIS & IMF Issue warnings to Global Central Bankers
As we reported last month, Global Economic Risks have taken a noticeable and abrupt turn downward over the last 60 days. Deterioration in Credit Default Swaps, Money Supply and many of our Macro Analytics metrics suggested the global economic condition is at a Tipping Point. Though we stated "Urgent and significant actions must be taken by global leaders and central banks to reduce growing credit stresses" nothing has occurred even after the 19th disappointing EU Summit to address the EU Crisis. Some event is soon going to push the global economy over the present Tipping Point. The IMF recently warned and reduced Global growth to 3.5%. This is just marginally above the 3% threshold that marks a Global recession. This would be the first global recession ever recorded.
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 AUGUST 2012: MONTHLY MARKET COMMENTARY (Subscription Plan II)
MONETARY MALPRACTICE : Moral Hazard, Unintended Consequences & Dysfunctional Markets - Monetary Malpractice has had the desired result of driving Investors into becoming Speculators and are now nothing more than low-odds Gamblers. There is a difference between investing, speculating and gambling. At one time these lines were easy to comprehend and these distinctive groups separated into camps with different risk profiles in which to seek their fortunes. Today investing has become at best nothing more than speculating and realistically closer to outright gambling.
The reason is that vital information is either opaque, hidden or manipulated. Blatant examples such as: the world of off balance sheet debt, Contingent Liabilities, Derivative SWAPS, Special Purpose Vehicles (SPV), Special Purpose Entities (SPE), Structured Investment Vehicles (SIV) and obscene levels of hidden leverage make a mockery out of public Financial Statements. Surely if we get our ego out of this for a moment we can see that stockholders are now nothing more than gamblers? What is worse is that the casino is rigged. With Monetary Policy now targeting negative real interest rates, it is forcing the public out of interest bearing savings and investing, and into higher risk vehicles they would have shunned historically. They have no choice as the Monetary Malpractice game is played against them.
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MARKET ANALYTICS & TECHNO-FUNDAMENTAL ANALYSIS |
 AUGUST 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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ENTITLEMENTS: The Coming Demographics
America's Demographic Cliff: The Real Issue In The Coming, And All Future Presidential Elections 08-18-12 Zero Hedge
The first wave of Baby Boomers, born between the years of 1946 and 1964, officially reached retirement age in 2011. There are a whole lot of Baby Boomers - just under 76 million, to be exact - that will depend on new money flowing into the system to help keep the entitlements coming. According to the latest Social Security and Medicare Board of Trustees 2012 Annual Reports Social Security now pays out more than it takes in, and is expected to do so for the next 75 years.
According to the Census Bureau’s Current Population Survey, about 40.2 million people – 13% of the entire US population – are 65 years or older and eligible to receive government entitlements such as Medicare and Social Security. At current levels, spending on these entitlements make up about 8.7% of GDP – about $1.3 trillion. While this may sound sustainable over the short term, in coming years the amount of entitlement outlays necessary to keep up with retiring Baby Boomers is going to send spending through the roof. By 2030, for example, a full 19.3% of the population will be claiming SSI and Medicare benefits, based on the Census Bureau’s population projections (the CB uses an adjustment factor for the age cohorts based on mortality rates, foreign-born immigration, and life expectancy). For simplicity’s sake, here’s a decade-by-decade look at where the aging population – and expenditures – will be in the years to come, courtesy of the Census Bureau and the Congressional Budget Office (CBO):
- In 1900, 4.1% of the US population was 65+. By 1950, this number had almost doubled to 8.1%. As the chart following the text shows, the Baby Boomers (now ages 48-66) represent the most significant population wave in US history. According to the CBO, the population aged 65 and over will increase by 87% over the next 25 years as Baby Boomers enter retirement, compared to an increase of only 12% in those aged 20-64.
- This year, 13% of the US population is 65+ and entitlement spending accounts for 8.7% of GDP. And that number only includes SSI and Medicare, not Medicaid and future Obamacare subsidies which add to these outlays.
- In 10 years (2022): 16.1% of the population will be 65+, entitlement spending estimated at 9.6% ($1.5 trillion, based on 2011 US GDP)
- 2037 (25 years on): 20 % of the US population will be 65+, entitlement spending estimated at 12.2% of GDP ($2.0 trillion)
- Not surprisingly, there will be far more women than men in the 65+ population. Women currently live about five years longer than their male peers, on average. Accordingly, the Census Bureau estimates that in 2030, there will be about 8 million more women than men that are 65 and older by 2030: 27.8 million versus 35.7 million.
It’s a pretty tough picture, to say the least; as the population ages, we’re looking at more and more money dedicated to retirement benefits with a smaller workforce to fund the spending. We’re not the only ones, either: Japan is in worse shape than the US, with 23.1% of the population already over 65. In 2050, government statistics forecast that number to be 39.6%. Europe’s in the same boat: 17.4% of the population in EU countries was 65+ in 2010, and it’s expected to be about 30% by 2060. The developed world, essentially, is facing a demographic “Fiscal cliff” with no clear-cut strategies for how to fund the liabilities inherent in an entirely predictably aging population.

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08-20-12 |
FISCAL |
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27 - Pension - Entitlement Crisis |
DISPOSABLE INCOME - 66M (20%) Below $28.8/Year Subsistence Level
Americans At Or Below 125% Of The Poverty Level 08-19-12 Zero Hedge
From AP: "the number of Americans with incomes at or below 125 percent of the federal poverty level - the income limit for qualifying for legal aid - is expected to reach an all-time high of 66 million this year. A family of four earning 125 percent of the federal poverty level makes about $28,800 a year, government figures show." And visually...
As usual, if anyone expects these 66 million Americans (over 20% of the US population) to vote for someone who dares to even think about taking away any of the entitlements said tens of millions of people are used to, then by all means buy Las Vegas real estate. |
08-20-12 |
CATALYTST DISPOSABLE INCOME |
STANDARD OF LIVING |
FISCAL CLIFF - Asymmetric Risk Profile & PE Contraction
GOLDMAN: Investors Need To Wake Up Because The Fiscal Cliff Is Only Getting Scarier 08-19-12 Goldman Sachs via BI
It may be time for a reality check for investors who are shrugging off the fiscal cliff.
That's according to Goldman Sachs chief U.S. equity strategist David Kostin, who writes in his latest note to clients that "portfolio managers have been swayed by hope over experience" when it comes to anticipating the effects the fiscal cliff will have on markets.
Kostin writes that investors aren't giving as much attention the fiscal cliff as they should be, and that may be helping to set the markets up for a repeat of last year, when the debt ceiling negotiations sent stocks plummeting.
From the note:
A look at the 2011 trading pattern of the S&P 500 explains the reason for our belief that the market has an asymmetric risk profile and offers more downside than upside. Last year the deadline for Congress to raise the federal debt ceiling was known months in advance. Nevertheless, Congress was unable to reach an agreement that satisfied all factions. Investors were stunned and the S&P 500 plunged 11% in 10 trading days (and more than 17% from the level one month prior to the deadline). Eventually Congress reached a compromise on raising the debt ceiling.
We believe the uncertainty is greater this year than it was 12 months ago...Political realities and last year’s precedent suggest the potential that Congress fails to reach agreement in addressing the “fiscal cliff” is greater than what most market participants seem to believe based on our client conversations. In our opinion, equity investors seem unduly complacent on this issue. Portfolio managers have been swayed by hope over experience.
This month's stock market rally marked a major divergence from last year's performance as markets moved past the one-year anniversary of the debt ceiling showdown:
Kostin thinks the S&P 500 has quite a way to drop from here:
Assigning a P/E multiple to various ‘fiscal cliff’ and earnings scenarios is difficult because ultimately we expect Congress will address the situation. But investors must confront the risk they may not act until the final hour. Exhibit 4 contains a matrix of potential year-end 2012 S&P 500 index levels based on different ‘fiscal cliff’ resolutions and multiples. Our 1250 target reflects our ‘fiscal cliff’ assumption and a P/E slightly below 12x. Full expiration with P/E of 12x equals 1120 (-21%). A 14x P/E and full extension implies 1540 (+9%), but the two outcomes are not equally likely in our view.
Here is the matrix of potential market outcomes, according to Kostin:
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08-20-12 |
US FISCAL
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US ECONOMY |
MOST CRITICAL TIPPING POINT ARTICLES THIS WEEK - August 19th - August 25th, 2012 |
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EU BANKING CRISIS |
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SOVEREIGN DEBT CRISIS [Euope Crisis Tracker] |
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RISK REVERSAL |
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CHINA BUBBLE |
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JAPAN - DEBT DEFLATION |
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BOND BUBBLE |
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CHRONIC UNEMPLOYMENT |
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GEO-POLITICAL EVENT |
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MACRO News Items of Importance - This Week |
GLOBAL MACRO REPORTS & ANALYSIS |
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US ECONOMIC REPORTS & ANALYSIS |
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CENTRAL BANKING MONETARY POLICIES, ACTIONS & ACTIVITIES |
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Market Analytics |
TECHNICALS & MARKET ANALYTICS |
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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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