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

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

STALL SPEED : Any Geo-Political, Economic or Financial Event Could Trigger a Market Clearing Fall

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 unless major globally coordianted policy initiatives are undertaken. 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. The World Bank is "unpolitically'projecting 2.5%. The situation is now deteriorating so rapidly, as to be impossible to hide anylonger.

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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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	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

FLOUNDER METER - Debt is A Global Problem

IceCap Asset Management: The Flounder-Meter IceCap Asset Management

IceCap is introducing a necessary yet simplified tool for measuring the state of the World’s leading economies – "The Flounder Meter." This new metric considers the combination of money printing, bank bailouts, debt levels, government spending and borrowing costs for a given country. The Flounder Meter will finally allow everyone to see through the smoke and mirrors and decide for themselves whether a country is in good financial health.

HOW GORDONTLONG.COM views this: BELOW

EDUCATION - Frightening Survey Results for New Graduates

Trading caps and gowns for mops College grads taking jobs unrelated to their studies 08-23-12 MW

“Our society’s most talented people are unable to find a job that gives them a decent income”

Cliff Zukin, Professor of political science and public policy at Rutgers

SURVEYS

1. PayScale.com, a company that collects data on salaries conducted an online survey of 500,000 young workers between July 2011 and July 2012
2. Rutgers "Chasing the American Dream: Recent College Graduates and the Great Recession" 66 page pdf
3. inc./WomanTrend, conducted a nationwide online survey of 1,003 American adults ages 18-29 between July 27 and July 31, 2021 Generation Opportunity Announces New National Poll Results of 18 to 29 Year Olds
4. 2012 ROI Rankings: College Education Value Compared

• 63% of “Generation Y” workers — those age 18 to 29 — have a bachelor’s degree, the majority of the jobs taken by graduates don’t require one
• Half of graduates in the past five years say their jobs didn’t require a four-year degree and only 20% said their first job was on their career path
• The jobs that once went to recent college graduates are now more often going to older Americans. Over the past year, workers over 55 accounted for 58% of employment growth. Employers think older workers are a safer bet and more likely to stay.
• Unemployment hovered at 6.2% in July for workers over 55, according to the Labor Department, but was more than double that rate — 12.7% — for those ages 18 to 29.
• college graduates are finding themselves locked into lower-paid jobs. “The shaky economy has forced many of them into a world of underemployment,”
• The starting salary for a graduate is $27,000, 10% less than five years ago. “Unlike those who graduated five years ago, the long-term expectations of this generation are not being met.”

• One to five years since graduation, most of the students in our survey have made very little progress in paying down their debt.
• Only 13% have paid off all of their debts for their college education;
• one in four has not paid off any of it, thus far.
• Four in ten who graduated in 2009, 2010, and 2011 reported that they had yet to pay off any of their debt. Compounding their financial challenges is the fact that nearly half (46%) reported that they also have other financial debts, such as credit cards.
• 40% delayed buying a house or making other major purchases.
• 27% moved back home. If you are looking for a reason for a weak housing market there you have it. Graduates deep in debt with a job not in their field, or no job at all are unlikely to be buying houses and cars. Boomers facing retirement want to downsize, but there are few capable buyers able to make purchases. Housing is going to be structurally weak for years to come as a result of student debt and demographics.

Trading Caps and Gowns for Mops; Why Go to College If There Are No Jobs? Chasing the American Dream 08-24-12 Mish

ANALYTICS - Price Eventually Follows Volume

Why Volume Matters - The UnBearable Lightness Of Bear Market Rallies 08-24-12 Zero Hedge

YTD, low volume days have seen the S&P 500 rise around 15% in aggregate, while high volume days have seen the S&P lose around 5% in aggregate. The linear nature of the low-volume move is simply remarkable - perhaps September will bring some real volume back, and now we know what that means for market direction.

CAPITAL FLIGHT- EU Bank Runs to US Recipients

Where European Banks Store Their Cash: Foreign Banks Domiciled In US See Cash Hoard Spike Back To Record Highs 08-21-12 Zero Hedge

Foreign banks domiciled in the US have taken their cash balance back to all time highs, which at $918 billion is in the ballpark of the highest it has ever been, and merely confirms what everyone has known: the only reason the US market has benefited in the last several months is due to flight to safety into what, for whatever reason, is perceived as the safety of the US capital markets.

Foreign (read European) commercial banks located in the US have seen their cash holdings soar by $315 billion since April, or roughly since the time Europe start imploding once again after the LTRO 2 myth fizzled. What does this mean? That the tumble in the EUR in the past 4 months was driven primarily by European banks selling their currency and hoarding USD in US-subs. What, however, is notable is that this cash was not used to purchase US securities, but stayed inert to provide a cash buffer, supposedly to keep European banks in compliance with various Basel and other capitalization requirements. It also means that the market which has been looking at this number as potential dry powder for future purchases of stocks and bonds, has been dead wrong, and all it will take is for a sustained rise in the EUR for the cash balance to revert back out of the US, and into the holding level companies of the European banks which currently save dollars in the US.

Finally, what all this means is that, as we suggested two weeks ago, simple promises of future intervention by central banks will be insufficient, as US banks, whose cash balances have not budget in years, are now cash starved and in order to push the market to a new, higher level, they will require actual investable cash, i.e., reserves deposited by the Fed. Because ironically, risk flight out of one market and into another, does nothing for the aggregate level of global equities. Absent freshly printed money, the global stock markets will lurch from Europe to the US to Asia back to Europe indefinitely, until everyone develops terminal vertigo and gives up at which point not even the algos will be able to trade with each other.

SPAIN - Non Performing Bank Loans Go Ballistic

Spain banks’ bad loans hit record high in June 08-17-12 AlphaNOW

• Spanish banks’ bad loans rose to a record high in June as assets tied to the country’s deflating property market soured further, keeping the financial sector at the forefront of investor concerns about the country’s fragile economy.
• In the same month that Spain sought a European bailout of up to 100 billion euros for its struggling lenders, their non-performing loans rose to 9.42 percent of outstanding portfolios from 8.95 percent in May, central bank data showed on Friday.
• Loans that fell into arrears increased by 8.4 billion euros ($1.03 billion) to 164.4 billion euros.
  Bad loan rates have risen steadily since a decade-long property boom ended four years ago, with the country now in its second recession since 2009 and one in four Spaniards out of work.

HOUSING - New Home Sales & Prices Fall

New Homes For Sale Drop To Lowest Ever; Average New Home Price Plunges To 2012 Lows 08-23-12 Zero Hedge

Looking at the headline number in the just released New Home Sales data one would be left with the impression that the tepid "recovery" in housing may be chugging along: after all with a seasonally adjusted annualized 372,000 new homes sold in July, this was an improvement to the revised 359K in June (ignoring that the US housing market at best continues to drag along the bottom). This impression, however, promptly changes when one looks at the underlying data. The reality: the actual number of new homes sold in July was 34,000, the same as in June, and the lowest since March. Of this, a massive 3,000 (yes, three thousand) homes were sold in the Northeast in the entire month. Where things get worse is when one looks at the number of new homes for sale. At 142,000 (of which just 38,000 actually completed), this was the lowest number. EVER.

And finally, to ruin all hopes that the housing bottom may mean an actual pricing bottom, the median new home price slid to $224,200, down from $229,100 in June, and the lowest since January, while the average home price declined from $266,900 to $263,200. This was the lowest average price posted so far in 2012.

So much for the housing "recovery.

COMMERCIAL REAL ESTATE - June -33% Y-o-Y, July -20% Y-o-Y

Slumping Commercial Real Estate Sales Are Latest Flashing Red Non-Recovery Indicator 08-23-12 Barclays via Zero Hedge

Real Capital Analytics (RCA) released their US commercial real estate transaction data for July last night. The only way to interpret the data is - ugly. After a dismal June (down 33% YoY), July did not see any bounce and in fact plunged 20% YoY with transactions totaling $14.6bn. As Barclays notes, the takeaway is generally negative, as the growth trend has weakened considerably since March ( which was +62% YoY). What is interesting to us is that with Treasury yields so low, the cap-rate 'spread' makes commercial real estate relatively attractive and yet no-one's buying.

US CONSUMPTION - 71% Consumption is Unsustainable with Shrinking Real Disposable Income

System Heavily Reliant on Extreme Consumption MyBudget360

Q2 EARNINGS - Slowing Rate of Revenue Growth A Concern

U.S. corporate earnings point to further gloom 08-17-12 Reuters

For the second quarter:

• The percentage of companies beating revenue forecasts was the lowest since 2009.
• For every company that gave a positive outlook, nearly five companies gave negative outlooks,
• Third-quarter earnings estimates are down sharply, and now show a year-over-year decline of 1.8 percent,
• first quarter of negative growth in three years.
• Overall earnings growth for the second quarter was 8.4 percent, but a charge taken by Bank of America (BAC.N) at this time a year ago skews everything. Take them out, and growth was just 3 percent.
• Early in expansions, earnings tend to strengthen as cost-cutting efforts boost profits - but revenues tend to catch up as demand increases later in the cycle. That hasn't happened in an expansion nearing its third anniversary.

"What this is telling us is that the economy is slowing down, and that doesn't bode well for the bullish earnings expectations. "Generally there's always a gap, but this gap is much wider."

• SPX is just a few points from four-and-a-half year highs.
• With results in from 95 percent of the Standard & Poor's 500 companies, just 41 percent have beaten revenue expectations, well below the 64 percent average of the last four quarters.
• U.S. companies have been hit on several fronts:
  • a recession in Europe,
  • slower growth in China and
  • a lack of momentum in the U.S. economy.
• According to a recent Reuters poll, gross domestic product likely expanded at a 1.5 percent annual rate between April and June, after rising 1.9 percent in the first three months of the year.
• the number of companies posting revenue shortfalls was a surprise in this period. That has happened even though 68 percent of companies beat earnings expectations.
• Companies have done that by holding down costs and consolidating businesses rather than spending, a fact reflected in the nation's stubbornly high unemployment rate.
• Sectors with the worst revenue misses for the second quarter include materials, industrials and utilities, with all three showing a more than 70 percent miss rate on revenue.
• "Revenues have not grown in proportion with earnings. That's to be expected early in the recovery, but now we've matured. We're well along in the cycle, and revenues are still trailing,"

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. 

SENTIMENT - Consumer Comfort Plummets to -47.4

What's Wrong With This Chart? 08-24-12 Bloomberg via Zero Hedge

One (and by one, we mean the incumbent presidential candidate) can only hope that consumer comfort tracked by Bloomberg is not a leading market indicator... Of course, with Wall Street now solidly on the side of Mitt Romney, and well aware it needs to crash the S&P ahead of November if Romney is to have a running chance, this may well be the case.

SENTIMENT - Individual Investor Bullish Sentiment At Four Month High

Individual Investor Bullish Sentiment at Four Month High 08-23-12 BeSpoke

Following in the footsteps of investment advisors, bullish sentiment among individual investors rose for the fifth straight week.  According to the weekly survey from the American Association of Individual Investors (AAII), bullish sentiment increased from 36.8% to 41.96%, representing the highest reading since late March.  While investors wanted nothing to do with this market six weeks ago, today they are starting to open up to stocks.  As they say, price heals all wounds.

SENTIMENT - Newsflow a Leading Indicator -- Ugly

Newsflow Sentiment Confirms Global Recession 08-23-12 SocGen via Zero Hedge

The last few months have seen a rapid deterioration in economic newsflow. SocGen's newsflow indicators, which capture sentiment regarding trends in the underlying economy (based on the balance of economic strength and weakness in newswire and newspaper articles) typically leads the economy by around three months. Currently, this intriguing indicator suggests a notable drop off in global industrial production - and furthermore, while Fed/ECB anticipation has dragged market-implied inflation expectations up, newsflow has biased towards deflation rather notably in the last few months. It seems that rather than being the chess pieces of global central planners, we really do have minds of our own and act in our own best interest.

One can read a clear deterioration in SocGen's economic newsflow indicator, indicating that global growth is in danger in the months ahead...

and deflation is starting to worry people...

FISCAL CLIFF - Its About the INDECISION Until They Extend It - Then the RAMIFICATIONS they Did

The Scariest Fiscal Cliff Chart — And Why Investors May Be Walking Into A Disaster 08-18-12 BI

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

PATTERNS - Bear Market Comparisons

The Latest Look At The 'Real' Mega-Bears 08-21-12 Doug Short

CORPORATE GEARING - Pressures to Increase Leverage

Is The Post-Crisis Corporate Re-Leveraging Rally Over? 08-20-12 UBS via Zero Hedge

We’re seeing an apparent stalling out of the re-leveraging cycle. But while current opportunity costs may be low, a reluctance/inability for corporates to invest and/or return cash to shareholders is not without consequences. Returns on capital are set to decline this year – the first time since before the financial crisis. RoE is being squeezed from all sides: asset turns, profit margins, and leverage. We continue to believe that leverage will be the most effective mechanism to support RoE in this environment. Increasing dividend payouts and repurchasing more stock would certainly help here. With the corporate sector struggling to maintain aggregate earnings growth, it will be imperative – for both growth and returns – that the broader releveraging cycle not completely fade away (see illustrative charts below).

MARKET MOMENTUM - 200 EMA Divergence

Stocks Above 200-EMA Index Shows Eroding Support 08-17-12 Decision Point

When a stock is above its 200-EMA, it is considered bullish, and in the broadest sense the stock can be considered to be in a long-term rising trend. A good way to determine the amount of support behind a rally is to analyze the percentage of stocks above their 200-EMA. Decision Point keeps track of this percentage for the S&P 500 Index, and it indicates that there are fewer stocks pushing the SPX to the current highs than there were at the April highs. Also, we can see that the percentage in April was lower than it was at the 2011 highs.

Taking 2011 by itself, we can see the rapidly erroding percentage at the July 2011 tops just before the sharp decline in July and August. Of course, we must note that as of this writing both price and the indicator are making new highs since the June bottom, so it is possible for the appearance of weakness to be remedied if the rally continues.

Conclusion: The percentage of stocks above their 200-EMA shows fewer stocks participating in the advance than there were at the 2011 top and the March 2012 top. This is not a healthy condition, and will probably result in a correction fairly soon; however, the market needs to stop going up before it can go down

SOCIAL UNREST - Its Building With Troubled Youth Expectations

A Terrifying New Poll Of Young Voters On The Economy 08-22-12 Generation Opportunity

77% of Americans 18–29 years old report delaying action due to the poor economy—44% delay buying a home; 28% delay saving for retirement; 27% delay paying off student loans or other debt; 27% delay going back to school/getting more education or training; 26% delay changing jobs/cities; 23% delay starting a family; 18% delay getting married; 18% none; and 5% don’t know.

INFLATION - Controlled or Manipulated? You Decide.

A Look At Inflation From 1872 To Present 08-18-12 Doug Short

HARMONIC DECAY

MANIPULATION

MIT BILLION PRICES PROJECT

The Billion Prices Project @ MIT

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.