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Gordon T Long

RESEARCH ANALYTICS for the GLOBAL MACRO

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EXTEND & PRETEND: A Matter of National Security

 

There is something seriously wrong in America. We all sense it, but few in the mainstream media are willing to touch it or can effectively articulate it within the public’s sound-bite oriented attention span.

 

It isn’t just about the remnants of the financial crisis; it isn’t the protracted jobs recession and slow recovery; it isn’t the trillions of dollars in deficit spending; it isn’t the degree of rampant financial malfeasants. It is something deeper which reaches into the soul of who we are as a people and society. It will soon be the central theme to your investment strategy and financial security.

 

On the surface it might appear we have lost our optimism about the future and our confidence that America is still the ‘beacon on the hill’ that countries around the world admire and look to for leadership. Though our children mouth the platitudes taught by older generations, they ring hollow in the hallways with video surveillance, motion detectors and metal detectors when recited by them. The high minded ideals seem misplaced in unemployment lines where they stand with freshly minted advanced degrees in hand, huge education debts and little hope other than the faint possibility of a non-paying internship position.

 

It isn’t that the American people have changed. Our government has changed.

 

READ MORE

 

 

EXTEND & PRETEND: A Guide to the Road Ahead

 

It will likely surprise you but like a trolley car we are now locked into economic tracks that determine our financial destination. Unfortunately, it isn't a place anyone would choose knowingly other than possibly the Bilderberg elite.

 

Financially and economically we are lurching along, rocking from side to side with the occasional unexpected jarring flash crash jolt. But unlike a trolley line, for some reason no one seems to know what the destination is. Many are asking but few are willing to tell.

 

This road is well traveled and documented if you were to take the time to study the maps and not rely on the happy face media spin doctors for directions.  Since the route of the current global economic path is now locked in, we need to either accept the ride or hastily exit. 

 

I’m up from my seat and headed for the door. What are you going to do?

 

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READER ROADMAP -  2010 TIPPING POINTS aid to positioning COMMENTARY

 

 

 

1

         

SOVEREIGN DEBT PIIGS

EU BANKING CRISIS
BOND BUBBLE

STATE & LOCAL GOVERNMENT

CENTRAL & EASTERN EUROPE
BANKING CRISIS II
RISK REVERSAL

COMMERCIAL REAL ESTATE

CREDIT CONTRACTION II

RESIDENTIAL REAL ESTATE - PHASE II
EXPIRATION FINANCIAL CRISIS PROGRAM
US FISCAL IMBALANCES
PENSION CRISIS
CHINA BUBBLE

TODAY'S TIPPING POINTS UPDATE

Last Update: 06/23/2010 05:50 PM

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POSTS:   WEEKEND 06-19/20-10

 

 

GEO-POLITICAL TENSIONS - ISRAEL / KOREA / IRAN

 

IRAN

 

ISRAEL

 

KOREA

Guest Post- Behind and Beyond The Sinking of The Cheonan ZH

The sinking of the South Korean warship is not likely to lead to a wider conflict at this point, and much of what happens on the geopolitical scene will depend on China’s willingness to play a mediating role, and its determination to seize the opportunity to use its economic leverage to help denuclearize a North Korea that is on the edge of famine. Beijing is planning $10 billion worth of infrastructure investments in North Korea (an amount that represents 70 percent of North Korean GDP). This is where the main opportunity is to move beyond simply “managing” Pyongyang to “resolving” major security issues.

 

SOVEREIGN DEBT & CREDIT CRISIS

 

Germany and France examine 'two-tier' euro  Telegraph.co.uk

Germany and France are examining ways of creating a "two-tier" euro system to separate stronger northern European countries from weaker southern states. The creation of a "super-euro" zone would initially include France, Germany, Holland, Austria, Denmark and Finland. A two-tier mSenior politicians believe their economies need to be better protected as they could not cope with another crisis on a par the one in Greece.onetary system in the 16-member euro zone is being examined as a "plan B".

"It's an act of desperation. They are not talking about ideal solutions but the lesser of evils. Helping Greece could be done relatively cheaply but Spain they can't afford to let fail or bail-out.  "And putting more pressure on the people of France and Germany to save other countries is politically unfeasible."

Nicolas Sarkozy, the French president, is understood to have been initially cool on the idea but has grown so frustrated with Greece and now Spain that he has allowed officials to explore proposals.

"He would prefer to keep the euro in place but if Spain, Italy and Greece are dragging him down he accepts he may have to cut them loose," said the official. "They are trying to contain the contagious effect but they don't have a solution yet."

The crunch time will come in September, when Spain has to refinance £67 billion of its foreign debt.

"The euro zone debt crisis has a long way to run," said one senior EU negotiator. "No one knows where it is going to end up. Only one thing is sure, the euro zone will change."

 

Obama urges G20 to boost demand  FT

 

GREECE

 

ITALY

 

SPAIN / PORTUGAL

Ferocity Of Imminent Spain-Germany Cold War  ZH

IMF head seeks to allay fears over Spain  FT

 

FRANCE

Sarkozy marks de Gaulle speech in London  FT

 

GERMANY

Merkel set to lose control of upper house  FT

 

UK

Mervyn King gives clearest warning yet of interest rate rise Telegraph
 

Osborne to set out plans for easing debt  FT

Extra spending cuts or tax increases of at least £24bn on cards

Britain- Gateway to anguish  FT

Chancellor is preparing to deliver a Budget that will be costly for many

JAPAN

 

CHINA

 

China 1 Month Interbank Rate At Multi Year Highs, More Than Doubles In One Month  ZH

since June, the Chinese 1 Month Repo Rate has exploded and is not looking back.After trading in the 1.5% area for years, in the past 3 weeks, this has nearly tripled, and today traded at a 52-week (and close to all time) high of 3.8%. While for many Chinese banks, flush to the gills with money due to a tapering in consumer lending, this is not an issue, we are fairly confident there are various banks that will be impaired by this spike. And it certainly did not occur in a vacuum - there a distinct, and extremely levered, correlation between the CNY fixing and the 30 Day Repo. Should China go ahead and reval the renminbi, must we expect a complete lock up of the Chinese lending market? Perhaps with the Shanghai Composite hitting a fresh 52 week low today, at least someone is paying attention.

 

 

DUBAI WORLD

 

USA

ECRI Index Continues To Plunge, Drops By 2.2 To -5.7, And Just 4.3 Away From "Guaranteed" Double Dip Territory  ZH

 

The ECRI weekly leading index is continuing its accelerating dive, and is now well into negative territory, hitting -5.7 for the past week: a 2.2 decline from the prior week. Here is why, as David Rosenberg, this is a critical indicator, and why we may have just 4.3 more points to go before the critical -10 threshold: "It is one thing to slip to or fractionally below the zero line, but a -3.5% reading has only sent off two head-fakes in the past, while accurately foreshadowing seven recessions — with a three month lag. Keep your eye on the -10 threshold, for at that level, the economy has gone into recession … only 100% of the time (42 years of data)." At this rate of decline -10 will be taken out in the first week of July.

And some more recent observations on ECRI from Rosie:

Suffice it to say, when the ECRI was drifting lower in 2007, it got to -3.5%, where are we are now, in November and unbeknownst to the consensus at the time that a recession was only one month away. Remember that the economics community did not call for recession until after Lehman collapsed — nine months after it started; and go back to 2001, and the consensus did not call for recession until after 9/11 and again the economy had been in recession for a good six months).

Updated ECRI:

 

EU BANKING CRISIS

 

European Stress Tests Confimed To Be A Farce- Will Not Include Discussion Of Sovereign Risks ZH

Morgan Stanley's Huw van Steenis has confirmed that the European Stress Tests will be nothing more than a dud and a farce: the primary risk consideration that is enveloping Europe, i.e. sovereign risk, will not even be discussed at all in the stress tests.

ECB must buy 'hundred of billions' of bonds to tame Europe's debt crisis Telegraph

 

COT Weekly Data Discloses Biggest Euro Short Covering Episode In History  ZH

The CFTC Commitment of Traders is out and, it's a doozy: the amount of short covering in net spec EUR short positions hits what is certainly an all time record, as just under 50 thousand (49,585) short contracts are covered. This represents a huge 44% of all outstanding EUR net shorts (-111,945) as of the prior week. No wonder the EUR surged, and no wonder Goldman downgraded the EURUSD - in tried and true fashion we wonder how many banks tightened up margin requirements only to force the biggest short squeeze in history. It is only logical that every sellside desk would try to sucker as many clients as they could in advance of this rampage. The current net spec short position takes total shorts back to levels from mid-April, when the euro was trading in the 1.30 range. This is very bad news for existing EUR longs as it is now guaranteed that all weak hands have certainly been shaken out. Any additional move higher will actually have to occur for truly fundamental reasons. Alas, those will not be coming any time soon.

 

Here Are The 25 European Banks That We May Soon Know Everything About  BI

 

We're Only In This European Banking Mess Because They Wouldn't Come Clean Two Years Ago  BI

 

 

 

BOND BUBBLE

 

The reality of America's fiscal mess is starting to bite Tett (Complete via Google)‎
Fed to Touch Extension Chord Barron’s

The central bank is likely to maintain low rates for an even longer "extended period" than expected. Good news for Treasuries.

J.P. Morgan Pushes Back Rate Hike Forecast to Late 2011 WSJ
 

U.S. Debt and the Greece Analogy WSJ - Greenspan

U.S. Debt and the Greece Analogy

Don't be fooled by today's low interest rates. The government could very quickly discover the limits of its borrowing capacity.

By Alan Greenspan

An urgency to rein in budget deficits seems to be gaining some traction among American lawmakers. If so, it is none too soon. Perceptions of a large U.S. borrowing capacity are misleading.

Despite the surge in federal debt to the public during the past 18 months—to $8.6 trillion from $5.5 trillion—inflation and long-term interest rates, the typical symptoms of fiscal excess, have remained remarkably subdued. This is regrettable, because it is fostering a sense of complacency that can have dire consequences.

The roots of the apparent debt market calm are clear enough. The financial crisis, triggered by the unexpected default of Lehman Brothers in September 2008, created a collapse in global demand that engendered a high degree of deflationary slack in our economy. The very large contraction of private financing demand freed private saving to finance the explosion of federal debt. Although our financial institutions have recovered perceptibly and returned to a degree of solvency, banks, pending a significant increase in capital, remain reluctant to lend.

Beneath the calm, there are market signals that do not bode well for the future. For generations there had been a large buffer between the borrowing capacity of the U.S. government and the level of its debt to the public. But in the aftermath of the Lehman Brothers collapse, that gap began to narrow rapidly. Federal debt to the public rose to 59% of GDP by mid-June 2010 from 38% in September 2008. How much borrowing leeway at current interest rates remains for U.S. Treasury financing is highly uncertain.

Goblin Emeritus Says America's Spending Days Are Over  ZH

 

 

 

STATE & LOCAL GOVERNMENT

 

 

CENTRAL & EASTERN EUROPE

 

What Crisis? Euro Zone Adds Estonia  NY Times

 

HUNGARY

 

BANKING CRISIS II

 

 

FINANCIAL REGULATION BILL

 

RATING AGENCIES

 

RISK REVERSAL

 

 

COMMERCIAL REAL ESTATE

 

 

RESIDENTIAL REAL ESTATE - PHASE II

 

 

EXPIRATION FINANCIAL CRISIS PROGRAM

 

 

PENSION & ENTITLEMENTS CRISIS

 

 

CHRONIC UNEMPLOYMENT

 

 

 

 

Visualizing Global Labor Cost Disparities  ZH

The shocking disparities of labor cost

 

GOVERNMENT BACKSTOP INSURANCE

 

 

CORPORATE BANKRUPTCIES

 

 

BP - British Petroleum

BP Finalizing 5-10 Year, $5 Billion Unsecured Bond Offering, 8-10% Yield  ZH

 


 

OTHER TIPPING POINT CATEGORIES NOT LISTED ABOVE

 

GOLD MANIPULATION

IMF Sells 38.5 Tones Of Gold In Q2, As Saudi Holdings Higher By 180 Tones  ZH

The WGC has released its latest report of official gold holdings. The key buyers and sellers, well, seller, were Russia, +27.6 tonnes, Venezuela, +3.1 tonnes, and Philippines, +10.3 tonnes, while the IMF sold 38.5 tonnes. Yet most interesting was the surge in Saudi Arabia holdings which increased its official holdings from 143 to 323 tonnes. It appears, at least on the surface, that this was not incremental purchasing, or at least that is how the Saudi Arabian Monetary Authority is trying to spin it: “gold data have been modified from First Quarter 2008 as a result of the adjustment of the SAMA’s gold accounts.” We wonder just how a country can "reclassify" 180 tonnes, or more than double existing holdings, in gold. Of course, if would not be good to see the country which lies on a sea of the world's biggest non-gold, yet $-denominated commodity to be in the market, diversifying its dollar holdings into gold. If SA had in fact purchased the gold, it would be equivalent to roughly $7.5 billion worth of purchases in the open market.

 

Money Market Funds Plunge By $38 Billion In Prior Week, 1.5% Of Total, YTD Flow Differential Now At Record $134 Billion  ZH

One does not even need to look at daily record gold prices to grasp the accelerating dollar credibility loss. A better proxy might well be the plunging assets at money market funds: in the past week these saw a massive outflow of $37.9 billion, which represents a drop of 1.5% in total money market assets. Even scarier is that this is almost half a trillion, or $456 billion in YTD outflows. From the peak, current MM holdings have declined by 28%, or over a $1 trillion. Speaking of losing credibility, the "money on the sidelines" argument is promptly losing it as well. Yet ironically even as half a trillion in cash has been pushed "elsewhere", the dollar, on both a relative basis (FX), and due to ongoing deflation, has continued to gain strength. US consumers have once again listened to the propaganda media and lost: whether it is due to the slow and unchanged grind in all asset classes over the past 6 months, or the sudden, massive losses from the flash crash. Either way, with gold at an all time high, we now know where some or all of the $134 billion differential between MM outflows and all other fund inflows, has gone.

Total MM holdings:

Total fund flows YTD, per Lipper/AMG:

 

MARKET WARNINGS

Telling Market Data You've Been Dismissing Smart Money 

Can the Low-Volume Rally Last?
 

FLASH CRASH - HFT - DARK POOLS

 

INNOVATION

 

VIDEO TO WATCH

 

 

INTERESTING ARTICLES - GENERAL

 


WSJ: Wall Street Journal, BL: Bloomberg, ZH: Zero Hedge, FT: Financial Times, BI: Business Insider

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Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.

 

© Copyright 2010 Gordon T Long. The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or recommendation you receive from him.

 

         

TODAY'S NEWS

Weekend

06-19/20-10

JUNE
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27 28 29 30 1 2 3

ARCHIVAL

SOVEREIGN DEBT PIIGS

EU BANKING CRISIS
BOND BUBBLE

STATE & LOCAL GOVERNMENT

CENTRAL & EASTERN EUROPE
BANKING CRISIS II
RISK REVERSAL

COMMERCIAL REAL ESTATE

CREDIT CONTRACTION II

RESIDENTIAL REAL ESTATE - PHASE II
EXPIRATION FINANCIAL CRISIS PROGRAM
US FISCAL IMBALANCES
PENSION CRISIS
CHINA BUBBLE
CHRONIC UNEMPLOYMENT
INTEREST PAYMENTS
US PUBLIC POLICY MISCUES
JAPAN DEBT DEFLATION SPIRAL
US RESERVE CURRENCY.
GOVERNMENT BACKSTOP INSURANCE
SHRINKING REVENUE GROWTH RATE
FINANCE & INSURANCE WRITE-DOWNS
RETAIL SALES
CORPORATE BANKRUPTCIES
US DOLLAR WEAKNESS
GLOBAL OUTPUT GAP
CONFIDENCE - SOCIAL UNREST
ENTITLEMENT CRISIS
IRAN NUCLEAR THREAT
OIL PRICE PRESSURES
FOOD PRICE PRESSURES
US STOCK MARKET VALUATIONS
PANDEMIC
US$ RESERVE CURRENCY
TERRORIST EVENT
NATURAL DISASTER

 

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Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, we recommend that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.

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© Copyright 2010, Gordon T Long. The information herein was obtained from sources which the Gordon T Long. believes reliable, but we do not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that the Gordon T Long. or its principals may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Gordon T Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or recommendation you receive from us.