Already a CLASSIC.

The defining book for the current

Macro Economic Environment

Gordon T Long

RESEARCH ANALYTICS for the GLOBAL MACRO

|   TIPPING POINTS   |  COMMENTARY  READER ROADMAP | SWAP SENTINEL   | 

 

BUY ANY BOOK

 

GET 2 MONTH SUBSCRIPTION TO

 

 MONTHLY MARKET

COMMENTARY

 

PROMOTION  DETAILS

 

BOOKSTORE


Bookmark and Share 

PROFESSIONAL COMMUNITY

SITE ACCESS

 FUND MANAGERS & ANALYSTS


Developers of Chaos Theory

& Mandelbrot Generator

Algorithms


Fibonacci series and spiral

Fibonacci - W.D. Gann

Elliott Wave - J. M. Hurst

 

SPECIFICALLY TAILORED

 

 


 

READ ALL THE

"EXTEND & PRETEND SERIES"

 

 

Shifting Risk to the Innocent

 

Uncle Sam, You Sly Devil!

 

Is the US Facing a Cash Crunch?

 

Gaming the US Tax Payer

 

Manufacturing a Minsky Melt-Up

 

Hitting the Maturity Wall

 

An Accounting Driven Market Recovery

 


 A MUST READ FOR ANY UNDERSTANDING

of the current

GLOBAL MACRO ECONOMIC

ENVIRONMENT

 


 

READ ALL THE

"SULTANS OF SWAP"

 

ACT I

Sultans of Swap: Smoking Guns!

ACT II

Sultans of Swap: The Sting!

ACT III

Sultans of Swap: The Get Away!

 

 

ALSO

SULTANS OF SWAP: Explaining $605 Trillion in Derivatives!

 

SULTANS OF SWAP: Fearing the Gearing!

 

FOR UPCOMING SHOW TIMES SEE: COMMENTARY

 


 

FREE INTRODUCTORY

MAILING

 

The Latest Quarterly Advisory

62 pages

 

EXTEND & PRETEND

 

Click page to view Index

 

Contact Us

 

Add Promo Code: "Introduction"

in the Subject Heading

 

The Latest Monthly

MONTHLY MARKET COMMENTARY

12 pages

 

Click page for Front Page

 

Contact Us

 

Add Promo Code: "MMU"

in the Subject Heading

 


Eliott Wave

The Elliott Wave Principle

Prechter &  Neely Methods

 

FREE INTRODUCTORY

MAILING

 

TECHNICAL ANALYSIS

RESEARCH

 

W.D.Gann

Elliott Wave Principle

J.M Hurst

 

PROPRIETARY

Chaos Theory

Mandelbrot Generators

Fibonacci Conditions

 

Latest Boundary Condition

Analysis

 

Click chart to view

 

Contact Us

 

Add Promo Code: "Technical"

in the Subject Heading

 


FREE INTRODUCTORY

ACCESS

 

FACEBOOK

 

 

DAILY TIPPING POINT ARTICLE POSTS

 

SAMPLE PAGE

 

Click page to view Index

 

Contact Us

 

Add Promo Code: "Facebook"

in the Subject Heading

 

 


 

CUSTOMIZE YOUR RESEARCH EFFORTS

 

TIPPING POINT

TAG ENGINE

 

Click page to view Index

 

Free Access to Our Tag Engine for detailed research behind our Tipping Points.

 

OVER 1000 ARTICLES INDEXED

each with an

Executive Summary - Abstract

 

SAMPLE

 

Click page to view Index

 

Contact Us

 

Add Promo Code: "Tag Engine"

in the Subject Heading

 

  Bookmark and Share


 

 

 

 

 

 

 

                    LATEST PUBLICATIONS

RSS 

COMMENTARY for all articles by Gordon T Long

 

EXTEND & PRETEND: Stage I Comes to an End!

The Dog Ate my Report Card

 

Both came to an end at the same time: the administration’s policy to Extend & Pretend has run out of time as has the patience of the US electorate with the government’s Keynesian economic policy responses. Desperate last gasp attempts are to be fully expected, but any chance of success is rapidly diminishing.

Before we can identify what needs to be done, what the administration is likely to do and how we can preserve and protect our wealth through it, we need to first determine where we are going wrong. Surprisingly, no one has assessed the results of the American Recovery & Reinvestment Act 2009 (ARRA) which was this administration’s cornerstone program to place the US back on the post financial crisis road to recovery.

We can safely conclude either:

1-    The administration completely under estimated the extent of the economic crisis, even though we were well into it when the ARRA was introduced.

2-    The administration was unable to secure the actually required stimulus amount which was likely 4-5 times that approved.

3-    The administration failed to implement the program in a timely manner.

4-    The administration failed to diagnose the problem correctly and that in fact it is a structural problem versus a cyclical and liquidity problem, as they still insist it to be.

I personally believe it is all four of the above.

READ MORE

 

 

SULTANS OF SWAP: BP Potentially More Devastating then Lehman!

 

As horrific as the gulf environmental catastrophe is, an even more intractable and cataclysmic disaster may be looming. The yet unknowable costs associated with clean-up, litigation and compensation damages due to arguably the world’s worst environmental tragedy, may be in the process of triggering a credit event by British Petroleum (BP) that will be equally devastating to global over-the-counter (OTC) derivatives. The potential contagion may eventually show that Lehman Bros. and Bear Stearns were simply early warning signals of the devastation lurking and continuing to grow unchecked in the $615T OTC Derivatives market.

 

What is yet unknowable is what the reality is of BP’s off-balance sheet obligations and leverage positions. How many Special Purpose Entities (SPEs) is it operating? Remember, during the Enron debacle Andrew Fastow, the Enron CFO, asserted in testimony nearly 10 years ago that GE had 2500 such entities already in existence. BP has even more physical assets than Enron and GE. Furthermore, no one knows the true size of BP’s OTC derivative contracts such as Interest Rate Swaps and Currency Swaps. Only the major international banks have visibility to what the collateral obligations associated with these instruments are, their credit trigger events and who the counter parties are. They are obviously not talking, but as I will explain, they are aggressively repositioning trillions of dollars in global currency, swap, derivative, options, debt and equity portfolios.

 

READ MORE


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: 07/20/2010 07:35 AM

RED ALERT

AMBER ALERT

ACTIVITY

MONITOR

Click to Enlarge

 

 

POSTS:   TUESDAY 07-20-10

 

 

GEO-POLITICAL TENSIONS - ISRAEL / KOREA / IRAN

 

IRAN

 

ISRAEL

 

KOREA 

 

SOVEREIGN DEBT & CREDIT CRISIS

 

YOU DON'T DO THIS UNLESS THERE IS MORE TROUBLE AHEAD

IMF aims to boost lending resources by $250 billion: report Reuters

 

GREECE

 

SPAIN / PORTUGAL

 

FRANCE

 

GERMANY

What Germany Knows About Debt NYT

ITALY

 

UK

   Cameron Raids Dormant U.K. Accounts as Minister Attacks Banks BL

JAPAN

"The yen declined for a second day against the dollar on speculation Japanese authorities may intervene to weaken the nation’s currency after it climbed to a seven-month high last week. “The strengthening of the yen has added to pressure on the BOJ to implement more reflationary policy,” said Mitul Kotecha, Hong Kong-based global head of foreign-exchange strategy at Credit Agricole CIB. “The risk is for a shift higher in dollar- yen in coming sessions from oversold levels.”

CHINA

 

USA

 

EU BANKING CRISIS

 

Hypo Real Estate Said To Fail Banking Stress Test

The bank that has been bailed out a hundred times before

is shockingly, rumored by Bloomberg to not pass the stress test.

 

European Interbank Liquidity Gets Worse: EUR Libor Passes 0.80%, OIS Surges To Highest In Over One Year  ZH

3 Month Euro Libor continue rising: for the first time August 2009 the rate is over 0.8%, hitting 0.80813%. More tremblingly, the far less manipulated OIS spread (no trimming of outlier percentiles) also jumped by an even greater amount, thus actually pushing the Libor-OIS spread down to 0.33331%. Another indication of the sudden EUR scarcity which both we and Nic Lenoir discussed in depth last week, is the plunge in the allocation by European banks toward the ECB's deposit facility: after hitting an all time record a month ago at €384 billion, a series of liquidity withdrawal actions have pushed this number to just over €58 billion: the scarcity of euros within the financial system is starting to be felt everywhere as banks no longer even have an excess of cash to deposit for risk free "storage." Market News describes this deterioration in liquidity as follows: "Eurozone interbank markets are likely to be dominated this week by speculation about, and the eventual publication Friday, of the EU Commission's bank stress tests. There are concerns Irish banks, German Landesbanks and the Spanish Caja could all perform badly in the tests." Luckily, all is good in Greece, where one version of G-Pap (the finance minister) announced earlier that all banks are expected to pass with flying colors. Somehow he said that with a straight face, and without breaking out in hysterical laughter.

Below is 3 Month Libor over the past year:

A chart demonstrating the abolsulte and relative spread between Libor and OIS:

And a blown up chart of OIS:

With total cumulative purchases at just over €60 billion since the beginning of its sovereign debt monetization program in May, the ECB purchased just €302 million in (Greek 6 Month) debt last week. As always, tomorrow will see the pyramid scheme of taking the purchases and reliquifying the market in yet another weekly term deposit auction to the tune of €60 billion. If indeed European liquidity is as bad as feared, especially with less than the total upcoming auction size on deposit with the ECB, the bid to cover on tomorrow's latest auction should be another informative data point as to just how bad the EUR scarcity in the eurozone currently is. On the other hand, with the ECB signalling a slow down in monetization, should the ramp in Libor/OIS rates continue, very soon it will be forced to step right back into the sovereign bond purchasing market, confirming the recent solvency lull is only temporary.

 

Stress-testing Europe's banks won't stave off a deflationary vortex Pritchard
Euroland's authorities are inflicting a triple shock of fiscal, monetary, and currency tightening on a broken economy.

 

BOND BUBBLE

 

America's AAA Rating Is Cut in Land of Bubbles- William Pesek  BL


STATE & LOCAL GOVERNMENT

 

Cities Rent Police, Janitors to Save Cash  WSJ

Services that cities can no longer afford to provide are being contracted to private vendors, counties or even neighboring towns. The move saves cities budget-crushing costs of employee benefits like health insurance and retirement.

Cities say they have little choice. Municipalities across the U.S. will face a projected shortfall of $56 to $86 billion between 2010 and 2012, according to a report from the National League of Cities. 

"You can do across-the-board cuts for only so long," said Andrew Belknap, Western Regional Vice President for Management Partners, a government consulting group. "It's gone from the tactical cost cutting to get through a recession, to in some cases saying we have to exit that business or service altogether."

As economy takes toll, mental health budgets shrink Stateline

 


CENTRAL & EASTERN EUROPE

 

HUNGARY

 

BANKING CRISIS II

 

 The Real Reason Geithner Is Afraid of Elizabeth Warren Talbott
I believe Geithner sees the appointment of Elizabeth Warren as a threat to the very scheme he has utilized to date to hide bank losses...

 

Mega Banks Pressure Smaller Players  WSJ

Bank of America, J.P. Morgan and Wells Fargo now have 33% of all U.S. deposits, up from 21% in mid-2007—the fastest shift of such a large chunk of deposits in U.S. history. Much of the gain came from their acquisitions of Countrywide Financial Corp., Washington Mutual Inc. and Wachovia Corp., respectively.

The three huge banks made 57% of all home mortgages in the first quarter, up from 28% in 2008, according to Inside Mortgage Finance, an industry newsletter. In 2008 and 2009, they got $95 billion in capital from the U.S. government, all of which they have repaid.

Measured in loans and other assets, Citigroup Inc. and the three other giants had $7.7 trillion as of March 31, up 56% since the end of 2007. Their combined assets are nearly twice as big as the assets of the next 46 biggest banks, according to SNL Financial, a research firm in Charlottesville, Va.

To keep their costs down, however, the big banks generally pay lower rates on certificates of deposit and other types of savings products than the small players, meaning less interest income for millions of depositors. Bank of America, J.P. Morgan and Wells Fargo "can make money beyond belief" because of their low costs and volumes of scale, and "there is no chance of anyone challenging them," says Arnold Danielson, a bank analyst in Bethesda, Md.

BBank consolidation has become an issue outside the U.S. as well. In Britain, the six largest banks increased their share of the mortgage market to 78% in 2008 from 66% in 2007, according to the National Audit Office. Lawmakers there recently asked for an inquiry into the power of the banking industry.

 

DODD FRANK ACT/strong>

 The Volcker Rule New Yorker
Obama’s economic adviser and his battles over the financial-reform bill.

 

RATING AGENCIES

 

RISK REVERSAL

 

 

COMMERCIAL REAL ESTATE

 

Morgan Stanley Ponders Its Property  WSJ
After building one of the biggest, most prestigious real-estate-investing businesses on Wall Street, Morgan Stanley is weighing plans to scale it back.  New regulations that would follow the passage of financial-services legislation in the U.S. would likely force Morgan Stanley and other banks to cut their own investments in real-estate funds and some other portfolios they manage.

Morgan Stanley told investors in the $8.8 billion real-estate fund that it may have accumulated losses since the fund's inception of nearly two-thirds of its money, according to the fund's report for the third quarter of 2009. The estimated $5.4 billion loss likely would be the biggest dollar loss in the history of private-equity real-estate investing. The firm in May closed a new $4.7 billion global real-estate fund amid a challenging fund-raising environment. That is about half of its initial fund-raising target set more than two years ago.

 

RRESIDENTIAL REAL ESTATE - PHASE II

 

NAHB Builder Confidence Drops Again, Misses Expectations, Back To April 2009 Levels  ZH

Today's National Association of Home Builders/Wells Fargo Housing Market Index update for July was yet another confirmation of the deterioration in the economic sentiment, and the US consumer's unwillingness to spend on homes absent tax rebates and other forms of stimulus, regardless of mortgage rates. The index came at 14, below expectations of a 16 reading, and a drop from downward revised 16 in June (prior 17). Ben Shalom is looking at all these deteriorating data points and getting closer to QE2 by the hour.

The chart says it all:

From the press release:

Builder confidence in the market for newly built, single-family homes declined for a second consecutive month in July to its lowest level since April of 2009, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. The HMI fell two points from a downwardly revised number in the previous month to 14 for July.

"We continue to see a lull in home buying activity following the expiration of the federal home buyer tax credit program, as many of the sales that would have occurred this summer were likely pulled forward to meet that program's deadline," noted NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. "In addition, builders are reporting continuing consumer hesitancy regarding home purchases due to uncertainty in the overall economy and job markets."

"This month's lower HMI reflects a number of underlying market conditions that builders are seeing, including hesitant home buyers, tight consumer credit, and continuing competition from foreclosed and distressed properties that are priced below the cost of construction," said NAHB Chief Economist David Crowe. "The pause in sales following expiration of the home buyer tax credits is turning out to be longer than anticipated due to the sluggish pace of improvement in the rest of the economy. That said, we do believe that favorable factors such as low mortgage rates, affordable prices, and demographic trends will help revive consumer demand for new homes this year, and that new-home sales will improve by 10 percent in 2010 from 2009."

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Each of the HMI's component indexes recorded declines in July. The component gauging current sales conditions fell two points to 15, while the component gauging sales expectations in the next six months edged down one point to 21 and the component gauging traffic of prospective buyers fell three points to 10.

Regionally, the HMI results were mixed in July. The Northeast, which has a smaller survey sample and therefore is prone to greater monthly volatility, posted a seven-point increase to 23 this month, while the Midwest posted a one-point improvement to 15. The South and West each posted five-point declines to 14 and 9, respectively.

U.S. home builders' index falls to 15-month low MW

 

EXPIRATION FINANCIAL CRISIS PROGRAM/font>

 

 

PENSION & ENTITLEMENTS CRISIS



CHRONIC UNEMPLOYMENT

 

Obama Urges Senate to Extend Jobless Benefits CNN
Companies Step Up Hiring Plans in Latest NABE Survey WSJ NABE

The Senators Who Gave Us 15 Million Unemployed Want to Deny Them Benefits Baker

GOVERNMENT BACKSTOP INSURANCE

 

 

CORPORATE BANKRUPTCIES

 

BBBP - British Petroleum

BP Now Down Over 6%, As White House Confirms New Leak  BI

 

It was uncovered that (at least one more) seepage near the BP well site may be leaking oil, methane and who knows what else uncontrollably, potentially confirming the running thesis proferred by Matt Simmons that leaks are prevalent and not localized to just the Macondo well. Reuters follows up: "Investors fretted about possible seepage from BP's capped Gulf of Mexico well on Monday and speculation grew about assets the company may sell to pay multibillion dollar costs for its oil spill. A BP spokesman said the seep was detected by its engineers but it was unclear whether the source was the blown-out well, adding that seeps were a natural phenomenon in the Gulf." The stock has sold off appropriately, now that BP trades as a "distressed catalyst" story, with any given day seeing the shares going up or down by double digit percentage. How this stock is still pitched as a relative value play is mindboggling, when one adverse piece of news could send it materially lower. /p>


Breaking: Robert Gibbs Confirms BP's Oil Well Is Leaking At Top, With Seepage 2 Miles Away  ZH

BP says scientists conclude seepage naturally occurring, not related to Macondo well... The market seems to be buying it - after all it appears all the scientists have Ph.D.'s

A White House spokesman says BP's ruptured oil well is leaking at the top, along with seepage about two miles away. Robert Gibbs also says officials are monitoring bubbles that can be seen on an underwater camera. Leaks could mean the cap on the well has to be opened to prevent oil and gas from escaping elsewhere. The mechanical cap on the well stopped the flow of oil into the Gulf of Mexico on Thursday.

 

MAP OF THE DAY- What's Really Happening At The Ocean Floor BI

Just when you thought you knew what was happening at the Maconda Prospect, there was a flurry of news this weekend:

  • hydrocarbons were seeping from the seabed
  • the seabed seepage was natural -- which is good, but still a sign of instability
  • oil was leaking from the well itself
  • What we're really worried about is that the whole area could collapse. Check out this helpful map from Monkeyfister. The red arrow shows the seepage:motd seep

    Click to Enlarge

    U.S. Demands More Test Data From BP as Seep Found in Seabed BL

    Cameron to face BP Libya questions  FT

    Megrahi controversy dogs UK PM’s first US visit

     


     

    OOTHER TIPPING POINT CATEGORIES NOT LISTED ABOVE

     
    Goldman Sachs - Abbey Cohen Presentation  

    CHART OF THE DAY- Is College Education The Next Bubble Set To Burst BI

    The price of a college education, compared to the CPI, has risen dramatically since 1980. It has outpaced the housing bubble, and has many of the same characteristics, including a government sponsored credit bubble.

    And with competitive quality now in question compared to emerging economies like China, the value per dollar spent for that American college tuition may be even lower.

    From Carpe Diem (via Humble Student of the Markets):

    chart of the day, tuition, home prices, cpi, 1978-2010

     

    The world is hooked on low interest rates. This will not end well G&M
    Western economies are still in danger of sinking under an ocean of self-created debt King

    FLASH CRASH - HFT - DARK POOLS

     

    MARKET WARNINGS

    Hussman- Here's Why The Market Is NOT Cheap And You Should Start Saving  BI

    Don't Take the Bait Hussman
    Apart from our own measures, which indicate continued overvaluation, there are several good indicators of market valuation that are not overly sensitive to year-to-year fluctuations in profit margins. One is based on the 10-year average of actual net (not operating) earnings, which is advocated by economist Robert Shiller, and another is Tobin’s "q" ratio which is based on comparing market value to replacement cost, and is advocated by Andrew Smithers. Both of these measures largely agree with our own measures, both presently and on a historical basis. Based on last week’s valuations, both suggest that the S&P 500 is substantially overvalued.

    qratio

    Valuations/strong>  Comstock Partners
    The only way the main valuation metric (P/E Ratios) could show the market to be cheap is to replace the age old "reported earnings" (Generally Accepted Accounting Principles-GAAP) with "operating earnings".  The pundits are using forward looking "operating earnings" in order to reach for their estimates of 10 to 12 times earnings.

    The earnings estimates for the year 2010 are about $82 for operating and $67.35 for reported earnings.  The earnings estimates for 2011 are $95 for operating, and $78 for reported earnings.  As bad as it is to use forward earnings, the really insane part of these estimates is  that virtually all of "Wall Street" is using Operating earnings that were not even in existence before the mid 1980s.  Even more outrageous is the fact that these earnings exclude "write-offs" even if the write-offs are recurring and disregard the GAAP earnings (reported earnings) which were the only earnings ever used before the mid 1980s (and which became more popular each year as it became harder to make  stocks look undervalued-especially during the dot.com bubble).  

    If you break down these earnings estimates by the quarter or half year, you will find that the estimates are higher for the second half of this year than the first and clearly higher by about 15% in 2011.  We find this to be curious since it seems to us that the recovery is running out of steam. 
     
    The main ingredients for virtually any upswing in the economy are dependent upon
    1. Employment
    2. Consumer Spending
    3. Housing
    4. Increase in Exports, and
    5. Restocking of Inventory. 

    Usually these ingredients need easy money or some form of inflation.  Despite low interest rates banks are reluctant to loan money to small businesses and individuals.  These ingredients needed to stimulate the economy have all either rolled over or never really got started.  Retail sales were just released and were disappointing for the second month in a row after a false start from the stimulus package.  Employment continues to disappoint and the rebuilding of inventory has come to a screeching halt.  The trade deficit has just recently gotten worse and that speaks volumes about our ability to export goods and services. 

    The worst part of the ingredients that produce an economic rebound is the fact that deflation is permeating the whole system.  The Fed was worried about deflation back in 2003 and talked about it constantly.  Well now, according to the Federal Reserve Bank of Cleveland, the median Consumer Price Index was virtually unchanged at 0.0%  in May, while the CPI was down 0.1% in April and down 0.2% in May.  The PPI released today was down 0.5% in June vs. down 0.3% in May.  In 2003 the median CPI from Cleveland was up about 1.5% and the CPI was up 2.3% during all of the Feds ranting about deflation and how they would make sure it will not occur in this country. 

    They were able to drop rates to 1% and keep them there for a year, which was the main impetus that drove housing and stocks into a bubble, comparable to the dot.com bubble, from 2003 to 2007.  We suspect strongly that the recent easy policy will not produce a third bubble.  It takes a while for investors to learn from past mistakes and there is no way to start another bubble in the near future.   

    It sure doesn't seem that the economy has much going for it, and if that is the case,  it is hard to believe that the earnings will be higher in the second half than the first (which is presently the estimate), and really hard to believe that they will increase by 15% next year (which is also the estimate). 

    If we use the reported earnings estimate of $67.35 (which we don't believe) you get a P/E of 16.2, if you use the estimate of next year of $77.64 (which we really don't believe) the P/E works out to just over 14.  All of these P/E ratios on reported earnings are above the average for forward earnings and do not reflect an undervalued market.  

    Our favorite means of determining a fair valuation is to smooth the reported earnings over a 9 year period of time by taking the 9 year average and grow the average for 4.5 years (one half the 9 years) at 6% (where earnings have grown historically) to arrive at the $64 of smoothed earnings.  Using the smoothed earnings of $64 you arrive at the overvalued level of 17 times. 

    We also believe that this market will not bottom out until it reaches 10 times or lower the smoothed earnings.  Although this may sound implausible, we note that the S&P 500 sold at a P/E of 10 or under smoothed earnings in 17 of the past 60 years.   

     

    GORDON T LONG

    Click to Enlarge

     

    TOP LINE PROBLEMS

    GE is a barometer for GDP growth. Revenues were down 4.3% from a year ago

    Gannet, the number one newspaper publisher reported revenues down -6% Y-o-Y

    Banks saw Citi report revenues -33%, B of A -11%

    IBM disappoints on revenue with 2% Q-o-Q

     

    Baltic Dry Shipping Rates have declined -60% since the May high.  

     

    GOLD MANIPULATION

     

     

    VIDEOVIDEO TO WATCH

     

     

     

    QUOTQUOTE OF THE WEEK

     

    The U.S. economy continues to face the predictable effects of credit obligations that quite simply exceed the cash flows available to service them, coupled with the predictable shift away from the consumption patterns that produced these obligations. The misguided response of our policy makers has been to defend bondholders at all costs, using public funds to make sure that lenders get 100 cents on the dollar, plus interest, while at the same time desperately trying to prod consumers back to their former patterns of overconsumption. These policies are designed to preserve exactly the reckless and unsustainable behavior that caused the recent downturn. They are likely to fail because the strategy is absurd. The ultimate outcome, which will be forced upon us eventually if we do not pursue it deliberately, will be the eventual restructuring of debt obligations and a gradual shift in the profile of U.S. economic activity toward greater saving – either to finance exploding government deficits, or preferably, to finance an expansion in productive investment, research and development, and capital accumulation.

    From my perspective, bolder approaches are required. Debt that cannot be serviced should be restructured, rather than socializing the losses of reckless private decision-making. We will inevitably have a large "stimulus" package, but it will be essential to craft it in a way that emphasizes incentives to create and accumulate productive capital, both private and public.

    On the tax side, we also have options. There are far more possibilities than simply preserving or discarding the Bush tax cuts. Frankly, I was never a fan of those cuts, which added more variation, not less, in tax rates across various forms of income. Ideally, efficient tax systems should feature flat rates and very broad bases. You define income in a very wide manner, and you tax it all at the same rate. You introduce a progressive tax structure by creating large exclusions from taxes at low income levels, so that people at lower income scales pay no tax at all. In my view, the same thing should be done with Social Security – drop the rate substantially, but include all income – wage and non-wage. Three-quarters of Americans pay more in payroll taxes than in income taxes. By reducing the wedge between the hourly amount earned by employees and the hourly cost paid by employers, this strategy would create immediate incentives for employment. Moreover, it would raise more revenue because at present, even Warren Buffett only pays Social Security taxes on the first $106,800 of income. Combining a flatter income tax with a flatter and broader payroll tax would stimulate growth, employment, and greater economic efficiency without compromising total revenues.

    JOHN HUSSMAN - Hussman: Here's Why The Market Is NOT Cheap And You Should Start Saving

     
    Harvard economics professor Robert Barro says the real myth is the Keynesian multiplier, which is supposed to convert a fiscal stimulus into a significantly larger boost to aggregate demand. On the contrary, supersized deficits are denting business confidence, not least by implying higher future taxes.

     


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

     

    BUY ANY BOOK/font>

     

    GET 2 MONTH SUBSCRIPTION TO

     

     MONTHLY MARKET COMMENTARY

    BOOKSTORE

    PROMOTION  DETAILS

     

     

     

    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

    TUESDAY

    07-20-10

    JULY
    S M T W T F S
            1 2 3
    4 5 6 7 8 9 10
    11 12 13 14 15 16 17
    18 19 20 21 22 23 24
    25 26 27 28 29 30 31

    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

     

    READING THE RIGHT BOOKS?

     

    NO TIME?

     

    WE HAVE IT ANALYZED & INCLUDED IN OUR LATEST RESEARCH PAPERS!

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Book Review- Five Thumbs Up for Steve Greenhut's Plunder!  Mish

     

     

     

     

    Fair Use Notice

    Fair Use Notice

    This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

     

    If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.   

     

     

    l Fractal Research l Secrets of the Pyramids l Φ Research l Platonic Solids l 6T Development Site

     

    E-Mail


     
    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.

    Copyright and Disclaimer

    © 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.