Gordon T Long

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INNOVATION: What Made America Great is now Killing Her!

 

 

 

What made America great was her unsurpassed ability to innovate.  Equally important was also her ability to rapidly adapt to the change that this innovation fostered. For decades the combination has been a self reinforcing growth dynamic with innovation offering a continuously improving standard of living and higher corporate productivity levels, which the US quickly embraced and adapted to.

 

This in turn financed further innovation. No country in the world could match the American culture that flourished on technology advancements in all areas of human endeavor. However, something serious and major has changed across America.  Daily, more and more are becoming acutely aware of this, but few grasp exactly what it is.  It is called Creative Destruction. 

 

It turns out that what made America great is now killing her!

 

Our political leaders are presently addressing what they perceive as an intractable cyclical recovery problem when in fact it is a structural problem that is secular in nature. Like generals fighting the last war with outdated perceptions, we face a new and daunting challenge. A challenge that needs to be addressed with the urgency and scope of a Marshall plan that saved Europe from the ravages of a different type of destruction. We need a modern US centric Marshall plan focused on growth, but orders of magnitude larger than the one in the 1940’s. A plan even more brash than Kennedy’s plan in the 60’s to put a man of the moon by the end of the decade. America needs to again think and act boldly. First however, we need to see the enemy. As the great philosopher Pogo said: “I saw the enemy and it was I”.

READ MORE

   

 

SULTANS OF SWAP: Gold Swaps Signal the Roadmap Ahead

 

SLIDE REFERENCE PAGE: Shadow Banking

 

The news rocked the global gold market when an almost obscure line item in the back of a 216 page document released by an equally obscure organization was recently unearthed. Thrust into the unwanted glare of the spotlight, the little publicized Bank of International Settlements (BIS) is discovered to have accepted 349 metric tons of gold in a $14B swap. Why? With whom? For what duration? How long has this been going on? This raises many questions and as usual with all $617T of murky unregulated swaps, we are given zero answers. It is none of our business!

Considering the US taxpayer is bearing the burden of $13T in lending, spending and guarantees for the financial crisis, and an additional $600B of swaps from the US Federal Reserve to stem the European Sovereign Debt crisis, some feel that more transparency is merited. It is particularly disconcerting, since the crisis was a direct result of unsound banking practices and possibly even felonious behavior. The arrogance and lack of public accountability of the entire banking industry blatantly demonstrates why gold manipulation, which came to the fore in recent CFTC hearings, has been able to operate so effectively for so long. It operates above the law or more specifically above sovereign law in the un-policed off-shore, off-balance sheet zone of international waters.

Since President Richard Nixon took the US off the Gold standard in 1971, transparency regarding anything to do with gold sales, leasing, storage or swaps is as tightly guarded by governments as the unaudited gold holdings of Fort Knox. Before we delve into answering what this swap may be all about and what it possibly means to gold investors, we need to start with the most obvious question and one that few seem to ask. Who is this Bank of International Settlements and who controls it?

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READER ROADMAP -  2010 TIPPING POINTS aid to positioning COMMENTARY

 

 

 

POSTS:  WEDNESDAY 08-18-10

 

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: 08/19/2010 02:54 AM

RED ALERT

AMBER ALERT

ACTIVITY

MONITOR

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08-18-10

 

 

GEO-POLITICAL TENSIONS - ISRAEL / KOREA / IRAN

 

IRAN

 

The latest development in the neverending saga of Iran, comes via the Middle East Media Research Institute (MEMRI) which states that according to the Gulf states, the military option may be the best option to deal with the Iranian nuclear program, as the contra-Iran axis is now complete. The article also reflected "the Gulf states' growing tension and concern regarding Iran's nuclear program, and mentioned their proximity to the Bushehr reactor." What is scary is that the straw man of military intervention is pretty much presented as a fait accompli, and alternatives to military intervention are not even considered as an option. The timing could not be worse: as we highlighted earlier, John Bolton believes that there is ticking clock (through the 21st) after which the option of "striking" Iran with manageable casualties becomes negligible. And lastly, and certainly not making matters any easier, was the earlier revaluation by AFP, that Iran is preparing to unveil an array of weapons next week. An impartial reader would be forgiven if left with the impression that at this point a military operation is all but granted. Yet, keeping an eye out on spot oil, indicates that the realistic chance of an incursion is still negligible, at least as judged by oil prices. We believe that is still one of the best advance warnings indicators of a geopolitical shift. Unfortunately, if the oil market is in any way comparable to stocks in its predictive ability, it just may be that oil is, for once, a reactionary indicator instead of forward looking, in which case it will be useless as a predictive force.

 

ISRAEL

 

 

Iran Threatens Israel’s Existence if Attacked

Bloomberg reports Iran Threatens ‘Israel’s Existence’ If It Attacks
Iran will respond if Israel attacks its first nuclear power plant, which will begin loading fuel Aug. 21, according to the Persian Gulf country’s defense minister.

“In that case we will lose a power plant, but Israel’s existence will be in danger,” Ahmad Vahidi was cited as saying today by the state-run Mehr news agency, in response to questions about the possibility of an attack by Israel on the Russian-built atomic facility at Bushehr.

Israeli leaders have said that all options are on the table in dealing with Iran’s nuclear aspirations. Iran is under four sets of United Nations sanctions over its nuclear program, which the U.S. and many of its allies say is aimed at creating a weapon. Iran, the second-largest oil producer in the Middle East, denies the allegation, saying it needs nuclear energy for civilian purposes, such as generating electricity.

The Bushehr power station will begin producing electricity in several months, Sergei Novikov, spokesman for Rosatom Corp., the Russian state nuclear holding company that built the plant, said Aug. 13.
Saudi Daily says Military Option Best Solution to Crisis

A Saudi Daily Editorial says Military Option Best Solution to Crisis
"Tehran's [August 13, 2010] announcement, confirmed by Russia, that an Iranian nuclear reactor would be inaugurated this month in Bushehr, on the Arabian Gulf coast, and that it would be equipped with fuel and would operate as a nuclear facility, is an indication that the region is now entering a new phase.

"In taking this action, Tehran is ignoring all the advice, warnings, and requests to halt its nuclear program, or at the very least to try to continue it under clear and open international inspection that would guarantee that it does not have a military facet. If [Tehran] insists upon going ahead [with the program] without the agreement of the international community, it will bring embarrassment and suspicion upon every [country] that supported [Iran's] right to peaceful nuclear energy.

"More importantly, by means of this action, Tehran is moving its conflict with the international community into high gear, and [in this case] some may consider the military option to be the best solution. [Delaying recourse to this option] may lead to a point where it is impossible to implement it – if Tehran manages to produce a nuclear bomb of its own.
Russia to load fuel into reactor on Saturday

The Jerusalem Post reports 'Israel has days to strike Bushehr'

 

KOREA 

 

SOVEREIGN DEBT & CREDIT CRISIS

 

GREECE

 

SPAIN / PORTUGAL

 

 

FRANCE

 

GERMANY

Germany's Economic Outlook Plummets In August And Has Established A Clear Downtrend  BI

 

 

ITALY

 

UK

 

JAPAN

 

CHINA

China Doubles Korea Bond Holdings as Asia Switches From Dollar BL
Why China's Housing Bubble Will End Badly Daily Finance
China: No Looming Banking Crisis BCAR

 

USA

 

EU BANKING CRISIS

   

 

BOND BUBBLE

 

Moody's says clock is ticking on fiscal reform Fortune 
“A potential interest rate shock is the biggest single threat to the debt affordability of Aaa governments”

 

 

STATE & LOCAL GOVERNMENT

 


CENTRAL & EASTERN EUROPE

 

 

HUNGARY

 

BANKING CRISIS II

 

 

Fed President Admits- Sorry, We Can't Help The Economy Anymore  BI

 

 

 

 

 

 

DODD FRANK ACT

RATING AGENCIES

 

 

RISK REVERSAL

 

 

COMMERCIAL REAL ESTATE

 

 

RRESIDENTIAL REAL ESTATE - PHASE II

 

HOUSING HEARINGS

 

Geithner Sees U.S. Role in Mortgage Market  WSJ

The U.S. government will likely continue to play a role in guaranteeing mortgages, but policy makers must figure out how to design a system that doesn't lead to a rerun of the collapse of Fannie and Freddie, Geithner said.

 

 

FT London: Reform of Fannie Mae and Freddie Mac, which have incurred losses of about $150bn (€117bn, £96bn) for the US since being placed under government control in 2008, was left out of the massive financial regulatory overhaul bill enacted last month, but has since risen to the top of the economic and financial policy agenda.

The Obama administration is expected to propose its own reform plan in January, and Mr Geithner said there was a “strong case to be made for a carefully designed guarantee in a reformed system”. Without such support, “future recessions could be more severe”, with greater home price declines and damage to financial wealth.

But Bill Gross, founder of Pimco and manager of the world’s largest bond fund, said it was “unrealistic” to think the private market was going to come back in a significant way. “For better or worse, the government is part of our future in terms of the mortgage market.”

Bloomberg: “To suggest that there’s a large place for private financing in the future of housing finance is unrealistic,” Gross said today at a U.S. Treasury Department conference in Washington. “Government is part of our future. We need a government balance sheet. To suggest that the private market come back in is simply impractical. It won’t work.”

 

Here's Why Bill Gross Might Get His Wish For A Mammoth Housing Stimulus  BI

 

 

'Vultures' Save Troubled Homeowners  WSJ

LOAN SERVICING FIRMS: Loan servicing firms that don't actually own loans, but represent banks and investors, and collect mortgage payments on their behalf. These firms follow often-ambiguous rules set by the owners of the loans. In cases where a loan has been bundled into a security, it might have thousands of owners scattered around the world, making it impossible to know all their preferences.

FUNDS: Selene is the sole owner of its loans and has a servicing affiliate that can negotiate directly with borrowers. "Every case is individual," Mr. Ranieri says. "There's no template. "But the main reason Mr. Ranieri can strike deals with borrowers is that his firm buys loans, mostly from banks, at steep discounts to the balance due. If his fund pays $50,000 for a loan with a $100,000 balance due, for example, it can make a profit even if the borrower ends up paying back only $70,000. Around 90% of Selene's loan modifications involve reducing the principal, compared to less than 2% of the modifications done by federally regulated banks in the first quarter. Selene, which owns about $1 billion worth of home mortgages, will say only that it has modified "thousands" of loans, a drop in the bucket among the millions of overdue mortgages. Many loans are locked up in securities and thus unavailable for sale. In other cases, owners of loans aren't willing to take the losses that would be needed to mark down the mortgages enough to lure buyers like Selene.

HAMP: One reason Selene has the leeway to help borrowers is that it generally bypasses the federal government's $50 billion Home Affordable Modification Program, or HAMP. The program offers financial incentives to lenders and servicers to modify loans. When President Barack Obama announced HAMP 18 months ago, the program raised hopes among millions of borrowers. As of June 30, however, only about 389,000 households were benefiting from long-term reductions in payments under that program, and 364,000 were in "trial" periods, trying to qualify by showing they could make reduced payments. Critics say the program is overly complex, unwieldy and revised so often that servicers have a hard time keeping up with the latest requirements for modifications. The Treasury Department blames servicers. They "have done a terrible job of making sure that they are doing everything they can to meet the needs of their customers who are facing the possibility of losing their home," Treasury Secretary Timothy Geithner told a congressional panel in June. Nonprofit counselors who help homeowners say far more borrowers have either failed to qualify or given up than have actually received modifications. Some borrowers have spent more than a year trying to find out whether they qualify.

 

 

 

 

EXPIRATION FINANCIAL CRISIS PROGRAM

 

 

PENSION & ENTITLEMENTS CRISIS



CHRONIC UNEMPLOYMENT



GOVERNMENT BACKSTOP INSURANCE

 

 

OUTRAGE OF THE DAY- Now The FHA Is Subsidizing Sales Of $3 Million New York Apartments  BI

 

 

CORPORATE BANKRUPTCIES

 

Hotel Chain Explores Bankruptcy  WSJ

A real-estate investment firm led by Joseph E. Robert Jr. is exploring a potential bankruptcy filing for Highland Hospitality that would mark yet another collapse of a major hotel company.

SEC Launches Probe of General Growth  WSJ

 

 

 

BP - British Petroleum

SULTANS OF SWAP: BP Potentially More Devastating then Lehman!

------------

 

BP Is Telling Fishermen Not To Report Tar Balls  BI

 

 



 


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GENERAL INTEREST

 

Retailers Are Sold on Frugality  WSJ
"How in the heck can you increase earnings with tighter revenue? The answer is that we expect some expense relief," said Home Depot Chief Financial Officer Carol Tome. The company has been hiring more part-timers, with fewer vacation days and benefits, as sales slowly return.  The results provided fresh evidence that top retail chains are adapting to the prolonged economic slowdown by reducing employee work hours, maintaining bone-thin inventories, squeezing costs out of supply chains and finding other ways to match consumers' belt-tightening.

 

FLASH CRASH - HFT - DARK POOLS

 

MARKET WARNINGS

 

 

GOLD MANIPULATION

 

 

VIDEO TO WATCH

HIGHLIGHTS:
1- the inevitable restructuring of untenable sovereign debt,
2- the nearly $5 trillion in new global debt that needs to be issued just to plug near-term deficits,
3- the joke that was the European stress test and the ongoing insolvency of the European banking system which is times bigger than its US equivalent,
4- the imminent downward revision of Q2 GDP to sub 1%,
5- the Fed's conflicted position as a political authority whose sole purpose now is not to keep inflation and unemployment low, but merely to keep interest rates as low as possible, as even the slightest shift to higher short-end rates will be seen as a black swan, indicative the Fed is losing control over the economy, and ultimately the futility of Keynesian theory band-aiding of a world caught in a toxic debt death spiral.

In short, Bass sees no way the world can get out of its current state absent a huge reset.

 

 
 

 

QUOTE OF THE WEEK
“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” – Mark Twain

"the recent financial crisis and recession was not caused by high interest rates but by low rates that contributed to excessive debt and leverage among consumers, businesses and government. We need to get off of the emergency rate of zero, move rates up slowly and deliberately. This will align more closely with the economy’s slow, deliberate recovery so that policy does not lag the recovery.

Monetary policy is a useful tool, but it cannot solve every problem faced by the United States today. In trying to use policy as a cure-all, we will repeat the cycle of severe recessionand unemployment in a few short years by keeping rates too low for too long. I wish free money was really free and that there was a painless way to move from severe recession and high leverage to robust and sustainable economic growth, but there is no short cut."

Thoma  Hoenig
Kansas City Federal Reserve President
FULL SPEECH

 


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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

WEDNESDAY

08-18-10

AUGUST
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TIPPING POINTS

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.
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IRAN NUCLEAR THREAT
OIL PRICE PRESSURES
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PANDEMIC
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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.