Gordon T Long

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COMMENTARY for all articles by Gordon T Long

 

CURRENCY WARS: Misguided Economic Policy

 

The critical issues in America stem from minimally a blatantly ineffective public policy, but overridingly a failed and destructive Economic Policy. These policy errors are directly responsible for the opening salvos of the Currency War clouds now looming overhead.

 

Don’t be fooled for a minute. The issue of Yuan devaluation is a political distraction from the real issue – a failure of US policy leadership. In my opinion the US Fiscal and Monetary policies are misguided. They are wrong! I wrote a 66 page thesis paper entitled “Extend & Pretend” in the fall of 2009 detailing why the proposed Keynesian policy direction was flawed and why it would fail. I additionally authored a full series of articles from January through August in a broadly published series entitled “Extend & Pretend” detailing the predicted failures as they unfolded. Don’t let anyone tell you that what has happened was not fully predictable!

 

Now after the charade of Extend & Pretend has run out of momentum and more money printing is again required through Quantitative Easing (we predicted QE II was inevitable in March), the responsible US politicos have cleverly ignited the markets with QE II money printing euphoria in the run-up to the mid-term elections. Craftily they are taking political camouflage behind an “undervalued Yuan” as the culprit for US problems. Remember, patriotism is the last bastion of scoundre s  READ MOREE

   

 

PRESERVE & PROTECT: The Jaws of Death

 

The United States is facing both a structural and demand problem - it is not the cyclical recessionary business cycle or the fallout of a credit supply crisis which the Washington spin would have you believe.

 

It is my opinion that the Washington political machine is being forced to take this position, because it simply does not know what to do about the real dilemma associated with the implications of the massive structural debt and deficits facing the US.  This is a politically dangerous predicament because the reality is we are on the cusp of an imminent and significant collapse in the standard of living for most Americans.

 

The politicos’ proven tool of stimulus spending, which has been the silver bullet solution for decades to everything that has even hinted of being a problem, is clearly no longer working. Monetary and Fiscal policy are presently no match for the collapse of the Shadow Banking System. A $2.1 Trillion YTD drop in Shadow Banking Liabilities has become an insurmountable problem for the Federal Reserve without a further and dramatic increase in Quantitative Easing. The fallout from this action will be an intractable problem which we will face for the next five to eight years, resulting in the “Jaws of Death” for the American public.  READ MORE


READER ROADMAP -  2010 TIPPING POINTS aid to positioning COMMENTARY

 

 

 

POSTS:  WEDNESDAY 10-20-10

 

Last Update: 10/21/2010 04:45 AM

SCHEDULE: 1st Pass: 5:30AM EST, 2nd Pass: 8:00 AM, 3rd Pass 10:30 AM. Last Pass 5:30 PM

ARTICLE SOURCE 1 2 3 4 5 6 7 8 9 10
                       
US ready to sell $60bn of weapons to Saudis FT X                  
Strikes Intensify in France WSJ X                  
France Pension Protests Crimp Fuel Supply, Disrupt Transport Bloomberg X                  
Osborne cuts to usher in ‘sober decade’ FT X                  
U.K. Defense Industry Braces for Cuts in Spending Review Bloomberg X                  
UK and US seek own paths FT Wolf X                  
Popular Delusions Societe Generale X                  
USA                      
Fed: U.S. Economy Expands at `Modest Pace' in September Bloomberg X                  
Industrial Suppliers See Gains Slowing WSJ X                  
Credit still elusive on Main Street CNN X                  
Bond, Junk Bond: A Casino Royale? Merk     X              
Muni Bondholders: Watch Out! Forbes     X              

N.Y. Fed Backing Boosts Pimco Push For Mortgage-Bond Buybacks

Bloomberg     X              
Financial CDS Spreads Explode ZH               X    
Housing Starts in U.S. Unexpectedly Rise to Five-Month High Bloomberg                 X  
Underwater Mortgages FRBSL                 X  
House sales gloom for builders FT                 X  
                       
ARTICLE SOURCE 11 12 13 14 15 16 17 18 19 20
                       
Possible Deal Discussed in 'Pay-to-Play' Probe WSJ X                  
Gallup Finds U.S. Unemployment at 10.0% in Mid-October Gallup   X                
John Chambers and Safra Catz- The Overseas Profits Elephant in the Room WSJ       X            
China Raises Benchmark Rates for First Time Since 2007 Bloomberg                 X  
Research - China: Fighting a defensive war Danske                 X  
Chinese Property Sales Dry Up Thanks To A Slew Of New Regulations BI                 X  
Stop Bashing China- China's Growth Created American Jobs BI                 X  
                       
                       
BP OIL                      
Bumpy Start to BP Fund Puzzles Gulf WSJ                    
CENTRAL BANKING & MONETARY POLICY                      
Fed's Lockhart: Quantitative easing must be big Reuters                    
It Is Folly to Place All Our Trust In the Fed Stiglitz                    
Quantitative Easing Is Only Show in Town Bloomberg                    
What Has – and Has Not – Been Learned About Monetary Policy in a Low Inflation Environment? A Review of the 2000s. PIMCO                    
Markets Expect QE2 to Result in Higher Inflation Northern Trust                    
GENERAL INTEREST                      
Deleveraging, Deceleration and the Double Dip Keen                    
Is It Better to Lead or Follow? Wells Fargo                    
Economic Indicators Review NB Financial                    
More Inflation Fears Paul                    
On The Verge of Asset Mania Lenzner                    
FLASH CRASH                      

NYSE Software Glitch Spurs $7.9 Billion Misprice in S&P 500 ETF

Bloomberg                    
MARKET WARNINGS                      
China Sparks Wide Sell-Off WSJ                    

China rate rise triggers market falls

FT                    

CURRENCY WARS

                     
King Says G-20 Needs `Grand Bargain' to Avert Protectionism Bloomberg                    
A currency war the US cannot win VOX                    
World Bank blames U.S. for unruly capital flows Reuters                    
Brazil Steps Up Action in `Currency War,' Pleads for Ceasefire Bloomberg                    
S. Korea weighs emergency plans on currency war Yonhap                    
Critics slam Fed money-printing plan Straits Times                    
No currency war: IMF official Shanghai Daily                    
India warns on damage from G20 tension FT                    
S Korea plans capital controls FT                    
Q3 EARNINGS                      

Bank of America Posts $7.7B Loss on Special Charge

AP                    
Goldman Sachs Profit Beats Estimates as Expenses Drop Bloomberg                    
MARKET & GOLD MANIPULATION                      
                       
VIDEO TO WATCH                      
                       

Complete Legend to the Right, Top Items below.
Articles with highlights, graphics and any pertinent analysis found below.

1

         

1-SOVEREIGN DEBT

2-EU BANKING CRISIS
3-BOND BUBBLE

4-STATE & LOCAL GOVERNMENT

5-CENTRAL & EASTERN EUROPE
6-BANKING CRISIS II
7-RISK REVERSAL

8-COMMERCIAL REAL ESTATE

9-RESIDENTIAL REAL ESTATE - PHASE II
10-EXPIRATION FINANCIAL CRISIS PROGRAM
11-PENSION CRISIS

12-CHRONIC UNEMPLOYMENT

13-GOVERNMENT BACKSTOP INSUR.
14-CORPORATE BANKRUPTCY

TODAY'S TIPPING POINTS UPDATE

RED ALERT

AMBER ALERT

ACTIVITY

MONITOR

Click to Enlarge





10-20-10

 

GEO-POLITICAL TENSIONS - ISRAEL / KOREA / IRAN

 

IRAN

US ready to sell $60bn of weapons to Saudis  FT

 

1- SOVEREIGN DEBT & CREDIT CRISIS

 

SOVEREIGNS

 

 

GREECE

 

SPAIN

 

GERMANY

 

FRANCE

Strikes Intensify in France  WSJ
French labor unions vowed to keep demonstrating in the streets, thwarting gasoline supplies, flights and public transport, as rolling strikes against President Nicolas Sarkozy's pension overhaul enter their second week.

 

France Pension Protests Crimp Fuel Supply, Disrupt Transport BL

 

UK

Osborne cuts to usher in ‘sober decade’  FT

Public sector pay freeze and 490,000 jobs to go in transformed state

 

U.K. Defense Industry Braces for Cuts in Spending Review  BL

UK and US seek own paths  FT Martin Wolf

 

IRELAND


JAPAN

Popular Delusions Societe Generale

 
Nikkei 63,000,000? A cheap way to buy Japanese inflation risk

 

 

USA

 

time (et) report period Actual Consensus
forecast
previous

Wednesday, Oct. 20
2 pm Beige Book Oct.   -- --

 

Fed: U.S. Economy Expands at `Modest Pace' in September BL Beige Book

 

Industrial Suppliers See Gains Slowing  WSJ
Manufacturing companies have been among the best profit generators this year, but the party crashers are beginning to arrive in the industrial sector in the guise of rising costs and slowing sales gains.

 

Credit still elusive on Main Street CNN  FRBNY

 

 

2- EU BANKING CRISIS

   

 

3- BOND BUBBLE

 

Bond, Junk Bond: A Casino Royale? Merk

Muni Bondholders: Watch Out! Forbes

N.Y. Fed Backing Boosts Pimco Push For Mortgage-Bond Buybacks  BL

 

4- STATE & LOCAL GOVERNMENT

 


5- CENTRAL & EASTERN EUROPE

 


6-BANKING CRISIS II



7- RISK REVERSAL

 

Financial CDS Spreads Explode  ZH

 

The bloodbath in fin CDS is even worse than what is going on in equities. Bank of America is currently at the widest it has been in 2010.The latest rack is provided below, and the LTM 5 year Sr CDS spread is charted below.

  • Bank of America Corp.    196.50    184.5    +12.00
  • Citigroup Inc    163.50    162.5    +1.00
  • Capital One Bank    101.50    96.5    +5.00
  • Capital One Financial Corp.    137.50    135.5    +2.00
  • JP Morgan Chase & Co.    95.50    90.5    +5.00
  • Wells Fargo & Company    125.50    118.0    +7.50

Yet the biggest bloodbath continues to take place in woefully underreserved HR Block, which is certainly not too big to fail, and which was about 30 bps wider on the day, now at 720/691. On the chart below, HRB's spread is on the right axis. Will the little tax preparer that almost could be the first casulaty that sets off the TARP 2 starter pistol?

 

8- COMMERCIAL REAL ESTATE

 

 

9-RESIDENTIAL REAL ESTATE - PHASE II

 

Housing Starts in U.S. Unexpectedly Rise to Five-Month High BL

Underwater Mortgages FRBSF

House sales gloom for builders  FT

Hoped-for UK uplift fails to materialise

 

10- EXPIRATION FINANCIAL CRISIS PROGRAM

 

 

11- PENSION & ENTITLEMENTS CRISIS


Possible Deal Discussed in 'Pay-to-Play' Probe  WSJ
Staffers of the New York Attorney General's office and representatives of former Obama administration official Steven Rattner discussed a possible settlement over his role in the wide-ranging pension pay-to-play scheme.

12- CHRONIC UNEMPLOYMENT


Gallup Finds U.S. Unemployment at 10.0% in Mid-October Gallup

13- GOVERNMENT BACKSTOP INSURANCE

 

 

14- CORPORATE BANKRUPTCIES

 

John Chambers and Safra Catz- The Overseas Profits Elephant in the Room WSJ

 

One trillion dollars is roughly the amount of earnings that American companies have in their foreign operations—and that they could repatriate to the United States. That money, in turn, could be invested in U.S. jobs, capital assets, research and development, and more.

But for U.S companies such repatriation of earnings carries a significant penalty: a federal tax of up to 35%. This means that U.S. companies can, without significant consequence, use their foreign earnings to invest in any country in the world—except here.

The U.S. government's treatment of repatriated foreign earnings stands in marked contrast to the tax practices of almost every major developed economy, including Germany, Japan, the United Kingdom, France, Spain, Italy, Russia, Australia and Canada, to name a few. Companies headquartered in any of these countries can repatriate foreign earnings to their home countries at a tax rate of 0%-2%. That's because those countries realize that choking off foreign capital from their economies is decidedly against their national interests.

 

 

17- CHINA BUBBLE


China Raises Benchmark Rates for First Time Since 2007 BL

Research - China: Fighting a defensive war Danske

Chinese Property Sales Dry Up Thanks To A Slew Of New Regulations  BI

Stop Bashing China- China's Growth Created American Jobs  BI

19- PUBLIC POLICY MISCUES



 


OTHER TIPPING POINT CATEGORIES NOT LISTED ABOVE

 

24-RETAIL SALES

 

 

26-GLOBAL OUTPUT GAP

 

 

31-FOOD PRICE PRESSURES

 

 

32-US STOCK MARKET VALUATIONS

 




BP - British Petroleum

SULTANS OF SWAP: BP Potentially More Devastating then Lehman!

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

 



Bumpy Start to BP Fund Puzzles Gulf  WSJ
In tourist towns and fishing villages along the Gulf Coast, there is rampant confusion and frustration about the payment decisions and timing of BP's Gulf Coast Claims Facility.

   

CENTRAL BANKING MONETARY POLICIES, ACTIONS & ACTIVITIES

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


Fed's Lockhart: Quantitative easing must be big Reuters

It Is Folly to Place All Our Trust In the Fed Stiglitz

Quantitative Easing Is Only Show in Town   BL

 What Has – and Has Not – Been Learned About Monetary Policy in a Low Inflation Environment? A Review of the 2000s. PIMCO

Markets Expect QE2 to Result in Higher Inflation Northern Trust

 

 GENERAL INTEREST

 

 Deleveraging, Deceleration and the Double Dip Keen

 

Is It Better to Lead or Follow? Wells Fargo

 

Economic Indicators Review NB Financial

 

More Inflation Fears Paul

 

On The Verge of Asset Mania Lenzner

 

FLASH CRASH - HFT - DARK POOLS

 

NYSE Software Glitch Spurs $7.9 Billion Misprice in S&P 500 ETF BL

 

MARKET WARNINGS

 

China Sparks Wide Sell-Off  WSJ

 
China surprised investors by raising interest rates, sparking a world-wide sell-off in stocks, commodities and emerging-markets currencies as investors lowered their expectations for Chinese growth, which has been seen as a key driver of the global economy.

 

China rate rise triggers market falls  FT

 

CURRENCY WARS

 

King Says G-20 Needs `Grand Bargain' to Avert Protectionism  BL

 
Bank of England Governor Mervyn King said global finance chiefs need to reach a “grand bargain” to coordinate economic policies and avert a round of protectionism

 

A currency war the US cannot win VOX

 

World Bank blames U.S. for unruly capital flows Reuters

 

Brazil Steps Up Action in `Currency War,' Pleads for Ceasefire BL

 
“This currency war needs to be deactivated.  We have to reach some kind of currency agreement.”

 

S. Korea weighs emergency plans on currency war Yonhap

 

Critics slam Fed money-printing plan Straits Times

 

No currency war: IMF official Shanghai Daily

 

India warns on damage from G20 tension  FT

 

S Korea plans capital controls  FT

 

Q3 EARNINGS

 

Bank of America Posts $7.7B Loss on Special Charge AP

 

Goldman Sachs Profit Beats Estimates as Expenses Drop BL

 

MARKET & GOLD MANIPULATION

 

AUDIO / VIDEO

 

QUOTE OF THE WEEK

 

"The global financial system continues to be unsound in the same way that a Ponzi scheme is unsound: there are not enough cash flows to ultimately service the face value of all the existing obligations over time. A Ponzi scheme may very well be liquid, as long as few people ask for their money back at any given time. But solvency is a different matter - relating to the ability of the assets to satisfy the liabilities."

John Hussman
No Margin of Safety, No Room for Error


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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.ont>

 

© 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

10-20-10

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TIPPING POINTS

1-SOVEREIGN DEBT & CREDIT CRISIS

2-EU BANKING CRISIS
3-BOND BUBBLE

4-STATE & LOCAL GOVERNMENT

5-CENTRAL & EASTERN EUROPE
6-BANKING CRISIS II
7-RISK REVERSAL

8-COMMERCIAL REAL ESTATE

9-RESIDENTIAL REAL ESTATE - PHASE II
10-EXPIRATION FINANCIAL CRISIS PROGRAM
11-PENSION CRISIS

12-CHRONIC UNEMPLOYMENT

13-GOVERNMENT BACKSTOP INSUR.
14-CORPORATE BANKRUPTCY
 

15-CREDIT CONTRACTION II

16-US FISCAL IMBALANCES
17-CHINA BUBBLE
18-INTEREST PAYMENTS
19-US PUBLIC POLICY MISCUES
20-JAPAN DEBT DEFLATION SPIRAL
21-US RESERVE CURRENCY.
22-SHRINKING REVENUE GROWTH RATE
23-FINANCE & INSURANCE WRITE-DOWNS
24-RETAIL SALES
25-US DOLLAR WEAKNESS
26-GLOBAL OUTPUT GAP
27-CONFIDENCE - SOCIAL UNREST
28-ENTITLEMENT CRISIS
29-IRAN NUCLEAR THREAT
30-OIL PRICE PRESSURES
31-FOOD PRICE PRESSURES
32-US STOCK MARKET VALUATIONS
33-PANDEMIC
34-S$ RESERVE CURRENCY
35-TERRORIST EVENT
36-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.