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"Extend & Pretend" Read the Series...



Stage 1 Comes to an End!
A Matter of National Security
A Guide to the Road Ahead 
Confirming the Flash Crash Omen
It's Either RICO Act or Control Fraud
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

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"SULTANS OF SWAP"
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"EURO EXPERIMENT"
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"UR all PIGS from HELL

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"EXTEND & PRETEND"

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Published November 2009


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"INNOVATION"
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"PRESERVE & PROTECT"
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POSTS:  Wednesday, 12-29-2010
Last update:  12/30/2010 3:29 AM Postings begin at 5:30am EST
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EU SOVERIGN DEBT CRISIS     1
ZH 1
  Economic Collapse 1
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JAPAN     1
Bloomberg 1
  Atlantic 1
     
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STATE & LOCAL GOVERNMENT     4
Bloomberg 4
Economic Collapse 4
Washington Post 6
Bloomberg 6

Before Its News 6

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  USA Today 30
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  Pitt Report 33
       
Other Tipping Point Categories not listed above
CENTRAL BANKING MONETARY POLICIES, ACTIONS & ACTIVITIES      
Reinhart Says Fed Bond Purchases May Exceed $600 Billion   Bloomberg  
2011 OUTLOOKS      
One Investment Strategy for Q1 2011: Cash, Baby, All the Way   BI  
Hedge Funds Crash, Apple Turns Uncool in 2011   Lynn  
Get Ready For A Year Of Volatility: More Flash Crashes, Fed Hating, Civil Unrest And Bad Weather   Krasting  
Nobel Prize Economist Mundell Says Forget All These Bullish Forecasts, 2011 Growth Is Going To Be Weak   Bloomberg  
CURRENCY WARS      
China says it can subdue prices   WSJ  
COMMODITY CORNER      
Gold tops $1,400-an-ounce - Silver above $30   MW  
How to profit on global commodity demand   Farrell  
MARKET WARNINGS      
NYSE Short Interest Drops To Lowest In 2010

ZH  
'I Am Moving To Net Short Position'   Kass  
Global markets slide for second day as China rate rise unsettles investors   Telegraph  
GENERAL INTEREST      
America's Second Great Depression 2010 Year-End Update (Part 1)   AVA Investment Analytics  
America's Second Great Depression 2010 Year-end Update (Part 2)   AVA Investment Analytics  
War Would End the Recession?   The Freeman  
Inflation Update   Saville  
China’s Companies Dump U.S. Stock Listings   WSJ  
       
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Briefs
     
     
READER ROADMAP & GUIDE:   2010 Tipping Points and commentary


 
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Quote Of The Week

"Gold as money is incompatible with unlimited majority rule and scoffs at the idea that money is just 'credit'. It negates any rationale, however farfetched, for the existence of central banks. It precludes 'fractional reserve banking' or any other method of debasing its utility as a medium of exchange. Last and most important, it SEVERELY curbs the power of government to interfere in the lives of its citizens. No assembly of national “leaders” brought together to “modernize” a financial system will ever agree to its use as money. But let one nation anywhere implement it, and the lid blows off."

William A. Buckler, Publisher:  The Privateer

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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.

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TIPPING POINTS
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October Case-Shiller Home Price Indices came in down 0.8% — far below Wall Street expectations for a 0.2% drop. Behold the dreaded double-dip:

“The double-dip is almost here, as six cities set new lows for the period since the 2006 peaks. There is no good news in October’s report.  Home prices across the country continue to fall.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “The trends we have seen over the past few months have not changed. The tax incentives are over and the national economy remained lackluster in October, the month covered by these data. Existing homes sales and housing starts have been reported for both October and November, and neither is giving any sense of optimism. On a year-over-year basis, sales are down more than 25% and the months’ supply of unsold homes is about 50% above where it was during the same months of last year. Housing starts are still hovering near 30-year lows. While delinquency rates might have seen some recent improvement, it is only on a relative basis. They are still well above their historic averages, in both the prime and sub-prime markets.”

 

 

 

Today, to little fanfare, the ECB managed to obtain just E60.8 billion in tender interest for its most recent 7 Day SMP "peripheral bond monetization" operation, whereby it needed at least E73.5 billion to be able to offload all of its cumulative acquired sovereign bonds to other financial institutions: a de facto sterilization, which is why the ECB has so far been claiming it is not monetizing debt (as it constantly rolls the held balance on other bank balance sheets). That is no more: following today, the ECB is left with just under E13 billion in sovereign holdings and thus are not sterilized. This development follows Monday's announcement, which was reported first on Zero Hedge, that the ECB acquired 100% more in peripheral bonds in the prior week compared to two weeks ago. Another notable development: the number of bidding banks participating in the tender operation dropped to just 41- the lowest since the inception of the program in May when Greece went tits up and all of Europe was supposed to bail each other out in perpetuity. And what is most disturbing is that this complete lack of interest (or telegraphed lack of bank liquidity) happened even as the marginal rate jumped by over 50%, from 0.6% to 1%- the same as the maximum rate allowed on an auction. Should banks not come back with tender takedown interest next week, this could very well be the catalyst for the next leg down in the European crisis. Because despite what ING economist Martin Van Vliet told Reuters, "It has happened before but I wouldn't make too much of a big deal out of it", we would make a big deal out of it, as this has actually not happened before. For confirmation that ING economists may want to take an Excel 101 chart, below is the buffer shortfall in every auction since the program's inception. As is all too obvious, this was the first one that missed by a mile.

 

According to the just released NYSE short interest update, the number of shares short on the NYSE group has just dropped to 2010 lows, after dropping by over 1 billion since the August highs. This has occurred pretty much in linear fashion: in the last 4 months, there has been just one two week period in which the shorts have increased. What is just delightfully ironic, is that even as broad market volume has collapsed, biweekly short covering has surged on a relative basis. In essence, the bulk of the market buying has been short covering, which traditionally is always 'offer-lifting' heavy, as shorts are willing to pay any price to cover underwater positions, especially if there is an accelerant involved, such as when a repo desk advises its "client" that State Street has decided to force squeeze financial stocks for the nth time since March 2009. The chart below shows that after standing firm through the end of September, shorts have capitulated and the bulk of the weak hands has by now been washed out.