The European Central Bank's (ECB) unprecedented use of a three year, low cost LTRO (Long Term Repurchase Agreement) policy initiative may have removed some of the short term pressures from the EU Banking crisis, but like the Greenspan PUT, the unintended consequences are not yet fully understood. One is the moral hazard which is fostering financial "games" to be played with reckless abandon. Some of the mischievous and cunning games are frankly questionably as being even legal! But then, nothing is illegal if the regulators and those organizations charged with surveillance are not bothering to investigate. Extend > Pretend > Bend is the new approach. MORE>>
The Global Markets have reached the point of waht can be best labeled as "Elevated Risk". Analytics measurements including Fundamenal Analysis, Techncial Analysis and Risk Anlysis all are independently signalling this along with warnings. This months report lays out the Risk Assessment, Risk Levels as determined by our proprietary aggregated Global Financial Risk Index, changes in Tipping Points and the Macro Risk-On, Risk-Off Drivers.
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The market action since March 2009 is a bear market counter rally that has completed a classic ending diagonal pattern. The Bear Market which started in 2000 will resume in full force when the current "ROUNDED TOP" is completed. We presently are in the midst of of a "ROLLING TOP" across all Global Markets. We are seeing broad based weakening analytics and cascading warning signals. This behavior is typically seen during major tops. This is all part of a final topping formation and a long term right shoulder technical construction pattern.
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TRIGGER$ publications combine both Technical Analysis and Fundamental Analysis together offering unique perspectives on the Global Markets. Every month “Gordon T Long Market Research & Analytics” publishes three reports totalling more then 380 pages of detailed Technical Analysis and in depth Fundamentals. If you find our publications TOO detailed, we recommend you consider TRIGGER$ which edited by GoldenPhi offers a ‘distilled’ version in a readable format for use in your daily due diligence. Read and understand what the professionals are reading without having to be a Professional Analyst or Technician.
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Latest Public Research ARTICLES & AUDIO PRESENTATIONS
EURO EXPERIMENT : ECB's LTRO Won't Stop Collateral Contagion! Released December 27th, 2011
I would argue that the problem short term is a shortage of real collateral and that US dollar cash, versus 'encumbered' cash flow, is now king. It is clear that the rampant advancing Collateral Contagion will quickly eat the futile LTRO attempt like ravenous wolves. A well circulated Tweet from PIMCO bond king Bill Gross said it all: " What does LTRO stand for? 1- A shell game; 2-Cash for trash; 3 Three-card Monti; or 4. All of the above." Here is the stark reality of what forced the ECB to offer unprecedented three year loans at absurd rates and most alarmingly, the acceptance of collateral that no other financial institutions will accept. The ECB has sacrificed its balance sheet in yet another EU "kick at the can". MORE>>
04/24/2012 4:28 PM
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"BEST OF THE WEEK "
TIPPING POINT or 2012 THESIS THEME
HOTTEST TIPPING POINTS
COLLATERAL CONTAGION - Determining True Value and Wealth
In a world with hundreds of trillions of imaginary collateral whose ultimate owner will never be tracked down, (and a daisy-chained bankrupt domino collapse will come before anyone finds out who owns what), only that which is:
Tangible, Undilutible and Real
will have value.
RISK - Risk to Most Systemically Important Banks Now Elevated and Rising
In a little over a month, the risk of the 30 most systemically important global banks has jumped an impressive 45%.
What is intriguing is how absolutely end-of-the-world the situation felt heading into Q1 2009 and yet - with banks' risk considerably higher now, we have become so much more 'used' to this state of chaos that our anchoring bias says - all is well?
No matter how you spin it, having debt three times your income before you are responsible for paying it down as a mitigating circumstance is simply idiotic.
UK: English graduates don’t have to repay their loans unless they make 21,000 pounds a year. They pay 9 percent of their earnings over that amount and all debts are forgiven after 30 years. Payments are automatically deducted from paychecks. Graduates don’t have to pay if they lose their job or transition to part-time work, as many working mothers do.
US: By contrast, U.S. education debt can’t be discharged through bankruptcy and almost 2 million Americans with student debt are over 60, according to the New York Federal Reserve. About $85 billion in student debt was delinquent in the third quarter of 2011. In March, the Consumer Financial Protection Bureau said U.S. student-loan debt had reached $1 trillion, based on preliminary findings.
EU: In the rest of Europe, where higher education is free or relatively inexpensive, governments are watching to see if the U.K. plan succeeds
There is one simple reason why the market is less the jubilant about recent earnings "beats" - they all come on trails of aggressive recent trimmings to near forecasts, all at the expense of hockeysticking latter part of the year expectations.
Consensus revenue growth expectations (excluding energy and financials) are 6.5% in 2012 and 5.8% in 2013. This is lower than the 8.2% growth achieved in 2011. We think it is sensible that the revenue growth expectations are lower for 2012 and 2013 versus 2011 but don’t think estimates embed risks like the 2013 fiscal cliff or a recession in Europe. At the sector level, 2012 earnings growth expectations are highest in financials, technology, and industrials. The lowest growth estimates are in utilities, telecom, and health care.
MARGIN EXPECTATIONS - Not Realistic, Don't Pass the Common Sense Test.
One place where it is more obvious than anywhere: margin expectations, which somehow the consensus see soaring in 2013 after what has now become a very tepid 2012 (despite irrational exuberance toward the mid/late part of 2011).
With much more downside risks associated with the longer-term corporate outlook (fiscal cliff, Europe, China slow down), the market has once again reverted to its "show me" phase, where Q1 results are good, but simply not good enough to where mere hockeysticks in expectations will offset the overhanging fears of a global slowdown.
4 COMPANIES CARRING MARKET: AAPL, GOOG, IBM & ORCL
3 companies, GOOG, IBM and ORCL, and the Financial sector in general (which is neck deep in so much "one-time" DVA and otherwise accounting-based trickery we wouldn't know where to even begin) account for more than 60% of the EPS upside!
ESTIMATES STEADILY DOWN - Until Recently
The 2012 EPS estimate, currently at $106.16, reached a near-term bottom of $105.34 in February 2012, while the 2013 estimate troughed at $118.47 in early March versus the current reading of $119.24.
CORPORATOCRACY -CRONY CAPITALSIM
GLOBAL FINANCIAL IMBALANCE
STANDARD OF LIVING
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Tipping Points Life Cycle - Explained Click on image to enlarge
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