STALL SPEED : Any Geo-Political, Economic or Financial Event Could Trigger a Market Clearing Fall
As we reported last month, Global Economic Risks have taken a noticeable and abrupt turn downward over the last 60 days. Deterioration in Credit Default Swaps, Money Supply and many of our Macro Analytics metrics suggested the global economic condition is at a Tipping Point. Though we stated "Urgent and significant actions must be taken by global leaders and central banks to reduce growing credit stresses" nothing has occurred even after the 19th disappointing EU Summit to address the EU Crisis. Some event is soon going to push the global economy over the present Tipping Point unless major globally coordianted policy initiatives are undertaken. The IMF recently warned and reduced Global growth to 3.5%. This is just marginally above the 3% threshold that marks a Global recession. This would be the first global recession ever recorded. The World Bank is "unpolitically'projecting 2.5%. The situation is now deteriorating so rapidly, as to be impossible to hide anylonger.
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MONETARY MALPRACTICE : Moral Hazard, Unintended Consequences & Dysfunctional Markets - Monetary Malpractice has had the desired result of driving Investors into becoming Speculators and are now nothing more than low-odds Gamblers. There is a difference between investing, speculating and gambling. At one time these lines were easy to comprehend and these distinctive groups separated into camps with different risk profiles in which to seek their fortunes. Today investing has become at best nothing more than speculating and realistically closer to outright gambling.
The reason is that vital information is either opaque, hidden or manipulated. Blatant examples such as: the world of off balance sheet debt, Contingent Liabilities, Derivative SWAPS, Special Purpose Vehicles (SPV), Special Purpose Entities (SPE), Structured Investment Vehicles (SIV) and obscene levels of hidden leverage make a mockery out of public Financial Statements. Surely if we get our ego out of this for a moment we can see that stockholders are now nothing more than gamblers? What is worse is that the casino is rigged. With Monetary Policy now targeting negative real interest rates, it is forcing the public out of interest bearing savings and investing, and into higher risk vehicles they would have shunned historically. They have no choice as the Monetary Malpractice game is played against them.
There is an old poker player adage: "when you look around the table and can't determine who the patsy with the money is, it is because it is you." MORE>>
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. - The "Peek Inside" shows the detailed coverage available this month.
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Latest Public Research ARTICLES & AUDIO PRESENTATIONS
The recent position of the Fed was spelled out and will be enacted. You may be happy, unhappy or camped in between but they will do exactly what they have said they are going to do. This is a Continent apart for the recent announcement of the ECB and should be noted. The European Central Bank waved the banner of “unlimited” and “without cap” subject to the CONDITION of the EU’s acceptance and audits and the approval of any nation applying for aid. It may not have dawned upon you or most of the world but the ECB may never do anything as a result of the yoke that it placed upon itself; nothing at all may ever happen. If the Austrians and the Dutch are to be taken at their word and no more of their money is going to be used to bailout other nations then all of the fluff raised upon giant banners may be no more than flags waving in the wind. The strategy has worked to date and driven down interest rates but when people figure out that the condition is actually an impediment; the winds may begin blowing in the other direction. If “A” depends on “B” and “B” is not forthcoming then “A” is a worthless proposition.
Tell no one that I told you though. It could cause indigestion in Brussels and their food is rich enough now and costly enough for the other nations in Europe. It is a funny thing you know; when a promise made is not a promise kept then Pandora jumps about with her little box of miseries.
“Let the key guns be mounted, make a brave show of waging war, and pry off the lid of Pandora's Box once more.”
Far more important to most Americans than the interest rate on their mortgages is how much they have to pay to fill up their cars. This is true, I think, for the group affected by both costs but the amount of people in the United States that have no mortgages and still have to pay for gas to go to work and the grocery store is a far larger amount of people than those that own houses. Further, the amount of time necessary to lower mortgage rates is a much longer proposition than the time it takes to raise prices at the gas stations. With oil hovering around $100.00 and likely to go higher as a consequence of the Fed’s recent actions; trouble may be brewing.
Even without Bernanke’s recent move the price of gas has escalated dramatically. Regular gas, since July 1, has risen 54 cents to $3.87 which is a 14% move up in just two and one-half months. It is now highly likely, in my view, that regular gas will reach $4.00/gallon and move higher from there. This will cause a hue and a cry from the streets and the Press will turn its attention to this and the Fed and Mr. Obama may well get blamed for this outcome and hence the “unintended consequence” swings fully into view.
22 - Oil Price Pressures
REAL VERSUS NOMINAL: Hyperinflationary Germany Tells the Story
A century apart and a continent apart. With Bernanke's fingers now glued on CTRL-C, perhaps the reality of these two charts suggests it's really not different this time at all...
Chart 1 - GERMAN REAL STOCK MARKET 1914-1927
Chart 1 is the real value of the German stock market from 1914 to 1927 (and the lower chart is the nominal price)
Chart 2 -The GERMAN Wealth Effect
Chart 2 is the real value of the Dow Jones Industrial Average from 1999 to Present (real = adjusted for the value of Gold)
Can you identify what is being charted in each of these images?
Doing so may help to lift the veil of Bernanke's (and Draghi's) Grand Plan.
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