RACE TO DEBASE : The "Race to Debase" Accelerates in a "Race to the Bottom"
The November GMTP issue discusses the Regional Macro Economic Issues in Europe, Japan, China and the Emerging Economcis and BRICS countries. The IMF, World Bank and BIS have all warned of heightened economic and financial risk. The IMF cut the grwoth rate of the advanced economies by 25% taken it down to levels not seen since 2009. The World Bank released a study indicating theat 600 million new jobs must be created over the next 15 years to meet economic and social demands. Meanwhile global growth is falling at rates not seen since the early stages of the 2008 financial crisis.
Currency Wars have entered a new stage has global economies fight for a shrinking piece of export/import demand. Any Geo-Politicl event, an unresolved US Fiscal cliff or unexpected corporate financial failure could be the catalyst to push the world into its first global recession.
MORE>> EXPANDED COVERAGE INCLUDING AUDIO & MONTHLY UPDATE SUMMARY
THE P/E COMPRESSION GAME: An Old Game with a Different Twist to Misprice Risk
We are manipulating markets metrics in such a fashion as to intentionally Misprice, Misrepresent & Hide RISK. Prior PE reference boundary conditions which reflected risk have decoupled. Never has the game of forward operating earnings (versus historically trailing earnings) been more inappropriate than presently. Forward PE's can only be of value in rapid revenue and profit growth eras. This is not what we have presently. It is the wrong tool for the wrong job! Unless you are a sell side analyst, then it is exactly the right too for the difficult selling job you have. We have an era of Peak earnings growth RATES, slowing profit growth RATES and Peak PEs which are reflective of rapidly contracting PE's. We have a secular bear market in REAL terms but PE's are not contracting at a sufficient enough rate to reflect this. Though PEs in nominal terms net out inflation, they don't reflect the underlying downward trend in real terms. MORE>>
We have witnessed QEfinity "Unlimited", OMT "Uncapped', and the US Election results. Now we begin to watch the Fiscal Cliff political poker game unfold. So far it has been a Buy on the Rumor, Sell on the News scenario with markets down significantly since each event, but appearing to find support at the 200 DMA. With US government facing another downgrades to its "Risk Free" status, earnings plummeting and a clear global slowdown in progress, what should we expect before year end and more importantly in the New Year? The short answer is 'volatility' as we complete the "Right Shoulder" of a classic Head and Shoulders pattern of a major Long Term Technical structure. Once complete we then head lower.
A Santa Claus Rally is highly likely despite a rarely confirmed Hindenberg Omen and technical chart patterns that mirror the pre-1987 market crash - way too closely for this analyst. The markets are at levels of extreme risk which is not priced in. Most investors are best advised to stand aside and error on being too conservative. It is too risky at this moment to be either net long or short. Soon however there will be a lower risk entry to be net short the market for the 2013 market clearing event, which the macro charts are consistently signaling.
MORE>> EXPANDED COVERAGE INCLUDING AUDIO & EXECUTIVE BRIEF
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Latest Public Research ARTICLES & AUDIO PRESENTATIONS
Israel Defense Forces confirmed Nov. 14 that it had killed Ahmed Jabari, the leader of Hamas' armed wing, the Izz al-Deen al-Qassam Brigades. The airstrike that killed Jabari came a day after Israel warned that it was considering targeted assassinations in response to increasing rocket fire from Gaza. In addition to the strike on Jabari, the Israeli air force reportedly attacked a cache of 20 long-range missiles and a Gaza police station, and loud explosions are being reported in Gaza City. An IDF spokesman announced that the Israeli military was embarking on Operation Pillar of Defense, which could include a ground incursion into Gaza. The assassination of Jabari seems to have been a first salvo, one that will provoke retaliation from Hamas and that could affect Jordan and Syria. Renewed and expanded bouts of rocket fire are certain, including rockets targeting urban areas. But the question is what other operations Hamas can and will conduct. Stratfor
It was widely reported that Israel agreed to delay any war against Iran until after U.S. elections. A little over a week after the election, Israel launched a "targeted assassination" against the leader of Hamas (who Haaretz called Israel's subcontractor in Gaza). That is what started the current round of fighting.
Professor Michel Chossudovsky notes: On November 14, Hamas military commander Ahmed Jabari was murdered in a Israeli missile attack. In a bitter irony, barely a few hours before the attack, Hamas received the draft proposal of a permanent truce agreement with Israel.
The targeted assassination of Ahmed Jabari was followed by an extensive bombing campaign under Operation Pillar of Cloud. The latter consists of a carefully planned military endeavor.
Leading German newspaper Spiegel reports: Israeli Prime Minister Benjamin Netanyahu is hoping the offensive in the Gaza Strip wins his Likud party more votes in January’s election. “When the cannons roar, we see only Netanyahu and Barak on the screen, and all the other politicians have to applaud them,” wrote the daily Haaretz in a commentary published Thursday. “The assassination of (Hamas’ top military commander Ahmed) Jabari will go down in history as another showy military action initiated by an outgoing government on the eve of an election.”
Asia times writes: So why snuff out al-Jabari? Simple. Israel goes to the polls in January. Thus emerges Bibi's political campaigning in full-action mode. Campaign motto: Let's kill Palestinians. With such thrills on offer, any other Israeli political voice - even slightly dissenting - is drowned.
This escalation occurs just days after widespread reports about newly reelected Obama mulling a grand bargain with Iran over its disputed nuclear program. Barbara Slavin and Laura Rozen at Al-Monitor reported on Monday that US officials told them Washington was considering offering a “more for more” deal with Iran, based on the fuel swap deal from Obama’s first term.
So what does Israel’s impending war on defenseless Gaza have to do with Iran diplomacy? Here’s a tweet from the Tehran bureau chief for the New York Times, Thomas Erdbrink:
Forget ANY #Iran-US talks if conflict in Gaza escalates
I suspect this point was not lost on the Israeli leadership, either. So, is Netanyahu knowingly escalating military tensions in order to avoid a successful diplomatic overture? I’m speculating, but it isn’t far fetched. We know from extensive reporting, mainly in Israeli media, that in 2010 – just as President Obama requested a freeze on Jewish settlements in the West Bank with the aim of resuming peace talks – Israeli Prime Minister Benjamin Netanyahu tried to provoke Iran into a war with Israel that would eventually drag in the United States.
It reminds me of what former CIA Middle East analyst Paul Pillar referred to this week as “Netanyahu’s tension-stoking brinksmanship: to divert attention from continued Israeli occupation of Palestinian territory and inaction on the festering Israeli-Palestinian conflict.” “[T]he Iran issue,” Pillar has previously written, provides a “distraction” from international “attention to the Palestinians’ lack of popular sovereignty.” Now the situation seems reversed: Israel is escalating war with Gaza to maintain deadlock with their favorite scapegoat, Iran.
Israel, lest we forget, instigated this resumption of missile exchanges last week when two Palestinian civilians were shot and killed and
Israeli tanks intruded into Gaza, prompting Gaza militants to respond by targeting Israeli soldiers, which then gave Israel an excuse to unleash successive airstrikes. And Israel had numerous chances to pacify the situation, considering Hamas publicly offered to establish a total ceasefire and Egypt appeared about to broker a truce between the two. Israel has intentionally inched towards escalation from the beginning. Are we to believe this isn’t strategic?
THEORY 2 - A second theory is that this is a prelude to an Israeli attack on Iran. Specifically, some theorize that Israeli is trying to assassinate top Hamas militants before hitting Iran … so that Iran’s proxy Hamas cannot retaliate.
THEORY 3 - A third theory is that Israel is trying to drag Iran into a war. Given that Israeli treatment of Palestinians is perhaps the key source of hostility towards the current Israeli administration in the Arab world, starting a war in Gaza may be an attempt by Israeli to drag Iran into war.
After all, Iran backs Hamas, and Israel just assassinated a top Hamas leader after making an overture of peace to him. So some believe that Israel is attempting to poke the hornet’s nest in an attempt to justify wider war. By provoking Hamas into attacking, Israel might point to Hamas-backer Iran. Specifically, Israel may claim that pre-emptive strikes on Iran are "necessary" to undermine Hamas and make sure it doesn't obtain "weapons of mass destruction".
Historically the bond market has been a disciplining force for policymakers. When the Fed was too soft on inflation or the fiscal deficit was out of control, interest rates spiked higher. In our view, this has changed and today the stock market is the disciplining force for Washington. Stocks have generally endorsed Fed policy. We estimate that stock prices rose a cumulative 15% in the past three years in response to Fed announcements or actions. While some investors have misgivings about what the Fed is doing, the overall market likes it. By contrast, the stock market is giving a clear no-confidence vote to fiscal policymakers. This was particularly clear when the TARP bailout plan failed to pass and at the end of the debt ceiling debate.
The Grand Distraction
The post-election discussion underscores the futility of trying to get a quick “grand bargain,” putting in place a long-term plan for deficit reduction. Speaker Boehner has emphasized that any increase in tax revenues should come from broad-based reform: “in order to garner Republican support, the President must be willing to reduce spending and shore up the entitlement programs that are the primary drivers of our debt.” While tax and entitlement reform are good long term goals, are they really feasible in a few months?
A near-term grand bargain faces not just one, but four major hurdles:
A low starting point: Neither party has even scratched the surface in presenting a feasible plan for either tax or entitlement reform, in our view. Tax reform requires tough choices around which loopholes to cut, a topic that has been carefully avoided by both parties. Medicare reform also requires tough choices around how care is rationed. Republicans have offered a voucher plan, but haven’t mentioned that it will only reduce costs if patients have large out-of-pocket expenses so they have an incentive to limit their spending. Democrats have offered to cut payments to providers, but without any impact on service. The American public needs to be educated about the true options it faces.
Bi-partisan cooperation: As was clear in the 1986 tax reform, getting complicated and contentious reforms enacted is very hard without true cooperation, particularly with relatively evenly divided government. The leaders of the two parties have to stand together and fight the special interests.
High complexity: The US tax code is extremely complicated and any attempt to change it creates many winners and losers. It has big impacts on the many special interests with tax advantages. It also redistributes income across not just income classes but between states (ironically, high-income people in the “Blue states” that voted for the Obama have the most to lose since those states tend to have high mortgages and high state and local taxes). If anything, Medicare reform is even more difficult since it involves life and death choices and there are fundamental disagreements about the relative role of markets and administration in controlling costs.
A sizable gap in view: The two parties strongly disagree about how tax reform impacts the economy. Republicans argue that most of the revenue from tax reform will come from creating a stronger economy. In the past week, President Obama countered: "What I will not do is to have a process that is vague, that says we're gonna sorta, kinda raise revenue through dynamic scoring or closing loopholes that have not been identified."
We agree that it is important to start laying the ground work for tax and entitlement reform, but we also believe it is also important to get the sequencing right. First, dismantle the fiscal cliff, and then start negotiations on the longer term solutions.
2- Sovereign Debt Crisis
AMERICAN HERO: Ron Paul's Congressional Farewell Speech
On Wednesday, Rep. Ron Paul (R-Texas) delivered a 48-minute farewell address on the House floor after serving 30 years in Congress. His farewell speech is arguably the best in his career.
Time permitting, I strongly encourage everyone to play the video or at least read the full and complete text. For now ...
Here are a few highlights.
Note: For ease in reading, I dispense with my normal blockquotes (indentation).
The major stumbling block to real change in Washington is the total resistance to admitting that the country is broke. This has made compromising, just to agree to increase spending, inevitable since neither side has any intention of cutting spending.
If liberty is what we claim it is- the principle that protects all personal, social and economic decisions necessary for maximum prosperity and the best chance for peace- it should be an easy sell. Yet, history has shown that the masses have been quite receptive to the promises of authoritarians which are rarely if ever fulfilled.
In the early part of the 20th century our politicians promoted the notion that the tax and monetary systems had to change if we were to involve ourselves in excessive domestic and military spending. That is why Congress gave us the Federal Reserve and the income tax. The majority of Americans and many government officials agreed that sacrificing some liberty was necessary to carry out what some claimed to be “progressive” ideas. They failed to recognized that what they were doing was exactly opposite of what the colonists were seeking when they broke away from the British.
We Need an Intellectual Awakening. Without an intellectual awakening, the turning point will be driven by economic law. A dollar crisis will bring the current out-of-control system to its knees.
If it’s not accepted that big government, fiat money, ignoring liberty, central economic planning, welfarism, and warfarism caused our crisis we can expect a continuous and dangerous march toward corporatism and even fascism with even more loss of our liberties. Prosperity for a large middle class though will become an abstract dream.
Economic ignorance is commonplace. Keynesianism continues to thrive, although today it is facing healthy and enthusiastic rebuttals. Believers in military Keynesianism and domestic Keynesianism continue to desperately promote their failed policies, as the economy languishes in a deep slumber.
The immoral use of force is the source of man’s political problems. Sadly, many religious groups, secular organizations, and psychopathic authoritarians endorse government initiated force to change the world. Even when the desired goals are well-intentioned—or especially when well-intentioned—the results are dismal.
We now have a standing army of armed bureaucrats in the TSA, CIA, FBI, Fish and Wildlife, FEMA, IRS, Corp of Engineers, etc. numbering over 100,000. Citizens are guilty until proven innocent in the unconstitutional administrative courts.
Government in a free society should have no authority to meddle in social activities or the economic transactions of individuals. Nor should government meddle in the affairs of other nations. All things peaceful, even when controversial, should be permitted.
The Constitution established four federal crimes. Today the experts can’t even agree on how many federal crimes are now on the books—they number into the thousands. No one person can comprehend the enormity of the legal system—especially the tax code. Due to the ill-advised drug war and the endless federal expansion of the criminal code we have over 6 million people under correctional suspension, more than the Soviets ever had, and more than any other nation today, including China. I don’t understand the complacency of the Congress and the willingness to continue their obsession with passing more Federal laws. Mandatory sentencing laws associated with drug laws have compounded our prison problems.
The federal register is now 75,000 pages long and the tax code has 72,000 pages, and expands every year. When will the people start shouting, “enough is enough,” and demand Congress cease and desist.
It is claimed that war, to prevent war for noble purposes, is justified. This is similar to what we were once told that: “destroying a village to save a village” was justified. It was said by a US Secretary of State that the loss of 500,000 Iraqis, mostly children, in the 1990s, as a result of American bombs and sanctions, was “worth it” to achieve the “good” we brought to the Iraqi people. And look at the mess that Iraq is in today.
Excessive government has created such a mess it prompts many questions:
Why are sick people who use medical marijuana put in prison?
Why can’t Americans manufacture rope and other products from hemp?
Why are Americans not allowed to use gold and silver as legal tender as mandated by the Constitution?
Why do our political leaders believe it’s unnecessary to thoroughly audit our own gold?
Why can’t Americans decide which type of light bulbs they can buy?
Why is the TSA permitted to abuse the rights of any American traveling by air?
Why should there be mandatory sentences—even up to life for crimes without victims—as our drug laws require?
Why haven’t we given up on the drug war since it’s an obvious failure and violates the people’s rights? Has nobody noticed that the authorities can’t even keep drugs out of the prisons? How can making our entire society a prison solve the problem?
Why do we sacrifice so much getting needlessly involved in border disputes and civil strife around the world and ignore the root cause of the most deadly border in the world -the one between Mexico and the US?
Why does Congress willingly give up its prerogatives to the Executive Branch?
Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same?
Why did the big banks, the large corporations, and foreign banks and foreign central banks get bailed out in 2008 and the middle class lost their jobs and their homes?
Why do so many in the government and the federal officials believe that creating money out of thin air creates wealth?
Why do so many accept the deeply flawed principle that government bureaucrats and politicians can protect us from ourselves without totally destroying the principle of liberty?
Why can’t people understand that war always destroys wealth and liberty?
Why is there so little concern for the Executive Order that gives the President authority to establish a “kill list,” including American citizens, of those targeted for assassination?
Why is patriotism thought to be blind loyalty to the government and the politicians who run it, rather than loyalty to the principles of liberty and support for the people? Real patriotism is a willingness to challenge the government when it’s wrong.
Why is it is claimed that if people won’t or can’t take care of their own needs, that people in government can do it for them?
Why do some members defend free markets, but not civil liberties?
Why do some members defend civil liberties but not free markets? Aren’t they the same?
Why don’t more defend both economic liberty and personal liberty?
Why does the use of religion to support a social gospel and preemptive wars, both of which requires authoritarians to use violence, or the threat of violence, go unchallenged? Aggression and forced redistribution of wealth has nothing to do with the teachings of the world’s great religions.
Why do we allow the government and the Federal Reserve to disseminate false information dealing with both economic and foreign policy?
Why should anyone be surprised that Congress has no credibility, since there’s such a disconnect between what politicians say and what they do?
What are the greatest dangers that the American people face today and impede the goal of a free society? There are five.
1. The continuous attack on our civil liberties which threatens the rule of law and our ability to resist the onrush of tyranny.
2. Violent anti-Americanism that has engulfed the world. Because the phenomenon of “blow-back” is not understood or denied, our foreign policy is destined to keep us involved in many wars that we have no business being in. National bankruptcy and a greater threat to our national security will result.
3. The ease in which we go to war, without a declaration by Congress, but accepting international authority from the UN or NATO even for preemptive wars, otherwise known as aggression.
4. A financial political crisis as a consequence of excessive debt, unfunded liabilities, spending, bailouts, and gross discrepancy in wealth distribution going from the middle class to the rich. The danger of central economic planning, by the Federal Reserve must be understood.
5. World government taking over local and US sovereignty by getting involved in the issues of war, welfare, trade, banking, a world currency, taxes, property ownership, and private ownership of guns.
The problem we have faced over the years has been that economic interventionists are swayed by envy, whereas social interventionists are swayed by intolerance of habits and lifestyles. The misunderstanding that tolerance is an endorsement of certain activities, motivates many to legislate moral standards which should only be set by individuals making their own choices. Both sides use force to deal with these misplaced emotions. Both are authoritarians. Neither endorses voluntarism. Both views ought to be rejected.
I have come to one firm conviction after these many years of trying to figure out “the plain truth of things.” The best chance for achieving peace and prosperity, for the maximum number of people world-wide, is to pursue the cause of LIBERTY.
If you find this to be a worthwhile message, spread it throughout the land. End Paul - Start Mish
It sounds so logical, doesn't it? So why are we in this mess?
The answer is we nominate clowns like Mitt Romney and President Obama and the vast majority of people choose between Tweedle-Dum and Tweedle-Dee based on some sense of morality orperhaps some kind of handout.
The pro-life hypocrites were willing to vote from Mitt Romney who is hell bent on starting a war with Iran in spite of obvious failures in Iraq and Afghanistan, in spite of the fact that war kills real living people.
As Paul said, "500,000 Iraqis, mostly children, in the 1990s died, as a result of American bombs and sanctions." Supposedly it was “worth it” for the greater “good”. It was so "worth it" that we did it a second time, and lied to do it.
Congressional lemmings supported the war en masse. Paul didn't. Neither did I, and I am proud of it. Question of the Day
If Republicans are not in favor of deficit spending and Democrats are not either, then how the Hell do we have trillion dollar deficits?
The answer is vast majority of politicians are liars, with no backbone to stand up and tell the truth to US citizens: "the country is broke".
We cannot afford wars. We cannot afford to keep troops in 140 countries. We cannot afford to be the world's policeman.
We also cannot afford Davis-Bacon and prevailing wage laws. We cannot afford the pension promises we have made. We cannot afford collective bargaining of public unions. We cannot afford all kinds of entitlements that have been promised.
How Does It Happen?
We have all of these things because corrupt politicians buy votes of constituents who want to hear the lie that we can afford those things. In the end, that's what it's really all about.
The unions, the warmongers, the banks, and all the other special interest groups buy votes of corrupt politicians every step of the way. The "compromise" in Congress is Republican get their wars and Democrats get fiscally unsound social programs.
In the meantime, government grows bigger and bigger and bigger. And the Fed (and Congress) repeatedly bail out the banks and the wealthy at the expense of the middle class.
Hope - it appears - peaked at the start of the year in the US, following the global coordinated central bank pump which ramped it from lows to highs within a few months. All that hope - and then some - has now apparently faded. The General Business Conditions expected six months forward dropped to its lowest level since March 2009. What is perhaps worse, given the focus on jobs jobs jobs, is that for the first time since April 2009, the employment outlook for employment turned negative - suggesting firms are looking to reduce employees at the fastest rate in over three-and-a-half years. The hopium seems to have been depleted...
MOST CRITICAL TIPPING POINT ARTICLES THIS WEEK - Nov 18th - Nov 24th, 2012
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