Posts Tagged ‘debt crisis’

The Three Stages of Delusion

Courtesy of John Mauldin, Outside the Box 

[Artwork courtesy of William Banzai7]

I am back from the Forbes cruise to Mexico and starting to deal with a thousand things, but first on the list is making sure you get this week’s Outside the Box. And a good one it is. In fact, it is two short pieces coming to us from friends based in London over the pond.

Both of them have to deal with the unfolding crisis that is Europe, which is going to unfold for several years as they lurch from solution to solution. The first is from Dylan Grice of Societe Generale and reminds us why we should put no stock in what leaders say about a crisis. He has lined up the statements of leaders from one crisis after another. He finds a simple, repeating pattern. And shows where we are now.

The second is from hedge fund manager Omar Sayed, who I met last time I was sin London. A very bright chap and good guy. He offers us very succinctly four paths that Europe can take. Some of them are not pretty. It all makes for a very interesting OTB. I trust your week will go well.

Your over-dosed on guacamole (and it was worth it) analyst,

John Mauldin, Editor

Outside the Box


Flashback to Crises Past: Three Stages of Delusion 
Popular Delusions

By Dylan Grice

The recent sequence of reassurances from various eurozone policymakers suggests we are in the early, not latter, stages of the euro crisis. Only an Anglo-Saxon style QE will prevent dissolution of the euro. Such a radically un-German solution will only be taken with a full acceptance of how serious the euro’s problems are. But denial persists.

The dawning of reality hurts. Prodded and bullied along a tortuous emotional path by events unforeseen and beyond our control, we descend through three phases: the first is denial that there is a problem; the second is denial that there is a big problem; the third is denial that the problem was anything to do with us.

US policymakers’ three steps during the housing crash fit the template well. Asked in 2005 about the danger posed to the economy by the housing bubble, Bernanke responded: “I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis.” Here was the…
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The Real Horror Story: The U.S. Economic Meltdown

The Real Horror Story: The U.S. Economic Meltdown

Courtesy of Michael Snyder at Economic Collapse 

economic meltdownThis October, millions of Americans are going to watch horror movies and read horror stories because they enjoy being frightened.  Well, if you really want to be scared, you should just check out the real horror story unfolding right before our eyes – the U.S. economic meltdown.  It seems like more bad news for the U.S. economy comes out almost every single day now.  Unfortunately, things are about to get a whole lot worse.  The mainstream media has been treating "Foreclosuregate" as if it is a minor nuisance, but the truth is that the lid is about to be publicly lifted on years and years of massive fraud in the U.S. mortgage industry, and this thing has the potential to cause economic chaos that is absolutely unprecedented.  Over the past several days, expert after expert has been coming forward and warning that this crisis could completely and totally paralyze the mortgage industry in the United States.  If that happens, it will be essentially like pulling the plug on the U.S. economic recovery. 

Not that there was going to be a recovery anyway.  The truth is that economic statistic after economic statistic has been pointing to incredible trouble for the U.S. economy.

For example, the U.S. government just announced that the U.S. trade deficit went up again in August.  According to the U.S. Census Bureau, the U.S. trade deficit was $46.3 billion during August, which was up significantly from $42.6 billion in July.

So how much coverage did this get in the mainstream media? 

Well, just about none.

We have gotten so used to horrific trade deficits that it isn’t even news anymore.

But these trade deficits are absolutely killing our economy.

How long do you think that the U.S. economy can keep shelling out 40 or 50 billion more dollars than we take in every single month?

If you look at the countries around the world that have become very wealthy, almost all of them have gotten that way by trading with the United States.

Meanwhile, many of our once great manufacturing cities are turning into open sewers.

Every single politician in the United States should be talking about the trade deficit.

But hardly any of them are.

Is it because Americans have all become so dumbed-down that we don’t understand these things anymore, or is it because we are so…
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Europe Offers $957 Billion in Hope of Appeasing the Banks

Europe Offers $957 Billion in Hope of Appeasing the Banks

Courtesy of JESSE’S CAFÉ AMÉRICAIN

The US SP futures are soaring almost 30 points, along with world equity markets, as the Europeans join the Americans in agreeing to monetize their debts by expanding their currencies. Make no mistake, no matter how they wrap this package and call it debt, it is the expansion of the money supply to prevent insolvency.

This does not cure the problems which remain, but rather provides time and latitude for the politicians to act. Discussion should begin at the IMF meeting on May 11, although this is unlikely to render any practical discussion of financial reforms, other than further debauching of the savings of the nations and their peoples.

These are dark days indeed that bring a false dawn that will quickly prove to be simply insubstantial.

The bribe has been given. Now there is the real work of reform and justice yet to be done. But will it be deferred and diluted in Europe as has been done in America.

NY Times
E.U. Details $957 Billion Rescue Package
By James Kanter and Landon Thomas Jr.
May 9, 2010

BRUSSELS – European leaders, pressured by sliding markets and doubts over their ability to act in unison, agreed on Sunday to provide a huge rescue package of nearly one trillion dollars in a sweeping effort to regain lost credibility with investors.

After more than 10 hours of talks, finance ministers from the European Union agreed on a deal that would provide $560 billion in new loans and $76 billion under an existing lending program. Elena Salgado, the Spanish finance minister, who announced the deal, also said the International Monetary Fund was prepared to give up to $321 billion separately.

Officials are hoping the size of the program – a total of $957 billion – will signal a "shock and awe" commitment that will be viewed in the same vein as the $700 billion package the United States government provided to help its own ailing financial institutions in 2008.

Early reaction from world markets was positive, with Japan’s Nikkei index rising more than 1 percentage point after being battered last week.

In reaching the deal, European leaders were making yet another attempt to stem a debt crisis that has engulfed Europe and global markets. Underscoring the urgency, President Obama spoke to the German chancellor, Angela Merkel, and the


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Currency Wars: Markets Shudder on Downgrade of Spain

Currency Wars: Markets Shudder on Downgrade of Spain

Spanish bullfighter David Fandila El Fandi performs a pass to a bull during a bullfight at the Maestranza bullring in Seville

Courtesy of JESSE’S CAFÉ AMÉRICAIN

There was unusually heavy put buying yesterday in NY markets on the Spanish stock index ETF.

Last month a group of US hedge funds were investigated for collusion in planning short selling assaults on the euro. Having exhausted the developing world, which has largely tossed them out, have the economic hitmen finally turned on the developing world as we forecast in 2005 that they would?

This is not to say that Greece, Portugal, or Spain are without problems or fault. There is a general crisis in many of the developed country fiat currencies, including the United States. The rising price of gold and silver, despite the heavy handed manipulation by a few of the banking centers, is a sure sign of a flight from paper controlled by central banks.

The US financial interests have been shown to exercise a disconcerting amount of control over the three US-based Ratings Agencies. I wonder how long it will be before any of the US states will have their credit ratings downgraded, and how those attacks might be structured. I am sure the government would then act to curtail their naked shorting and market manipulation activity.

As the NY based stock tout crowed on Bloomberg this morning, "The US can inflate its way out of this crisis much more easily than can any other country." Well, it is an advantage to own the printing press, and to control key elements of the global financial system.

And it makes one wonder how long the economic predators will be given free rein by the co-opted regulatory agencies and government in the US, which cannot even pass a motion to debate financial reform to the floor of its Senate. I would suggest that the debate, even when it moves forward, will not produce anything sufficient to promote a sustainable recovery. That is why this debate must move now to the floors of Parliaments and legislative bodies in the rest of the world. And there has to be much more openness compelled from their central banks with regard to private dealings with the US Federal Reserve. It is now a matter of national priority. 

Wall Street Journal
Euro Drops To New One-Year Low On Spain Downgrade
By Bradley Davis
April 28, 2010

NEW YORK (Dow Jones)--The euro dropped to a


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The Federal Reserve is Public Enemy #1 – with Bill Fleckenstein of Greenspan’s Bubbles

The Federal Reserve is Public Enemy #1 – with Bill Fleckenstein of Greenspan’s Bubbles

Courtesy of Damien Hoffman at Wall St. Cheat Sheet
 

Bill Fleckenstein has kept a hawk’s eye on what the government does to our economy. Most recently, Bill wrote an excellent article describing the new health care law as “the great health care bailout.”

I caught up with Bill to discuss three hot topics:

1) How the new health care law will affect our economy;

2) Whether the Fed has painted itself into a corner of low interest rates; and,

3) Whether the foreign debt crisis are an omen for what’s coming to the US.

The Federal Reserve is Public Enemy #1 with Bill Fleckenstein

 
 
 
0:41 / 14:01Download

 

About Bill Fleckenstein

Bill Fleckenstein is a writer for MSN Money, head of Fleckenstein Capital, and author of the acclaimed book GREENSPAN’S BUBBLES: THE AGE OF IGNORANCE AT THE FEDERAL RESERVE.

Click here for a free trial to Wall St. Cheat Sheet


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Armstrong Economics: Entering Phase II of The Debt Crisis

Introduction by Ilene

martin armstrongYou may be wondering why Chopshop is referencing Martin Armstrong’s writings, given Marty’s extended stay in maximum security prison.  Chopshop contends that Martin’s cyclic modeling is genius and ought to supersede whatever opinion one has of Armstrong’s case.

Armstrong is a gold-to-$5,000 guy.  Chopshop agrees that one day gold will likely reach those dollar-denominated "values", but believes that gold will likely digest its 400% gain of the past decade over the next few years before ‘going for the gusto.’

Chopshop and Fibozachi have remained steadfast in calling for first targets of 81 and 84 on the US dollar since they nailed its bottom on December 3rd.  (See also this and this.) They believe we are at a juncture within the credit crisis where "gold is much more likely to take a $350 John Edwards-style haircut before reaching $1450 and beyond."

Back to Armstrong, whose proclivity for gold stems "not from an ill-conceived loathing of the dollar but from an impeccably nuanced study of history’s mosaic.  Chopshop thinks Armstrong’s work can be appreciated by all, "not only because of Marty’s historical breadth but also because his forecasts are predicated upon explicit methodology."

So I asked Chopshop why Martin was in prison, and, for the first time he paused, answering a few seconds later that the reason is because Martin didn’t "obey the rules of Fight Club" ~ you don’t talk about Fight Club and you don’t talk about the alleged collusion of broker/dealers, investment banks, hedge funds and nation-states publicly when "they" are who you consult / manage money for. Armstrong spoke to the manipulation of silver futures by JPM, named Warren Buffett as a mystery $2 billion futures participant of "the Club" and, ultimately, spoke to alleged cabals operating from within, yet behind, financial markets.  Marty spoke about the game being rigged by the Club, being anything but a random walk. Is such the reason for his incarceration with extreme prejudice; not his Pi cycles, public-private pendulum or other brilliant work within cyclic periodicity? So basically, he’s in the hole on trumped up charges.

The long and short of it, according to Chop’s opinion, is that Martin is a political prisoner and cyclic genius who speaks to the intermediate and long-term horizon with probabilistic prescience.  He’s not selling anything and not offering actionable advice. He’s focused solely on finding robust patterns within his models and across history.  Marty has a nearly…
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Greece and the Greek Banks Get the Word “First” Etched on the Side of Their Domino

Greece and the Greek Banks Get the Word "First" Etched on the Side of Their Domino 

Euripedes (c480-406 BC)

Courtesy of Reggie Middleton writing at Zero Hedge 

The Greek Tragedy is unfolding pretty much as I expected. Readers, at least (if not Greek citizens) should be comforted to hear that things are going as anticipated. From CNBC: Greek Bank Shares Fall on EU Support Worries

Greek bank shares fell more than 4.0 percent on Thursday, underperforming the broader Greek market, on worries Greece may be forced to turn to the IMF to deal with its debt crisis for want of EU aid.

"There are concerns over the lack of concrete EU support and because Greece seems to be dragged towards the last resort, which is the International Monetary Fund," Cyclos Securities analyst Constantinos Vergos said.

Shares in National Bank, which reports full-year results after the market’s close, were down 3.8 percent to 15.03 euros, withAlpha Bank shedding 4.1 percent. 

"The IMF scenario was off the table but now seems to be coming back, raising question marks as to what this would entail," said analyst Nikos Koskoletos at EFG Eurobank Securiries.

For those subscribers who didn’t get to act on my Greek bank warning a while back (see  Banks exposed to Central and Eastern Europe and  Greek Banking Fundamental Tear Sheet), don’t fret. If I continue to be correct, this is but the tip of the iceberg, subscribers see Greece Public Finances Projections). The Greek PM is implicitly backing my analysis: Papandreou Urges EU Emergency Plan After German Officials Suggest IMF Aid

March 18 (Bloomberg) — Greek Prime Minister George Papandreou set a one-week deadline for the European Union to craft a financial aid mechanism for Greece, challenging Germany to give up its doubts about a rescue package.

Papandreou said he may turn to the International Monetary Fund to overcome the debt crisis unless leaders agree to set up a lending facility at a summit March 25-26. The IMF option has already been dismissed by European Central Bank President Jean- Claude Trichet and French President Nicolas Sarkozy, who say it would show the EU can’t solve its own crises.

He’s throwing the gauntlet down, and the gauntlet is made out of US forged IMF metal. Greece is willing to diss the EU in order to offer an ultimatum. Whose going to be the first to flinch? 

“It’s an opportunity to make a


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"Bernanke Warned Congress On Wednesday That The United States Could Soon Face A Debt Crisis Like The One In Greece"

"Bernanke Warned Congress On Wednesday That The United States Could Soon Face A Debt Crisis Like The One In Greece"

Courtesy of George Washington

Bernanke is now joining Rosenberg, Ferguson and Faber, Edwards, Grice and many others in warning that the debt crisis rearing its head in Greece may spread to America, causing  U.S. interest rates to climb.

As the Washington Times wrote yesterday:

With uncharacteristic bluntness, Federal Reserve Chairman Ben S. Bernanke warned Congress on Wednesday that the United States could soon face a debt crisis like the one in Greece, and declared that the central bank will not help legislators by printing money to pay for the ballooning federal debt.

Recent events in Europe, where Greece and other nations with large, unsustainable deficits like the United States are having increasing trouble selling their debt to investors, show that the U.S. is vulnerable to a sudden reversal of fortunes that would force taxpayers to pay higher interest rates on the debt, Mr. Bernanke said. 

"It’s not something that is 10 years away. It affects the markets currently," he told the House Financial Services Committee. "It is possible that bond markets will become worried about the sustainability [of yearly deficits over $1 trillion], and we may find ourselves facing higher interest rates even today."

Yes, massive debt overhangs do matter.

Contrary view: A very smart financial expert disagrees, telling me:

Higher interest rates do not equal a debt crisis.

Greece’s situation is not comparable to the US. Greece’s situation is comparable to that of California. It makes a big difference whether you control your currency or not.

 


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CREDIT MARKETS CONTINUE TO WAVE THE WARNING FLAG

CREDIT MARKETS CONTINUE TO WAVE THE WARNING FLAG

Courtesy of The Pragmatic Capitalist

Caribbean Reef Sharks

One of the primary reasons for our move to sell equities in mid-January was the warning shot the CDS market was sending.  Specifically, we said:

As the problem of debt refuses to go away and in fact, quietly spreads, we’ve seen another slow development over the course of the last few weeks – problems in Greece appear to be worse than originally expected and credit default swaps are sending warning messages again.  The term structure in Greek CDS recently inverted as investors are now increasingly concerned of a default in the next few months.  This is something we saw in 2008 before the financial markets nearly collapsed.  That time the inversion was in Lehman Brothers and Merrill Lynch CDS.

As the problems in the banking sector unfolded in late Summer 2008 the sovereign debt of the big three developed nations began to skyrocket before reaching a crescendo in early 2009.  What’s alarming with the situation in Greece is the similarities in CDS price action.  The recent uptick could be serving as a warning flag of things to come in 2010 and 2011 when the problem of debt has potential to rear its ugly head again.  Barclays might not have been too far off when they said the probability of a crisis would grow in 2010.

Well, this situation has only worsened in recent weeks and the equity markets have dipped over 5% since our “must sell” signal.  Jim Reid at Deutsche Bank is reiterating the concern we expressed several weeks ago that this is looking increasingly similar to the action in the markets heading up to the Lehman bankruptcy:

“The danger for every risk asset beyond IG credit is that if higher quality assets see forced re-pricing then it surely has to impact the riskier end of markets. The situation is increasingly reminding us of August/September 2008 when the credit market was sending out a strong sell signal to the equity market. Failing a quick sovereign bail-out, the credit markets are sending out a similar sell signal.”

Reid goes on to note that the markets appear to be accelerating what the governments hoped they could heal with time.  In essence, we’ve put all our…
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Zero Hedge

MUST SEE CHARTS: The U.S. Govt. Financial Disaster vs. Gold & Silver

Courtesy of ZeroHedge. View original post here.

By the SRSrocco Report,

The financial disaster taking place at the U.S. Government costs one heck of a lot of gold and silver.  I doubt many precious metals investors understand the tremendous amount of gold and silver it takes to service the U.S. debt or supplement the massive budget deficits.

I was actually quite surprised by the results when I compared the calculations.  In 2015, the U.S. Federal Government paid $402 billion just to service the interest on its debt.  This figure can be found at ...



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ValueWalk

Details Of The FIFO LIFO Inventory Valuation Methods

By Jae Jun. Originally published at ValueWalk.

Details Of The FIFO LIFO Inventory Valuation Methods by Jae Jun

Table of Contents



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Phil's Favorites

Has The Fed's Policy Decisions Propped Up Equities?

 

Has The Fed's Policy Decisions Propped Up Equities?

Courtesy of The Fat Pitch

Summary: The stock market rises on days when the FOMC releases its policy statement, probably as a result of some uncertainty being removed for market participants. This pattern has existed for more than 30 years. The Fed's ability to "jawbone" the market higher is no more exceptional now than it was during any prior bull market. 

* * *

Morgan Stanley's chief economist this week stated ...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Atlanta Fed trims U.S. third-quarter growth forecast to 2.4 percent (Reuters)

The U.S. economy is on track to grow at a 2.4 percent annualized rate in the third quarter, the Atlanta Federal Reserve's GDP Now forecast model showed on Friday, following the latest data on inventories, trade and consumer spending this week.

Satellite Data Show China May Have Stored More Crude Than Estimated (Bloomberg)

...



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Mapping The Market

Sad Clown

A thought from Jean-Luc:

Every day that goes by brings more shady deals from Trump's past – now Cuba, more stuff about his foundation, his taxes! No wonder he doesn't want to release his taxes either – who the heck knows is buried in there.

In the meantime, Trump gets up at 5:00 AM to tweet about Alicia Machado! What a despicable coward little man-child!

Atrios sums up my feelings:

Sad Clown

I admit I find it hard to keep up the sense of humor about things these days. We laughed a lot during the Bush years, didn't we, my fellow pony aficionados. Trump should just make me laugh and laugh and laugh and laugh. But with Bush we could sorta pretend that people voted for him because they didn't quite see him for what he was. There's no doing that with Trump. Trump is Trump. He won't win, but a lot of...



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Kimble Charting Solutions

Commodities attempting triple breakout, says Joe Friday

Courtesy of Chris Kimble.

Below looks at Commodities ETF DBC over the past decade. Since the highs in 2008, DBC has been a great asset to avoid. Is it time to start paying attention and potentially own this hard hit ETF? Check out the rare price situation below in DBC.

CLICK ON CHART TO ENLARGE

The CRB (Commodities Index) has been down 5-years in a row, this has never happened in the history of commoditi...



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Chart School

RTT browsing latest..

Courtesy of Read the Ticker.

Please review a collection of WWW browsing results.



Date Found: Saturday, 26 March 2016, 02:36:15 PM

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Comment: ZH: Its a BULLARD market, the FED jaw boning is keeping the market up!



Date Found: Sunday, 27 March 2016, 02:31:30 PM

Click for popup. Clear your browser cache if image is not showing.
Comment: RTT: World trade near 2008/09 lows. SP500 near all time highs. PLACE YOUR BETS! Roll up! Roll up!



Date Found: Tuesday, 29 March 2016, 02:42:11 PM

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OpTrader

Swing trading portfolio - week of September 26th, 2016

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Members' Corner

Market Liquidity and Macroeconomic Bullshit

 

Market Liquidity and Macroeconomic Bullshit

Courtesy of The Nattering Naybob

STJL - "Apparently macroeconomics is all bullshit – ROFL! Paging Naybob now… Famous Economist Paul Romer Says Macroeconomics Is All Bullshit."

The Nattering One muses... Macroeconomics as practiced by academics and those in charge is pure voodoo. Better to chant over goat blood, bird feathers and scattered entrails...

As for reality, overnight CNH HIBOR (...



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Digital Currencies

Gold, Silver and Blockchain - Fintech Solutions To Negative Rates, Bail-ins, Currency Debasement and Cashless

Courtesy of ZeroHedge. View original post here.

By Jan Skoyles

I was so pleased yesterday by the announcement that I have joined the Research team at GoldCore as it meant that I could finally start talking about it and was back in a role that lets me indulge in my passion by researching and geeking out on all things gold, silver and money.

...



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Biotech

Epizyme - A Waiting Game

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer.  One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."

Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.  

Genetic components are the DNA sequences that are 'inherited.'  Some of these genes are stronger than others in their expression (e.g., eye color).  Yet, some genes turn on or off due to external factors (environmental), and it is und...



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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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We know you love coming here for our Stocks & Options education, strategy and trade ideas, and for Phil's daily commentary which you can't live without, but there's more!

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News: If you missed it, you can probably find it in our Market News section. We sift through piles of news so you don't have to.   

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