Archive - Feb 16, 2010

Forget the claims and allegations that false flag terror - governments attacking people and then blaming others in order to create animosity towards those blamed - has been used throughout history.

This essay will solely discuss government ADMISSIONS to the use of false flag terror.

The U.S. economy ceased to function this week after unexpected existential remarks by Federal Reserve chairman Ben Bernanke shocked Americans into realizing that money is, in fact, just a meaningless and intangible social construct. What began as a routine report before the Senate Finance Committee Tuesday ended with Bernanke passionately disavowing the entire concept of currency, and negating in an instant the very foundation of the world's largest economy. "Though raising interest rates is unlikely at the moment, the Fed will of course act appropriately if we…if we…" said Bernanke, who then paused for a moment, looked down at his prepared statement, and shook his head in utter disbelief. "You know what? It doesn't matter. None of this—this so-called 'money'—really matters at all." "It's just an illusion," a wide-eyed Bernanke added as he removed bills from his wallet and slowly spread them out before him. "Just look at it: Meaningless pieces of paper with numbers printed on them. Worthless."

The topic that generates by far the greatest disagreement in the investment community, just after whether we will have inflation or deflation, is whether gold is cheap or expensive. And as much as gold is a speculative commodity, it does have roots in fundamental supply and demand. A good source in demystifying the fundamentals in the gold industry, The World Gold Council, has released its summary analysis of investment trends, and market and economic influences in the gold market in Q4 of 2009.

A statistics problem. One I would love to solve. Me and a few thousand other people. A big payoff if you do solve it. The question is, has some already figured this out?

The one index that just refused to correlate to the market, and the UMichigan Index, and the Confidence Board, was released today, and once again hit a 2010 low of -49. The index has been in a -48 to -49 range for the past five weeks. The primary reason for this week's drop was due to a 6 point decline in the personal finance component, from -6 to -12, the lowest reading since December 6, with not much change in the other two readings: National Economy and Buying Conditions. It is somewhat confounding that this index persistently "refuses" to go up with all the other self-reinforcing confidence indices out there.Maybe this is the reason: from the report "Eighty-eight percent think that the economy, despite what economists say to the contrary, is still in a recession."

Love him or hate him, Putin sets the record straight. While the media's attention remains on the Greek fiscal crisis, the bigger debt crisis is in the US, and the world is starting to take notice.

A string of massive recalls. Losses in confidence, declines in sales, a halt in production. Now the Transportation Department is demanding (not asking) that Toyota hand over documents revealing how long the fallen company knew of the aforementioned issues- or face fines.

Maybe we don't follow product recalls as much as we should here in America, enough to write about them well (at least I don't) but one thing is for sure- when a consumer product gets recalled- you don't get a glimpse of the ins-and-outs in mainstream media as much as we're getting here with Toyota... Then again, we're talking over 8.5 million units... And in an industry we need to reclaim.

Paulson & Co's December 31, 2009 13-F was just released. The disclosure for the fund's equity long (shorts are not disclosed, neither are credit cash nor CDS and other holdings) reveals $19.8 billion in positions. The fund's top position continues to be GLD at a value of $3.4 billion (unchanged from September 30). Notable is the addition of 206.7 million shares to the fund's Citi position which is now worth approximately $1.7 billion. Other notable financial additions include SunTrust Bank, in which Paulson added 28.8 million shares, Wells Fargo, a new 17.5 million position worth $472.3 million, JPMorgan common, in which the fund added 5 million shares to 7 million for $291 million, as well as JPM Warrants worth $250 million (a new position). Other new positions in the top 20 include Comcast (44 million share), XTO Energy (10 million shares), IMS Health (18 million shares), and Pfizer (15.6 million shares). A primary reduced holding is the fund's exposure in Bank Of America - Common stock, which declined by 8.8 million shares to 151 million, or $2.27 billion. This was offset by the purchase of 13.8 million BAC "Units" worth $205 million.

A just-published study covering nearly 500,000 corporate results over 27 years found how companies “round up” their numbers to beat their estimates fractionally knowing that the fast-money momentum players will trade the stock price higher. On average, it only takes $31,000 in quarterly net income to beat estimates by a penny, which can be handled easily by a tweak to inventory valuation. The report also showed that companies that find ways to “round up” are also the ones with the highest propensity for re-statements in the future. Well worth a read and hopefully ends the nonsense that we see in the media and Wall Street reports over the extent to which financial results are meeting or beating pre-conceived EPS projections. - David Rosenberg

While I am not predicting an imminent market crash in China, the possibility of a major slowdown in China is increasing in my view. Yet commodity prices and stocks do not seem to be priced for this scenario. I feel a short emerging market exposure offers a good risk reward trade at present. An interesting counter view to the current enthusiasm for China is presented in an intriguing note written by Paul Krugman, written as far back as 1994 called "The Myth of Asia's Miracle". The note laid out a bearish view on the Tiger economies of the time, which proved to be correct. However, on China he noted that in 1994, the World Bank estimated that the Chinese economy was 40% the size of the US economy, and that if it continued on its current growth rate of 10%, it would overtake the US by 2010. Alas that forecast has proven to be wrong, and I suspect that current forecast of Chinese growth will also prove to be exaggerated. Given the amount of stimulus rolling off, I believe we will see a long term peak growth rate in the second quarter of this year, with growth slowing substantially after that. - Horseman Global

Another convincing piece by John Hussman, elaborating on his previous perspectives on the "unlegislated" $1.5 trillion bail out of the GSEs. When reading this piece, keep in mind that during the Q&A of Hoenig's speech reference earlier, the Kansas Fed president said "Our primary goal is the exit strategy. We need to remove the assets from our balance sheet. And we need to get out of this as early as we can." Of course, Ben Bernanke will never actually do this, and the "calendar" is so vague it could be referencing 3000AD. As Dow Jones noted earlier, "In outlining the likely path the Fed will take to tighten credit once the economy is strong enough, Chairman Ben Bernanke last week said he expects the central bank's balance sheet to shrink over time. However, Bernanke said he didn't anticipate the Fed would sell any of its holdings of long-term U.S. Treasuries or mortgage-backed securities "in the near term." It is against this backdrop that the sinister ploy described by Hussman is taking place.

Some time ago UBS economist Paul Donovan claimed that hyperinflation as a policy tool to inflate away a staggering debt load (for those of you who have missed all the recent musings by SocGen's Edwards and Grice, this is precisely the situation the developed world countries, not to mention the STUPIDs, find themselves in right now) is unworkable due to the impacts this type of concerted action would have on broader markets. "The idea that governments can readily inflate their way out of their debt problems is a misnomer — arising, perhaps, from confusion between the fate of the individual bondholder and the response of the collective market... [M]odern governments can not rely on markets to remain collectively indifferent to inflation. Inflation will raise the nominal cost of borrowing (of course) but through the inflation uncertainty risk premium it will also add to the real cost of borrowing." Yet a recently declassified paper by the IMF's Guillermo Calvo "Is Inflation Effective for Liquidating Short-Term Nominal Debt?" (a document which was previously not for public use) comes to a frighteningly different conclusion, one which could imply that the last weapon in the Fed's, and the administration's arsenal, could very well be just this heretofore unthinkable "bazooka approach" previously thought only possible in such developing countries as Korea and Venezuela.

A SPY block moves market by several points. We exaggerate. (Not really). Volume down, market up, volume up, market down. Rinse, repeat. Computers are happy as pigs in a trough as shorts refuse to even dip a toe in this busted market. China tightening? Greece collapse? Record debt overhang? Pulled IPOs and HY deals? Who cares. The algos are sniffing and providing liquidity.

The Tiger discloses some core holdings: DirecTV, Google, Priceline, Mastercard, Visa, Apollo Group (nothing surprising there - the VIC momo crowd's first and last loves); disclosed shorts: Financials. Also included are some other musings.

Greek police say a bomb exploded Tuesday evening outside an office of JPMorgan Chase & Co. (JPM) in Athens, The Associated Press reports. No one was hurt, the AP says. The bomb went off after a warning call to an Athens newspaper. From Dow Jones.