Archive - Aug 12, 2011

I am beginning to feel a bit like one of the French unfortunates stumbling through the fog in the Ardennes, circa 1914. Except that, instead of Germans full of deadly intent coming at me in the gloomy forest, it is a flock of black swans. As it was for the French in the Ardennes, the number of problems – then Germans, now black swans – is becoming overwhelming. Consider just a little of what we as investors, and as individuals looking forward to retirement in accommodations more commodious than a shipping box, must contend with...

There are a cluster of problems involving Fukushima ...

But the administration - despite its rhetoric - is doing nothing to decrease unemployment, and is solely helping the super-rich at the expense of everyone else ...

Remember how two months ago Greece came up with a bulletized list of austerity measures it would immediately if not sooner engage in to demonstrate its responsible adult behavior, funded by over €200 billion in European and American taxpayers funds and two bailouts? Well, since then we have learned that Greek GDP has plunged below even the worst case scenarios, even as the country has missed all deficit cut targets. Today, it is Italy's turn, which however apparently was confused and presented the list of austerity before it got a Greek-style rescue. Which is bad. Because within a few weeks we expect the strike (and riot)-cam to be planted firmly in the Piazza Navona and across the streets ot the Trastevere in capturing the latest round of European indignation, oddly enough not caused by local filming of The Jersey Shore. And now that the strawman is out there, when Italy actually needs the money, which will be soon, and is found to be in compliance with precisely zero of its Reps and Warranties (or kinda like a Bank of America RMBS prospectus) it just may make defrauding the middle that much more difficult.

This one will be on our doorstep in five weeks. Also, a new AAA hits the street. This is better than the USA? Go figure.

“Welcome to The Final Stretch, broadcasting live from beautiful Financial Park; home to the exuberant commentary. You join us now as we to go in today’s financial Gymkhana……And They’re Off!!!

There were some who speculated that the east China July 23 bullet train crash was indicative of bigger problems with China's breakneck spree to build infrastructure for the sake of building infrastructure. Sure enough, Xinhua reports that not one, not two, but 54 high speed trains have been recalled over safety concerns. What next: someone inquires into China's GDP numbers and discovers that everything is a complete and utter fabrication? Oh wait, China is the BRIC that will pull the world out of the next recession. We keep forgetting.

"By suggesting, without adequate support, that the registries are full of fraudulent and defective documents, clouding thousands of titles, YOU are adding to the public's confusion and hesitancy to re-enter the real estate market."

RANsquawk Weekly Wrap - Stocks, Bonds, FX -- 12/08/11

America's WTF (certainly not to be confused with Winning The Future) economy summarized in one easy chart.

Now that Ben Bernanke has made it clear that monetary intervention is on hold (supposedly...at least according to the FOMC minutes; what happens at Jackson Hole is not so clear), that monetary stimulus is on hiatus (if one can call a 2 year ZIRP extension and duration cut hiatus), the economic renaissance ball is deep in the court of fiscal policy. But unlike the Fed, where events by now are so finely and quantitatively nuanced courtesy of the the If=>Then logic of the Fed (no matter how troubled or failed), with the economy now in the hands of politicians, this more than anything could be a reason for everyone to really panic. That said, below is a blueprint of what Congress is "supposed" to doto not throw the economy into a tailspin, and also what it has to do to avoid a repeat of the debt ceiling fiasco once again (which as everyone knows by now buys $2.4 trillion in deficit funding in exchange for $22 billion in deficit cuts).

Another constitutional slap in the face for the constitutional scholar. Just out from Reuters: the 11th Circuit Court of "Appeals court rules that Obama's healthcare law's individual mandate to own health insurance unconstitutional." It has thus found in favor of the 26 states that challeneged a requirement that Americans should purchase health insurance. What next: Obama takes Obamacare to the Supreme Court? And just when the summer seemed like it may finally get boring for a change...

Earlier, we noted a release that the probability of what can soon be the largest US municipal bankruptcy in history, that of Jefferson County, Alabama, is 80%. On this painfully slow day (and in the aftermath of four 400+ DJIA point swings anything would be a snooze), those who wish to follow the hearing in real time can do so here courtesy of Birmingham News. While we have described the nuances in the past, the bottom line revolves around whether the proposed debtor plan which sees a 66 cents on the dollar recovery to the creditor committee led by JPM. If indeed there is only 20% chance of default avoidance, this will likely be the catalyst event that unleashes many other comparable muni Chapter 9 filings, which would now have a case study that not only it can be done, but how it should be done.

The model in my forecast says that meaningful reform to the status quo will not be readily accepted by the power elite. They will promote a 'new normal' which will span a leisurely 'five to ten years' for economic recovery, while they are comfortably standing above it all on other people's necks.

Sprott's Eric Sprott and Scott Colbourne will conduct a market outlook call at 12:30pm EDT the topic of which is "Navigating Volatile Markets." Readers who wish to participate on what promises to be a quite an informative call which discusses the best performing asset class to date among many other topics, can do so by registering here.