Archive - Jul 18, 2013 - Story

The backlash in Congress against the government’s monstrous spy program and the ridiculous notion that a secret court (the FISA court) grants any sort of oversight is growing, and it is a bipartisan effort. Rep. Bob Goodlatte (R-Va.), the chairman of the committee, said he was surprised that the programs had been kept secret for so long.

“Do you think a program of this magnitude gathering information involving a large number of people involved with telephone companies could be indefinitely kept secret from the American people?” Goodlatte asked.

“Well,” ODNI general counsel Robert S. Litt said with a slight smile, “we tried.”

Just in case there was any question if a thousand monkeys armed with iPads could not only give Moody's a run for the money (even without leaking LBO information to the highest bidder) but solidly trash Uncle Warren's rating agency, the following statement should put any doubts to rest: "The bankruptcy filing by Detroit is a credit negative, Moody's Investors Service said on Thursday, because it creates uncertainty for bondholders, will likely interrupt payments on general obligation and limited tax bonds, and begins a process that may span years." That this statement comes from the same rating agency which concurrently with the Detroit bankruptcy raised its outlook on the US (a/k/a established a DOJ litigation reserve) due to, among other things, the "secure status of US dollars" is not surprising at all.

We seem to be approaching an inflection point of some complexity. If U.S. economic and earnings hockey stick forecasts are achieved, markets will soon be left without Fed accommodation. If the hockey sticks are not achieved, and growth continues at stall speeds, perhaps all the markets will be left with will be Fed accommodation. We had reached an inflection point in mid-2007, but it was not perceived by most...

One of the prime reasons why the Middle East holds such importance to the West is partiality because it is the main supplier of oil and natural gas to countries in the West. Over the past several decades Western countries had few, if any, options other than to purchase its oil and gas from Middle Eastern oil producing nations despite the headaches that came with it. Headaches, for example, that’s included political unrest, turmoil and strife. But now with the newly found fields of oil and gas in Central Asian countries that are only the beginning of what may lie in these vast oil fields of the steppes and the Caucuses, there may be options.

The "coming economic collapse" has already been happening.  You see, the truth is that the economic collapse is not a single event.  It has already started, it is happening right now, and it will accelerate during the years ahead.  The statistics in this article show very clearly that the U.S. economy has fallen dramatically over the past ten years or so. The mainstream media will continue to scoff knowingly, "An economic collapse is never going to happen.  We can consume far more wealth than we produce forever.  We can pile up gigantic mountains of debt forever.  There is no way that the party is over.  In fact, the party is just getting started.  Woo-hoo!"Anyone with half a brain should be able to see what is coming.  Just open your eyes and look at the facts...

UPDATE: S&P futures are stalling too now - down 5 points (it seems Japan is more worried about a tech wreck than the US); JPY and Gold are rising and JGB Futures rise to highest in 2 months

For now it appears there is no apparent catalyst (unless someone just got the mother of all taps on the shoulder) but the Nikkei 225 futures just collapsed almost 600 points from the US day-session highs... five days of gains gone in 30 minutes. 

Goldman's Advanced GLI now locates the global cycle again in the ‘Slowdown’ phase - characterised by positive but falling Momentum. But the bigger picture story is that momentum has been relatively flat lately and remains on the boundary of the two phases - oscillating between 'expansion' and 'slowdown' as more than half of the components have deteriorated this month. Good enough reason to buy stocks to all-time highs?

Four years ago he bailed out the city's automotive industry, and a whole lot of union votes. Moments ago, Obama was just called in again, this time to bail out the entire city. "Representative Chaka Fattah (D-PA), a leader of the Congressional Urban Caucus, sent a letter to President Obama today calling on the Administration to lend a helping hand to Detroit, Michigan following the news that the city has filed for bankruptcy." So will the president play favorites? Or will the municipal bailout begin where the private sector bailout ended? And since bailouts tend to be contagious, if and when Obama does "lend a helping hand" to Detroit, paid for by all US taxpayers, which city, or rather cities, will demand the same treatment? And how long until other people's money finally runs out?

With the S&P 500 joining the rest of the maddening herd at new all-time highs, we are still told day after day that stocks are cheap. This seems somewhat odd in the face of an ugly reality that sees GDP and earnings expectations being ratcheted down day after day also. We decided to look at the facts. The current 12-month trailing P/E ratio (as reported earnings) is 18.3x; the 12-month trailing P/E ratio at the time of the 2007 peak in S&P 500 earnings was 17.7x - so stocks are in fact more expensive now than at the prior peak. Furthermore, S&P 500 operating earnings have peaked in the $24-25 per share range since 2007, but have never exceeded $26 per share. The secret to the 'cheapness' is in the alchemy of the future...the hockey-stick... S&P forecasts quarterly EPS will increase 28% to over $33 per share by 4Q14 (which means we are currently trading at 14.3x forecast 2014 as reported earnings) despite EBITDA having rolled over and growing at its slowest rate in over three years.

Recent dramatic declines in gold prices and strong redemptions from physical ETFs (such as the GLD) have been interpreted by the financial press as indicating the end of the gold bull market. Conversely, our analysis of the supply and demand dynamics underlying the gold market does not support this interpretation. As we have shown in previous articles, the past decade has seen a large discrepancy between the available gold supply and sales. Many recent events suggest that the Central Banks are getting close to the end of their supplies and that the physical market for gold is becoming increasingly tight. The recent sell-off was all orchestrated to increase supply and tame demand. We believe that central planners are now running out of options to suppress the gold price. After taking a pause, the secular gold bull market is set to continue.

Here’s what happens next...

Watch the first official press conference following the largest US muni bankruptcy in history.

"Both before and after the appointment of an emergency manager, many talented individuals have put enormous energy into attempting to avoid this outcome. I knew from the outset that it would be difficult to reverse 60 years of decline in which promises were made that did not reflect the reality of the ability to deliver on those promises. I very much hoped those efforts would succeed without resorting to bankruptcy. Unfortunately, they have not. We must face the fact that the City cannot and is not paying its debts as they become due, and is insolvent..... I know we share a concern for the public employees who gave years of service to the City and now fear for their financial future in retirement, and I am confident that all of the City's creditors will be treated fairly in this process. "

Richard D. Snyder Governor, State of Michigan

Just nine short months after proclaiming victory on his plan to save Detroit by throwing taxpayer money at the 'problem' of over-levered, over-unioned, and under-demanded auto manufacturers, it seems the ball is back in President Obama's court once again. He "refused to throw in the towel and do nothing. We refused to let Detroit go bankrupt. We bet on American workers and American ingenuity, and three years later, that bet is paying off in a big way." Of course, what the rest of the unsuspecting US citizenry is likely unaware of yet is that once again the municipal workers' pension plans (that face 90% losses) will be bailed-out via the Pension Benefits Guaranty Corporation (PBGC) - A US Government (ponzi) Agency. But of course, that's for the good of the whole nation...