• Tim Knight from...
    12/21/2014 - 09:37
    The five remaining equity bears on Earth are all saying the same thing: "We'll get 'em in 2015." To which I ask: why? What's going to change?

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Guest Post: Is Democracy Possible In A Corrupt Society?

If the citizenry cannot dislodge a parasitic, predatory financial Aristocracy via elections, then "democracy" is merely a public-relations facade, a simulacra designed to create the illusion that the citizenry "have a voice" when in fact they are debt-serfs in a neofeudal State. When the Status Quo remains the same no matter who gets elected, democracy is a shamThe U.S. Status Quo is also like an iceberg: the visible 10% is what we're reassured "we" control, but the 90% that is completely out of our control is what matters. There is another dynamic in a facsimile democracy: the Tyranny of the Majority. When the Central State issues enough promises to enough people, the majority concludes that supporting the Status Quo, no matter how corrupt, venal, parasitic, unsustainable and dysfunctional it might be, is in their personal interests. In this facsimile democracy, citizenship has devolved to advocacy for a larger share of Federal government swag. Is Democracy Possible in a Corrupt Society? No, it is not. Our democracy is a PR sham.



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Will Obama II Be Reagan I Or Truman III?

There are plenty of analogs for market and economic behavior currently echoing the past - some scary, some terrifying, and some hopeful. Barclays found two interestingly similar election-bound relationships to the current environment but with very different outcomes: Harry Truman's successful 'Fair Deal' 1948 campaign and Jimmy Carter's unsuccessful 1980 re-election effort. In both cases business confidence and capital spending were soft during the election year - just like the current economy; but due to a monetary policy mistake (raising the reserve requirement) Truman III's world slumped into a recession. Unfortunately the current market traded as if this was hope-ridden 1980, but it turns out we could be headed for 'Truman's 3rd term' (evident in the charts below). Clearly, Barclays believes, the risk is a policy mistake – this time fiscal – which could drive another capital spending bust and a shallow recession.



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Chinese Gold Imports Surge In September, YTD Total Surpasses Official Indian Holdings

Anyone who may have been concerned by the slowdown in Chinese gold imports in August, when the country imported "only" 53.5 tons of gold from Hong Kong (down from 75.8 in July), can breathe a sigh of relief. According to the Hong Kong Census Bureau, in September Chinese gross imports soared by 30% reverting to the long-term trendline of 65 tons in gross imports per month, and rising to a total of 69.7 tons. Net imports were 40% less, although that excludes organic Chinese gold mining and recirculation, which is why for all intents and purposes the gross number is the apples to apples one. And using that, Year-To-Date China has now imported a whopping 582 tons of gold, more than the official holdings of India at 558 tons, and which through November has certainly surpassed the holdings of the Netherlands, and make China's gross imports in just 2012 nominally the equivalent of Top 10 largest sovereign holder of gold.



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Preview Of The Boring Week Ahead

The upcoming week comes less loaded with policy events. The only major one is the Eurogroup meeting on Monday, however EU officials have already confirmed that no decision on the next Greek aid tranche will be made before the Troika’s next report on Greece’s adherence to the bailout conditions. Greece has scheduled an auction for Tuesday in order to roll over €3.1 bn in T-bills expiring by the end of the week. Additionally, in the US, the President has invited leadership of both parties for a first round of talks on the fiscal cliff. The data calendars also look lighter, with the publication of the FOMC minutes on Wednesday, and US Philly Fed on Thursday.



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Guest Post: John Michael Greer: If the Four Horsemen Arrive, Offer Beer

We need to come to terms with the fact that we don’t have limitless energy, we don’t have limitless resources, we don’t have limitless time. All of these things are specific. They function within a finite world. And engaging in hand waving about well, human ingenuity is limitless. No, it isn’t. Okay, it may be immense, but it’s not limitless. We need to accept that the world’s not functioning in our favor, that we have to function within realistic sets of limitations within which everything should operate. And then we might actually be able to get off our duff and do something creative with the time we have on this earth. What would we do that would be sensible? Get out of the empire business and accept the hard truths about our country. Once done, there is an optimistic trajectory we can start following...



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Austerity Farm: Where Cuts For Some Are More Equal Than Cuts For Others

As the Greek government voted on their austerity plans (and prepare to vote on the budget), most of the media is focused on the molotov-cocktail-throwing malarkey that is occurring outside of the parliament. However, as Reuters reports, it was the band-of-brothers inside the building that may just have sparked the largest anger among the public. The government workers, who have enjoyed the "kind of lavish pay and benefits that have become emblematic of the public sector excess at the heart of Greece's debt crisis", suddenly discovered that in the 500-page draft of cost cuts and tax hikes that they themselves were expected to share in that sacrifice. This was entirely not acceptable and thus - they walked off the job, with police having to be called to prevent the shut off of power to the parliament building. Dubbed "The Princes of Parliament", these 'unsackable' staff who have enjoyed 16-month-per-year salaries, seem happy to draft the cuts for others but when it is their own..."we will stop it... Maybe forcefully this time" is response.



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Ron Paul: A New Beginning

America is over $16 trillion in debt. The “official” unemployment rate still hovers around 8%. Our federal government claims the right to spy on American citizens, indefinitely detain them, and even assassinate them without trial. Domestic drones fly over the country for civilian surveillance. Twelve million fewer Americans voted in 2012 than in 2008, yet political pundits scratch their heads. It’s not hard to see why, though.



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Visualizing The Impotence Of Bernanke's Wealth Transmission Channel

We have discussed the apparent (though anecdotal) divergence between refinancing rates and interest rates a number of times. Furthermore, we have exclaimed at the significant drop in refi rates since QE3 (following the initial spike) noting the unintended consequence that US households are increasingly realizing that rates will never be allowed to rise and so every rate rise is not a signal to rush into refinancing but instead a signal to pause for lower rates. The chart below is somewhat surprising in its clarity as Goldman Sachs note that despite record low mortgage rates, borrowers are refinancing at a rate of just 20-30% per year - far lower than prepayment speeds we would expect. The great majority of 'in the money' mortgages are not being refinanced and while we suggest this is the unintended Bernanke conditioning, Goldman also opines that industry capacity and underwriting standards on the supply side; and consumer awareness and household behavior on the demand side. Bernanke's wealth-building transmission channel via housing is entirely broken...



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Guest Post: Why The Chicago Plan Is Flawed Reasoning And Would Fail

On October 21st, 2012, Ambrose Evans-Pritchard wrote a note titled “IMF’s epic plan to conjure away debt and dethrone bankers”, on UK’s The Telegraph. The article presented the International Monetary Fund’s working paper 12/202, also titled “The Chicago Plan revisited“. I will begin the discussion on this working paper with two disclosures: a) my personal portfolio would profit immensely if the Chicago Plan, as presented by the IMF’s working paper 12/202, was effectively carried out in the US. The reason I write today, however, is that to me, it is more important to ensure that my children live and grow in a free and prosperous world, and b) I have not read the so called Chicago Plan, as originally proposed by H. Simmons and supported by I. Fisher. My comments are on what the IMF working paper tells us that the Chicago Plan proposed, without making any claim on the original plan.



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Spot The Start Of The End Of The Keynesian Dream

Presented with little comment, but while there are numerous reasons for elevated oil prices (from short-term supply disruptions, middle-east tensions, and emerging-market demand) it appears something broke in Q1 2009 between a proxy for world trade (or indeed for ship-building mal-investment in hope-driven excesses continuing) and the cost of fulfilling that demand. After 25 years of credit-driven Keynesian (monetary-to-fiscal-policy reach-around) planning, it would appear it is different this time as the potential for infinite supply of fiat currency clashes with the 'finite' supply of hard assets (crude oil in this case)... Much as we question who gained from Draghi's first year of action in Europe, we suggest this chart clarifies who did not benefit from Bernanke's experimentation...



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Israel Launches A Missile Into Syrian Territory For The First Time In 39 Years

Golan Heights

Last week, when we reported that Syria has decided to enter the Golan Heights DMZ, and "provoke" yet another pro-Western stalwart, Israel, we said: "Syria can't wait to start a war, hopefully one which also involves Iran, and provokes the punishment of NATO and the west." We said this because when it comes to what the "fair and objective" media has deemed rogue states, the theory of rational actors no longer applies. Such is the case now in Syria, whose regime is not only involved in a bloody civil war (whose one-sided accounts we get each and every day), but it recently did everything in its power to start a war with Turkey (which failed after it became clear time and again that this was nothing but one huge false flag provocation) and thus provoke NATO's fury which would naturally wipe Syria off the map with the UN's blessing, and start a broader Middle Eastern conflict which certainly would not end there, but has also escalated to Israel just to be certain it gets promptly retaliated against. Today, we learn that Syria has finally gotten what it so urgently desired, after Israel, for the first time since 1973 "returned fire on Syrian military forces after Syrian shells exploded in Israeli territory."

 



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Deep Sunday Morning Thoughts From Bill Gross

Just because Jack Handey never got to manage $1+ trillion in debt...



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If The Greek Elections Were Held Today

Last week's largely symbolic vote in which the Greek bailout-addicted parliament passed, by the tiniest of margins, the latest request for just one more monetary fix promising that this time it will, pinky swear, get its house in order (and maybe even collect some taxes, because all those previous promises were just rehearsals) succeeded in one thing: the coalition government from this summer's elections, crumbling well ahead of time. Which means the time for yet another parliamentary vote is fast approaching. So if a vote were held today, who would be the most represented parties in the Greek parliament? The answer, according to the latest KAPA poll, is the following...



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Barclays' Barry Knapp Batters Bullish Believers

Barclays' Barry Knapp has joined the growing crowd of 'sub-1400 year-end S&P 500 target' realists among sell-side equity strategists. With Morgan Stanley's Adam Parker at 1167 and Goldman's David Kostin at 1250, Knapp just reduced his target to 1325 as he notes "the election scenario that unfolded was the one with the most risk, the status quo outcome." In a brief but densely packed interview on Bloomberg TV (the likes of which we suspect we will not see on CNBC), Knapp summarizes his non-rose-colored-glasses view: "In the longer term, while U.S. growth ... remains constrained by policy uncertainty and balance sheet deleveraging. Financial repression has limited the Fed’s effectiveness... We believe a period of significant equity market valuation improvement can’t begin until the Fed initiates the exit strategy process, which is unlikely to occur until Federal government debt sustainability is addressed." From lame-duck impotence to tax-selling pressures, Knapp nails our new reality and explains, as we have been saying, that the only solution lies in a market-forced move: "We suspect, absent a market correction large enough to force compromise, the two sides will not agree on the starting point for tax rates." Must Watch...



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Spain's "Terrible And Inhumane" Situation Prompts End To Evictions

With Spanish unemployment at record levels over 26% (and youth unemployment over 50%), even the bailout-avoiding prime minister is now recognizing the "terrible things and inhumane situations" that many real people are dealing with. To wit, a 53-year-old woman died after she threw herself from a window of her apartment when representatives of Spanish bank La Caixa arrived with locksmiths to evict her yesterday morning. The suicide (following another last month in Granada) has prompted Rajoy to temporarily halt evictions of the most vulnerable families as the government devises measures to help people stay in their homes. And yet, we are told again and again by Juncker, Barroso, van Rompuy et. al that the corner has been turned... we suspect not!



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