Hong Kong

Pay no attention to that Keynesian moron behind the curtain!

The appalling fiscal and monetary situation in the U.S. will lead to further dollar weakness in the coming  months. This weakness will be most manifest versus gold as other fiat currencies have their own risks. 

• A U.S. Default Seen as Catastrophe Dwarfing Lehman’s Fall (BBG)
• Software, Design Defects Cripple Health-Care Website (WSJ)
• Gunmen kill 5 Egyptian soldiers near Suez Canal, 2 people die in blast (Reuters); Egypt death toll rises to 53, streets now calm (Reuters)
• Three retailers sell Apple iPhone 5C for $50 or less (Sun Sentinel)
• New American Economy Leaves Behind World Consumer (BBG)
• Dow's Exiles Often Have Last Laugh (WSJ)
• Macy's Puts China Online-Expansion Effort on Hold Amid Economic Slowdown (WSJ)
• Gold Befuddles Bernanke as Central Banks’ Losses at $545 Billion (BBG) - just ask the BIS gold selling team: they are unbefuffdled
• Markit Group Said to Avoid U.S. Antitrust Claims as EU Proceeds (BBG) - being owned by the banks has benefits
• Paulson leads charge into Greek banks (FT) - and scene for the Greek banking sector

We identify the six investment themes that look likely to generate alpha over the coming decade.

• Troops Forage for Food While Golfers Play On in Shutdown (BBG)
• Police suspect dental hygienist Miriam Carey was behind the wheel of Capitol chase (WaPo)
• Italian Senate committee starts Berlusconi expulsion process (Reuters)
• Swiss Regulator Probing Banks Over Foreign-Exchange Manipulation (WSJ)
• GOP Begins Search for Broad Deal on Budget (WSJ)
• No Jobs Report Means Economists Chew on Football Instead of Data (BBG)
• U.S. default seems unthinkable but investors have options (Reuters)
• Citigroup fined $30 million after analyst sent report to SAC, others (Reuters)
• FBI Snags Silk Road Boss With Own Methods (BBG)
• Recession Warnings Found in Asset Price Falls (BBG)
• Bank of Japan warns of severe global impact from U.S. fiscal standoff (Reuters)

• Mounting Wall Street fears of US default (FT)
• This is what the US government does when it is "shut down" - CIA ramping up covert training program for moderate Syrian rebels (WaPo)
• SEC Weighs Overhaul of Exchanges’ Self-Regulatory System (WSJ) - just let Goldman and JPM do all the policing; not like anyone cares anymore
• Reid Sets Tone for Democrats in Shutdown Fight (WSJ)
• No Movement in Shutdown Standoff (WSJ)
• Shutdown will not slow Fed nomination, says Obama (FT)
• Syrian Regime Chokes Off Food to Town That Was Gassed (WSJ)
• Tesla Says Car Fire Began in Battery (AP)
• China Services Index Increases in Sign of Sustained Rebound (BBG) or sustained data manipulation

• U.S. Government Shut Down With No Quick Resolution Seen (BBG)
• 12 House Republicans now say they’d back a ‘clean’ CR (WaPo)
• Republicans’ 2014 Senate Edge Muddied by Shutdown Message (BBG)
• Obama Shortens Asia Trip Due to Government Shutdown (WSJ)
• Fed Said to Review Commodities at Goldman, Morgan Stanley (BBG)
• Foreign Firms Tap U.S. Gas Bonanza (WSJ)
• Behind Standoff, a Broken Process in Need of a Broker (WSJ)
• Japan Awaits Abe’s Third Arrow as Companies Urged to Invest (BBG)
• Microsoft investors push for chairman Gates to step down (Reuters)

Mass Surveillance Destroys Innovation, Trust, the U.S. Internet Market and Other Foundations of Prosperity

There is a considerable amount of debate in alternative economic circles as to whether a federal government shutdown would be a “good thing” or a “bad thing”. Sadly, a government shutdown is sizable threat to the American financial system, and few people seem to get it.  Perhaps because the expectation is that any shutdown would only be a short term concern.  And, this assumption might be correct.  But, if a shutdown takes place, and, if “gridlock” continues for an extended period of time, We have little doubt that the U.S economy will experience renewed crisis.  Here's why...

The financial crisis of 2008 killed a lot of things. It killed the line of credit, it killed the finances of millions of people around the world, it ousted governments and relegated leaders to the back offices and it was the kiss of death to a failed system and brought down entire states.

• Government Heads Toward Shutdown (WSJ), First U.S. Shutdown in 17 Years at Midnight Seen Probable (BBG), Congress in game of chicken (RTRS)
• Italian Premier Pursues Last-Ditch Rescue of Government (WSJ)
• Election risk rattles Italian government bonds (RTRS)
• Obama and Ryan Stay on Sidelines on Budget (WSJ)
• Volcker Rule Costs Tallied as U.S. Regulators Press Deadline (BBG)
• Faltering Chinese Factory Growth Adds to Rebound Fears (FT)
• Health Law Hits Late Snags as Rollout Approaches (WSJ)
• Apple Overtakes Coca-Cola as Most Valuable Brand, Study Finds (BBG)
• Euro-Area September Inflation Slows More Than Forecast on Energy (BBG) - Puting will fix that shortly

Dispassionate overview of the key factors shaping the investment climate in the week ahead.  

• House GOP banking on Plan C (Politico)
• Pimco shook hands with the Fed - and made a killing (Reuters)
• BlackBerry's Torsten Heins has a $55 Million golden parachute (Reuters)
• JPMorgan Urged to Pay More in Mortgage Deal (NYT)
• Soros Adviser Turned Lawmaker Sees Crisis by 2020 (BBG)
• U.N. Members Agree on Syria Disarmament (WSJ)
• U.N. Says Humans Are 'Extremely Likely' Behind Global Warming (WSJ)
• The non-falsifiable threats emerge: Shutdown Would Shave Fourth-Quarter U.S. Growth as Much as 1.4% (BBG)
• Swaps Rules Worry Industry: Coming Regulations Have Market Players Concerned About Possible Disruption (WSJ)

• JPMorgan eyes $4bn ‘pay for peace’ deal (FT)
• Prosecutors Pursue Big SAC Settlement (WSJ) - in the US if you are rich enough, no crime is bad enough
• Cruz's Defiant Stand Is Also a Lonely One (WSJ); Texas senator speaks for more than 14 hours (FT)
• Iran Applies Brakes to U.S. Mideast Plans (WSJ)
• Americans in Poll Doubt Economy Rebound in Defiance of Forecasts (BBG)
• Big Banks Cut Basel III Shortfall by $112 Billion at End of 2012 (BBG) - the equivalent of 10 bridges to the Kalahari desert
• Obama’s Jabs at Russia on Syria Shows Diplomacy Tensions (BBG)
• ICAP Staff Face Criminal Charges Tied to Libor  (WSJ)
• Alibaba Is Said to Shift Target for I.P.O. to U.S. From Hong Kong (NYT)
• Home gold rush is over (Reuters)
• Conoco in landmark Alaska drone flight (FT)

Goldman Sachs is once again predicting that gold will fall, setting a new near-term target of $1,050. Never mind the schizophrenic gene that would be required to follow the constantly fluctuating predictions of all these big banks. Sure, the too-big-to-fails can move markets - but they say things that are good for them, not us. As an example, while Goldman Sachs was telling clients and the public to sell gold in the second quarter, they bought 3.7 million shares of GLD and became the ETF's 7th largest holder. When we visited China, guess who no one was talking about? Goldman Sachs. Since January 1, gold ETF holdings have fallen by roughly a quarter (26%, according to GFMS). But Chinese housewives aren't refraining from buying and certainly aren’t selling...