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The Market Just Figured Out Two HUGE Problems

Phoenix Capital Research's picture





 

 

The US Presidential election ended November 6, 2012. Since that time, the market has fallen 3%.

 

There are a multitude of reasons for this, but the primary one is the fact that the markets is beginning to realize two key items:

 

  1. Everything that was a problem in the run up to the US election is still a problem (in fact many issues are now worse than they were a few months ago).
  2. Having engaged in pre-emptive and extreme actions to keep things calm in the run up to the election, the US Fed and ECB have run out of effective monetary bullets.

 

Regarding #1, according to the ECRI, as of June 2012, the US is back in recession. The ECRI has proven far more accurate and timely in predicting recessions than the NBER. And now that the election is over I expect other US data (the ISM, LEI, and employment numbers) to start moving towards reality (bad).

 

By the way, the US just hit a new record for food stamp usage.

 

Across the pond, the European banking and sovereign debt crisis continues to worsen: Greece has to redeem €5 billion worth of bonds on Friday. The country just managed to pass its latest budget proposal (which undoubtedly the country will fail to meet… just like all the others) but the troika has yet to issue its latest report on Greece.

 

Germany has stated point blank that without the troika report, Greece won’t be getting more funds. Is Germany finally ready to let Greece fail? It’s hard to say. But Germany did put together a special advisory panel to focus exclusively on assessing the cost of a Grexit back in August.

 

Elsewhere in the EU, Spain continues to implode. The mainstream financial media notes that people are now killing themselves when evicted from their homes. However, things are in fact worse than that. My contacts in the country inform me that in some regions the government hasn’t even paid its pharmacies in six months. Indeed, the region of Valencia owes its pharmacies an insane €500 million.

 

This is nothing short of a societal shut down. Expect the civil unrest and economic implosion to accelerate in the coming weeks and months.

 

And finally, France’s private sector is falling to pieces. September’s auto sales numbers were worse than those of September 2008. The country’s PMI reading is back to April 2009 levels. And the French Central Bank has announced the country will re-enter recession before year-end.

 

Again, nothing has been fixed in the last six months. In fact, things have gotten much much worse.

 

As for #2, it is now clear that the ECB and US Fed used up their last remaining effective bullets this summer in their efforts to aid the Obama re-election campaign (Romney stated he would fire Bernanke, hence the Fed’s decision… while various EU officials admitted the Obama administration requested that they keep things calm in the build up to November).

 

Indeed, stocks are now sharply down since QE 3. Gold and Silver, in contrast are up. If this dynamic does not change immediately then the positive consequence of the Fed’s actions (namely stocks rising) is now obsolete while the negative consequence (higher inflation) is about to hit lift off.

 

What would the market look like without the Fed’s aid? According to the business cycle the S&P 500 would be closer to 1,000.

 

In the EU, the ECB announced a plan to make unlimited bond purchases for EU nations that meet various reforms and “conditions.” The problem with this is that none of the countries that need money (namely Spain and Italy) want to meet any conditions as their economies are already imploding without additional austerity measures (see the information on Spain above).

 

Thus, the ECB promise has in fact turned out to be a colossal bluff. At the end of the day, Mario Draghi can say whatever he wants, but unless Germany is willing to go along with the ECB, he can’t do much of anything. Germany demands “conditions” therefore so does the ECB.

 

So… the global economy continues to slow. Europe is burning (literally in some countries). And the primary Central Banks (the Fed and the ECB) are out of ammo.

 

Buckle up… things are about to get messy. 

 

On that note, if you’ve yet to prepare for Europe’s BIG collapse…we’ve recently published a report showing investors how to prepare for this. It’s called What Europe’s Collapse Means For You and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.

 

This report is 100% FREE. You can pick up a copy today at:

http://gainspainscapital.com/eu-report/

 

Best Regards,

 

Graham Summers

 

PS. We also offer a FREE Special Report detailing the threat of inflation as well as two investments that will explode higher as it seeps throughout the financial system. You can pick up a copy of this report at:

 

http://gainspainscapital.com/gpc-inflation/

 

 

 

 

 

 


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Wed, 11/14/2012 - 05:27 | Link to Comment Zero Govt
Zero Govt's picture

"Buckle up… things are about to get messy."

You're kidding Graham

Juncker is planning (no joke) with Greek politicians (no jokers) their budget to 2022 (no f'n kidding?!!)

...despite short-term Greek budget control looking like the shit hitting the fan at a Clown Convention long-term German-Greek fiscal planning is looking up, up, up!!!

I'm so friggin relaxed here in Europe i haven't got a nail left to chew down on

Tue, 11/13/2012 - 03:34 | Link to Comment Diogenes
Diogenes's picture

International socialism = communism

National socialism = fascism

Mon, 11/12/2012 - 21:36 | Link to Comment hooligan2009
hooligan2009's picture

around half of all taxes collected go on welfare of one form or another, this from Forbes a while ago (pargaraph 4 of page 2)

http://www.forbes.com/sites/peterferrara/2011/04/22/americas-ever-expand...

here is a breakdown of taxes per quintile from last april 2012

http://www.ctj.org/pdf/taxday2012.pdf

we wont know the spending on welfare for 2012 for a while because not everyone has an i-phone yet (should make it pear-shaped i think).

if you add the bottom earners share of the total tax until you get to the 50% that is given back by way of benefits, from the ctj link, you can see that 90% of the population pay no net taxes at all.

those earning over 250,000 make up the other (just less than) half of taxes collected and (presumably) receive no benefits.

the choice is stark. make the "rich" become an awful lot poorer, or cut benefits to the bottom 90%. the degree that these benefits (100% removal, 75% removal, half or remove none) are removed is the "real choice" since this is where all discretionary spending of the governement is going.

this is what defines whether the usa continues to travel towards communism, or tries to give "self motivation" to get off their asses and stop thinking that they are owed all their tax money back.

the lowest voter turnout in decades is the result of this rather obvious fact. polticians go nowhere and no thing but hurt people in the short or long term, as do their agencies and zealous, "herdlike" supporters.

 

Tue, 11/13/2012 - 02:53 | Link to Comment Setarcos
Setarcos's picture

"around half of all taxes collected go on welfare of one form or another"

Does that include virtual donations to the military/industrial complex, TBTF banks and other corporations sucking off the state/tax dollar?

You are wildly uninformed with "the usa continues to travel towards communism".  Good grief, I know that Usans are generally dumbed-down by decades of misinformation/propaganda/Hollywood, but the road being travelled is towards FASCISM FFS!

Not even the Soviets believed they had 'communism'.  What they had was actually a form of 'national socialism' as a counter-party to German National Socialism(Nazism).

Now, if not always for a couple of centuries, pretty much every country is 'national socialist'/fascist ... please attempt to be more informed/less indoctrinated by slogans.

Mon, 11/12/2012 - 21:28 | Link to Comment seataka
seataka's picture

I love this site.

I love gold and silver.

I love having a little in the stock market - short.

Stock futures are down after hours!

My wife said I spent too much time reading this site et al.

I filed for divorce.

Life is grand!

Mon, 11/12/2012 - 21:04 | Link to Comment j0nx
j0nx's picture

Don't matter. Shit will fail and those uncooperative republicans will get the blame. Outside of Wiley E. Coyote, I've never seen a bigger band of incompetents than the current crop of supposed conservative politicians. They let the MSM slap them around unimpeded and fall into every trap that the dems lay for them. Sad bunch they are. Their treatment of Ron Paul was the last straw for me. Assuming I ever vote again, which is doubtful, it certainly won't be for the GOP or the dems for that matter. I'm done with civic mindedness.

Mon, 11/12/2012 - 20:08 | Link to Comment Joe moneybags
Joe moneybags's picture

The European equity market indexes are only off of their recent highs by a few percent, and most are trading above their 50 day moving averages.  This proves nothing, but it does demonstrate that the powers-that-be of Europe, and Big Money around the world, don't view the Eurozone as the disaster-in-progress that Graham does.  At least, not yet.

Mon, 11/12/2012 - 19:38 | Link to Comment Clint Liquor
Clint Liquor's picture

Anyone who believes the FED and ECB are out of 'bullets' has no understanding of how high you can build a house of cards.

Tue, 11/13/2012 - 03:31 | Link to Comment Diogenes
Diogenes's picture

Or how high you can pile bullshit before it topples over.

Mon, 11/12/2012 - 19:31 | Link to Comment falak pema
falak pema's picture

debt jubilee; we declare Buffet most indebted person of USa and forgive his debt; so he can pay it back to the US in taxes; all 50 billion. Rinse and repeat with all the oligarchs. Debt jubilee them all and they will be so relieved they'll gladly pay their net worth as taxes to feel free n easy. 

The THIRD biggest secret of US capitalism is out! I learnt it by reading Graham Summers.

Debt Jubilee for tax reversion of all debt which is equity but becomes debt as jubileed! 

Mon, 11/12/2012 - 18:49 | Link to Comment whotookmyalias
whotookmyalias's picture

Come on. I went all cash and metal waiting for the post election dive so I can trade it, make more fiat, and buy more metal.  My patience is growing thin.  I think it's because in California you can only buy one handgun in a 30 day period so I have 30 days to go before I can pick out my next one.  But back to the market, I am still sitting here on the sidelines waiting for some tradable action.  Anytime now...

Mon, 11/12/2012 - 19:07 | Link to Comment SILVERGEDDON
SILVERGEDDON's picture

I miss Meth man, Robot Trader's Mom, and Million Dollar Bonus. Life is so damm complicated without a quality retard to laugh about every now and then.

Oh, and, THE SKY IS STILL FALLING !

Chicken Little that, mo fo.

Back in the bunker, rifle at the ready. 

Mon, 11/12/2012 - 18:05 | Link to Comment Howdan
Howdan's picture

"My contacts in the country inform me that in some regions the government hasn’t even paid its pharmacies in six months. Indeed, the region of Valencia owes its pharmacies an insane €500 million"

Hang on a minute - We have the ECB, BoE, BoJ and the Federal Reserve printing TRILLIONS of euros/ dollars / pounds / yen etc and just where the f**k is it all going? Please don't tell me it's all going to the TBTF banks???

Something stinks to high heaven here - why on earth don't the CBs use some of the trillions to help ordinary people out with medical bills, debt relief, tax relief etc and thereby freeing up people's incomes to boost the economy?

Everyday I am baffled by how much money is being printed and yet the ordinary taxpayers and pensioners never see a single penny of it. It's disgusting and we've got to do something to change it, but what?

Mon, 11/12/2012 - 20:03 | Link to Comment sosoome
sosoome's picture

"Please don't tell me it's all going to the TBTF banks???"
Ok. Even though that's where it's going, I won't tell you. Promise. 

Mon, 11/12/2012 - 19:47 | Link to Comment spinone
spinone's picture

Howdan, catch up.  We got done with the whole rightous indignation thing in like 2009.

Mon, 11/12/2012 - 19:15 | Link to Comment Tenshin Headache
Tenshin Headache's picture

Think like a criminal. It all makes sense when you do. Or, in more extreme situations, think like a tyrant.

Mon, 11/12/2012 - 17:49 | Link to Comment SheepDog-One
SheepDog-One's picture

Without the FED's aid, S&P would be closer to 1,000? 

WTF? So in other words all the trillions funneled in by the FED make each S&P point worth approx $50 billion dollars or something? I find it extremely hard to believe this line. I think without the FED's aid the S&P would be around 200, maybe.

Mon, 11/12/2012 - 17:45 | Link to Comment SheepDog-One
SheepDog-One's picture

'Out of ammo' huh? Hmmmm....damn the torpedos full speed ahead!! Forward into the breech men! CHARGE!

Mon, 11/12/2012 - 19:16 | Link to Comment Tenshin Headache
Tenshin Headache's picture

They are loading the Muppet cannons even as we speak.

Mon, 11/12/2012 - 17:11 | Link to Comment pemdas
pemdas's picture

Don't complain too much or we will get the Mad Hedge Fund Trader back.

Mon, 11/12/2012 - 17:19 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

+1 LOL

Mon, 11/12/2012 - 16:35 | Link to Comment President Palin
President Palin's picture

So, how many people here have subscribed to Graham's newsletter? 

Really tired of this fluff...

Mon, 11/12/2012 - 17:20 | Link to Comment FreedomCostsaBu...
FreedomCostsaBuck-o-Five's picture

We won't admit it if we did. (oops) I know someone who did tho'....

Tue, 11/13/2012 - 00:58 | Link to Comment Midas
Midas's picture

It's no wonder we are depressed.  We have Graham Summbers, but no Money McBags.

Mon, 11/12/2012 - 16:32 | Link to Comment nate
nate's picture

>Regarding #1, according to the ECRI, as of June 2012, the US is back in recession.

Incorrect.  The ECRI (at businesscycle.com) has two indexes that are worth watching.  The Coincident Index (USCI) is the most accurate, however, it has a lag time of about 6 months.  We may be in a recession, but the USCI is NOT stating that at the moment.  Second, the Weekly Leading Index (WLIW), which is prone to false positives.  It decreased slightly last week, but it is still showing a positive number for "growth", so it is also NOT showing a recession.  I don't entirely understand the methodology, but even if this number is negative, it doesn't necessarily forecast a recession.

Maybe you are referring to the video by Lakshman Achuthan, who has been predicting a recession for a year now, despite his own data showing otherwise.  He will eventually be proven corrent.

Tue, 11/13/2012 - 05:35 | Link to Comment Diplodicus Rex
Diplodicus Rex's picture

The US prints 10% of its GDP (deficit spending) out of thin air. Therefore true GDP is 10% lower than the declared GDP on an absolute basis. Using the definition of recession as two consecutive quarters of less than zero growth, the US has been in recession since 1972. You have no credibility if you peddle the growth/no growth mantra.

Mon, 11/12/2012 - 17:44 | Link to Comment SheepDog-One
SheepDog-One's picture

Right we're not in a recession as any fucking idiot can clearly see we're in a depression papered over by heavy layers of fake fiat currency.

Tue, 11/13/2012 - 00:44 | Link to Comment ebworthen
ebworthen's picture

Thanks for that.

Mon, 11/12/2012 - 16:29 | Link to Comment digitlman
digitlman's picture

All bread and no meat in this post.  Like always.

Mon, 11/12/2012 - 16:25 | Link to Comment eatthebanksters
eatthebanksters's picture

Oh, that $80 billion in new taxes from the uberwealthy who make $250,000 or more a year will solve all our probems, right Barry? Dammit, that's what you told us!

Mon, 11/12/2012 - 18:38 | Link to Comment bobnoxy
bobnoxy's picture

Why not? Bush told us his tax cuts were going to boost the economy and help create loads of new jobs.

Tue, 11/13/2012 - 01:53 | Link to Comment vast-dom
vast-dom's picture

You dummy Graham! re: "What would the market look like without the Fed’s aid? According to the business cycle the S&P 500 would be closer to 1,000." The NY FED came out and said w/out QE's and such SP would be at 600, NOT 1k!

 

re "Buckle up… things are about to get messy." Fuck do you know? You've been saying this for too long. No one knows when things are "about" to get whatever they will get, except you of course since being wrong is your forté. 

Tue, 11/13/2012 - 00:47 | Link to Comment markmotive
markmotive's picture

Markets found out a third problem. It's MOvember and nobody is getting laid.

BTW - the fiscal cliff is the biggest problem. But it's fixable (in the short term)

http://www.planbeconomics.com/2012/11/12/gary-shilling-on-u-s-deficit-fi...

Do NOT follow this link or you will be banned from the site!