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Charting The Biggest Threat To Investors Over The Next Six Months
The following note from JPM's Ken Landon summarizes what, in the aftermath of an ECB which as Yves Mersch just noted, will not intervene in the markets due to the realization that monetization will bring about the 4 horsemen of the apocalypse, is the greatest threat to investors: strong>political instability, manifested either formally in the form of elections, or informally, in the form of occupations, riots, revolutions, civil wars, alien invasions, etc. And of course, to JPM, just like to everyone else threatened by the upcoming end of the status quo, the bad guy suddenly is the ECB, which had made it all too clear since inception it will not monetize debt. Yet somehow now that we are approaching the endgame it appears this was not very clear. So the plan is to shame them into monetizing everything, Weimar flashbacks be damned. To wit: "The ECB does not operate in a political vacuum. It is the only entity that has the capacity to be the lender of last resort in the Eurozone. Without this, the Eurozone does not have much longer to exist. It will implode. With the ECB decidedly on the sideline, investors are reduced to the state of having to read the tea leaves of national politics. For example, today and tomorrow are crucial days for the formation of the Monti-led government in Italy. Will he be given a strong mandate? Even if he is, will the new government be able to come up with a credible plan that investors will have confidence in?... Greece remains a wild card with the main opposition party refusing to sign a declaration of support of the October agreement. When politics dominate markets and economies, you can be sure that uncertainty will reign and that growth will suffer." So without further ado, here is the complete list of what to look for in the next several months on the all too critical political front, courtesy of UBS.
And the full note from JPM:
Is ECB Waiting For A Panic Before Acting?
* ECB - Although most attention is focused on the actions of national governments in Italy and Greece, the key to near- and medium-term developments is the ECB. This has been a theme of the Lowdown for months. That is, the Eurozone is dysfunctional because it is a giant Social Welfare State without all the means of financing the required spending. A captive central bank is a crucial entity for the financing of governments. The common phrase "lender of last resort" is most applicable to governments that investors have judged to be too risky to lend to. That is where central banks come in very handy for governments. When no one else is willing to lend, most governments can turn to their captive central banks, which have the power of unlimited finance because of the ability to "print" money (or to create unlimited amounts of bank reserves).
This is the key issue right now. The Europeans set up a system in which its central bank would supposedly refrain from financing any particular government. Of course, this legal restriction on the ECB was broken in spirit when the ECB provided repo financing to banks on favorable terms. Regulations that favor government debt made it inevitable that the banks would buy the least risky asset with the repo financing. They loaded up on government bonds and, thus, the respective governments were financed indirectly by the ECB.
As a result of the monetary and regulatory restrictions, European banks now find themselves in a weakened position. In other words, the financing conduit of government finance has been shut down in Europe, which leaves just one bank -- the ECB -- that could provide funds. Instead of acting as a traditional lender of last resort like most central banks around the world do, the ECB is sitting on its hands and claiming that the problem is for governments to resolve.
I agree with the ECB. The fundamental problem is for governments to resolve. Despite widespread public opposition to the trimming of the giant Social Welfare State, governments have to find a way to cut spending. Otherwise, the current system is unsustainable and will collapse in on itself.
As much as I agree with the ECB about the fundamental issue, I disagree with the central bank's aloofness when it comes to government finance. The ECB does not operate in a political vacuum. It is the only entity that has the capacity to be the lender of last resort in the Eurozone. Without this, the Eurozone does not have much longer to exist. It will implode.
* With the ECB decidedly on the sideline, investors are reduced to the state of having to read the tea leaves of national politics. For example, today and tomorrow are crucial days for the formation of the Monti-led government in Italy. Will he be given a strong mandate? Even if he is, will the new government be able to come up with a credible plan that investors will have confidence in? At the time of writing, the surge of Italian 10Y yields to above 7% suggests that investors do not have confidence at all. Greece remains a wild card with the main opposition party refusing to sign a declaration of support of the October agreement. When politics dominate markets and economies, you can be sure that uncertainty will reign and that growth will suffer.
There is not much more to say. Investors and economic decision-makers are being paralyzed by the political uncertainty, which will be with us for quite a long time. Keep in mind that political uncertainty remains in the U.S., although the nightmare in Europe has taken attention away from Washington. Next week, the so-called Super Committee is scheduled to release its proposal to cut the fiscal deficit. As of writing, it is unclear if Republicans and Democrats have been able to agree to a credible plan.
In this environment, the JPY will continue to perform well because it is now the default "safe haven" currency. To end on a less pessimistic note, gold is the ultimate protection asset. The supply of gold is not subject to the whim of policymakers, which makes it an excellent store of value. It is notable that gold has not come close to challenging the previous high of just above $1900 that was hit in September. Perhaps that is telling us that the world is not as messed up as the headlines make it appear? Or perhaps that is merely a reflection of positioning in the market? However, the longer that gold remains below its previous high, the more credible its signal will be that the financial system is not as weak as many people currently fear.
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Gold under 1900 tells us there is not so much to fear about the collapse...or that there is some real MOPE going on to try to tell all of us that there is nothing to fear. In hindsight, it will be very clear which one it was. I'm betting one way, mostly because I don't trust the bastards in power. As PJ O'Rourle has astutely pointed out, "Giving money and power to politiians is like giving whiskey and car keys to teenage boys." No counterparty risk, bitchez. I'm keeping my car keys...and my whiskey.
'In this environment, the JPY will continue to perform well because it is now the default "safe haven" currency. To end on a less pessimistic note, gold is the ultimate protection asset. The supply of gold is not subject to the whim of policymakers, which makes it an excellent store of value. It is notable that gold has not come close to challenging the previous high of just above $1900 that was hit in September.'
Half of the countries on that chart aren't even in the EU, their elections matter little or none for the EU. JPM is grasping at straws because Eurotenization is in doubt. Douchebaggery as usual from JPM.
Do NOT underestimate the Democratic Republic of the Congo.
pods
Someone should tell Yves Mersch, that the ECB is alreading hoovering up excess southern debt.
It isn't when will it start doing it, it's when will it stop doing it.
http://www.renegadeeconomist.com/news/four-horsemen-film-official-trailer.html
“The end of Democracy and the defeat of the American Revolution will occur when government falls into the hands of lending institutions and moneyed incorporations.” Thomas Jefferson
Government IS the lending institution of first resort ! Jefferson was thinking in a hard money world ! The current fiat fiasco fascist socialist state is way beyond his worst nightmares or imagination ! Government is in it's OWN hands....working to protect it's own overpaid bureaucratic assholes.....jacking the serf working people and small business owners off ! Jefferson would have been with the private productive sector and Ron Paul....not with OWS and the fascist nanny state they want more of....much more ! Monedas 2011 Mas viejo y mas cabron, todavia !
For the average Joe Blow whose head is on the block this is undoubtedly the slowest guillotine blade in world history.
WTF is a Technocrat, anyway? Anyone who believes Monti The Outsider can save Europe deserves to own Italian 10Y purchased at par.
A propagator of technocracy...
Via Dictionary.com:
tech·noc·ra·cy
[tek-nok-ruh-see] Show IPA noun, plural -cies for 2, 3.1.
a theory and movement, prominent about 1932, advocating control of industrial resources, reform of financial institutions, and reorganization of the social system, based on the findings of technologists and engineers. 2.
a system of government in which this theory is applied. 3.
any application of this theory.
aka 'dictatorship'... after all, you need one figurehead to corral all those 'technologists' & 'engineers'... You can't expect them to mobilize actions on their own now can you?... Whoever controls the military gets to do that job...
"Technocrat" = "Central Planner"
Growth hasn't seemed to do so well when governments were printing either. What world has he been living in?
He is talking about his growth. Could not care less about your growth.
No army can evict an idea whose time has come
#occupywallstreet
I guess you must be referring to this...
http://www.bloomberg.com/news/2011-11-15/u-s-mayors-crack-down-on-occupy-wall-street.html
EXCERPT
"New York City police in riot gear swept into a Lower Manhattan park early today to remove hundreds of Occupy Wall Street demonstrators who had been camping there for more than eight weeks to protest income inequality."
---
Well let's see... the #occupywallstreet-ers want income equality... How about heading down to Capitol Hill & demand all members of Congress, the TOTUS, & all his cabinet work for minumum wage... I guess that's an example of an idea whose "time hasn't come"
I share your desire to put principles into action; courage is also needed. I have visited the local #occupy on several occasions and have made the following conclusions:
The big ideas are so old they have begun to rot (make "the Rich" pay, Capitalism sucks, ...),
The conversational focus seems to be on activities to promote activism in the coming election year,
The union presence is there every day but not interested in much more than signage,
The Occupiers are mostly young idealistic progressively minded individuals who have been so sheltered they are genuinely surprised that the whole world is "too real" and the State is seen as the ultimate provider of human needs,
Knowledge of the actual structure of government, its powers and privileges, is almost non-existant,
Financial knowledge is non-existent.
If you would do what is right, you must know what is true.
The Philosopher must precede the Warrior.
The time indeed has come, where are the ideas ?
So basically they're just a bunch of deluded little a55wipes trying to score some easy sex before their time runs out, or while they still don't mind the taste of Ramen Noodles & cheap beer...
Just as I figured...
http://www.economicpolicyjournal.com/2011/11/economists-of-occupy-wall-s...
"JPY" the default SAFE HAVEN currency. how delusional are they
"the greatest threat to investors: strong>political instability, manifested either formally in the form of elections, or informally, in the form of occupations, riots, revolutions, civil wars, alien invasions, etc."
That isn't the greatest threat to investors. That's the biggest threat to the TBTF and their fellow 1%'ers.
I personally relish the thought of throwing the bums out.
Voting them out is the preferred method.
I noticed the list only goes to June 2012. Please add the following: Tuesday November 6, 2012.
Tuesday November 6, 2012 , is not an election day , the person has already been picked , they will let you go to the electronic voting stations just to let you be happy, but it will make no difference.
Green for you !
Now can you provide the name ?
There is no PERSON, only a very fungible partisans. Completely interchangeable.
Now onto the curious behavior of crowds. Social inertia can be influenced but not controlled.
I rarely have reason to quote Keynes, however, if he was around today I believe he would recycle his comments from 1933. Reporters asked him (about the banking and economic collapse) if there had ever been anything like this. He replied "Yes, it was called the Dark Ages and lasted 400 years."
depending on where you reside on the class heirarchy, I'd say the personal choice is about a toss-up...
USB needs to include European and American long weekends on that chart - if something goes bad it is likely to be announced when they have some time to control the exuberence (or you can use panic if you like).
Slightly OT - Will Mr. Nobody crash Europe?
http://www.businessspectator.com.au/bs.nsf/Article/Germany-euro-debt-crisis-bailout-referendum-EU-Mer-pd20111114-NL4XX?OpenDocument&src=kgb
The question is whether he will survive a car crash on slippery roads on the way to the debates.
When markets and economies dominate politics, you can be sure that corruption will reign and the people will suffer.
+ Missing: dec11 pariliament in Ivory Coast ;)
Gold under 1900 in all likelihood indicates that the banks are buying. TPTB always pound down the price of whatever they're buying.
Today people aren't "investing" in a stock market. They are gambling on a Central Planned rigged Ponzi full of insiders and cheats and propped up by rumors from a Politiburo and threats of massive money. People just try to find out what the cheats and insiders are betting on each day and copy them. Las Vegas is more fair, open and honest than this thing. The only thing this market is good for is shorting.
Anyone expecting the Germans to suck it up and commit financial suicide by going along with the ECB plans has obviously not spent much time in Germmany.
Imagine going to a productive farming community in Nebraska - and explaining to salt-of-the-earth God fearing Christians that their taxes and fees must rise - essentially forever - becuase bankers and sex criminals in New York, San Francisco and Chicago need more money -
What do you expect would happen?
Please explain how Germany (and how much of Germany) is equivalent to a productive farming community in terms of mentality. My guess would be about 2.5% of Bavaria only so less than 1% of Garmany -- even there there are key differences in the mentality.
We're talking about a country where almost 25% of the population once voted for a party which had run on an election promise of increasing fuel prices by 200% to 300% through tax increases, giving them their best ever result. I can't see that happening in Nebraska or anywhere in the Anglo-American world for that matter.
As to Monti, the answers are NO and NO.
WTF!!!!
NASDAQ megaphone pattern on daily chart indicates a big move lies ahead.
SP500 monthly chart remains bearish and USDX weekly remains bullish, so it’s only a matter of time until the market makes its move.
http://stockmarket618.wordpress.com
The Euro-lushes have been boozing it up for years, now the bartender and the bouncer are looking at their watches and blocking the exits...