It seems like it was only 24 hours ago that Europe bailed out Greece for the third time and everything was "fixed", with a resultant desperate attempt to validate this by pushing the EURUSD above 1.3000. Sadly, as always happens, Europe, and especially Greece, refuses to be fixed, because as we will not tire of saying: you can't fix debt with i) more debt, ii) hockeystick projections or iii) soothing words of platitude and an outright bankruptcy, just like that which Argentina is about to undergo, will be needed. If that means the end of the EUR and the delusion that the Eurozone is a viable monument to the egos of a few technocratic career politicians, so be it. As a result, this time around the halflife of the latest bailout was precisely zero, as was that of the latest Japanese QE episode, as the entire world is now habituated to the lies emanating from Europe, and demands details, which in turn are sorely lacking, especially as relates to the question of just where will Greece get the money desperately needed to fund the Greek bond buyback. But at least Kathimerini was kind enough to advise readers that said buyback must take place by December 7 in time for the euroarea finmins to approve the payment of the next Greek loan tranche at the December 13 meeting, something which will likely not happen, especially if Germany's SPD party delays the vote on the Greek bailout until the end of December as was reported yesterday. We can't wait to learn the details of the buyback package, which will come in the "next few days" per ANA, and especially where the buyback money will come from, especially with the FT reporting that various European countries will already lose money next year on the latest Greek bailout.
Government Spends Tens of Trillions On Unnecessary, Harmful Projects … But Won’t Spend $100 Million to Prevent the Greatest Threat
Despite the hope of the last day or two, policymakers remain, we suggest, as far apart as they ever have, with 'no news' simply that. An oversold bounce does not a fiscal cliff fix, and as BofAML's Michael Hanson suggests in his 'brief history of brinksmanship': "one lesson from the recent past is that market reaction has been an important mechanism to reaching compromise and forcing action." Unfortunately, he adds, as we have been quite vociferous about, that "history also shows that the equity markets have to sell off sharply before policy makers listen to the 'stock market vigilantes'." With some politicians still thinking going over the cliff might be their best strategy, it could once again take a sharp market sell-off to focus the minds of the negotiating parties. If we actually manage to go over the cliff, even if only for a brief period of time, a repeat of the TARP sell-off seems only too probable.
- Israel Ready to Invade Gaza If Cease-Fire Efforts Fail (Bloomberg)
- Petraeus: A Phony Hero for a Phony War (NYT)
- IMF'S Lagarde says Greek deal should be "rooted in reality" (Reuters) "rooted" or "roofied"? And where was it until now?
- ECB's Asmussen says Greece to need aid beyond 2014 (AP)
- EU makes budget plans without (FT)
- Japanese Poll Shows LDP Advantage Ahead of Election (WSJ)
- Shanghai Composite Dips Below, Regains 2,000 Level (Bloomberg)
- Bond investor takes big punt on Ireland (FT)
- Noda defends BoJ’s independence (FT) Indewhatnow?
- Inaba Says BOJ Could Ease More If Government Reins in Debt (Bloomberg) Actually it's the other way around
- Miles Says Bank of England Can Do More If U.K. Slump Persists (Bloomberg) So much for the end of QE
- US tax breaks worth $150bn face axe (FT)
In the past it has been the bond market whose vigilantes had rampaged across the fields to keep policymakers honest - but something has changed with the Fed's boot on the bond market. As BofAML notes, when the Fed was too soft on inflation or the fiscal deficit was out of control, interest rates spiked higher. In our view, this has changed and today the stock market is the disciplining force for Washington. We have argued this perspective for a while - that nothing will be done until we get a stock market crash - but the press will continue to make molehills out of mountains it seems as BofAML adds, the most obvious lesson of the last week is that when Washington approaches a policy impasse, the financial press tends to signal a resolution of the crisis many times before it happens. Don’t believe it. After elections there is always conciliatory talk: no one wants to be seen as a sore loser or a gloating winner. The risk remains huge and the four hurdles to a grand bargain seem to be getting larger - no matter what the press wants us to think - investors should look past reassuring rhetoric and focus on the underlying reality.
- Israel Mobilizes Troops as Hostilities Escalate (WSJ)
- FHA Sets Stage for Taxpayer Subsidy With 2012 Deficit (Bloomberg)
- On eve of fiscal cliff talks, positions harden (Reuters)
- Japan PM Noda contradicts challenger Abe on BOJ (Reuters)
- Regulators cut JPMorgan's ability to trade power (Reuters)
- EU Should Reach Agreement on Greek Aid Next Week, Grilli Says (BBG)
- Moscovici rejects talk of French crisis (FT)
- Egypt Urges Push for Gaza Peace as Rockets Hit Israel (BBG)
- Leading Japan politicians draw election battle lines (Reuters)
- Fed Push to Tie Zero-Rate to Economic Goals Faces Doubts (BBG)
- China’s commerce minister voted out in rare congress snub (Reuters)
- China’s new leaders could have reform thrust upon them (Reuters)
- Both Sides of Gaza Border Brace for Further Conflict (WSJ)
- Fed Sees Hurdles in Housing Rebound (Hilsenrath)
- The Complete 2012 Business Schools Ranking (Bloomberg)
- Wal-Mart misses topline expectations: Revenue $113.93bn, Exp $114.89bn, Sees full year EPS $4.88-$4.93, Exp. $4.94, Unveils new FCPA allegations; Stock down nearly 4%
- China chooses conservative new leaders (FT)
- Eurozone falls back into recession (FT)
- Moody’s to Assess U.K.’s Aaa Rating in 2013 Amid Slowing Economy (Bloomberg)
- Another bailout is imminent: FHA Nears Need for Taxpayer Funds (WSJ)
- Hamas chief vows to keep up "resistance" after Jaabari killed (Reuters)
- Obama calls for rich to pay more, keep middle-class cuts (Reuters)
- Obama Undecided on FBI's Petraeus Probe (WSJ)
- Battle lines drawn over “growth revenue” in fiscal cliff talks (Reuters)
- Rajoy’s Path to Bailout Clears as EU Endorses Austerity (Bloomberg)
- Zhou Seen Leaving PBOC as China Picks New Economic Chiefs (Bloomberg)
- Russia warns of tough response to U.S. human rights bill (Reuters)
- Japan Opposition Leader Ups Pressure on Central Bank (WSJ)
- Zhou Seen Leaving PBOC as China Picks New Economic Chiefs (Bloomberg)
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 sham. The 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.
A three year project revisited every TBTF Halloween...
So with world central banks printing paper money day and night it is no surprise that Gold is now emerging as the ultimate currency: one that cannot be printed. Indeed, Gold has broken out against ALL major world currencies in the last ten years. The below chart prices Gold in Dollars (Gold), Euros (Blue), Japanese Yen (Red) and Swiss Francs (Purple):
Before the campaign contributors lavished billions of dollars on their favorite candidate; and long after they toast their winner or drink to forget their loser, Wall Street was already primed to continue its reign over the economy. For, after three debates (well, four), when it comes to banking, finance, and the ongoing subsidization of Wall Street, both presidential candidates and their parties’ attitudes toward the banking sector is similar – i.e. it must be preserved – as is – at all costs, rhetoric to the contrary, aside. Obama hasn’t brought ‘sweeping reform’ upon the Establishment Banks, nor does Romney need to exude deregulatory babble, because nothing structurally substantive has been done to harness the biggest banks of the financial sector, enabled, as they are, by entities from the SEC to the Fed to the Treasury Department to the White House.
How does the US economy add 800K+ jobs during a month in which employment taxes and consumer spending FALL? Answer: magic! Or actually the BLS lied... again.
The majority of Americans seem OK with just waddling through life, accepting the lies and misinformation blasted from the boob tube and their various iGadgets by their owners, gorging themselves to death on Twinkies and Cheetos, paying 15% interest on their $10,000 rolling credit card balance, and growing ever more dependent on the welfare/warfare state to provide and protect them from accepting personal responsibility for their lives. A minority of critical thinking people have chosen to question everything they see and hear being spewed at us by the propagandist mainstream media. What do 'we, the people' want? As it seems the entitlement “free shit” mentality permeates our culture. The question is whether we will stand idly by, fiddling with our gadgets, tweeting about Honey Boo Boo, or will we regain our sense of duty to the future generations of this country.
Spoiler Alert: They’re mostly still in office (so much for building suspense).
On October 3, 2008, 338 elected officials (263 House reps, 74 Senators and 1 President) took it upon themselves to save America from certain financial doom by passing the Emergency Economic Stabilization Act of 2008, completely ignoring the will of the American people, opting instead to fulfill a Thomas Jefferson prophesy:
“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
A common theme among many of our insights is the reality that lurks behind the proposed perception of many of our economic, financial, and political leaders' projections. From Spain not needing a bailout to Juncker's lies, from Bernanke's transitory inflation to Dimon's not needing TARP, the list is endless. Artemis Capital, whose insights we have discussed here and here, use the metaphor of the impossible object (e.g. Penrose Triangle or Necker's Cube) to explore the role of perception in modern markets, monetary policy, and risk. In a world where global central banks manipulate the cost of risk, the mechanics of price discovery have disengaged from reality resulting in paradoxical expressions of value that should not exist according to efficient market theory. Fear and safety are now interchangeable in a speculative and high stakes game of perception. The market is no longer an expression of the economy... it is the economy; and common sense says do not trust your common sense.