Tuesday, September 7, 2010

Global Collapse of the Fiat Money System: Too Big To Fail Global Banks Will Collapse Between Now and First Quarter 2011

Matthias Chang / globalresearch.ca,

Readers of my articles will recall that I have warned as far back as December 2006, that the global banks will collapse when the Financial Tsunami hits the global economy in 2007. And as they say, the rest is history.

Quantitative Easing (QE I) spearheaded by the Chairman of Federal Reserve, Ben Bernanke delayed the inevitable demise of the fiat shadow money banking system slightly over 18 months.

That is why in November of 2009, I was so confident to warn my readers that by the end of the first quarter of 2010 at the earliest or by the second quarter of 2010 at the latest, the global economy will go into a tailspin. The recent alarm that the US economy has slowed down and in the words of Bernanke “the recent pace of growth is less vigorous than we expected” has all but vindicated my analysis. He warned that the outlook is uncertain and the economy “remains vulnerable to unexpected developments”.

Obviously, Bernanke’s words do not reveal the full extent of the fear that has gripped central bankers and the financial elites that assembled at the annual gathering at Jackson Hole, Wyoming. But, you can take it from me that they are very afraid.

Why? (more)

A 7 Million Increase In US Population Results In A Labor Force... Decline? Why The US Has Really Lost 11.2 Million Jobs This Recession

One of the most peculiar observations of this depression started in December 2007 is that while the total US population has increased by 6.8 million from 303.3 million to just over 310 million in July 2010, over the same 32 month period, the civilian labor force has declined from 153.9 million to 153.6 million. This makes zero sense, as all those aging into working age, or immigrating into the US need to find some job or some other paid activity (either legally or illegally). But let's assume that due to discouragement with economic conditions people simply refuse to look for jobs. The reality is that eventually all those people will come storming into the job market, once the economy recovers sufficiently. Which is why we make an estimate of what the "fair value" of the civilian labor pool is based on the historical average participation rate of 50.4% (as a percentage of total population). Backing into the cumulative population growth by this estimate, means that as of July 2010, the labor force has really grown by 3.4 million, once the one-time adjustment of a "recession" is eliminated (and after all that's what all modern economist claim right - that recessions are merely one-time blips on the road to perpetual Keynesian growth). In other words, the cumulative differential between the labor force as reported, and as calculated has hit an all time record of 3.7 million: this is a number that has to be added to the 7.6 million directly tabulated unemployed to get a sense of just how many jobs have been lost assuming a reversion to the mean for the US economy. In other words, after eliminating the statistical voodoo of the BEA and the Census Bureau, the US has lost just over 11.2 million jobs since the start of the recession.

Chart 1: we demonstrate the cumulative change in the population of the US, the cumulative change in the as reported and the as calculated labor force, and the difference between the two (thick black line).

Chart 2: Cumulative job losses since December 2007, based on Establishment Survey estimates and adjusted for Labor Force "Catch Up"

Why The End Of The 'Equity Cult' Means Trillions In Upcoming Outflows From Stocks


Citi's Robert Buckland is out with the must read report of the weekend, especially for all the optimists who believe that despite the ongoing depression (and as many have demonstrated, all the talk about a double dip is moot, as America has never left the depression, or as Rosie calls it a period of prolonged economic subpar activity: the latest NFP number merely reinforces the theme of economic deterioration), and despite the 17 weeks in retail equity outflows (which would be a contrarian signal if there was hope that retail would ever feel safe enough to return in stocks. After nearly 5 months of no change in trend, the debate can be put to rest, if at least for 2010) there is still hope. There very well may not be - Citi has just pronounced the "Equity Cult" dead: "It has taken 10 years, and two 50% bear markets, to reverse this cult. European and Japanese equities are already trading on dividend yields above government bond yields. US equities are almost there as well. An immediate reincarnation of the equity cult seems unlikely. Global corporates, especially the mega-caps, rushed to exploit cheap financing as the equity cult inflated. They have been slow to redeem equity now that the cult has deflated. Equity oversupply remains a drag on share prices." And as more and more companies and investors shift to a de-equitization theme, the trendline in allocation for the US pension assets will soon revert to that seen when the "Equity Cult" began, or roughly 20% of all assets, with bonds taking on an ever greater precedence of asset allocation (incidentally the UK is already back to the equity/debt relative investment levels of the early 1960s). What does this mean for capital flows? "A reduction in equity holdings back to pre-1959 levels (around 20% of total assets) would indicate considerable selling pressure to come. For US private sector pension funds alone, that would imply a further $1900bn reduction in equity weightings. The evidence suggests that there could still be considerable institutional selling to come." (more)

More than 400 US Banks Will Fail: Roubini

By: Patrick Allen
CNBC Senior News Editor

Even if the US and European economies manage to avoid a double dip, it will still feel like a recession, while more than half of the 800-plus US banks on the "critical list" are likely to go bust, according to renowned economist Nouriel Roubini of Roubini Global Economics.

Nouriel Roubini

The second half of the year will remain weak as tailwinds become headwinds, Roubini told CNBC on the shores of Lake Como, Italy at the Ambrosetti Forum economics conference.

"In the second half, fiscal policy becomes a headwind, no more cash for clunkers," Roubini said. "The positive scenario is that growth will be below par."

Roubini recently said the chance of a double-dip recession in the US was now more than 40 percent.

"The big risk is that there will be a downturn in markets that could impact the bond, the equity and the credit markets," he said.

“Job losses have been higher, the US jobs number will show that. There is no private sector jobs growth," he said. "Consumption is weak, exports are weak and housing is weak."

"If there is no final sales and no final demand, companies will not invest," he added. (more)

Exclusive: The Paulson Portfolio Post-Mortem (In Which We Learn That The Maestro Himself Is Advising J.P. On Future Gold Prices)

One of the most fabled funds of recent years, John Paulson's Paulson and Co., has not had a good first half to 2010: not only was Paulson implicated in the biggest Goldman Sachs scandal in recent history (which took the 200 West firm a few hours worth of operating profits to settle with the SEC), but the firm has seen substantial outflows after a subpar performance in the first half of 2010, a time which has seen the firm's flagship Event Arbitrage ($16.6 Billion in AUM) fund lose just under 6% YTD and 6.6% in H2. Yet among the other Q2 losers, which have also included the firm's Merger Arb fund ($4.0 Billion, down 5.21% in Q2), and Credit Fund ($7.7 Billion, down 1.75% in Q2), nowhere was the pain as acute as for investors in the firm's reflation bet, better known as the $2 Billion Recovery Fund, which was down 12.6% in Q2. For the man who had rarely if ever tasted loss before, many are asking if the recent disappointing performance a sign that the multi-billionaire has peaked? And surely with a personal net wealth well in the billions, just how big is Paulson's motivation any more? If the fund is now nothing more than a levered bet on the broader market, surely there are other levered ETFs available that do not charge 2 and 20%, and may be better suited for the needs of the firm's LPs? Or is Paulson right, and once the market realizes the folly of its ways he will make his investors (in addition to himself) truly rich? Just what is the logic behind the investment choices? Read on to find out.

But first, here is a snapshot summary of the firm's various investment strategies, funds, along with strategy AUM and performance. (more)

Weekly Visual CFTC Commitment Of Traders Summary - September 3 - 10 Year UST Net Spec Positions Surge

Before we get into the core visualizations, here are this week's key observations:

  • Wheat net spec positions on the CBOT dropped substantially, from a record 36.7k to 25.9k W/W, even as they hit a fresh record on the KCBOT, at 71.6k from 67.6 W/W.
  • After some fireworks earlier in the year, Cocoa net spec positions have plunged to the lowest in the year, and the first negative print in 2010, at -1.6K, compared to 8.1K the week prior.
  • Silver COMEX net specs surged to the highest in 2010, hitting a 2010 record of 44.8K, compared to 34.8K the week prior.
  • Gold Comex net specs came at the second highest print of 2010 at 238K, an increase from 221K the week prior, lower only to the 244K recorded on June 22.
  • Currencies:
    • CHF - jumped to the highest in a month, at 14.3k, from 13.9k W/W
    • GBP - jumped to the lowest in over a month, at -15.3k, from -4.4k W/W
    • JPY - remained flat at 49.9K, compared to 51.0k W/W
    • EUR - short bets continue to increase in straight line, after hitting a 2010 high of -3.7K on August 10, the are now down to -25.6K, compared to -21.6K the week prior.
  • The most interesting observation is the net spec breakdown in 2 Year, 5 Year and 10 Year Treasury: as can be seen on the chart below, 10 Year positions surged Week over Week, jumping by a stunning 80k contracts, to 62.9K from -19.9K the week prior. This was only the first time this series has gone positive for the entire year. This is a major bullish inversion point at a time when the 10 Year is finally starting to decline. Someone may get burned...
Commitment of Traders Report

Commitment of Traders Financials

High Frequency Chicanery

By MIKE WHITNEY- BLN Contributing Writer

Here's something to munch on from Dennis K. Berman in last week's Wall Street Journal:

"Today, small investors are fleeing the equities markets in droves, according to data from the Investment Company Institute, pulling out a net $34 billion from stock funds so far this year.....They say, "I still feel like someone is screwing me......trading feels different than it used to."

Berman traces the problem to its source, the "inscrutable interplay between myriad exchanges and high-frequency traders, whose volume now accounts for an estimated two-thirds of all trading"..."a market that many perceive as tainted and prone to gaming by a cadre of insiders."

That sounds like a long-winded way of saying the market is rigged.

High-frequency trading (HFT) is algorithmic-computer trading that finds "statistical patterns and pricing anomalies" by scanning the various stock exchanges. It's high-speed robo-trading that oftentimes executes orders without human intervention. HFT allows one group of investors to see the data on other people's orders ahead of time and use their supercomputers to buy in front of them. It's called frontloading, and it goes on every day right under the SEC's nose. (more)

Monthly Stock Scoreboard

Gold Could Double over Five Years – Headed Higher with Government Resentment: Holmes


Gold has the potential to double within the next five years, and if governments stumble with their policies, it can go even higher, said Frank Holmes, CEO of US Global Investors.

“When Obama gave money to stimulate job creation, a lot of that money went to State governments and not into the private sector, where it was really needed most. Now we’re dealing with a high unemployment rate that won’t go down, which is leading to increasing anger that you can see in the approval numbers. If that was to accelerate then you could see gold taking off faster,” Holmes said in an interview with Kitco News.

“I think that gold can double over the next five years, comfortably; that is a 15% compound on rate of growth. And that is what I’ll stick to,” he said. “There are not many asset classes that can demonstrate that,” Holmes said.

He said, “If you are a linear person and you use linear models - gold should be at $50,000 an ounce. If you go to inflation adjusted prices then gold should be at $2,300,” he said.
Holmes’ firm tracks government social programs to determine whether they are based on social investing or social welfare. (more)

How Real Estate Short Sales Work

A Short Sale is a very different type of transaction than a normal sale with equity. Parties in the transaction have a different set of priorities, expectations, and concerns. The Short Sale Listing Agent needs an entirely different skill-set.

Here is everything you need to know about how a short sale works. (from a Seller’s perspective)

Pre-Listing Considerations

Marketing and Selling a Short Sale

Submitting a Short Sale Package

The Short Sale Bank Approval Process

The Short Sale Escrow Process and Close

How Short Sales Die

Getting a New Buyer

Credit, Collections, and Tax Consequences

Pre-Listing Considerations

Most of the same considerations you would have when selling under normal circumstances still apply: De-clutter, touch-up the paint, keep the landscaping tidy, etc. Here are some of the extra issues that Short Sellers face and some questions they often ask…

What should you look for in a Listing Agent?

More than anything, you need an agent who has a decent amount of experience with short sales and has shown exceptional market knowledge. Fancy fliers, glamour-shots, and a “neighborhood specialist” won’t do you any good in a short sale. And don’t hire a “Short Sale Expert” just because they call themselves one.

A great Short Sale Listing Agent will have:

  • Good Short Sale experience. Seeing as how we’ve been doing them for 4 years, an agent you hire should have done at least 20 or so successful short sales. Be wary of someone who says they’ve done hundreds…many of them won’t have the time or inclination to give you the extra effort when you need it most.
  • Excellent industry and market knowledge. Short sale transactions are so much longer and more complex. It seems like there are a lot more things to go wrong. A good short sale agent needs to understand appraisals, different lending standards and practices, inspection and repair issues, and generally be the kind of person who can come up with the solutions needed to keep a deal moving forward. (more)

US Economic Calendar

DateTime (ET)StatisticForActualBriefing ForecastMarket ExpectsPriorRevised From
Sep 810:30 AMCrude Inventories09/04-NANA3.42M-
Sep 82:00 PMFed's Beige BookSep-NANANA-
Sep 83:00 PMConsumer CreditJul--$5.5B-$5.25B-$1.3B-
Sep 98:30 AMInitial Claims09/04-475K470K472K-
Sep 98:30 AMContinuing Claims08/28-4450K4445K4456K-
Sep 98:30 AMTrade BalanceJul--$46.5B-$47.2B-$49.9B-
Sep 1010:00 AMWholesale InventoriesJul-0.5%0.4%0.1%-

Chart of the Day