Central Bankers Are Pushing On A String

The message of the market says distribution in the financial sector. This, in turn, implies that central bankers are pushing on a string despite their ability to “beat the grass to startle the snakes” – sell the hype. A quick review of trend energy in the financial sector reveals distribution and increasing downside force. The negative divergence in trend energy relative to price, lower highs in REV(E) relative to higher highs in price, reflected distribution in early 2011. This negative divergence was confirmed several months later when the 8/9/09 breakout gap was breached on increasing volume during the summer of 2011 decline. Support broken with force often becomes resistance. The market confirmed it as resistance in November. While the market rallies, the message of distribution in the financial sector suggests central bankers are “pushing on a string” regardless of the liquidity injections and hype.

SPDR Financials ETF:

Liquidity Is the Only Easy Solution

Central bankers despite their best efforts are not in control of the markets. The futures might be soaring today, but infinite liquidity cannot turn distribution into accumulation in global equities or unemployment into employment for the US workforce.

Gross aptly suggests that Europe won't escape its debt straightjacket for years. This is why the central banks have become increasing reliant on coordinated liquidity injections to maintain confidence within a crumbling monetary system.

Headline: Stock futures soar after central banks act globally

(Reuters) - Stock index futures soared on Wednesday as investors welcomed a coordinated action by major central banks to provide liquidity to the global financial system.

The Federal Reserve, the European Central Bank as well as the central banks of Canada, Britain, Japan and Switzerland agreed to lower the cost of existing dollar swap lines by 50 basis points starting from December 5.

The actions came as China unexpectedly cut its banks' reserve requirements in hopes of boosting an economy running at its weakest pace since 2009.

S&P 500 futures jumped 33.2 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 269 points, and Nasdaq 100 futures added 58 points.

Source: reuters.com

Headline: Gross Says Europe Won’t Escape Debt ‘Straitjacket’ for Years

Investors should recognize that Europe’s problems are global and it will be years before nations in the region can escape from their “straitjacket” of debt, Pacific Investment Management Co.’s Bill Gross said.

With global growth likely stunted for years and interest rates kept artificially low, investors should consider risk assets in emerging economies such as Brazil and countries in Asia, Gross, manager for the world’s biggest bond fund, wrote in a monthly commentary posted today in the Newport Beach, California-based company’s website.

“Consider Brazil with its agricultural breadbasket and its oil. Consider Asia with its underdeveloped consumer sector but be mindful of credit bubbles,” Gross wrote in the note.

Source: bloomberg.com

Junior Gold Miners Still Showing Distribution

The junior gold stocks continue to show signs of distribution over the short-term. Signs of distribution do not always precede a mark down phase, so do not needlessly panic here. While the long-term trend remains up, it is becoming more violent as the sovereign debt crisis metastasizes throughout the global financial system. Investors able to exercise flexibility of thought consistent with the message of the market adapt and survive.

Junior Gold Miners Index

Market Forces Are The Fulcrum of Change

Heavy volume on the 11/11 weekly gap illustrates the wolf pack isolation of Italy (weak prey) from the EU (herd).

3x Italian Treas Bond ETN:


Italy's borrowing costs are surging and France and Germany spreads are expanding at an alarming rate. Market forces have always been the fulcrum of change with in society regardless of what the headlines suggest.

Infinite QE remains the only viable option to maintain the status quo without dramatic structural changes to the EU. Massive structural changes demands sharing and compromise within a culturally heterogeneous union. Good luck with that! The wolf pack will not relent their attack until all the weaker members have been culled from the union. The message of distrubtion in the Euro market confirms their intentions.

Euro ETF:


US, Chinese, and Indian equities have been sending the message of distribution.

Morgan Stanley India Index:

Dear Santa, Please Send Hopium

Any upside wiggle is certain to generate hopium for a Santa Claus rally and beyond. The market is due for a short term bounce after heavy selling and technical damage. Watch for a retest of the 11/21 breakdown gap.

Nasdaq Composite with exchange volume:


Caution is warranted until the message of the market changes. Don't count it, though. Cycles are repeating, but the daily noise of greed, fear, and inane chatter prevents many from seeing the comparison.

1929-1944 & 2000-Present Comparison: S&P 500 to Gold ($/oz) Ratio


Headline: Global stocks recover on euro rescue proposals

LONDON (AP) -- Global stocks advanced Monday as further proposals to get a grip on Europe's debt crisis were touted amid signs that the U.S. Christmas shopping season has started off strongly.

The advance came despite denials that the International Monetary Fund was readying a euro600 billion ($794 billion) rescue package for Italy and that the eurozone's six triple-A rated countries were preparing to float bonds together and use the proceeds to provide assistance to some of the single currency bloc's indebted members, such as Italy and Spain.

Investors are clearly hoping that the recent signs of deterioration in the debt crisis will finally get Europe's leaders to agree on a package of measures that can ease market concerns over whether the euro currency itself can survive. Anecdotal evidence that the U.S. enjoyed a strong day for retailing on Friday after Thanksgiving Day has eased concerns that the world's largest economy will slide back into recession.

Commentary: Revisiting the 1937-1942 Analog

Distribution in the Nasdaq Composite

While the US focuses on the events of black Friday, craziness of nincompoops in the pursuit of more crap we could all live without, do you think anyone noticed that 10/10 breakout gap was filled on increasing volume on 11/23? I doubt it. The filling of the gap on increasing volume during a pre-holiday session suggests downside force is increasing. Watch for a fill of the downside gap on lighter volume to confirm distribution. Europe has yet to orchestrate a long-term structural solution to save the Euro zone beyond QE to infinity. The wolf pack will continue to pressure the weaker prey until they succumb. Failing interest in the Bund auction and rising spreads between France and Germany foreshadows the wolf pack’s inevitable targets.

Nasdaq Composite (OTC) with exchange volume:

Happy Thanksgiving To All

Copper Futures Retreat on U.S., China Data

The wolf pack will cull any investor/trader that assumes risk-on without confirmation from Dr. Copper. Caution is still warranted until copper exhibits signs of accumulation.

Copper (JJC) And Copper Diffusion Index (DI)


Headline: Copper Futures Retreat on U.S., China Data

NEW YORK—Copper futures fell amid pressure from a stronger dollar and downbeat economic data from the U.S. and China.

The most actively traded contract, for December delivery, was down 5.45 cents, or 1.6%, at $3.2665 a pound in midday trade on the Comex division of the New York Mercantile Exchange.

U.S. manufacturers' orders for durable goods eased 0.7% to a seasonally adjusted $197.68 billion, the Commerce Department said Wednesday. September data were lowered to a 1.5% drop, from an earlier estimate of a 0.6% decline.

The data underscore continued weakness in the U.S. economy and were a downbeat note for copper, which is widely used in industrial and consumer products.

In China, the top consumer of copper, preliminary data showed a sharp contraction in November manufacturing activity. The flash HSBC China Manufacturing Purchasing Managers Index fell to 48.0, from a final reading of 51.0 for October. The November reading was the lowest since March 2009.

Source: online.wsj.com

D-Wave Analysis Continued

The D-wave analysis (and chart) establishes the window of opportunity for time and price in gold; COT money flow analysis confirms it.

Waiting for a second, maybe third spike in the Concentration Index.

Gold London P.M Fixed and Concentration Index (CI): 1 = Bullish Setup, -1 = Bearish Setup


Fred makes some observations,

Hi Eric,

Thanks for posting the chart.

Just my 20cents.

Just a back of the envelope calculation taking a 62% retrace of the top of 1920 and bottom of 1486 from the last cycle gives 1650, which is in line with your numbers, but on the high side.

My only comment for your calculation of AlphaAvg is that there seems to be a trend for T to be increasing. I noticed you took the average of the last two periods of T to get 183.

I'm thinking that your alphaHigh will be closer to the mark with T at 300+ days than your alphaAvg, which also gives a number closer to 1650.

It also lines up with Jim's Angel at 1650.

The only thing is - at present, we're at 1700, almost at 1650. I guess what this is saying is that it will probably range trade for another 250-300 days, bottom out at around 1650 and go up from there.

That feels like a long time to me, but my gut isn't the best guide.

Cheers,

Fred

Every Action Carries A Consequence

In response to The ECB is not The Fed

Jim:

QE to Infinity need not be legal.

The Fed will do the deed as they did in 2009.

Eric:

And confidence never breaks? The consequences of such actions cannot be denied forever. Either way, gold wins.

Jim:

Yes sir because there is no tool in any central banks tool box outside of QE that can stop a run on financial institutions. Confidence will break. To every action there are consequences.

Eric:

It's only a matter of time and setting up the right players,

D-Wave Analysis and Probability Forecasts:

The ECB Is Not The Fed

As Armstrong suggests, the ECB, unlike the Fed, is not authorized to create an elastic money supply. In simple terms this means ECB cannot endlessly "intervene" buy sovereign debt of weaker EU members when the wolf pack (market forces) bear down on them. In other words, the ECB will run out of money and need to be recapitalized unless the monetary system is revised.

Any effort to recapitalize the ECB will be public and highly political. This type of forum has the potential to spawn a crisis in confidence that once initiated will be difficult to control. As Armstrong suggests, “we will have an ECB crisis and that will create the impression Europe has failed and we could see wholesale bank runs throughout Europe.”

The message of distribution from the Euro market supports this cautionary assessment.

Euro ETF (FXE)


The Euro money flow setup reveals that the crisis might have to wait until 2012. Money flow setups, however, can quickly invert during periods of panic. Any significant change in the Euro market, either TA or money flow, is likely to foreshadow another pivotal event in history.

Euro (FXE) And Euro Diffusion Index (DI)


Headline: Euro jumps on ECB lending talk, outlook shaky

By Nia Williams

LONDON, Nov 18 (Reuters) - The euro rose against the dollar on Friday as speculation the European Central Bank may start lending to the International Monetary Fund to bail out bigger euro zone economies helped lift the embattled bloc's currency.

The euro has been under sustained pressure in recent weeks as funding costs for major euro zone states Italy and Spain reached danger levels and the debt crisis even threatened to engulf France, endangering the entire currency project.

The ECB is widely seen to be the only institution with the firepower to stop the rot and some policymakers have urged it to take a more activist role, which top bank officials and bloc power broker Germany have so far refused to countenance.

"There are stories circulating about the ECB going via the IMF to lend money to countries that need help. The ECB would have to be involved in any potential solution for it to be credible so I would expect that to give the euro a bit of a lift," said Tom Levinson, FX strategist at ING.

"Whether it will persist or not is highly debatable. This is a knee-jerk euro reaction and I think it will struggle to hold around this level."

The shared currency extended gains to rise more than 1 percent on the day to a high of $1.3615 on trading platform EBS, although markets players said appetite to sell on upticks remained high.

Investors closing short positions to book profit ahead of the weekend helped boost the euro in early trade, before a series of stop-loss orders were triggered around $1.3550, accelerating the single currency's climb.

The euro was last up 1 percent at $1.3602, pulling away from a five-week low of $1.3421 struck on Thursday. Traders cited good offers in the $1.3515-20 region.

On the downside, support lies at around $1.3405, the 76.4 percent retracement of last month's rally from around $1.3145 on Oct. 4 to a high of $1.4248 on Oct. 27.

Speculation that talks on the ECB lending to the IMF have gained traction in the past few days. On Thursday, European officials said there have been discussions about the central bank possibly lending to the global lender, which would give it enough money to bail out bigger euro zone countries. Pressure is mounting on the European Central Bank to step up its bond-buying programme with Italian and Spanish bond yields close to unsustainable levels and plummeting demand from other,
real-money investors.

Source: reuters.com

Headline: ECB Intervention Eases Pressure on Spanish Bonds

MADRID – Intervention by the European Central Bank eased market pressure on Spanish debt, which ended 460 basis points above benchmark German bonds Thursday after approaching the 500 bps level.

Market jitters also forced the Spanish Treasury to pay an average yield of almost 7 percent – the highest in 14 years – to sell some 3.5 billion euros in 10-year bonds.

After the debt auction was completed, Spain’s risk premium – the extra return investors demand compared to safe-haven German government bonds – skyrocketed to as high as 499 bps.
Source:

The ECB responded by buying up Spanish debt, easing the pressure and lowering the risk premium to 460 bps, the same level as Wednesday.

The turmoil in Spain’s sovereign debt market came just three days before general elections in which the conservative main opposition Popular Party is expected to win in a landslide.

laht.com

Earthquakes Foreshadow Volcanic Eruptions And Turning Points In Silver

Silver, an extremely volatile market, demands extreme patience. Unfortunately, patience is the first thing to go when silver starts moving. Concentrated money flow setups, like earthquakes before volcanic eruptions, inevitably setup the major turns. The wolf pack, however, tends to pressure its prey until all patience is lost and pockets are emptied.

Silver London P.M Fixed and the Silver Concentration Index (CI)

HardTalk & Kyle Bass on The Global Economy & Finance Situation - BBC Interview

Key Points of the Interview

• Concept of the "Fat Pitch" - Think Gold


• PIIGS have reached the zone of insolvency


• Mexican Standoff between Germany and PIIGS


• Japan's Coming Fall

HardTalk & Kyle Bass on The Global Economy & Finance Situation - BBC Interview

Stocks Close Sharply Lower After Fitch Report

US banks have substantial exposure to Europe. Recent equity market volatility illustrates the uncertainty and the growing deterioration of confidence from this exposure.

Forget the Fitch Report, the message from the market report paints a picture of distribution in the financial sector. The close below the August 2009 breakout gap on increasing volume in August 2011 represents a sign of weakness (SOW) and distribution within the financial sector.

KBW Bank Index and NYSE Volume (BKX)


Headline: Stocks Close Sharply Lower After Fitch Report

Stocks dropped heavily in the final hour of trading to finish sharply lower in thin trading Thursday following a report from Fitch on U.S. bank exposure to Europe.

The Dow Jones Industrial Average fell 190.57 points, or 1.58 percent, to finish at 11,905.59, after hovering around the psychologically-important 12,000 level for most of the session.

Source: cnbc.com/

For first time, nations mull Greek exit from euro

If Greece goes, others are certain to follow. European politicians have begun to alter their discussions and tactics to allow weaker members to exit the Euro zone. The market (wolf pack) will likely force the weaker members to return to their own currencies much sooner than expected. Any decay in the EU membership increases the odds of economic isolationism (restrictive trade practices) returning to Europe.

Headline: For first time, nations mull Greek exit from euro

LONDON (AP) -- Maybe it's not the Hotel California after all.

Ever since the idea of the euro currency really took off in the late 1980s, it has been accepted wisdom that entry was forever. But now, with no less than the leaders of France and Germany conceding that Greece could leave the euro, everyone is scrambling to figure out exactly what would happen.

The stakes couldn't be higher: many economists say it could plunge the global economy into another crisis on the scale of what ensued following the collapse of U.S. investment bank Lehman Brothers in 2008. Others say it would spell the beginning of the end of the dream of building a unified Europe from the ashes of World War II.

Yet some are saying it's the least bad of all possible outcomes, part of the only remedy available for a currency whose design flaws have led to three countries requiring rescue. The crisis is now threatening Italy — the eurozone's third-biggest economy — and is showing alarming signs of infecting France — its second-biggest.

Source: finance.yahoo.com

Fannie, Freddie execs score $100 million payday

If only all our failures could be this lucrative.

Headline: Fannie, Freddie execs score $100 million payday

NEW YORK (CNNMoney) -- Mortgage finance giants Fannie Mae and Freddie Mac received the biggest federal bailout of the financial crisis. And nearly $100 million of those tax dollars went to lucrative pay packages for top executives, filings show.

The top five executives at Fannie Mae received $33.3 million in 2009 and 2010, while the top five at Freddie Mac received $28.1 million. And each company has set pay targets of as much as $17 million for its top managers for 2011.

That's a total of $95.4 million, which will essentially be coming from taxpayers, who have been keeping the mortgage finance giants alive with regular quarterly cash infusions since the Federal Home Finance Agency (FHFA) took control of the companies in September 2008.

Fannie CEO Michael Williams and Freddie CEO Charles Halderman, each received about $5.5 million in pay for last year, and they could receive more when their final deferred compensation for 2010 is set. All the executives receive a significant portion of their pay in the year or years after they earn it.

Source: money.cnn.com

D-Wave Flush Underway

When asked about gold, Armstrong responded, “Basically what you are doing is you are building a sideways type of base. Eventually gold is going to take off to the upside, but largely when people begin to see the Emperor has no clothes and we’re getting close to that. I would only give it a few more months.”

The D-wave flush is underway. Capital uses it to reposition into the secular up trend.

Gold London P.M Fixed (Gold) and the COT Futures and Options Open Interest Stochastic Weighted Average (WA)


Armstrong and connected money follow cycles when the trend become voilent. One of the many cycles is illustrated below.

Open Interest Stochastic Weighted Average (WA) & Fourier Cycle


Source: kingworldnews.com

Eminence Front written by Pete Townsend of the Who alludes to the party in which people ignore their problems by hiding behind a social facade. While Townsend was talking about cocaine abuse, the premise of the song applies equally to behavioral economics. Traders know this eminence front as MOPE and its influence on confidence.

EURO GOVT-Italian yields rise; relief at new govt fades

The wolf pack will continue pressuring Italian bond yields because it understands that austerity within an economy dominated by the public sector and saddled with massive debts is a bad combination. Smart money is looking directly at Germany and France while headlines obsess about the periphery of the sovereign debt crisis.

Headline: EURO GOVT-Italian yields rise; relief at new govt fades

* Italian yields rise after auction, ECB steps in
* Yields hit euro-era high at 5-yr bond sale
* Bunds rally as crisis rages on

By Kirsten Donovan and Ana Nicolaci da Costa
LONDON, Nov 14 (Reuters) - Italian government bonds
yields rose on Monday as relief over the appointment of a new
head of government in Rome gave way to concerns over the size of
the task still facing policymakers trying to tackle the euro
zone debt crisis.

Yields at a 3 billion euro five-year Italian bond sale hit
euro-era highs of 6.29 percent, though demand was enough to see
the deal price below levels seen in the secondary market in
early trading.

The European Central Bank (ECB) stepped in to buy bonds
shortly after the auction as yields began to rise, traders said.
But Italian yields were up sharply in late trade and Spanish
yields broke above 6 percent for the first time since August.
Underpinning safe-haven Bunds, German Chancellor Angela
Merkel said Europe could be living through its toughest hour
since World War Two as a new leadership in Greece as well as
Italy rushed to form governments and limit the damage from the
crisis.

"I think the market believes that that's a step in the right
direction, but the problem is it's just one or two steps and the
journey is huge. So you are already moving on to other worries,"
John Davies, fixed income strategist at WestLB, said.
Following premier Silvio Berlusconi's resignation, Italian
President Giorgio Napolitano asked former European Commissioner
Mario Monti on Sunday to form a government to restore market
confidence.

Source: reuters.com

China’s Dagong May Cut U.S. Credit Rating Again If It Adopts QE3 Program

Policy makers will have to be both economically and politically cornered before another official QE(n) program is adopted, but it's only a matter of time. The public might talk austerity, but they will scream for help by any means as the sovereign debt crisis worsens not only in Europe but also the United States.

Headline: China’s Dagong May Cut U.S. Credit Rating Again If It Adopts QE3 Program

China’s Dagong Global Credit Rating Co. may cut the U.S.’s sovereign rating for the second time since August if the world’s biggest economy conducts more large- scale asset purchases.

Dagong, based in Beijing, lowered the U.S. sovereign rating one level to A on Aug. 3, on par with Russia and South Africa, after saying America’s decision to raise the debt ceiling will precipitate a national crisis. Investors have been speculating the U.S. will conduct a third-round of quantitative easing, or QE3, to boost an economy hurt by job losses.

“If the U.S. adopts more quantitative easing policies, we may downgrade or put it on the negative watch list,” Zhang Jun, general manager of Dagong’s marketing division, said by phone today. “We are closely monitoring it.” Guan Jianzhong, Dagong’s chairman, made similar comments in an interview with Al Jazeera television, Zhang confirmed. The Guardian newspaper reported Guan’s comments today.

The U.S. central bank purchased $2.3 trillion of debt to spur the economy in two earlier rounds of quantitative easing. Federal Reserve Vice Chairman Janet Yellen said Oct. 21 a third round might become warranted if necessary to boost a U.S. economy challenged by unemployment and financial turmoil.

Source: bloomberg.com

Europe could be in worst hour since WWII: Merkel

Confidence in the exist leaders and the system they represent and support is crumbling. Large European banks are rushing to announce their reduced exposure to Italy, because they know confidence is failing. Revolving leadership is not helping confidence.

Depositors have a tendency to withdrawal their money as confidence declines. Banks simply do not have enough reserves to handle concentrated withdrawals. Bank runs despite today's centralized insurance are not a relic of the past.

Headline: Europe could be in worst hour since WWII: Merkel

By Philip Pullella and Harry Papachristou

ROME/ATHENS (Reuters) - German Chancellor Angela Merkel said on Monday that Europe could be living through its toughest hour since World War Two as new leaders in Italy and Greece rushed to form governments and limit the damage from the euro zone debt crisis.

Financial markets on Monday took heart on relief that a key Italian bond auction drew decent demand from investors and hopes that new leaders in Greece and Italy would take decisive action to breathe new life into their sick economies.

"Europe is in one of its toughest, perhaps the toughest hour since World War Two," Merkel told her conservative party in Leipzig, saying she feared Europe would fail if the euro failed and vowing to do anything to stop this from happening.

Source: finance.yahoo.com

Consumer sentiment rises on better outlook in November

Hopium is a contrarian indicator sold hard by headlines. Consumer expectation's strong negative correlation to gold, -0.74, suggests that this rally in confidence will setup not only another decline but also gold’s next advance. In other words, the higher confidence rises over the short-term within a financial crisis, either private or sovereign, the greater gold rises over the intermediate- and long-term. Hopium is a dangerous drug that suckers the public and capital ignores.

University of Michigan Consumer Expectations (CE) and Gold: A Correlation Study


Headline: Consumer sentiment rises on better outlook in November

NEW YORK (Reuters) - U.S. consumer sentiment rose to its highest level in five months in early November as Americans felt better about the economic outlook, a survey released on Friday showed.

The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment rose to 64.2 from 60.9 the month before, topping the median forecast of 61.5 among economists polled by Reuters.

The survey's gauge of consumer expectations climbed to 56.2 from 51.8. While respondents were no more positive about the current state of the economy, they were less likely to expect it to worsen in the year ahead, the survey said.

The survey's barometer of current economic conditions nudged up to 76.6 from 75.1.

All three main indexes were at their highest level since June.

Source: finance.yahoo.com

Italy pushes through austerity

Italy with its €2.5 trillion debt burden has been encircled by the wolf pack. The wolf pack, knowing that ECB lacks the ability to support (buy) so much debt, has pushed Italian yields above 7% recently. Many view this development as an expansion of the sovereign debt crisis.

Management has been changed in response to the actions of the wolf pack. Cries of save the system have bellowed throughout Europe. New Italian and Greek leadership, likely old ideas dressed in new clothing, are certain to embrace austerity as a means to facilitate further bailouts. One would think that public sector austerity within economies largely supported by the public sector would be deemed reckless and foolish. Be certain that the wolf pack recognizes it.

In the end, the movement of capital, investors voting with their feet, is the ultimate force behind change.

Headline: Italy pushes through austerity

(Reuters) - Italy's parliament is rushing through austerity measures demanded by the European Union to avert a euro zone meltdown, after President Barack Obama ratcheted up pressure for more dramatic action from the currency bloc.

Italy's Senate approved a new budget law on Friday, clearing the way for approval of the package in the lower house on Saturday and the formation of an emergency government to replace that of Prime Minister Silvio Berlusconi.

Obama spoke with German Chancellor Angela Merkel and French President Nicolas Sarkozy late on Thursday and also called Italian President Giorgio Napolitano, who in turn was due to speak to Sarkozy in a round of telephone diplomacy.

A German government official said there had been an "exchange of opinions" between Merkel and Obama, while Treasury Secretary Timothy Geithner demanded fast action from Europe.

"The crisis in Europe remains the central challenge to global growth. It is crucial that Europe move quickly to put in place a strong plan to restore financial stability," Geithner said in a statement following a meeting with finance ministers from the Asia Pacific Economic Cooperation countries.

After months of dither and delay, Rome appears to have got the message as bond markets pushed it to the brink of needing a bailout that the euro zone cannot afford to give.

Source: reuters.com

Progress in Italy, Greece on debt sends stocks up

Yeah right. The sharp and forceful decline through the August low illustrates the insignificance of today’s debt progress in Italy. The wolf pack, currently circling their prey, has yet strike for the kill. This is not over by any means.

3X Italian Treas Bond ETN


Headline: Progress in Italy, Greece on debt sends stocks up

NEW YORK (AP) -- Signs of progress in Europe's debt crisis and an unexpected drop in unemployment claims pushed stocks higher Thursday, a day after the stock market took its worst fall since the summer.

Greece named a new prime minister Thursday and Italy borrowed $6.8 billion at lower interest rates than analysts expected. Italy's benchmark rate dropped below 7 percent after spiking above that level Wednesday.

Investors were also relieved by talk that the economist Mario Monti is likely to replace Premier Silvio Berlusconi, who was seen as an obstacle to meaningful economic reforms. Italy's president pledged that Berlusconi will step down soon.

The Dow Jones industrial average rose 112.92 points, or 1 percent, to close at 11,893.86. It plunged 389 points Wednesday after Italy's borrowing rates soared and talks in Greece to name a new prime minister broke down. Traders have been concerned that debt troubles in Italy and Greece could spread to the U.S. and lead to a global financial crisis.

Source: finance.yahoo.com

Is It Risk On Yet?

The US equity market has moving higher since October 4th. This steady rally has many investors reallocating to stocks in anticipation of the Santa Claus rally and positive gains ahead in 2012. Perhaps they are right, but glaring negative divergences in trend force and momentum implies underlying weakness despite investors' new found confidence. This setup coupled with continued distribution in the Euro suggests risk off regardless of the headlines.

S&P 500 ETF (SPY)

Fannie Mae taps $7.8 billion from Treasury, loss widens

This is old news, but depth of the money pit continues to shock even the most jaded observer. The credit machine behind housing is broken. The slow, seemingly endless decay in home prices reflects it.

U.S. Median Home Price (MHP) And MHP to Gold Ratio


Headline: Fannie Mae taps $7.8 billion from Treasury, loss widens

(Reuters) - Fannie Mae, the biggest source of money for U.S. home loans, on Tuesday said it needed a further $7.8 billion in federal aid to stay afloat as a shaky housing market widened its third-quarter loss to $5.1 billion.

The government-controlled firm also attributed the deeper cash drain to losses on derivatives used to hedge its exposure to interest-rate swings and on expenses related to home loans made prior to the 2008 financial collapse. In the year-earlier quarter it had a loss of a $1.3 billion.

Fannie Mae has now drawn $112.6 billion in bailout funds from the Treasury Department since being seized by the government in 2008 as mortgage losses mounted, and it has returned $17.2 billion to taxpayers in the form of dividends.

"There is certainly a lot of pre-2009 loans that we need to work through and that is certainly driving the credit losses you saw in this quarter and over the last several years," Fannie Mae Chief Financial Officer Susan McFarland told Reuters.

Source: reuters.com

Jefferson County, Alabama, Votes to Declare Biggest Municipal Bankruptcy

Once the first domino of default falls, the contagion will spread on global, federal, state, and local scale. What politicians and economic planners will come to learn is that like cold not much can be done about it other than treating the symptoms.

Headline: Jefferson County, Alabama, Votes to Declare Biggest Municipal Bankruptcy

Jefferson County, Alabama, commissioners voted 4-1 to file the largest U.S. municipal bankruptcy after reaching an impasse over concessions with holders of $3.14 billion of bonds.

JPMorgan Chase & Co. (JPM), which arranged most of the debt to fund a sewer renovation, will likely take the biggest loss in the process, which begins with a hearing 10 a.m. local time tomorrow.

A provisional agreement with creditors that commissioners approved in September included $1.1 billion in concessions and called for sewer-rate increases of as much as 8.2 percent for the first three years. The county, which encompasses the state’s largest city, Birmingham, couldn’t get signed commitments from creditors, Commission PresidentDavid Carrington said today.

In addition, the 25-member legislative delegation for the county was unable to unite behind bills needed to implement the tentative settlement.

“We’ve reached that last resort,” said Commissioner Joe Knight. “We could continue and keep kicking this can down the road, but I think the people of Jefferson County have had enough.”

Source: bloomberg.com

Italy at breaking point, Merkel calls for "new Europe"

Once a nation defaults, the wolf pack will find its next victim regardless of the number of emergency meetings and/or suggestions of various official super committees. Germany is the key. If the German people turn inward by withdrawing from the Euro zone, trade barriers will likely reemerge and social tension will rise. There’s far more at stake here than whether or not Greece, Italy, Spain, et. al. will be able to pay their bills. This is the message being sent by the Euro and gold.

Headline: Italy at breaking point, Merkel calls for "new Europe"

ROME/BERLIN (Reuters) - Italian borrowing costs reached breaking point on Wednesday after Prime Minister Silvio Berlusconi's insistence on elections instead of an interim government opened the way to prolonged instability and delays to economic reform.

Italian 10-year bond yields shot above the 7 percent level that is widely deemed unsustainable, reflecting investors' concerns that they may not get their money back and prompting German Chancellor Angela Merkel to issue a call to arms.

Merkel said Europe's plight was now so "unpleasant" that deep structural reforms were needed quickly, warning the rest of the world would not wait. "That will mean more Europe, not less Europe," she told a conference in Berlin.

She called for changes in EU treaties after French President Nicolas Sarkozy advocated a two-speed Europe in which euro zone countries accelerate and deepen integration while an expanding group outside the currency bloc stayed more loosely connected -- a signal that some members may have to quit the euro if the entire structure is not to crumble.

Source: finance.yahoo.com

Is Spain the Next Domino?

Is Spain the next domino? Yes. The wolf pack will wear down and cull the weaker prey with methodical precision.

Sean Eagan characterizes the unfolding European debt crisis as four bites from the apple. Most investors would be surprised to know that we're already chewing the third bite. Shrewd investors have been accumulating gold because they know the fourth bite in form of distress in Italy and Spain is coming.

Portion of the Transcript

debt is growing as a result. so any interest beyond let's say 2.5% is a problem. and with italy's growth shrinking, as a result of the austerity measures they're putting in place, we're beyond it. basically if it doesn't come down in the very near future, we've gone from the greece problem to the italy and possibly spain problem. really? you know all the counters, right? they have $8 to $12 billion in interest payments last year. greece didn't have close to that. the economy at least functions. it is fundamentally different than greece. it just doesn't function. those are the counter points. none of that sways you? it doesn't win the day. not even the fact that they've got so much more tax revenue based on compared to the interest payments? greece is becoming dysfunctional. when you have people -- italy. no, greece is. i'm saying people aren't paying taxes. they're going around the tollbooths. there are riots. it's gone, basically. it's going to take time to put it back on track. italy is where things are focused. if you have a interest rate on a ten-year north of 6%, it's very, very difficult to bring it back. and then it brings us to the next question. how are we going to solve the problem? there have been three bites at the apple with this whole european crisis. the first one is greece was going to default and the recoveries are going to be much less than expected. okay. announce that. second one was that the major european banks are going to have to take significant writedowns on the exposure. and it's going to hit their cost of funds and their equity prices. that's already happened. we're in the midst of the third. the third is that there isn't going to be enough money to save all the countries. and, therefore, we're going to have the golden rule. that is that germany and to a lesser extent france are putting up the gold. they and their banks are going to be fine. but the others are going to be weak. we're in the middle of that. and the manifestation of it is the ten-year on italy spiking up well above 6%. it doesn't matter whether berlusconi stays or whether he writes love poems or whatever. the songs. i'm sorry. it doesn't matter. we're beyond it. and now we're moving into the fourth phase, fourth bite at the apple, if you will. and that is how this is ultimately going to be resolved? how can they fix it? one is that you can find some massive growth. and that's very difficult to find. so if facebook decided to relocate to italy and there is a facebook 2, that will be fantastic. the 30-year-olds moved out from their mother -- they can start supporting themselves. that's right and start working 60 hour weeks to start up the facebook. at lower salaries. and another rescue? something else has to happen then. well, that's a first thing. the second thing is that somehow funds are found to fill the hole. and the hole is massive. we calculate it at about $2.5 trillion euros. so either the u.s. steps up in a major way -- for all of europe? for a big portion of europe. it's not just limited to italy. it's not just limited to greece. it's the whole thing. 2.5. and then -- so the u.s. or the imf, china is not good for the whole thing. they've had trouble just getting off a small offering for the efsf. so that's a problem. you have the facebook solution, you have the funds being found. you have massive defaults which is a we calculate it at about $2.5 trillion euros. so either the u.s. steps up in a major way -- for all of europe? for a big portion of europe. it's not just limited to italy. it's not just limited to greece. it's the whole thing. 2.5. and then -- so the u.s. or the imf, china is not good for the whole thing. they've had trouble just getting off a small offering for the efsf. so that's a problem. you have the facebook solution, you have the funds being found. you have massive defaults which is a real problem. or you have a clintonesque type moment. and that is where you come clean and say listen, we can't afford that. we simply cannot afford it. the only solution is a massive printing of currency. i say clintonesque because it takes some time to get to that point. so with monica lewinsky, he didn't want to release the real information until it was public was ready to accept it. we've been trying to get him on the show this week and you're back on monica lewinsky. can we talk about something else? but it's prapting currency. you have a huge, huge hole here. it's massive. all right. what is the $2.5 trillion represent? okay. if you take the debt of all the sovereign countries and their banks and they're joined at the hip. that has been about 90% correct. the only case where it hasn't been correct in iceland. you take anything, a 50% hair cut. so it's $5.1 trillion in terms of the total debt of the countries and the related banks. the whole of europe? no, that's just weaker countries. you know, greece, spain, italy, belgium, portugal. you take that. it's 5.1. you take a 50% hair cut. you're roughly up 2.5 trillion euro. credit down. even if it's only two trillion or 1.5, it's massive.

Is Spain the Next Domino?




Source: video.cnbc.com

Freeport McMoRan Still Says Risk-Off

Freeport-McMoRan Copper & Gold Inc to copper ratio will help time the risk-on/risk-off trade. It's still risk-off for those scoring at home. Patience requires discipline to follow the money and ignored biased headlines.

Freeport-McMoRan Copper & Gold Inc to Copper Ratio:

Accumulation/Distribution In Global Currencies

Francois is following the money.

Short-term distribution

Australian Dollar (Kiwi) ETF


Short-term distribution

Canadian Dollar (Loonie) ETF


Light volume sell off after a strong surge suggests accumulation.

Swiss Franc ETF


Positive divergence suggests accumulation

US Dollar Index ETF


For now, it's still risk off.

Hi Eric. Thanks for your continued insights.

Have you recently done a comparison between accumulation/distribution of 'commodity currencies' like the Australian and Canadian dollars against 'safe haven' currencies like the US dollar and Swiss Francs? It would be interesting to see on which side insiders are betting.

Regards

Francois

France to unveil new austerity steps

Herbert Hoover knows better than most that offering balanced budgets- today’s austerity measures to world hungry for stimulus and devaluation will only intensify the sovereign debt crisis. Human nature which tends to live in the moment so easily forgets the message from history.

Headline: France to unveil new austerity steps

NEW YORK (MarketWatch) — The French government will on Monday announce its latest efforts to bring its finances under control, with a new package of tax increases expected to be unveiled.

Europe's week ahead: BOE meetingThe Bank of England will announce its monetary-policy decision on Thursday. Investors will also closely watch developments in Greece and Italy, reports MarketWatch’s Polya Lesova.
The Wall Street Journal reported Sunday that French President Nicolas Sarkozy met with government ministers over the weekend to work on the measures. The report cited an unnamed person familiar with the matter.

The Journal said French newspaper Le Journal Du Dimanche reported that steps under consideration include raising the value-added tax on restaurant meals, taking away one public holiday a year and possibly raising the tax rate on companies with revenue over €150 million to 36% from 33%.

Morgan Stanley cuts Europe equities to underweight

Distirbution in the Euro suggests that the market has been downgrading Europe since 2008

Euro ETF (FXE)


Headline: Morgan Stanley cuts Europe equities to underweight

MADRID (MarketWatch) -- Morgan Stanley on Monday downgraded European equities to underweight from neutral, saying October's bounce will likely prove short-lived. The firm cited four reasons for the downgrade, including a still-insufficient policy response to the Europe crisis and deteriorating economic growth. Among the others, the firm said corporate profits are coming under increasing pressure from deteriorating margins and market-timing indicators are no longer in "buy" territory. They're further underweighting financials and adding to defensives such as pharmaceuticals and consumer staples. "We believe investors should look to use any residual strength in stocks and sectors as an opportunity to construct an even safer and more secure portfolio -- at this time the prime goal of investors should be wealth preservation rather than wealth generation," the analysts wrote.

Source: finance.yahoo.com

All Generations Are Interconnected

What the hell is wealth anyways? Is it correctly defined as the production and productive capacity of a nation? From this vantage point, the young are rich beyond their dreams in comparison to the old. They have the time to think about, explore, challenge, and discover today’s unknown and inconceivable.

Yet headlines often imply that wealth must be shared, some say redistributed from those that chose to fight against the finite nature of time, to rebalance society.

Class warfare is a dangerous concept people. It will divide this nation and scare capital offshore. Like it or not, capital seeks the next generation because they possess time to discover the unknown.

Protest, speak out, stomp your feet if you must, but above all learn to reach out because all generations (people) are interconnected.

Headline: US wealth gap between young and old is widest ever

WASHINGTON (AP) -- The wealth gap between younger and older Americans has stretched to the widest on record, worsened by a prolonged economic downturn that has wiped out job opportunities for young adults and saddled them with housing and college debt.

The typical U.S. household headed by a person age 65 or older has a net worth 47 times greater than a household headed by someone under 35, according to an analysis of census data released Monday.

While people typically accumulate assets as they age, this wealth gap is now more than double what it was in 2005 and nearly five times the 10-to-1 disparity a quarter-century ago, after adjusting for inflation.

The analysis reflects the impact of the economic downturn, which has hit young adults particularly hard. More are pursuing college or advanced degrees, taking on debt as they wait for the job market to recover. Others are struggling to pay mortgage costs on homes now worth less than when they were bought in the housing boom.

Source: finance.yahoo.com

CME Clarification

Eric,

CME issued a clarification. They are LOWERING initial margin requirements down to maintenance levels to bring the ratio down to 1:1 and not the other way around of raising maintenance to initial margin requirements.

WE can all relax now and go back to sleep while we wait for the CME group to get someone who knows how to write in clear, understandable English!

Dan

Source: traderdannorcini

CME Increases Margin Call

Peter Meyer discusses Friday's announcement by the CME to raise margin call as follows:

If something like this had happened in the equity markets, chances are pretty good that the market would have traded in one direction, down. Futures markets are obviously different as there’s a buyer and a seller on each trade. It would have been impossible to determine if the legacy MF positions were slanted one way or the other even if they weren’t spread all over LaSalle Street.

While the markets may not go in a specific direction as a result of Issue 1 and Issue 2, liquidation could flood the market with no regard for prevailing price action. Forced liquidation orders are always market orders and as such could lay bare the liquidity air pockets that the very MF traders liquidating their positions prevent from happening on a day-to-day basis in every futures market.

November 7th could be an interesting trading day.

Headline: CME increases margin call; markets will be under pressure

US options & futures holders will be forced to deposit billions in additional capital to the CME to avoid margin calls. This may pressure all asset classes on Monday

There is a liquidity crunch in the options & futures markets for commodities worldwide. CME, the exchange for such transactions in the US, had made the initial margin and maintenance margin equal for every commodity with options and futures. This implies that options and futures holders will be forced to deposit addition capital to the CME in the form of maintenance margin, simply to hold their positions. This will put markets under pressure on Monday. The lack of liquidity and additional margin requirement comes in the aftermath of the bankruptcy of MF Global.

Source: moneylife.in

Headline: Beware the 7th of November: At Least $1 Billion Needed.

Look at the ratios in today’s CME Press release. 5,300 of the reported 100,000 accounts have been transferred but $410 million of the $1.449 billion that CME Clearing expected to move in total has gone with those accounts. 5.3% of the accounts had 28% of the available capital attached. Big guys done, middle guys still moving, little guys out of luck? Issue 1: Risk of "homeless" positions being liquidated "at the market".

As discussed on Wednesday, CME Clearing is "holding back" 40% of MF’s segregated funds on deposit. This 40% was used for initial and maintenance margins on positions held at MF as of last Friday and throughout the past week. Mingled into this 40% is quite a bit of margin premium that had already been fully funded at the time of the option trade. Now the margins and option premiums are only 60% funded. The result is a collective $1 billion dollar deficit, the exact amount that CME Clearing is holding onto. Add that number to the very real possibility that the "new" clearers will be charging double margin in the near term and the $1 billion figure becomes a blip in the rearview mirror.

Interest rates are historically low but it’s about as easy for a trader to borrow risk capital as it is for some folks to get a home mortgage. Ex-MF traders may have collateral for a risk capital loan, but it’s tied up in a bankruptcy court with no release date in the offing. If your mortgage falls through, you don’t buy a house. If your risk capital loan gets denied, you have no choice but to liquidate your positions. Either you liquidate or someone will do it for you. Issue 2: Risk of "under-funded" positions being forced into liquidation.

Source: agweb.com

APNewsBreak: Own party urges Greek PM to resign

There’s political chaos in Greece. History reminds us that real change comes after all hell breaks loose, not before. Expect most American to be surprised when history repeats since the History channel and books have no chance against drama created by Dancing with the Stars - the horror!.

Headline: APNewsBreak: Own party urges Greek PM to resign

ATHENS, Greece (AP) -- Greece's ruling Socialists were in open revolt against their own prime minister ahead of a confidence vote Friday, a political free-for-all set off by a European bailout plan.

A week of unending drama in Athens has horrified the indebted country's European partners, spooked the markets and overshadowed the Group of 20 summit in the French resort of Cannes. The threat of a Greek default or exit from the common euro currency spooked global markets and worsened a European debt crisis that has already forced massive bailout deals for Greece, Ireland and Portugal.

Prime Minister George Papandreou on Thursday was forced to abandon his plan to hold a referendum on the debt deal, after markets and EU leaders reacted with hostility to the idea, sparking a global crisis as investors feared that rejection of the hard-fought agreement would force a disorderly Greek default.

Papandreou's two-year-old government has a tenuous majority of two in the 300-seat assembly, but at least four Socialist dissenters have refused to say whether they will back him.

Source: finance.yahoo.com

Germany Is The Epicenter of Unfolding Crisis

As the economic leader of Europe, Germany is the epicenter of the debt crisis. Negative divergences with price and trend in the German stock market, similar to 2007, foreshadow problems ahead. The collective voice of concern, however, is easily drowned out by the parade of talking heads selling the plateau of prosperity provided by the miracle of perpetual bailouts, stimulus, and endless debt creation.

Watch the epicenter close. The negative divergences illustrate distribution and a growing imbalance between price and trend energy. A technical break in the German stock market will send a financial shockwave that will quickly engulf global markets.

MSCI German Index ETF (EWG)

1998-2008


2001-Present

Jobs growth disappoints, but jobless rate falls

Statisticians appear to be using the birth/death model (BDM) to support job growth. It's an old trick. The table below shows that the birth/death model contributed 61,000 jobs in October 2010. This contribution jumped to 102,000 jobs by October 2011. Monthly job growth for October in 2010 and 2011 were 171,000 and 80,000, respectively. We’ll have to wait until year end to see if this increased reliance holds since differences in seasonal adjustments don’t allow for monthly subtraction of the nonfarm payrolls by the BDM.

Birth/Death Model Table:


The following chart illustrates an extremely weak labor market despite the highly touted economic recovery.

Birth/Death Model (BDM) Contribution to Nonfarm Net Payrolls (NFP) Added/(Lost):


Headline: Jobs growth disappoints, but jobless rate falls

(Reuters) - Employers hired fewer workers than expected in December and a surprisingly large number of people gave up searching for work, tempering the positive news of a big drop in the unemployment rate.

The disappointing jobs growth figure reported by the Labor Department on Friday suggested the Federal Reserve would likely stay the course with its effort to support the world's biggest economy with the purchase of $600 billion in government bonds.

The department's survey of nonfarm employers showed payrolls increased 103,000 last month, below economists' expectations for 175,000. Private hiring rose 113,000, while government employment fell 10,000.

"What we are seeing is a pace of hiring that is enough to keep us on track, where we stand, which has been a moderate recovery, but not really enough to point to an acceleration from here," said Julia Coronado, a senior economist at BNP Paribas in New York.

Disappointment over the employment gains and a court ruling in a key foreclosure case resulted in a marginal drop in U.S. stock indexes, while prices of safe-haven U.S. government debt rose. The dollar advanced against a basket of currencies.

Source: reuters.com

Federal hiring proves to be recession-proof

Big government both the cause and solution to the US's economic imbalances. What a mess.

Headline: Federal hiring proves to be recession-proof

WASHINGTON — While Democrats and Republicans in Congress fight over President Barack Obama's new jobs bill, it's worth remembering that there already is one bipartisan job creation program the two parties have agreed on since the recession began: expanding the federal workforce.

While overall payroll employment in the United States has fallen by nearly five percent since the official start of the recession in December 2007, there are 12 percent more federal workers today than there were when the downturn started, according to the Bureau of Labor Statistics.

New jobs data will be released by the Bureau of Labor Statistics Friday morning. The consensus expectation among economists is that a total of 95,000 jobs will have been added to payrolls in October. That would still put the total non-farm payroll tally at about 6.5 million fewer jobs than when the recession began in December 2007.

But the federal headcount has been recession proof, growing while many private sector firms are shedding employees or just holding job levels steady.

Source: msnbc.msn.com

Gold: The hedge against political stupidity

Gold is far more than inflation/deflation hedge. Inflation and/or deflation are symptoms brought bout by the mismanagement of economy and society by centralized powers. Many choose to voice their concerns on Main Street through public assembly, while other, a very small portion of society, let the flow of capital do all of their talking.

Headline: Gold: The hedge against political stupidity

NEW YORK (CNNMoney) -- Gold is said to be a hedge against inflation, deflation and all other nasty sorts of economic bugaboos. It looks like it may be a hedge against political incompetence too.

The price of gold has surged more than 7% in just the past week and a half. The yellow metal is now trading around $1,750 an ounce.

That's still a bit lower from the all-time high of about $1,924 from just a few months ago. But experts think that a new record could be in the cards soon if the debt melodrama in Europe (As George Papandreou Turns?) continues.

The incessant chatter and gossip -- will there be a referendum or not? -- is only serving to make already jittery investors even more skittish. That's a perfect recipe for a rally in gold, which is the quintessential safe haven because it's something with tangible value ... as opposed to a stock or paper currency.

Source: money.cnn.com

Watch Copper

Copper’s sharp decline in September requires buying with force to transform distribution into accumulation. A weak tape, illustrated by tapering volume from the October low and a weak up tick in REV(E), hints that bottom in copper may need more time. A robust risk-on trade requires confirmation and participation from copper.

Copper ETF (JJC)

Setting Up The Weak Hands?

The talking heads will soon be selling seasonal strength in US equities. They will likely say ho-ho-ho equities are the way to go as seasonal strength, i.e. the Santa Claus rally approaches.

Be careful of easy logic. Smart money knows that seasonality must coincide with accumulation. They know that seasonality under the veil of distribution is a bull trap.

Are we seeing accumulation or distribution?

The dollar as the best looking horse in the glue factory is beginning to show strength. As long as capital is flowing out of Europe into global safe havens such as the gold and US dollar, the risk-on trade must be considered vulnerable.

Distribution in the Euro and accumulation in US Treasuries confirms the dollar’s strength.

Euro ETF (FXE)


TBonds ETF (TLT)


While US equities have broken out of a well-defined trading range, their move lacks force. This lack of force suggests distribution in what Wyckoff called last points of supply (LPS).

NYSE Composite


As long as distribution persists, the risk-on trade as defined by seasonal strength is vulnerable. That means unless the message of the market changes smart money will setup the weak hands by distributing into strength.

Race To Devalue

Global currency devaluation, often characterized as the fiat race to the bottom, makes gold look more attract with each passing day.

Headline: Australia Cuts Rates for First Time Since ’09 as Europe’s Crisis Hits Asia

Australia’s central bank cut interest rates for the first time since 2009 and a Chinese manufacturing index slid, stoking concern that Europe’s debt crisis is weighing on Asia’s export-dependent economies.

The Reserve Bank of Australia today reduced its key lending rate to 4.5 percent from 4.75 percent, saying Europe’s woes are starting to hit Asian trade. In China, a purchasing managers’ index fell to 50.4, the lowest level since February 2009, while South Korea reported the smallest gain in exports in two years.

Asian stocks fell for a second day as slowing growth in the region threatens to limit a global expansion already constrained by elevated unemployment in the U.S. and Europe’s crisis. The Chinese report showed a contraction in export orders, fueling speculation that Premier Wen Jiabao may loosen policies to support the world’s second-biggest economy.

Source: bloomberg.com

Headline: ECB cuts key rate at 1st Draghi meeting

FRANKFURT, Germany (AP) -- The European Central Bank has cut interest rates by a quarter percentage point under new head Mario Draghi as it tries to boost a weakening economy that's reeling from a government debt crisis that threatens to spread from Greece.

The dramatic debut move from Draghi, which comes earlier than expected by many economists, takes the bank's benchmark rate to 1.25 percent.

European growth is expected to slow to near in the last three months of the year, and the rate cut is aimed at preventing a slowdown from turning into an outright recession. Uncertainty from Europe's debt crisis is a factor as business and consumers are reluctant to spend and investors are worried of the potential for more financial turmoil if Greece defaults on its debts.

The hope in the markets is that the rate cut will shore up confidence at a time when Europe is embroiled in a crisis stemming from Greek Prime Minister George Papandreou's pledge to hold a referendum on the country's latest bailout package.

Source: finance.yahoo.com

Money is Not Flowing Into Real Estate

The myopic focus of the headline perspective makes it nearly impossible to see the forest through the trees. This is the reason why I often recommend following the money rather than opinions from the media outlets. Following every little hiccup in the trend, such as double or triple dips, can fool the mind into believing that something other than a secular bear market in housing has been unfolding since 2005.

U.S. Median Home Price (MHP) And MHP to Gold Ratio


Headline: Home prices heading for triple-dip

NEW YORK (CNNMoney) -- The besieged housing market has even further to fall before home prices really hit rock bottom.

According to Fiserv (FISV), a financial analytics company, home values are expected to fall another 3.6% by next June, pushing them to a new low of 35% below the peak reached in early 2006 and marking a triple dip in prices.

Several factors will be working against the housing market in the upcoming months, including an increase in foreclosure activity and sustained high unemployment, explained David Stiff, Fiserv's chief economist.

Should home values meet Fiserv's expectations, it would make it the third (and lowest) trough for home prices since the housing bubble burst.

The first post-bubble bottom was hit in 2009, when prices fell to 31% below peak. The First-Time Homebuyer Credit helped perk prices up by mid-2010, but by the time the credit expired, prices fell again.

Source: money.cnn.com

Euro zone factory data suggest recession

The US based on a growing list of negative divergences and bearish setups tracked here is not far behind Europe. The probability of an unexpected economic and financial stumble in 2012 increases with each passing day.

Headline: Euro zone factory data suggest recession

LONDON (Reuters) - The downturn in euro zone manufacturing in October was even deeper than previously thought, according to "grim" business surveys on Wednesday that showed the currency union's debt crisis is dragging its economy back into recession.

The final Markit Eurozone Manufacturing Purchasing Managers Index (PMI) for October, which gauges changes in activity levels across thousands of euro zone manufacturers, fell to 47. 1, revised down from a preliminary reading of 47.3 and down from 48.5 in September.

This marks the third consecutive month the manufacturing PMI has been the 50 level that divides contraction from growth. Output and new orders indexes plunged to levels not seen since mid-2009.

The survey suggests the crisis is putting a chokehold on euro area business and, along with news that German unemployment unexpectedly rose for the first time in nearly two years to 7 percent, it adds pressure on the European Central Bank to cut interest rates.

The latest Reuters ECB poll from last week showed a rate cut was already on the cards by December and possibly as early as Thursday. (ECB/INT)

Source: finance.yahoo.com

It's not 2008. Financial firms have no savior

The financial system is highly interconnected. Unlike 2008, it won’t be so easy to engineer bailouts with public funds if the dominoes based on fictionalized balance sheets start falling again.

Headline: It's not 2008. Financial firms have no savior

NEW YORK (CNNMoney) -- MF Global is no Lehman Brothers. It doesn't have the size or the tentacles to put the entire global system at risk.

Still, MF Global's Chapter 11 filing is spreading contagion to other financial firms around Wall Street, helping crater the stocks of companies with big trading desks like Jefferies and Fortress Investment Group.

Back in 2008, troubled financial institutions Lehman Brothers, Merrill Lynch, Washington Mutual, and Wachovia all found willing buyers in Barclays, Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Wells Fargo. (WFC, Fortune 500) But the market isn't happy with any of these firms these days.

"Volunteers have been punished," said James Doak, who runs restructuring firm Miller Buckfire's banking practice.

After saving the too big to fail institutions, the major U.S. and global banks are, if anything, in shrinkage mode.

"I don't see a lot of bank CEOs who are daring to be great," said John Roddy, the head of investment banking at Australian bank.

Source: money.cnn.com

Here's Who's Freaking Out Now That Greece Will Hard Default

If Greece leaves the EU, the contagion will spread faster than policy makers can schedule emergency meetings.

REMINDER: Here's Who's Freaking Out Now That Greece Will Hard Default

A disorderly default in Greece just became a much bigger possibility, after PM George Papandreou announced a referendum on austerity yesterday.

If the Greeks vote no, this could be the end of Greece's participation in the euro, and spark contagion that could spread across Europe.

The Bank for International Settlements keeps a running tally of who has the biggest sovereign exposure to Greece. Although Japan, France, and Germany have all cut their debt exposure to Greece since earlier this year, they still stand to lose big if Greece decides austerity isn't worth it.

Source: businessinsider.com

Instant view: Manufacturing sector growth eases in Oct: ISM

US Economic activity is a lot weaker than generally depicted in the headlines. The approaching Presidential election, and increasing calls for austerity with no further bailouts and stimulus as a viable economic solution could become a cocktail for economic policy inaction throughout most of 2012.

ISM Prices Paid Index (PP) to National Purchasing Manager's Index (PMI) Ratio:


Headline: Instant view: Manufacturing sector growth eases in Oct: ISM

(Reuters) - The pace of growth in the U.S. manufacturing sector unexpectedly slowed in October, though it managed to stay in expansion territory, according to an industry report released on Tuesday.

U.S. construction spending growth slows on government drag

Growth in U.S. construction spending slowed in September as governments cut back on building and maintaining schools and public transportation, a government report showed on Tuesday.

Source: reuters.com

Wheels Come Off Euro Plan in Just Five Days

It's often best to focus on the message of the markets when emotions (and headlines) are running wild. Success or failure of any Euro plan will be anticipated by the Euro. Continued signs of distribution in the Euro anticipate (forecast) an unpleasant outcome.

The fill and close below the 9/9 breakdown gap on shrinking suggests illustrates weakness (further distribution) within a pattern of distribution that began in 2008.

Tread carefully until turns from distribution to accumulation.

Euro ETF (FXE)



Headline: Wheels Come Off Euro Plan in Just Five Days

On Thursday of last week stocks across the world surged on news that EU leaders, attending their 7th heads of state summit in 2011 alone had agreed a new plan to tackle the debt crisis.

The details of the plan are well known and focus on recapitalization of Europe’s banks, 50 percent haircuts for Greek debt holders and the leveraging of the European Financial Stability Fund to 1 trillion euros.

Just five days later and the plan is already facing huge criticism and the market, fueled by the collapse of MF Global on Monday is showing Angela Merkel and Co exactly what it thinks.

Stocks in major euro zone banks are showing double digit losses after the Greek Prime Minister George Papandreou called for a referendum on the deal which would have significantly reduced his country’s debt burden in return for cuts in Greek government spending.

“We have faith in our citizens, we believe in their judgment and therefore in their decision. All the country’s political forces should support the (bailout) agreement. The citizens will do the same once they are fully informed” said the Greek Prime Minister on Monday.

Source: cnbc.com

Average U.S. Sales Tax Rate Hits Record High

The real cutting when the realization that many States (and Federal) cannot tax their way to a balanced budget. It won't stop them from trying, though, as Americans hooked on big government increases daily.

Headline: Average U.S. Sales Tax Rate Hits Record High

President Obama's proposed budget calls for tax increases mainly on the well-to-do and rich. But many states are already raising the one big tax that falls disproportionately upon the poor.

In 2010 the average combined sales tax bite rose by a full percentage point, reaching 9.64% at the year end, according to an annual report from Vertex Inc., which calculates sales taxes for Internet sellers. That's the highest rate since the Berwyn, Pa., firm started calculating the number in 1982 and the second year in a row that it has set a record.

The year-to-year change is noteworthy and real. But Vertex's stated average is a bit artificial and likely higher than what Americans pay on average. Vertex calculated separately the average sales tax levied by states, by counties, by municipalities and by special districts such as business improvement zones and Indian tribes, and added them together. Five states (Alaska, Delaware, Montana, New Hampshire and Oregon) have no sales tax. Nor do a huge number of counties and cities. Most people aren't on a tribal reservation, either.

Source: forbes.com

Risk-On or Risk-Off? Watch Copper

Wyckoff defined a trend into three distinct phases.

(1) Accumulation or Distribution,
(2) Mark Up or Down
(3) Distribution or Accumulation

Copper remains in a mark down phase, but that will change in 2012. The mark down phase will yield to accumulation in 2012. This accumulation will setup the next mark up phase. The media often circuitously defines copper’s mark up phase as the “risk-on” trade. The media tendency to waffle between “risk-on” and “risk-off” on a daily basis makes reading the trend phases of copper an important, unbaised trading tool.

Copper (JJC) And Copper Diffusion Index (DI)

Futures drop on Greek referendum, Asian growth

Social unrest throughout Europe (Greece, Spain, Italy, etc) will be the wild card not easily placated by financial bailouts.

Headline: Futures drop on Greek referendum, Asian growth

NEW YORK (Reuters) - Stock index futures tumbled on Tuesday as the deal to rescue Greece and prevent a wider sovereign debt crisis faced a new hurdle and as Asian economic data reignited fears of a slowdown in global growth.

Greek Premier George Papandreou said he will put Greece's bailout deal through a referendum, throwing the long-awaited deal into disarray and sending European stocks down 3.5 percent. The region's bank shares fell 6 percent.

U.S. bank shares were expected to follow European lenders lower. The Financial Select Sector SPDR fell 2.3 percent in light premarket trading.

"The market did not see this Greek referendum coming, which is potentially a killer and could knock the wheels off the bus of the whole (European rescue) plan," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

Source: finance.yahoo.com