RPT GMTP 2013 10 TC Peek PDF

The Taper Caper
The Fed is Caught in a Box
GLOBAL RISK & TIPPING POINTS
GLOBAL MACRO TIPPING POINTS - OCTOBER 2013
9/26/2013
1 October 2013 Edition

Copyright 2013 Gordon T. Long All Rights Reserved
Restricted & Confidential

general@GordonTLong.com
The Taper Caper

The Fed is Caught in a Box.
GLOBAL MACRO TIPPING POINTS - OCTOBER 2013
TIPPING POINTS ...................................................................................................................... 15
GLOBAL MACRO: RISK ASSESSMENT .................................................................................................................................................... 15
SITUATIONAL ANALYSIS .................................................................................................................................................... 15
POSITIONAL FRAMEWORK: "WE ARE HERE!" ....................................................................................................................................................... 15
Mapping the Collapse of European Democracy ...................................................................................................................................................... 21
GLOBAL TRENDS THE SIX FRAMING MEGATRENDS ....................................................................................................................................... 22
GLOBAL THEMES TEN STRUCTURALTHEMES FOR STRATEGY ................................................................................................................... 24
DEBT SATURATION - A COLLAPSING PONZI SCHEME ...................................................................................................................................... 26
THE RISK CONTINUUM ................................................................................................................................................................................................ 28
FALL 2013 EVENT RISK DOMINATES ................................................................................................................................................................. 30
MACRO MONITORING INSTITUTIONS ............................................................................................................................... 38

IMF, WORLD ECONOMIC OUTLOOK - JULY 2013 .................................................................................................................................................. 39
IMF, FINANCIAL STABILITY REPORT - APRIL 2013 ............................................................................................................................................... 45
WEF (WORLD ECONOMIC FORUM -JANUARY 2013) ............................................................................................................................................ 51
The 17 Biggest Risks To Our Hyper-Connected World .............................................................................................................................................. 51
RISK SIGNALS ............................................................................................................................................................................................... 67

GEO-POLITICAL RISK ......................................................................................................................................................... 67
SYRIA ............................................................................................................................................................................................................................... 67
SYRIA - This has the Earmarks of the Kennedy Ear "Cuban Missile" Crisis ........................................................................................................... 67
SYRIA - Syrian War You Are Not Being Told About ................................................................................................................................................... 68
SYRIA - 25 Quotes ......................................................................................................................................................................................................... 69
SYRIA - What Coalition? ................................................................................................................................................................................................ 72
SYRIA - US Supporting Fully an "Al Qaeda Operation" ............................................................................................................................................. 74
SYRIA - Decision Already Taken to Bomb Syria ......................................................................................................................................................... 76
SYRIA - Market Patterns Before and Immediately After Conflict Begins.................................................................................................................. 85
FINANCIAL & ECONOMIC RISK .......................................................................................................................................... 87

EMERGING MARKETS ................................................................................................................................................................................................. 87
EMERGING MARKETS - Crisis Temporarily Halted .................................................................................................................................................. 87
EMERGING MARKETS - The Plight of four Asian countries - China, India, Indonesia and Japan. ..................................................................... 88
EMERGING MARKETS - Increasing Liquidity Problem In Selected Markets ......................................................................................................... 92
EMERGING MARKETS - EU Major Contributor to EM Current Account Deficit Growth...................................................................................... 103
EMERGING MARKETS - Insufficient BRICS Reserve Levels Prompt Russian-Chinese Support...................................................................... 106
EMERGING MARKETS - Global Bond Yields React To Taper Together............................................................................................................ 107
EMERGING MARKETS - Negative Current Accounts + Weak(ening) International Investment Positioning .................................................... 108
EMERGING MARKETS - BRAZIL .............................................................................................................................................................................. 109
EMERGING MARKETS - INDIA .................................................................................................................................................................................. 111
EMERGING MARKETS - SOUTH AFRICA ............................................................................................................................................................... 113
EMERGING MARKETS - TURKEY ............................................................................................................................................................................ 115
EMERGING MARKETS - "TAPER" Shock Waves Across Asia .............................................................................................................................. 117
EMERGING MARKETS - India Rupee Collapse Showing Signs of Exhaustion ................................................................................................... 125
EMERGING MARKETS - Asian Credit Contraction Problems ................................................................................................................................ 126
EMERGING MARKETS - Why Asian Markets Are Collapsing ................................................................................................................................ 128
EMERGING MARKETS - Surging Interest Rates ..................................................................................................................................................... 132
EMERGING MARKETS - Currencies Getting Clobbered ........................................................................................................................................ 133
EMERGING MARKETS - Crisis Worsens .................................................................................................................................................................. 134
EMERGING MARKETS - Korean Peninsula a Black Swan Possibility .................................................................................................................. 136
GLOBAL TAX GRAB - G20 Focusing on Finding Much Needed Tax Revenue .................................................................................................... 139
RISK - COLLAPSING PETRODOLLAR FOUNDATION .......................................................................................................................................... 143
RISK - GLOBAL DEBT 313% of GDP ........................................................................................................................................................................ 147
RISK - 202M GLOBALLY UNEMPLOYED................................................................................................................................................................. 148
RISK - SIGNS APLENTY, BUT NO ONE PANICKING - YET! ................................................................................................................................ 149
RISK - CANARIES SINGING AGAIN ......................................................................................................................................................................... 151
October 2013 Edition

Copyright 2013 Gordon T. Long

All Rights Reserved
RISK - COMPLACENCY & REPRESSED FEAR ...................................................................................................................................................... 152

RISK - TIED TO EU IN 2012 ....................................................................................................................................................................................... 153
RISK - GLOBAL DERIVATIVE COLLATERAL .......................................................................................................................................................... 155
RISK - GLOBAL RISK MATRIX................................................................................................................................................................................... 157
RISK - GLOBAL MACRO HEADWINDS / TAILWINDS ............................................................................................................................................ 157
RISK - FOOD A GROWING GLOBAL INFLATION & SOCIAL UNREST RISK .................................................................................................... 159
RISK - INCREASINGLY DYSFUNCTIONAL CAPITALS MARKETS ..................................................................................................................... 165
RISK - RISING GEO-POLITICAL EVENT RISK........................................................................................................................................................ 168
GLOBAL MACRO: RISK LEVELS .............................................................................................................................................................. 171

AGGREGATED GLOBAL FINANCIAL RISK INDEX............................................................................................................ 171
BANKING RISK - LIBOR-OIS SPREAD (Updated) .................................................................................................................................................. 172
BANKING RISK - TED SPREAD (Updated) .............................................................................................................................................................. 172
CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS (Updated) ........................................................................................................................ 173
CREDIT RISK - EU CREDIT DEFAULT SWAPS (Updated) ................................................................................................................................... 173
CONSUMER RISK - HOUSING - RATE OF CHANGE (Updated) .......................................................................................................................... 174
ECONOMIC RISK - ECRI LEADING INDEX (Updated) ........................................................................................................................................... 175
INFLATION RISK - MONEY SUPPLY GROWTH - M3 (Updated) .......................................................................................................................... 176
INFLATION RISK - MONEY VELOCITY (Updated) .................................................................................................................................................. 176
MONETARY RISK - BANK LIABILITIES (Updated) ................................................................................................................................................. 177
COST OF MONEY RISK - INTEREST RATES (Updated)...................................................................................................................................... 177
AGGREGATED RISK LEVEL .............................................................................................................................................. 179

TIPPING POINTS: CHANGES .................................................................................................................................................................... 180
TIPPING POINT MAPPING: 2013 YEAR BEGINNING UPDATE ........................................................................................ 180
TIPPING POINTS: TOP 5 FOCUS - SEPTEMBER 2013 ........................................................................................................................ 191
I - RISK REVERSAL............................................................................................................................................................ 191
II - JAPAN DEBT DEFLATION ............................................................................................................................................ 193
III-BOND BUBBLE .............................................................................................................................................................. 196
IV - EU BANKING CRISIS ................................................................................................................................................... 196
V - SOVEREIGN DEBT ....................................................................................................................................................... 197
VI - CHINA HARD LANDING ............................................................................................................................................... 199
GLOBAL MACRO ................................................................................................................... 203

GLOBAL MACRO: ECONOMIC OUTLOOK ............................................................................................................................................. 205
GLOBAL OUTLOOK - EM Crisis Will make the 1997 Asian Crisis Seem Like an Early Warning.......................................... 205
GLOBAL OUTLOOK - Global Deleveraging Accelerating and Developing Nations Feeling the Pain.................................... 207
GLOBAL OUTLOOK - Problems Erupting Everywhere (Signs of Implosion) ........................................................................ 209
GLOBAL OUTLOOK - Credit Fueled Globalization in Retreat .............................................................................................. 212
GLOBAL OUTLOOK - Rogoff's Sovereign Debt Default Levels ........................................................................................... 215
GLOBAL OUTLOOK - Fiscal Adjustments Required............................................................................................................ 218
GLOBAL OUTLOOK - Imbalances Continue to Increase Along With Financial Fragility ....................................................... 218
GLOBAL OUTLOOK - A 67 Million Jobs Gap ...................................................................................................................... 222
GLOBAL OUTLOOK - Center of Global Manufacturing Confirmed to be Shifting Away from developed Countries .............. 225
GLOBAL OUTLOOK - Mercantilist China the Clear Winner Globally, Mercantilist Germany Regionally ............................... 226
ECONOMIC CUTS .............................................................................................................................................................. 228
OECD CUTS ECONOMIC OUTLOOK ....................................................................................................................................................................... 228
IMF CUTS ECONOMIC OUTLOOK ............................................................................................................................................................................ 231
ECONOMIC WARNINGS .................................................................................................................................................... 242

IMF WARNS - May 2013 .............................................................................................................................................................................................. 242
BIS WARNS - June 2013 ............................................................................................................................................................................................. 248
WORLD BANK WARNS - June 2013 ......................................................................................................................................................................... 255
GLOBAL MACRO: INDICATORS ............................................................................................................................................................... 260

GLOBAL CREDIT ............................................................................................................................................................... 260
CREDIT CYCLE - HY Leading the Way ..................................................................................................................................................................... 260
CREDIT CYCLE - Reversal Ahead ............................................................................................................................................................................. 263
GLOBAL GROWTH............................................................................................................................................................. 267

GLOBAL GROWTH - PMI Barely Above Stagnation ................................................................................................................................................ 267
GLOBAL GROWTH - Chinese Slowing moves to CONTRACTION ....................................................................................................................... 270
GLOBAL GROWTH - Slowing Global Economies .................................................................................................................................................... 271
GLOBAL GROWTH - Global GDP Growth Trending Down by Region and Cumulatively ................................................................................... 272


All Rights Reserved
GLOBAL GROWTH - Global PMI ............................................................................................................................................................................... 272

GLOBAL GROWTH - Global Recession .................................................................................................................................................................... 275
GLOBAL GROWTH - Slowing Global Growth - Air Cargo Shipments ................................................................................................................... 276
GOBAL UNEMPLOYMENT ................................................................................................................................................. 277

GLOBAL UNEMPLOYMENT - The Beginnings of the Welfare Myth Unwind ........................................................................................................ 277
GLOBAL UNEMPLOYMENT - The Unsustainable Welfare Myth ........................................................................................................................... 280
GLOBAL UNEMPLOYMENT - Global Financial Sector Job Cuts ........................................................................................................................... 282
GLOBAL UNEMPLOYMENT - Global Unemployment Rising -Now 202 Million .................................................................................................. 284
GLOBAL TRENDS .............................................................................................................................................................. 286

BRANDS & COMMODITIES: Tell the Global Story .................................................................................................................................................. 286
GLOBAL SENTIMENT ........................................................................................................................................................ 299

GLOBAL SENTIMENT - Complacent ......................................................................................................................................................................... 299
GLOBAL SENTIMENT - Nielsen's Global Consumer Confidence, Concerns & Spending Intentions ............................................................... 300
GLOBAL INFLATION .......................................................................................................................................................... 311

GLOBAL INFLATION - Food Prices, Driver of Social Unrest .................................................................................................................................. 311
GLOBAL INFLATION - Food Price Manipulation in Thailand .................................................................................................................................. 313
GLOBAL MACRO: MONETARY POLICY & CENTRAL BANKING ........................................................................................................ 314

The "OMF" Trial Balloon Raised .......................................................................................................................................... 314
OPMF - A Reversing Wealth Effect May Force OPMF & Global Abenomics ........................................................................................................ 315
OPMF - Financial Times: Martin Wolf - "The Case For Helicopter Money" ........................................................................................................... 316
OPMF - Financial Times: Martin Wolf - "The Case To Reset Basis of Monetary Policy" ..................................................................................... 319
OPMF - Financial Times: Gavyn Davies On Why Helicopters Are Dangerous ..................................................................................................... 320
OPMF - A Conundrum for the World's Central Bankers ........................................................................................................................................... 323
GLOBAL CENTRAL BANKING ........................................................................................................................................... 325

CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
- Austerity Now Officially Dead Public Policy ........................................................................................................................... 325

- They are the Market .................................................................................................................................................................. 325
- The longer QE persists, the greater the magnitude of the left-tail event & a Minsky Trap ............................................. 328
- We May Have Reached a Risk-Off Leverage Pivot .............................................................................................................. 329
- The Macro Landscape .............................................................................................................................................................. 331
- A Serious Shortage of Quality Collateral - A $10T US Problem Over 10 Years ................................................................ 332
- Global Balance Sheet Expansion ............................................................................................................................................ 334
- Where Do these Deflators Come From? ................................................................................................................................ 338
- First Remove Gold Standard, Now Remove Debt ................................................................................................................. 339
EMERGING MARKETS ...................................................................................................................................................... 344

EMERGING MARKETS - The Impact of "TAPER" ................................................................................................................................................... 344
BOE - UK ............................................................................................................................................................................ 348

UK - Mark Carney and "Flexible Inflation Targeting" ................................................................................................................................................ 348
FED - US............................................................................................................................................................................. 349

US - FOMC January Minutes Un-Nerve Markets ...................................................................................................................................................... 349
US - Congress Asks Bernanke For Full Risk Analysis On Fed's Soaring Balance Sheet .................................................................................... 350
BOJ - JAPAN ...................................................................................................................................................................... 355

JAPAN - Some Policies Have Clearly Hit the Limit ................................................................................................................................................... 355
JAPAN - Foreshadows Next Global Crisis ................................................................................................................................................................. 356
JAPAN - Japan's Prime Minister Shinzo Abe prepares to print money for the whole world ................................................................................ 361
JAPAN - Shinzo Abes Monetary-Policy Delusions ................................................................................................................................................... 362
JAPAN - BOJ Governor Job Suddenly Available in Historical "Abenomics U-Turn" ............................................................................................. 365
JAPAN - Japanese Economic Policy Goes The Full Ponzi ...................................................................................................................................... 366
ECB - EU ............................................................................................................................................................................ 368

EU - Japan Will Effectively Monetize European Debt ............................................................................................................................................... 368
EU - TARGET-2 Imbalances - "The Debt Crisis Is Eating Its Way Ever Further Into Europe's Core" ................................................................ 368
EU - Draghi Will Soon Be Forced to Start Printing - Again! ..................................................................................................................................... 370
GEO-POLITICAL TENSIONS ..................................................................................................................................................................... 374

GLOBAL BOND SCARE ..................................................................................................................................................... 374
BOND SCARE - Volatility and Instability Increase Risk ........................................................................................................................................... 374
BOND SCARE - Inflation Expectations Contributing to Volatility ............................................................................................................................ 376
BOND SCARE - The Financial Times Headlines Tell An Interesting Story ........................................................................................................... 377
BOND SCARE - A LONG Supply and Demand Problem BUT Heavy SHORT Demand ..................................................................................... 378


All Rights Reserved
BOND SCARE - Long Term Support Trendline Achieved........................................................................................................................................ 379

BOND SCARE - Retail Investors Running for the Exit ............................................................................................................................................. 381
CHINA LIQUIDITY TIGHTENING SCARE ........................................................................................................................... 383

CHINA LIQUIDITY - Housing Bubble Restricting PBOC Actions ............................................................................................................................ 383
CHINA LIQUIDITY - PBOC Squeezing Banks towards Reducing Speculative Risk............................................................................................. 386
CHINA LIQUIDITY - Overnight Repo at 25% ............................................................................................................................................................ 387
CHINA LIQUIDITY - Red Flags ................................................................................................................................................................................... 388
CHINA LIQUIDITY - Credit Fueled Growth ................................................................................................................................................................ 390
CHINA LIQUIDITY - Shadow Banking System Showing Signs of Implosion ......................................................................................................... 395
CHINA LIQUIDITY - PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze .......................................... 398
CHINA LIQUDITY - Potentially De-Stabilizing Cash Crunch ................................................................................................................................... 400
CHINA LIQUIDITY - Chinese Liquidity Pump Unplugged ........................................................................................................................................ 401
CURRENCY WARS BECOMING RATE WARS .................................................................................................................. 403

CURRENCY WARS - A Major Shift ............................................................................................................................................................................ 403
BATTLEFIELD - Combatants & Belligerents ............................................................................................................................................................. 407
BATTLEFIIELD - The Race to Debase ....................................................................................................................................................................... 408
JAPAN - The Destabilizing Agent ............................................................................................................................................................................... 411
EUROPE - Euro Exposed ............................................................................................................................................................................................ 411
ARGENTINA - Here we Go Again!.............................................................................................................................................................................. 413
VENEZUELLA - Bad Situation ..................................................................................................................................................................................... 414
BRAZIL - No One Wants to Listen .............................................................................................................................................................................. 414
SWITZERLAND - No Choice ....................................................................................................................................................................................... 414
SINGAPORE - Hot Money ........................................................................................................................................................................................... 415
UK- Pound Joins War ................................................................................................................................................................................................... 416
CYBER WARS - GROWING THREAT ................................................................................................................................ 417

SECURITY-SURVEILLANCE COMPLEX - NSA Whistleblower Example: Booz Hamilton ................................................................................. 417
SECURITY SURVEILLANCE COMPLEX - Growing Without Public Control or Supervision!.............................................................................. 419
IRAN & SYRIA - COMPLETE MIDDLE EAST DOMINATION .............................................................................................. 420

MIDDLE EAST - Watch Out for a "False Flag" or "Covert" Activity Event .............................................................................................................. 420
MIDDLE EAST - Who Is Threatening Who Here? .................................................................................................................................................... 421
DRIVER$: RISK-ON - RISK-OFF ANALYTICS ......................................................................................................................................... 423

1- G10 MACRO SURPRISE INDEX .................................................................................................................................... 426
2- CUMULATIVE GLOBAL PMI........................................................................................................................................... 431
3- SLOWING GLOBAL EXPORTS ...................................................................................................................................... 437
4- US NON-REVOLVING CONSUMER CREDIT................................................................................................................. 442
5- IBES' RELATIVE GLOBAL PE RATIOS .......................................................................................................................... 446
6- CONSENSUS EARNINGS ESTIMATES - Sell Side Analysts .......................................................................................... 453
7- INFLATION PRESSURES - Global Food Prices.............................................................................................................. 456
REGIONAL ............................................................................................................................... 460

EUROSIS - A Terminal Disease ........................................................................................................................................ 460
RESEARCH WE FOLLOWED THIS MONTH ........................................................................................................................................................... 460
RESEARCH OF PARTICULAR IMPORTANCE ........................................................................................................................................................ 461
RESEARCH - EFSF Downgraded to AA+.................................................................................................................................................................. 461
RESEARCH - EU Stabilization Programs Are Presently Very Fragile .................................................................................................................... 462
RESEARCH - Spreads Widened in Peripherals and Significantly in Portugal and Greece ................................................................................. 465
PROGNOSIS: Why the European Situation Will Get Worse ................................................................................................................................... 467
PROGNOSIS: Increasing Structural Imbalances ...................................................................................................................................................... 470
PROGNOSIS: $22T Unaccounted - A Hidden World of Contingent Liabilities, Government Backing & Guarantees. ................................... 472
PROGNOSIS: Monetary Malpractice - ECB's LTRO Not a Solution but ................................................................................................................ 476
PROGNOSIS: Monetary Malpractice - ECB's SMP Effort Futile ............................................................................................................................. 479
PROGNOSIS: Monetary Malpractice - ECB Accepts BBB Collateral ..................................................................................................................... 481
PROGNOSIS: EU Banking Overbanked, Undercapitalized and Now Insolvent .................................................................................................... 482
PROGNOSIS: Monetary Malpractice - TARGET2 "Contingent Liabilities"............................................................................................................. 483
PROGNOSIS: Bailouts - Unsustainable & Unfundable ............................................................................................................................................ 489
MEDICAL CHARTS - Situation Critical ............................................................................................................................... 491

CHARTS- EU Real Rates ........................................................................................................................................................................................... 491
CHARTS - EU -NON Euro Members GDP RELIANCE ............................................................................................................................................ 492
CHARTS - EU GLOBAL GDP GROWTH CONTRIBUTION .................................................................................................................................... 493
CHARTS - EU PMI ........................................................................................................................................................................................................ 493
CHARTS - EU CPI ........................................................................................................................................................................................................ 495
CHARTS - Regional Risk-Reward .............................................................................................................................................................................. 496
CHARTS - Europe's "Core" Problem is France ......................................................................................................................................................... 497


All Rights Reserved
CHARTS - Germany's Preoccupation with Inflation is More Than It Would Seem ............................................................................................... 500
CHARTS - Evidence OF Global Slowing Now Indisputable ..................................................................................................................................... 501
CHARTS - EU Credit Downgrades, France and UK On Tap .................................................................................................................................. 503
CHARTS - Perceived Reduction in Risk, A Temporary Aberration ......................................................................................................................... 505
CHARTS - Dangerous Delusional Divergences ........................................................................................................................................................ 507
CHARTS - IMF Projections for Euro Area and GIIPS ............................................................................................................................................... 508
CHARTS - Air Cargo Shipments Confirm Slowing Global Growth .......................................................................................................................... 509
CHARTS - Eurozone Misery Indices Never Been Higher ........................................................................................................................................ 510
CHARTS - Euro Currency ............................................................................................................................................................................................ 512
ITALY - Budget Failure on NO Growth ................................................................................................................................ 517

RESEARCH - Italys Budget Failures, Weak Growth Outlook Call Debt Sustainability Into Question ................................................................ 517
CHARTS OF PARTICULAR IMPORTANCE ............................................................................................................................................................. 522
CHARTS - ITALY - Forced Rate Cuts ........................................................................................................................................................................ 522
SITUATIONAL ASSESSEMENT ................................................................................................................................................................................. 523
ITALIAN ELECTION - What You Need to Know ....................................................................................................................................................... 523
ITALIAN ELECTION - Europe Capitulates On Austerity- Never Had The Stomach For It ................................................................................... 524
ITALIAN ELECTION - Message Given By the People.............................................................................................................................................. 526
ITALIAN ELECTION - Bad Debt Continue to Soar ................................................................................................................................................... 530
ITALIAN ELECTION - Italians React Badly to Austerity, Elections Hardly a Surprise! ......................................................................................... 533
ITALIAN ELECTION - EUROPEAN FEEDBACK - #1 .............................................................................................................................................. 533
ITALIAN ELECTION - EUROPEAN FEEDBACK - #2 .............................................................................................................................................. 535
ITALIAN ELECTION - Regional Financial Cracks in Sicily ...................................................................................................................................... 539
FRANCE - Hollande Going Down for the Count................................................................................................................... 541

RESEARCH OF PARTICULAR IMPORTANCE ....................................................................................................................................................... 542
RESEARCH - France Loses its Coveted and NEEDED AAA Rating ..................................................................................................................... 542
CHARTS - FRANCE - GDP ......................................................................................................................................................................................... 544
CHARTS - FRANCE - UNEMPLOYMENT ................................................................................................................................................................. 545
CHARTS - FRANCE - BUDGET DEFICIT ................................................................................................................................................................. 546
CHARTS - FRANCE - TAX versus GDP .................................................................................................................................................................... 547
CHARTS - FRANCE - BUSINESS CONFIDENCE ................................................................................................................................................... 548
SITUATIONAL ASSESSMENT ................................................................................................................................................................................... 549
FRANCE - What You Need to Know .......................................................................................................................................................................... 549
FRANCE - Key Indicators ............................................................................................................................................................................................ 550
FRANCE: Sharpest Drop in Private Sector Output in Four Years........................................................................................................................... 553
FRANCE - Quits on Austerity - Never a Doubt This Would Happen ....................................................................................................................... 556
FRANCE - Socialism is Expensive.............................................................................................................................................................................. 557
FRANCE - Has Turned back to Socialism ................................................................................................................................................................. 559
FRANCE - Losing Its Way through Political Illusions and Lies ................................................................................................................................ 560
FRANCE - Uncompetitive ............................................................................................................................................................................................ 561
FRANCE - Titan Tire Calls Out French Labor ........................................................................................................................................................... 563
FRANCE - France Responds to Titan Tire................................................................................................................................................................. 565
FRANCE - What Happens In France When Companies Fire People ..................................................................................................................... 568
FRANCE - Hollande's Economically Insane campaign Promise ............................................................................................................................. 569
GERMANY - EU in the Hands Of Election ........................................................................................................................... 570

RESEARCH - Europe's Shadow Economy: As Big As Germany ............................................................................................................................ 570
CHARTS - GERMANY - Inflation ................................................................................................................................................................................ 574
CHARTS - GERMANY - IFO Investor Confidence .................................................................................................................................................... 574
CHARTS - GERMANY - ZEW Expectations .............................................................................................................................................................. 575
GERMANY - Anti Euro AfD Party May Cost Merkel in Critical September Election ............................................................................................. 578
GERMANY - The Euro Crisis Escalation over Cyprus May Politically Cripple Merkel .......................................................................................... 579
GERMANY - Call for End of "Coercive Euro Association" ....................................................................................................................................... 581
IBERIAN PENINSULA - Spain & Portugal Going Critical ..................................................................................................... 583

RESEARCH - Presidential Warning Spikes Yields To 8 Months Highs ................................................................................................................. 584
RESEARCH - Clear Signs of Desperation In Spain from a Growing Collateral Contagion .................................................................................. 586
RESEARCH - The Spanish Government's 'Bad Bank' Scam .................................................................................................................................. 587
CHARTS - PORTUGAL - Deficit Problem .................................................................................................................................................................. 589


All Rights Reserved

IBERIA - Credit Downgrades - At Precipice of "Non Investment Grade"................................................................................................................ 590
IBERIA - Regional Bailout Bailouts a Massive Problem ........................................................................................................................................... 591
IBERIA - NPL Going Ballistic ....................................................................................................................................................................................... 592
IBERIA - Spanish Funding Problem............................................................................................................................................................................ 593
IBERIA - The Giant Spanish Housing Bubble, Now Beginning to Implode ............................................................................................................ 598
IBERIA - Mal-Investment Coming Home to Roost .................................................................................................................................................... 600
IBERIA - Bank Deposits Were Leaving, Now they Are Fleeing ............................................................................................................................... 601
IBERIA - Now a Capital Investment Problem ............................................................................................................................................................ 602
IBERIA - Banks on Artificial "Ponzi Bond" Life Support ............................................................................................................................................ 603
UK - New BOE Governor with More Printing Ahead ............................................................................................................ 612

RESEARCH - UK workers' wage squeeze is longest since the 1870s ................................................................................................................... 612
CHARTS - UK - Crushed Disposable Income ........................................................................................................................................................... 613
CHARTS - UK - BOE Balance Sheet Growth ............................................................................................................................................................ 614
CHARTS - UK - Lending .............................................................................................................................................................................................. 614
CHARTS - UK - Unemployment .................................................................................................................................................................................. 615
CHARTS - UK - GDP - Pre and Post Recession Levels .......................................................................................................................................... 615
CHARTS - UK - GDP .................................................................................................................................................................................................... 616
CHARTS - UK - BOE Rates ......................................................................................................................................................................................... 616
UK - What you need to Know ...................................................................................................................................................................................... 617
UK - Joins Currency War - Down 8% YTD ............................................................................................................................................................. 619
UK - Specter of Stagflation Haunts UK ....................................................................................................................................................................... 620
UK - Public Policy turns Against Austerity and PM Cameron .................................................................................................................................. 621
UK - Doomsday Debt Machine .................................................................................................................................................................................... 622
UK - QE Extension Coming ......................................................................................................................................................................................... 625
UK - Small Business Credit Squeeze Now Acute - Loan Rejections Rising ......................................................................................................... 627
UK - Technically in a Depression ................................................................................................................................................................................ 628
CYRPUS - Latest EU Banking Crisis ................................................................................................................................... 631

CYRPUS - What you Need To Know .......................................................................................................................................................................... 631
CYRPUS - Basic Situational Charts ............................................................................................................................................................................ 633
CYPRUS - Crumbling Property Rights ....................................................................................................................................................................... 635
CYPRUS - Plan D Supersedes Plan C and B as Time running Out ....................................................................................................................... 639
CYPRUS - Forgetting About Contract Law, Private Property Rights and Due Process ....................................................................................... 642
CYPRUS - Russian Tax Haven ................................................................................................................................................................................... 643
CYPRUS - Plan B as Bad As Plan A .......................................................................................................................................................................... 644
CYPRUS - Breaks Public Trust and Incites the Politics of Germany Dictating Terms .......................................................................................... 646
CYPRUS - Does Anyone Care How a Capitalist System (versus a Crony Capitalist System) is Supposed to Work? ..................................... 652
CYPRUS - Criminal "Confidence Game" Payouts to Everyone at the Tax Payers Expense ............................................................................... 653
CYPRUS - Cyprus Pushes EU Banking Crisis Back Near the Edge ..................................................................................................................... 655
ASIA - SERIOUS CRACKS BELOW THE SURFACE .......................................................................................................................................... 656

CHINA - Credit Tightening Panic Averted - Temporarily? .................................................................................................... 656
CHARTS - CHINA - PMI ............................................................................................................................................................................................... 657
CHARTS - CHINA - PMI-2 .......................................................................................................................................................................................... 658
CHARTS - CHINA - GDP ............................................................................................................................................................................................. 659
CHARTS - CHINA - INDUSTRIAL OUTPUT ............................................................................................................................................................. 660
CHARTS - CHINA - Urban Fixed Asset Investment ................................................................................................................................................. 661
CHARTS - CHINA - RETAIL SALES .......................................................................................................................................................................... 662
RESEARCH - Investors Worried and Losing Confidence ....................................................................................................................................... 663
RESEARCH - China Stampeding into Gold ............................................................................................................................................................... 664
RESEARCH - China "Will introduce some measures to arrest the slowdown of growth in the next couple of quarters" ................................. 666
RESEARCH - Slower Growth In the Cards & Endorsed by New Chinese Leadership......................................................................................... 667
RESEARCH - Is a PBOC Controlled Speculation Bust Possible or Will It Get Out of Control ............................................................................ 669
RESEARCH - PBOC Liquidity Squeeze ..................................................................................................................................................................... 670
RESEARCH - Chinese Housing Bubble Restricting PBOC Actions ....................................................................................................................... 672
RESEARCH - PBOC Squeezing Banks towards Reducing Speculative Risk ....................................................................................................... 674
RESEARCH - Chinese Overnight Repo at 25% ........................................................................................................................................................ 676
RESEARCH - Red Flags .............................................................................................................................................................................................. 677
RESEARCH - Credit Fueled Growth in China ........................................................................................................................................................... 679
RESEARCH- PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze...................................................... 684


All Rights Reserved
RESEARCH - A Potentially De-Stabilizing Cash Crunch ......................................................................................................................................... 686

SITUATIONAL ANALYSIS ........................................................................................................................................................................................... 687
CHINA SHADOW BANKING - Shadow Banking System Showing Signs of Implosion ........................................................................................ 689
CHINA SHADOW BANKING - Shadow Banking and Credit Growth ...................................................................................................................... 692
CHINA SHADOW BANKING - The US Sub-Prime / CDO All Over Again ............................................................................................................. 695
CHINA SHADOW BANKING - Report ........................................................................................................................................................................ 699
CHINA SHADOW BANKING - Situation ..................................................................................................................................................................... 700
CHINA RESERVES - Distorted Foreign Reserve Levels ......................................................................................................................................... 701
CHINA RESERVES - Declining Reserve Accumulation ........................................................................................................................................... 703
CHINA RESERVES - Has Caught the Gold Bug big time! ....................................................................................................................................... 705
CHINA CURRENCY WARS - Hot Money into China ................................................................................................................................................ 707
CHINA - Withdraws Liquidity ....................................................................................................................................................................................... 708
CHINA - Socit General Sees a Likely Soft Landing! ............................................................................................................................................. 710
CHINA - True Debt is Orders of Magnitude More than Officially Being Reported ................................................................................................. 720
CHINA - Evidence OF Slowing Now Indisputable ..................................................................................................................................................... 723
CHINA - PMI Improvement .......................................................................................................................................................................................... 724
CHINA - Political Transition & Ongoing Emergence as a Super Power ................................................................................................................. 727
CHINA - An Implicit Social Contract ............................................................................................................................................................................ 729
CHINA - Manipulated Statistics due to Upcoming Decade Long Regime Change ............................................................................................... 731
CHINA - Increasing Leverage is China's Way of Monetary Easing ........................................................................................................................ 732
CHINA - Possible Interest-Rate Liberalization ........................................................................................................................................................... 733
CHINA - Global Impact of China's Slowdown ............................................................................................................................................................ 734
CHINA - Shanghai Composite at 2008 Low Levels .................................................................................................................................................. 736
CHINA - Shanghai Composite Warnings Signs ......................................................................................................................................................... 737
CHINA - Credit to GDP ................................................................................................................................................................................................. 739
CHINA - A Slow Recovery Through 2013 .................................................................................................................................................................. 740
CHINA - Manufacturing PMI in Contraction Territory ................................................................................................................................................ 742
JAPAN: The New Currency War Front ................................................................................................................................ 746

RESEARCH - Japanese Structural Problems a "Canary" for Western Developed Economies........................................................................... 746
07-15-13-JAPAN - Shinzo Abe Hasn't the Stomach for the Heavy Lifting Needed to Accompany ABE-nomics. ............................................. 749
RESEARCH - A Credit Squeeze Leads Deflationary Leg Down ............................................................................................................................ 751
RESEARCH - Some Japanese Policies Have Clearly Hit the Limit ........................................................................................................................ 752
RESEARCH - The ABE (Asset Bubble Evaluator) Index ......................................................................................................................................... 754
CHARTS - JAPAN - GDP Resurgence ....................................................................................................................................................................... 755
CHARTS - JAPAN - BOJ Balance Sheet ................................................................................................................................................................... 756
JAPAN - What You Need to Know .............................................................................................................................................................................. 759
JAPAN - Regional Risk-Reward .................................................................................................................................................................................. 761
JAPAN - Now the Frontrunner of Outright Monetization. ......................................................................................................................................... 762
JAPAN - Yen Devaluation ............................................................................................................................................................................................ 763
JAPAN - New Bank of Japan Policy - 2% Inflation in 2 Years ................................................................................................................................. 764
JAPAN - Appoints BOJ Governor Firmly Committed to Printing Money................................................................................................................. 766
JAPAN - Third Straight Quarter of Recession ........................................................................................................................................................... 768
JAPAN - Full Out War on Deflation ............................................................................................................................................................................. 768
JAPAN - First Test of the new found dominance of the Central Banks ............................................................................................................... 770
JAPAN - BOJ Was Next Up. No Surprise .................................................................................................................................................................. 773
JAPAN - Negative Current Account Balance and -3.5% Recession ....................................................................................................................... 775
JAPAN - A 50% Over-Valued Yen Has Undermined Self Confidence & Drive...................................................................................................... 778
JAPAN - Proves QE's Low Cost of Capital Does Structural Damage to Economy ............................................................................................... 780
JAPAN - BOJ Being Pressured to "Rip-Up Government Debt"1 ............................................................................................................................. 782
JAPAN - Easy Money Has Hurt Corporate Profitability in the Longer Term .......................................................................................................... 788
JAPAN - The Biggest Debtor with the Biggest Problem! .......................................................................................................................................... 791
JAPAN - A Magnitude Larger Problem than Europe................................................................................................................................................. 795
JAPAN - QE 9 A Complete Failure - Actually "Tightens" versus It's Intended Easing .......................................................................................... 801
JAPAN - Japanese Yen Continuously Under Attack ............................................................................................................................................... 805
JAPAN - Vast foreign US$ Coming Home for "Claim" .............................................................................................................................................. 806
JAPAN - PMI Breakdown ............................................................................................................................................................................................ 808
JAPAN - Exports Continue To Tumble ....................................................................................................................................................................... 810
JAPAN - Intervention Fails Again - It's a Whole new Ball Game ............................................................................................................................. 811
JAPAN - First Signs of Massive Debt Monetization After Next Election ................................................................................................................. 814
JAPAN - Japan to the ESM's Rescue ........................................................................................................................................................................ 814


All Rights Reserved
EMERGING MARKETS - SYNCHRONIZED MARKETS ................................................................................................................................. 816

EMERGING MARKETS - Stunning Withdrawals ...................................................................................................................................................... 816
EMERGING MARKETS - Bond Outflows Accelerating ............................................................................................................................................ 817
EMERGING MARKETS - This will make the 1997 Asian Crisis Seem Like an Early Warning ........................................................................... 819
EMERGING MARKETS - Developing Nations Feeling the Pain of Global Deleveraging Acceleration .............................................................. 821
EMERGING MARKETS - The Impact of "TAPER" ................................................................................................................................................... 823
CHARTS - Reserves versus World ............................................................................................................................................................................. 827
CHARTS - Current Account Balances versus GDP .................................................................................................................................................. 828
CHARTS - Emerging Markets Index versus MSCI World Index .............................................................................................................................. 829
CHARTS - SINGAPORE - Inflation ............................................................................................................................................................................. 830
CHARTS - SINGAPORE - Exports ............................................................................................................................................................................. 831
CHARTS - SOUTH KOREA ......................................................................................................................................................................................... 832
CHARTS - TURKEY - Spreads ................................................................................................................................................................................... 833
EMERGING MARKETS - What you Need to Know .................................................................................................................................................. 834
EMERGING MARKETS - Comparative Ease of Doing Business ............................................................................................................................ 836
EMERGING MARKETS - Importance of Employment, Equality and Per Capital Income .................................................................................... 837
ASIA ................................................................................................................................................................................................................................ 840
ASIA: CHARTS - AUSTRALIA .................................................................................................................................................................................... 841
ASIA - Regional Risk-Reward...................................................................................................................................................................................... 842
ASIA - Corporate Debt Levels Reflect Unintended Consequences of Mispricing & Malinvestment ................................................................... 843
ASIA - Synchronized Markets ...................................................................................................................................................................................... 848
ASIA - Caution Advised Regarding Positive South Korea Export Turnaround ...................................................................................................... 850
ASIA - Export Growth Looks Similar to Pre-2008...................................................................................................................................................... 851
ASIA - Global Slowing Quickly a Worsening Situation Across Asia ........................................................................................................................ 852
ASIA - Risks All on the Downside for Asia ................................................................................................................................................................. 853
ASIA - Demographic Headwinds ................................................................................................................................................................................. 855
ASIA - Pronounced Flight to Singapore Safety ......................................................................................................................................................... 856
BRICS ............................................................................................................................................................................................................................. 858
BRICS - A Development Bank-Forex Reserve Pool-African Integration ................................................................................................................ 858
BRICS - 40% of World Population and 25% of World GDP ..................................................................................................................................... 859
BRICS - $3 to $13B GDP in Ten Years ...................................................................................................................................................................... 862
BRICS- A World Wide Distrust of Financial Markets Building ................................................................................................................................. 864
BRAZIL - Inflation will remain high thanks to a "growth mismatch". ...................................................................................................................... 866
RUSSIA - Central bank will hike rates if inflation and oil prices continue to rise. .................................................................................................. 867
INDIA - Inflation ............................................................................................................................................................................................................. 868
INDIA - Will be fine as long as it continues to reduce its deficit............................................................................................................................... 869
INDIA - Watch Out For RE-Emergence of Food Price Inflation ............................................................................................................................... 870
US ECONOMY ......................................................................................................................... 872

THE GLOBAL MACRO OVERLAY ............................................................................................................................................................. 874
MACRO - US Macro Data Divergence ................................................................................................................................. 874
MACRO - US Macro Surprise Index .................................................................................................................................... 876
MACRO - Serious Structural US Problems Impeding Global Competitive ............................................................................ 879
MACRO - First Half In Charts .............................................................................................................................................. 881
US INVESTMENT CYCLE........................................................................................................................................................................... 890
GORD'S BIG PICTURE ECONOMIC CYCLE ...................................................................................................................... 890
ECONOMIC INDICATORS.................................................................................................................................................. 891
MONTHLY INDICATORS OF NOTE .......................................................................................................................................................................... 891
RESEARCH - The US Economy Continues to Tank Under Obama ....................................................................................................................... 891
REFERENCE CHARTS ............................................................................................................................................................................................... 894
THE CURRENT BUSINESS CYCLE - SITUATIONAL ANALYSIS ....................................................................................... 898

BUSINESS CYCLE - JOBS > CONFIDENCE > CONSUMPTION > GROWTH CYCLE ....................................................... 898
BUSINESS CYCLE - JOBS ................................................................................................................................................. 900
CHARTS & TABLES ..................................................................................................................................................................................................... 902
CHARTS - Underemployment Gap ............................................................................................................................................................................. 902
CHARTS - Employment to Population and Labor Slack........................................................................................................................................... 902


All Rights Reserved
CHARTS - Participation Rate ...................................................................................................................................................................................... 903

CHARTS - Part Time Employment.............................................................................................................................................................................. 903
REFERENCE - Prior Posts .......................................................................................................................................................................................... 911
BRIDGING : Jobs to Confidence & Sentiment .......................................................................................................................................................... 911
JOBS: Participation Rate at 1979 Carter Levels ....................................................................................................................................................... 915
BUSINESS CYCLE - CONSUMER & BUSINESS SENTIMENT .......................................................................................... 917

CHARTS & TABLES ..................................................................................................................................................................................................... 919
CHARTS - NFIB Small Business Sentiment .............................................................................................................................................................. 919
CHARTS - Orange Book .............................................................................................................................................................................................. 919
RESEARCH OF NOTE................................................................................................................................................................................................. 920
RESEARCH - Financial Stress Index Sends Market Clue ....................................................................................................................................... 920
RESEARCH - Consumer Confidence and the Mortgage Spike "Peak Signal" ...................................................................................................... 921
RESEARCH - Contrarian Breadth Rule...................................................................................................................................................................... 922
SENTIMENT: Consumer, Investor & Trader ............................................................................................................................................................. 925
Consumer Confidence - Conference Board ............................................................................................................................................................... 925
Consumer Confidence - Up but Sending Concern Signals .................................................................................................................................. 928
Consumer Sentiment - Michigan ................................................................................................................................................................................. 931
Consumer Comfort ........................................................................................................................................................................................................ 932
Investors Intelligence .................................................................................................................................................................................................... 933
American Association of Independent Investors ....................................................................................................................................................... 933
National Association of Active Investment Managers (NAAIM) ............................................................................................................................... 934
Small Business Optimism ............................................................................................................................................................................................ 935
BUSINESS CYCLE CONSUMPTION ............................................................................................................................... 936

CHARTS & TABLES ..................................................................................................................................................................................................... 939
CHARTS - Real Disposable Personal Income ......................................................................................................................................................... 939
CHARTS - Real Consumption Expenditure .............................................................................................................................................................. 939
CHARTS - Consumer Credit Deleveraging ............................................................................................................................................................... 940
CHARTS - Core Retail Growth ................................................................................................................................................................................... 941
RESEARCH OF NOTE................................................................................................................................................................................................. 941
RESEARCH - The Destruction Of America's Middle Class ..................................................................................................................................... 941
RESEARCH - Dramatic Slowing in Restaurant Business ........................................................................................................................................ 942
RESEARCH - Signs of Serious Troubles ................................................................................................................................................................... 943
RESEARCH - Falling Real Disposable Income means Falling Consumption........................................................................................................ 946
BUSINESS CYCLE - GROWTH .......................................................................................................................................... 948

CHARTS & TABLES ..................................................................................................................................................................................................... 951
CHARTS - Manufacturing ............................................................................................................................................................................................ 951
CHARTS - Exports ........................................................................................................................................................................................................ 951
CHARTS - Durable Goods ........................................................................................................................................................................................... 952
CHARTS - NFIB Small Business CAPEX .................................................................................................................................................................. 952
CHARTS - US Manufacturing Conditions Deteriorating ........................................................................................................................................... 953
RESEARCH OF NOTE................................................................................................................................................................................................. 953
RESEARCH - Shrinking CAPEX, Expanding Buybacks and Dividends ................................................................................................................. 953
REFERENCE - Prior Posts .......................................................................................................................................................................................... 957
GROWTH: US Economic Recovery Has Peaked ..................................................................................................................................................... 957
ECONOMIC CYCLE, INVESTMENT CYCLE, SECTOR ROTATION................................................................................... 962

US RECESSION A LOOMING US RECESSION ......................................................................................................................................... 966
RECESSION - Why a Looming Recession May Be Near ........................................................................................................................................ 966
RECESSION - Minimally in the Back Stretch of the Recovery ................................................................................................................................ 971
RECESSION - Reduced Household Income at the Core of the Growth of the Federal Reserve Balance Sheet ............................................ 977
RECESSION - Household Income and Signs of A Collapsing Middle Class ........................................................................................................ 979
RECESSION - More Cyclical Signs of a US Recession ........................................................................................................................................... 979
RECESSION - A Lack of Demand .............................................................................................................................................................................. 980
RECESSION - Money Going to Cash But Equity Inflows Still Suggest Corrective Correlation ........................................................................... 982
RECESSION - More and More Signals Flashing ...................................................................................................................................................... 985
RECESSION - Term Structures Suggest Signs of a US Recession Ahead .......................................................................................................... 987
DETROIT - A FAILURE OF PUBLIC POLICY TO RESPOND TO STRUCTURAL CHANGE.................................................................................. 989

DETROIT - By the Numbers ........................................................................................................................................................................................ 990
DETROIT - The News Reporting................................................................................................................................................................................. 991
DETROIT - A Structural Problem that Failed to be Politically Addressed .............................................................................................................. 993
RETIREMENT CRISIS NOW BEGINNING TO TAKE HOLD ........................................................................................................................ 994

ENTITLEMENTS - Underfunded and Unsustainable ................................................................................................................................................ 994
RETIREMENTS .................................................................................................................................................................. 997

RETIREMENT 35 Facts to Scare a Baby Boomer................................................................................................................................................. 997
10


All Rights Reserved
RETIREMENT: $205K Account Limits ....................................................................................................................................................................... 999

RETIREMENT: $3M Retirement Cap Unanswered ................................................................................................................................................ 1001
HEALTHCARE OBAMACARE........................................................................................................................................ 1003

HEALTHCARE - What Does Heart Surgery Really Cost, And Why Is It 70 Times More Expensive In The US? ........................................... 1003
HEALTHCARE - UPS Drops 15,000 Spouses From Health Plan, Blames Obamacare .................................................................................... 1004
STATISITICS - MORE FIXES TO GDP AND CPI......................................................................................................................................... 1006

FALSIFICATION - Government Data Knowingly Inaccurate According to Former BLS Head............................................. 1006
ENTITLEMENTS - Stealth Reform through "Chained CPI" Changes ................................................................................. 1008
CHAINED CPI - Both A Cut and Tax ........................................................................................................................................................................ 1008
CHAINED CPI - Reason It Hits So Hard .................................................................................................................................................................. 1010
GDP - Growth Through Manipulation................................................................................................................................. 1014

GDP - BEA Will Change The GDP Calculation To Boost Economy By 3% In July ............................................................................................. 1016
GDP - US GDP Makeover .......................................................................................................................................................................................... 1019
US PUBLIC POLICY - SOME NOTABLE POLICY PROBLEMS........................................................................................................... 1024

POLICY - Pointing US Towards Government Dependence ................................................................................................................................... 1026
POLICY - Yet Another Game of Deception .............................................................................................................................................................. 1030
POLICY - Obamacare A Flawed Public Policy Implementation ............................................................................................................................ 1033
POLICY - Financial Repression and Manipulated Illusions.................................................................................................................................... 1036
POLICY - US Economic Decline is Obvious to Anyone Caring to Look ............................................................................................................... 1041
POLICY - Policy Uncertainty and Confidence in Monetary Policy Direction is exposed .................................................................................... 1044
POLICY - "What is Good for GM is Good for America" is no longer correct ........................................................................................................ 1046
POLICY - Where is the Logic In US Public Policy ................................................................................................................................................... 1047
POLICY- What is the Real Driving Force Behind the New Immigration Law? ..................................................................................................... 1050
POLICY - Crony Capitalism and How America Lost its Way! ................................................................................................................................ 1053
MONETARY POLICY - TAPER & THE NEW FED CHAIR............................................................................................................................ 1057

TAPER .............................................................................................................................................................................. 1060
TAPER - The Fed Cannot Possibly "Exit" Without The Market Crumbling .......................................................................................................... 1062
TAPER - It Matters and the Fed Has Few Options As Quality Collateral Disappears. ....................................................................................... 1063
TAPER - Why Fed Bond Buying Can't Go on Indefinitely and Why TAPER........................................................................................................ 1065
TAPER - Political "Push-Back" by the Fed ............................................................................................................................................................... 1066
TAPER - Ending QE Will Pressure Fiscal Policy ..................................................................................................................................................... 1068
TAPER - Delay Risks Bond Market Volatility as Private Availability Steadily Shrinks ........................................................................................ 1072
TAPER - Clearly A Bluff or Muddled Policy ............................................................................................................................................................. 1075
TAPER - Why is the Fed Talking TAPER? .............................................................................................................................................................. 1077
TAPER - The Fed is Unlikely to Taper ..................................................................................................................................................................... 1080
TAPER - Fed Trapped in a Box ................................................................................................................................................................................. 1082
BOND SCARE .................................................................................................................................................................. 1083

BOND SCARE - The Bearish Bond Trend Has Resumed ..................................................................................................................................... 1083
BOND SCARE - Bonds (TLT) Break Important Support ........................................................................................................................................ 1085
A NEW FED CHAIRMAN .................................................................................................................................................. 1086

RESEARCH OF NOTE ..................................................................................................................................................... 1088
RESEARCH - Reduction at the Core of the Growth of the Federal Reserve Balance Sheet ............................................................................ 1088
RESEARCH - Fed's Excess Reserves are 51% Foreign Banks, 49% Domestic ................................................................................................ 1091
RESEARCH - A Game of Calculated Deception is Evolving to Something Worse ............................................................................................. 1093
RESEARCH - A Loan Distribution Credit Bubble .................................................................................................................................................... 1094
RESEARCH- QE To be Replaced with Guidance, Thresholds and Promises .................................................................................................... 1095
RESEARCH - Bernanke in a Box and Talking Out of Both Sides of Your Mouth ............................................................................................... 1097
RESEARCH - Duration Extraction: The Hidden Fed Game ................................................................................................................................... 1098
RESEARCH - The Fed's Stated Guidance Sign-Posts .......................................................................................................................................... 1100
RESEARCH - An Artificial Market ............................................................................................................................................................................. 1102
RESEARCH - Bank Reserves A Ticking Bomb, But Who Will Be Caught in the Blast? .................................................................................... 1102
RESEARCH - QE : An Intentionally Broken Mechanism Due to 2008 Policy Payable Interest on Bank Reserves ........................................ 1106
RESEARCH - QE Ineffective In Increasing GDP .................................................................................................................................................... 1107
REFERENCE - Prior Posts................................................................................................................................................ 1108

MONETARY: Helicopter Money of Central Bank Bond Purchases are Forever ................................................................................................. 1108
MONETARY: Central Bank Balance Sheet Expansion and the Theoretical Path to SPX of 1950 ................................................................... 1110
MONETARY: Central Bank Balance Sheet Expansion versus CPI ...................................................................................................................... 1112
MONETARY: The Fed Model No Longer Prices Risk ............................................................................................................................................ 1112
CHARTS: Fed Deliberately ignoring data on both growth and inflation ................................................................................................................ 1118
CHARTS: US Economic Activity ............................................................................................................................................................................... 1119
CHARTS: Effects of QE on S&P 500 ........................................................................................................................................................................ 1121
11


All Rights Reserved
CHARTS: Monetary Velocity versus Monetary Base .............................................................................................................................................. 1122

CHARTS: Days Between 'Unsterilized' Actions ....................................................................................................................................................... 1123
CHARTS: FOMC Economic Projections .................................................................................................................................................................. 1123
CHARTS: Taylor Rule & Evans Rule Estimates of Fed Funds Rates .................................................................................................................. 1124
CHARTS: Market Pricing In A Longer On-Hold Fed ............................................................................................................................................... 1124
CHARTS: Fed Balance Sheet Assets & Liabilities .................................................................................................................................................. 1125
CHARTS: Fed Policy Turns 180 Degrees ................................................................................................................................................................ 1125
CHARTS: US Banking Industry Concentration ........................................................................................................................................................ 1126
CHARTS: Total Credit Market Debt as % GDP ....................................................................................................................................................... 1127
CHARTS: Debt-to-GDP Ratio Above What Caused Great Depression ............................................................................................................... 1128
CHARTS: Yield Chase Completely Distorted .......................................................................................................................................................... 1128
CHARTS: Velocity of Money ...................................................................................................................................................................................... 1131
CHARTS: Real Negative Rates ................................................................................................................................................................................. 1134
CHARTS: Short Interest Rates a Fed Problem ....................................................................................................................................................... 1136
FISCAL POLICY - IT'S THAT TIME OF YEAR AGAIN!! ......................................................................................................................... 1138

CHARTS & TABLES ......................................................................................................................................................... 1141
CHARTS - Government Receipts & Outlay Growth Improves Significantly ......................................................................................................... 1142
CHARTS - Federal Budget Surplus / Deficit ............................................................................................................................................................ 1142
CHARTS - Real Federal Government Purchases ................................................................................................................................................... 1143
CHARTS - US Trade Balance Improvement............................................................................................................................................................ 1143
RESEARCH OF NOTE............................................................................................................................................................................................... 1144
RESEARCH - Congress Divided as Federal Government Shutdown Looms ...................................................................................................... 1144
RESEARCH - Avoiding Taxes ................................................................................................................................................................................... 1146
RESEARCH - A Confluence Of Risky Economic Events ....................................................................................................................................... 1147
RESEARCH - Everyone Hates Sequestration, But Few Can Agree On What to Cut ......................................................................................... 1148
RESEARCH - $70T Off-Balance Sheet Federal Liabilities .................................................................................................................................... 1150
REFERENCE - Previous Posts ................................................................................................................................................................................. 1153
CHARTS: Growth & Jobs ........................................................................................................................................................................................... 1153
CHARTS: Taxes & Spending ..................................................................................................................................................................................... 1156
CHARTS: Politics & Policy ......................................................................................................................................................................................... 1159
CHARTS: The Stakes ................................................................................................................................................................................................. 1160
CHARTS: Payroll Tax Holiday ................................................................................................................................................................................... 1163
CHARTS: Tax Rate Comparisons ............................................................................................................................................................................. 1164
CHARTS: Risk Perceptions ....................................................................................................................................................................................... 1165
CHARTS: 2013 Quarterly Impact .............................................................................................................................................................................. 1166
CHARTS: Budget Deficit ............................................................................................................................................................................................ 1167
CHARTS: Sovereign Debt .......................................................................................................................................................................................... 1170
CHARTS: State & Local Government Drag ............................................................................................................................................................. 1171
CHARTS: Government Dependence ........................................................................................................................................................................ 1174
CHARTS: Coming Demographic Shock ................................................................................................................................................................... 1174
CHARTS - Fiscal Cliff Outcome ................................................................................................................................................................................ 1178
BUDGET - What You Need to Know ................................................................................................................................. 1180

BUDGET: As Represented and Spun for the Public ............................................................................................................................................... 1180
BUDGET: A Budget That Institutionalizes Big Government .................................................................................................................................. 1182
BUDGET: The Secrets in The Budget ...................................................................................................................................................................... 1186
KEY DRIVERS - CATALYSTS OF CHANGE .......................................................................................................................................... 1189

EMPLOYMENT ................................................................................................................................................................. 1193
CHARTS & TABLES ................................................................................................................................................................................................... 1193
CHARTS - Nonfarm Payrolls Y-O-Y DECLINE ....................................................................................................................................................... 1193
CHARTS - Hiring Stalled at 200K Per Month (Approximates ONLY the New People Entering Workforce) ................................................... 1193
CHARTS - The Under-Employment Gap ................................................................................................................................................................. 1194
CHARTS Staycations A Sign of the FEAR of Job Loss & Competition for Jobs .............................................................................................. 1194
RESEARCH OF NOTE............................................................................................................................................................................................... 1196
RESEARCH - Low-Wage Jobs Bias Continues to Hamper U.S. Recovery ......................................................................................................... 1196
RESEARCH - A REAL Family Wage versus Part Time & HES ............................................................................................................................. 1198
RESEARCH - It is as Much About the Quality, as the Quantity of Jobs ............................................................................................................... 1205
REFERENCE - Prior Posts ........................................................................................................................................................................................ 1207
1- CAPITAL SPENDING ............................................................................................................................................................................................ 1207
2- SMALL BUSINESS OPTIMISM ............................................................................................................................................................................ 1210
3- DEMOGRAPHIC SHIFT ........................................................................................................................................................................................ 1214
REAL DISPOSABLE INCOME .......................................................................................................................................... 1225

CHARTS & TABLES ................................................................................................................................................................................................... 1225
CHARTS - Household Incomes a Sign of a Collapsing Middle Class .................................................................................................................. 1225
CHARTS - Food Stamps Now 14% of US Grocery Store Sales ........................................................................................................................... 1225
12


All Rights Reserved
RESEARCH OF NOTE............................................................................................................................................................................................... 1226

RESEARCH - Standards of Living and Artificial Expectations ............................................................................................................................... 1226
RESEARCH - A Lack of Demand in US Economy .................................................................................................................................................. 1229
RESEARCH - Full Time Jobs or Food Stamps & Disability? ................................................................................................................................. 1230
STANDARD OF LIVING - Salary Compression ...................................................................................................................................................... 1232
DISPOSABLE INCOME - 66M (20%) Below $28.8/Year Subsistence Level ...................................................................................................... 1233
FOOD STAMPS - 46,405,204 Individuals, 22,257,647 Households below Poverty Line ................................................................................... 1235
DISPOSABLE INCOME - Bad Even in Nominal Terms ......................................................................................................................................... 1236
US RESIDENTIAL REAL ESTATE .................................................................................................................................... 1239

CHARTS & TABLES ................................................................................................................................................................................................... 1239
CHARTS: Household Formations ............................................................................................................................................................................. 1239
CHARTS - Housing Starts .......................................................................................................................................................................................... 1239
CHARTS - Composition of Housing Sales ............................................................................................................................................................... 1240
CHARTS: New Home Sales ...................................................................................................................................................................................... 1240
CHARTS: Existing Residential Supply ..................................................................................................................................................................... 1241
CHARTS - Housing Starts .......................................................................................................................................................................................... 1242
RESEARCH OF NOTE............................................................................................................................................................................................... 1243
RESEARCH - Household Formation Drives Residential Real Estate ................................................................................................................... 1243
OVERVIEW.................................................................................................................................................................................................................. 1245
CURRENT SITUATIONAL ANALYSIS ..................................................................................................................................................................... 1249
CURRENT HOME OWNERSHIP TRENDS ............................................................................................................................................................. 1249
NATIONAL STATISTICS: PRICE ............................................................................................................................................................................. 1253
NATIONAL STATISTICS: EXISITNG HOME SALES ............................................................................................................................................. 1255
NATIONAL STATISTICS: NEW HOME SALES ...................................................................................................................................................... 1257
RESEARCH OF NOTE............................................................................................................................................................................................... 1258
US COMMERCIAL REAL ESTATE ................................................................................................................................... 1264

OVERVIEW.................................................................................................................................................................................................................. 1264
NATIONAL STATISTICS: COMMERCIAL REAL ESTATE.................................................................................................................................... 1265
RESEARCH OF NOTE............................................................................................................................................................................................... 1266
CAPITAL SHRUGGED .............................................................................................................................................................................. 1271
13


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The Taper Caper

The Fed is Caught in a Box

GLOBAL RISK & TIPPING POINTS

GLOBAL MACRO TIPPING POINTS - OCTOBER 2013

1 October 2013 Edition

Restricted & Confidential

The Taper Caper

MACRO MONITORING INSTITUTIONS ............................................................................................................................... 38

RISK SIGNALS ............................................................................................................................................................................................... 67

FINANCIAL & ECONOMIC RISK .......................................................................................................................................... 87

October 2013 Edition

Restricted & Confidential

RISK - COMPLACENCY & REPRESSED FEAR ...................................................................................................................................................... 152

GLOBAL MACRO: RISK LEVELS .............................................................................................................................................................. 171

AGGREGATED RISK LEVEL .............................................................................................................................................. 179

GLOBAL MACRO ................................................................................................................... 203

ECONOMIC WARNINGS .................................................................................................................................................... 242

GLOBAL MACRO: INDICATORS ............................................................................................................................................................... 260

GLOBAL GROWTH............................................................................................................................................................. 267

October 2013 Edition

Restricted & Confidential

GLOBAL GROWTH - Global PMI ............................................................................................................................................................................... 272

GOBAL UNEMPLOYMENT ................................................................................................................................................. 277

GLOBAL TRENDS .............................................................................................................................................................. 286

GLOBAL SENTIMENT ........................................................................................................................................................ 299

GLOBAL INFLATION .......................................................................................................................................................... 311

GLOBAL MACRO: MONETARY POLICY & CENTRAL BANKING ........................................................................................................ 314

GLOBAL CENTRAL BANKING ........................................................................................................................................... 325

- Austerity Now Officially Dead Public Policy ........................................................................................................................... 325

EMERGING MARKETS ...................................................................................................................................................... 344

BOE - UK ............................................................................................................................................................................ 348

FED - US............................................................................................................................................................................. 349

BOJ - JAPAN ...................................................................................................................................................................... 355

ECB - EU ............................................................................................................................................................................ 368

GEO-POLITICAL TENSIONS ..................................................................................................................................................................... 374

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BOND SCARE - Long Term Support Trendline Achieved........................................................................................................................................ 379

CHINA LIQUIDITY TIGHTENING SCARE ........................................................................................................................... 383

CURRENCY WARS BECOMING RATE WARS .................................................................................................................. 403

CYBER WARS - GROWING THREAT ................................................................................................................................ 417

IRAN & SYRIA - COMPLETE MIDDLE EAST DOMINATION .............................................................................................. 420

DRIVER$: RISK-ON - RISK-OFF ANALYTICS ......................................................................................................................................... 423

REGIONAL ............................................................................................................................... 460

MEDICAL CHARTS - Situation Critical ............................................................................................................................... 491

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ITALY - Budget Failure on NO Growth ................................................................................................................................ 517

FRANCE - Hollande Going Down for the Count................................................................................................................... 541

GERMANY - EU in the Hands Of Election ........................................................................................................................... 570

IBERIAN PENINSULA - Spain & Portugal Going Critical ..................................................................................................... 583

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SITUATIONAL ASSESSEMENT ................................................................................................................................................................................. 590

UK - New BOE Governor with More Printing Ahead ............................................................................................................ 612

CYRPUS - Latest EU Banking Crisis ................................................................................................................................... 631

ASIA - SERIOUS CRACKS BELOW THE SURFACE .......................................................................................................................................... 656

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RESEARCH - A Potentially De-Stabilizing Cash Crunch ......................................................................................................................................... 686

JAPAN: The New Currency War Front ................................................................................................................................ 746

October 2013 Edition

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