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Global Growth Estimates Get Ratcheted Down; Over Expectations May Still Be Built In

“We are now just over two months into that oft-dreaded year of 2012, and the economic and financial projections/assumptions by public and private institutions across the world have noticeably worsened. These are the same institutions (i.e. politicians, bureaucrats and executives) that have everything to lose by painting an accurate portrait of their position in the global economy, so it’s an extremely safe bet that they are still over-estimating their prospects. Nevertheless, the fact that their inflated, yet worsening projections completely destroy the myth of an economic recovery is telling.

The Chinese government just lowered its 2012 growth projection to 7.5%, which is the lowest it has been since 2004. As Ilargi recently noted here, that lowered projection itself is based on assumptions of stabilized exports, rising domestic consumption and no “hard landing” from the collapse of its unprecedented property/infrastructure bubble. Once we factor all of those things in, along with a potential 150% public debt/GDP ratio in 2011, the one and only remaining driver of the global growth story becomes much more of a liability than a boon.

Moving on to Europe….”

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Investors and Traders Alike Worry the Recent Rally Was Built on Hot Air

“For many, this year’s stock market rally has been really something. But investors and bankers on Wall Street worry it may be based on a whole lot of nothing, which is why they aren’t doing much of anything.

The Dow Jones Industrial Average has forged a path higher, marking its best start to a year since 1998. And on Monday, the Dow notched its 45th consecutive trading day without a triple-digit decline—the longest streak since 2006. Investors contained the decline in the blue-chip index to 14.76 points on Monday.

The market’s fear gauge—the CBOE Market Volatility Index, known as the VIX—has tumbled since August.

Such pleasant conditions would typically be celebrated by investors and considered a boon for Wall Street investment bankers and their clients seeking to put together mergers and acquisitions or initial public offerings.

Bloomberg NewsHeadwinds that investors see include rising oil prices, Europe’s unresolved debt troubles and elections in the U.S.

Instead, initial public offerings are in a slump, and mergers and acquisitions activity by some measures is the lowest since 2008, according to data firm Dealogic. As a result, investment banking fees are down by a third.

Recalling last year’s swings, some investors worry that volatility—or market declines—may be afoot. “We cannot continue this upward movement forever,” said Reed Choate, portfolio manager at Neville, Rodie & Shaw, a New York firm with $1.2 billion under management….”

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Investor Sentiment: Get a Parachute?

blueguyzee | March 4, 2012 |

Like last week, the “dumb money” remains extremely bullish and the “smart money” is bearish. What is also certain is that the bulls remain in control, yet the best gains are clearly behind us. What is uncertain is what happens when the music stops – will you find a chair to sit in or will you need a parachute? The 2010 liquidity love fest ended in the May 5 flash crash, and the 2011 version saw the SP500 drop 18% in 3 weeks. I ask myself everyday: if I am buyer today will I be able to get out of this market safely and without a parachute? Without a pullback to buy in to, I have my doubts.

Read the rest here. Be sure to see the dumb and smart money indicators.

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Krugman: America is doing exactly what both theory and history say it shouldn’t

“The economic news is looking better lately. But after previous false starts — remember “green shoots”? — it would be foolish to assume that all is well. And in any case, it’s still a very slow economic recovery by historical standards.

There are several reasons for this slowness, with the most important being the overhang of household debt that is a legacy of the housing bubble. But one significant factor in our continuing economic weakness is the fact that government in America is doing exactly what both theory and history say it shouldn’t: slashing spending in the face of a depressed economy.

In fact, if it weren’t for this destructive fiscal austerity, our unemployment rate would almost certainly be lower now than it was at a comparable stage of the “Morning in America” recovery during the Reagan era.

Notice that I said “government in America,” not “the federal government.” The federal government has been pursuing what amount to contractionary policies as the last vestiges of the Obama stimulus fade out, but the big cuts have come at the state and local level. These state and local cuts have led to a sharp fall in both government employment and government spending on goods and services, exerting a powerful drag on the economy as a whole….”

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SHIPPING CEO: Iran Could Send Oil To $440/Barrel

“The scariest Iran scenario yet comes from Bob Bandos, CEO of marine logistics and services company GAC North America.

Bandos tells Pierre Bertrand of the International Business Times:

[T]ankers can haul 1.8 million barrels of oil a day through the strait. If that supply is choked off, the effect would be similar to the fuel shortages of the 1970s – but more extreme, Bandos said.

“That would be nothing compared to this,” Bandos said, who added the shortage would be global.

If the 1973 embargo experience repeats itself, the price of a barrel of oil could soar to $440 a barrel.

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Our System Our Structure Our Illusion – A Documentary of Sorts

A documentary of sorts. More like a collection of great statements from comedians, politicians, and ordinary folk. If you watch this in its entirety you may think you have automated responses to the philosophical questions asked about government, law, society, economics, and humanity; but you’ll find that perhaps there are many illusions affecting your belief structure.


“All things are subject to interpretation; whichever interpretation prevails at a given time is a function of power and not truth.”

 –Friedrich Nietzsche



“An attempt to give an alternate perspective than what has ever been shown on mainstream media, I hope it inspires you to ask questions.

███ ██ █ ████ everything ███ ███ is ████ ██ ████ fine ████ ████ love. █████ ███ █ ███ your ████ ███ government


Cheers on your weekend!

[youtube://http://www.youtube.com/watch?v=-HFXMQ7Ot-k 450 300]

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Krugman on the GOP: Four Fiscal Phonies

“Mitt Romney is very concerned about budget deficits. Or at least that’s what he says; he likes to warn that President Obama’s deficits are leading us toward a “Greece-style collapse.”

So why is Mr. Romney offering a budget proposal that would lead to much larger debt and deficits than the corresponding proposal from the Obama administration?

Of course, Mr. Romney isn’t alone in his hypocrisy. In fact, all four significant Republican presidential candidates still standing are fiscal phonies. They issue apocalyptic warnings about the dangers of government debt and, in the name of deficit reduction, demand savage cuts in programs that protect the middle class and the poor. But then they propose squandering all the money thereby saved — and much, much more — on tax cuts for the rich.

And nobody should be surprised. It has been obvious all along, to anyone paying attention, that the politicians shouting loudest about deficits are actually using deficit hysteria as a cover story for their real agenda, which is top-down class warfare. To put it in Romneyesque terms, it’s all about finding an excuse to slash programs that help people who like to watch Nascar events, even while lavishing tax cuts on people who like to own Nascar teams.

O.K., let’s talk about the numbers.

The nonpartisan Committee for a Responsible Federal Budget recently published an overview of the budget proposals of the four “major” Republican candidates and, in a separate report, examined the latest Obama budget. I am not, by the way, a big fan of the committee’s general role in our policy discourse; I think it has been pushing premature deficit reduction and diverting attention from the more immediately urgent task of reducing unemployment. But the group is honest and technically competent, so its evaluation provides a very useful reference point.

And here’s what it tells us: According to an “intermediate debt scenario,” the budget proposals of Newt Gingrich, Rick Santorum, and Mitt Romney would all lead to much higher debt a decade from now than the proposals in the 2013 Obama budget. Ron Paul would do better, roughly matching Mr. Obama. But if you look at the details, it turns out that Mr. Paul is assuming trillions of dollars in unspecified and implausible spending cuts. So, in the end, he’s really a spendthrift, too….”

Full article

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In Focus: How Breitbart Helped to Launch Huffington Post

“Andrew Breitbart, the hyperactive, charming, and divisive creator of Big Government and its sister sites who died today at 43, also served as the link between two of the dominant media forces of the last decade: The Drudge Report, which he helped run for years, and Huffington Post, where he was present — briefly — at the creation.

Breitbart’s role as Drudge’s right hand is well known; less public was his brief, memorable stint as one of four partners in the Huffington Post in 2005. It’s a story that hasn’t been told in great detail, but BuzzFeed founder Jonah Peretti, who also co-founded the Huffington Post with with the site’s namesake Arianna Huffington and media business figure Ken Lerer, recalled that period in an interview today.

Breitbart’s role later became contested — he brashly claimed total credit for “the plan,” which his former partners denied — but he was an unmissable presence in the Soho office that was for a time Huffington Post’s New York headquarters. There, for a month in the spring of 2005, he worked closely with Lerer (who is now Chairman of BuzzFeed), and Peretti, a graduate of MIT’s media lab, to launch the site.

“He taught us a lot of things early on,” Peretti said, recalling how Breitbart showed them key features of the media ecosystem. “He explained about looking at the British newspapers late at night because they would sometimes break news before the U.S. papers. He cared about getting links up seconds or minutes faster than other publications and was obsessive about that.”

Breitbart was also a font of ideas, not all of which made it into practice.

“He wanted every commenter to have to pay $1 to comment, and the dollar would go to charity but the user’s true identity would be authenticated through a credit card,” Peretti recalled, noting that the idea prefigures current attempts to authenticate identity online.

He also proposed “a phone number where celebrities could call in and leave voice blogs that would automatically appear on the site ,” Peretti recalled. “He wanted that built before launch, and launch was four days away.”

His creativity, as many who worked with him know, could be hard to contain.

“He was just incredibly difficult to have in the office – he was totally ADD and would jump from idea to idea. He would spend hours playing fantasy baseball during the day. He was incredibly good at fantasy baseball,” Peretti said, but then started talking to another Huffington Post employee about starting a fantasy baseball company amid the Huffington Post launch.

There were also also ideological tensions from the start….”

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Marc Faber: Government Will Seize Gold

“Economist Marc Faber, publisher of The Gloom, Boom and Doom report, says the government will seize privately held gold, even as he continues to buy physical gold himself.

“I prefer to play the commodity space by owning physical gold,” Faber tells Chiefsworld. “If I were an American, I would store it outside the U.S., because in the U.S., it is not completely unlikely that they will eventually take it away.”

“Like in 1933, gold will be purchased back by the government” because eventually the financial mess will be so bad that gold prices “will go ballistic, and the government will take away something from a minority, and not many people own gold.”

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This is Not a Garden-Variety Post-War Inventory Recession

“For some time we have maintained that the economy, following the severe 2008 credit crisis, would grow at an exceeding slow and uneven pace, and this is the way it is playing out.

This is unlike the garden-variety post-war inventory recessions that were mostly short and shallow, and followed by robust rebounds that quickly exceeded prior peaks.

The crisis was caused by an extraordinary debt boom that will take many years to work off and create severe headwinds to economic growth.

Household debt as a percentage of GDP averaged 55% over the past 60 years, but soared to 99% by 2008.  It has now declined to 87% and still has a long way to go before returning to anything near normal.  Federal government debt has climbed from 56% of GDP in 2000 to 97% as of September 30th, and is undoubtedly higher now.  In our view the overall debt is the single most important factor to take into account in analyzing the future growth of the economy.

The reduction in household debt since the 2008 peak has been the key factor in dampening economic growth to date.  In fact, household debt has now been down for 13 consecutive quarters after never being down for even one quarter in the entire post-war period!

The effect of deleveraging is not a vague academic theory, but is clearly reflected in the real numbers.  GDP in the fourth quarter was only 0.8% higher than it was at the peak four years earlier.  In the last four quarters GDP growth was only 1.6%.  While fourth quarter GDP growth was an annualized 3.0%, two-thirds of the amount was accounted for by inventories.  These probably have to be pared down in the first quarter.  By almost any measure the current recovery has been far weaker than any other post-war expansion….”

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Leon Cooperman: Stocks Are the Best Place to Be

Stocks are the best investment out there right now, while government bonds are returning less than inflation, says Omega Advisors CEO Leon Cooperman.

“We find plenty of attractive stocks,” Cooperman says, according to CNBC.

Low interest rates make Treasury bills, cash and other investments less attractive namely because inflation outpaces the return.

“Then you’re left with equities,” Cooperman says, adding financial stocks are attractive as well.

Banks are lending less these days and have recapitalized in recent years, which makes their stocks stable although they often return less.

Good stocks in the financial sector include Bank of America, JPMorgan Chase and Citigroup, Cooperman says.

Some market watchers say stocks are due for break, including Doug Kass, who has set a target for the S&P 500 of 1,345, down from about 1,367.

“While I recognize the positive price momentum and the possibility of a further overshoot of my fair-value calculation, I remain cautious over the shorter term,” Kass writes on TheStreet.com.

Others agree a correction is coming, including Sam Stovall, chief equity strategist at S&P Capital IQ.

“The market continues to work its way higher. We are knocking on the door of the April 29 recovery high. It feels like there are an awful lot of people calling for a correction — or at least a digestion — and I’m one of them,” says Stovall, according to CNBC.

“We think we’re going to get to where we are now, or even as high as 1380 (on the S&P) and then maybe go down to the low 1300s before approaching 1400. That’s the scenario our technicians are talking about.”


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Rickards: Double-Dip Recession Likely and so Is Depression

“Despite improving economic indicators, the U.S. economy remains at risk for a double-dip recession, which would indicate the country is likely mired in depression, says James Rickards, a hedge fund manager and the author of “Currency Wars: The Making of the Next Global Crisis.”

Unemployment rates and initial jobless claims are falling, growth rates are up and so are stock prices.

That doesn’t mean the country is out of the woods by any means.


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Cook: The S&P Should Pullback as “bricks to the wall of worry” pile up

“The S&P 500 is likely to retreat to 1,330 as sluggish domestic growth, high oil prices and Europe’s debt woes take their toll on US stocks, according to Kevin Cook, senior stock strategist at Zacks.com.

Rose | Mueller | Stock4B | Getty Images

“This market is building a wall of worry,” Cook told CNBC recently. “The train has left the station and left a lot of fund managers behind who wish they’d bought. They all want a pullback and that’s why we’re not getting it at the moment. A pullback will be bought even before 1,330 on the S&P.”

In a note, Cook identifies a number of what he calls “bricks for a wall of worry” that could contribute to a retreat of the S&P 500 [.SPX  1372.18  —  UNCH    ] from the current levels, including a slowdown in the economy.

He believes that first quarter US gross domestic product growth could be close to 1 percent, as the 2.8 percent expansion seen in the fourth quarter of last year was largely due to inventory rebuilding.

Cook also says that the index could tilt downwards as earnings and sales forecasts at US companies become flat.

“These and other factors make a good wall for markets to climb near-term,” Cook said. “I’m a buyer of 3-6 percent pullbacks to S&P 1330 and 1300.”

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Analyst Fear ‘Monetary Anarchy’ As G-8 Nations Take on Enormous Money Printing Stances

“The scale of money printing in the West has become so massive that the world may fall prey to “monetary anarchy,” with traces of bubbles appearing everywhere.

Getty Images

At least that’s what some critics see in the latest round of cash pumping by major central banks.

It is also an eerily reminiscent of 2011, when similarly generous monetary easing sparked higher oil prices, slowed the recovery and stoked speculative hot money flows into vulnerable emerging markets.

The European Central Bank [cnbc explains] alone is expected to lend another half trillion euros or more of super-cheap money to banks on Wednesday, following Japan and Britain which have already injected fresh cash. The Federal Reserve has promised to keep interest rates low until 2014 and act further if needed.

There is a sense of deja-vu in financial markets. Just like the last time a wave of money was pumped into the world financial systems in 2011, crude oil – fuelled also this time by Middle East tensions – has jumped 15 percent this year.

As a result, riskier assets such as equities are already coming off new year highs. Rising emerging market currencies are forcing some central banks there to intervene.

The scale of money creation since the onset of the global credit shock can be seen in the size of central banks’ balance sheet expansion.

JP Morgan says G4 central bank balance sheets have more than doubled since 2007 to 24 percent of combined gross domestic product and will reach 26 percent this year.

“We have Monetary Anarchy running riot, where the elastic band between the real economy and the current liquidity-fuelled markets is stretched further and further beyond credulity,” Bob Janjuah, head of tactical asset allocation at Nomura, noted.

He said bubbles were visible in all asset classes because central bank balance sheets are at the core.

“If/when the current cycle implodes, central banks which have seen explosive balance sheet growth will add to the problems, rather than being able to act as credible lenders of last resort,” he said.

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WILLEM BUITER: ‘Catastrophe’ In Europe Has Been Avoided, But Fear ‘Will Strike Again’

“Citi’s chief economist Willem Buiter gave a tempered assessment of the effects of the European Central Bank’s two three-year LTROs when he appeared on Bloomberg TV this morning (via @lindayueh).

While he emphasized that the ECB’s liquidity actions were the best course of action to address a credit crunch in the banking system, he argued that Europe will still have to face many hurdles—and indeed, more “near-panics”—in the years ahead:

It has bought time. Without actions of this nature there could have been catastrophe. Catastrophe has been avoided, and the collective sigh of relief can still be heard from here to Frankfurt…

Undoubtedly I think before this crisis is over, there will be other episodes of near-panic and paralysis in the markets which will call for the big battalions of the ECB, or the big bazooka to use a metaphor, to be fired. Only the ECB has the big pockets to keep governments funded and the banks funded when fear strikes, and it will strike again. I mean, other sovereigns will restructure in the euro area in the years to come and there’s no doubt that other holes will be discovered in banks’ balance sheets that will have to be filled in a hurry.

As for the U.S., he predicted that the Federal Reserve will embark on more quantitative easing this year if unemployment or economic activity begins to disappoint as the year progresses. However, he argued that this time the Fed should make QE “credit easing” by expanding the kinds of assets it purchases….”

Watch his full interview 

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Gundlach: ‘US Stock Market Vulnerable..Rally Has Gone too Far’

“Jeffrey Gundlach, one of the world’s leading bond fund managers, on Friday warned that the rallying U.S. stock and corporate debt markets are highly vulnerable to a major reversal.

The investor, who was crowned by Barron’s as the new “King of Bonds” a year ago, said in an interview that he thinks the recent rally in stocks, which last week drove the Dow Jones industrial average above 13,000 points for the first time since May 2008, has gone too far.

Gundlach, the chief executive officer and chief investment officer of the $28 billion DoubleLine Capital LP, said he is still concerned about the euro zone crisis and deepening tensions in the Middle East.

The United Nations’ nuclear agency said on Friday that Iran has sharply stepped up its uranium enrichment drive in a report that will further inflame Israeli and Western fears that Tehran is pushing ahead with an atomic weapons program.

“It’s an awfully easy decision right now to not be making further investments in risk assets,” Gundlach said.

“The pricing of the market has returned to the levels prior to the scales falling from investors’ eyes regarding the global financial crisis, and I really don’t think that’s appropriate,” he said.

The Dow has gained 8 percent since December and the broader S&P 500 index is up roughly 10 percent.

The size of the gain leaves no cushion of safety given all the dangers in the world economy and leaves the stock market as priced for disaster as it was when the financial crisis hit in 2008, Gundlach argued.

“When I look at the pricing in the market today, I see a good chance of downside movement of some significance,” he said….”


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