Tuesday, June 30, 2015

Greece’s Downfall and Redemption


Decades of exorbitant military spending account for Greece’s present downfall under an Olympian-sized debt. European governments and news media portray the problem of Greece’s financial woes as public spending profligacy.

Read more: http://sputniknews.com/columnists/20150629/1023985661.html#ixzz3ecP1O4EV


Market Talk

Trading Community
Interesting day in Bunds where we saw initial weakness as the safe-haven bid was unwound, only to see it all reverse at the end of the day! GGB 2yr got messy at one stage on headlines (needless to say no IMF repayment was made) and was last seen 50bp higher at 35.75% at the time of this writing. YTD Greek banks on average have lost 52-61% of their value with Eurobank the worst performer (-61% YTD).

One area we should keep an eye on is the US/Bund 10yr yield spread. Currently quoted at 155bp. This spread will start taking its lead from the Euro, so when that starts to loose favor keep a watchful eye on TY/RX.

Asian shares were very volatile, Shanghai particularly trading with a 10% variation (daily low to high) today as PBOC were active again. In Europe we did see small gains intraday in DAX and CAC but neither could hold on and actually closed well into negative territory both down over 1%. UK FTSE never got into the green all day and closed -1.5%.

Credit markets are almost closed we hear! Trades are happening by appointment and to even move 1Mio EM bonds (at an opening price) is almost impossible. It is not uncommon to hear an indication only to trade 2% away from it. No-one is standing up to prices and to liquidate even a small portfolio can take weeks. Worth noting it is not worth partially selling bonds unless you can clear the position! Because once there is a traded price ALL holders will have to remark the book. That is unless it is on the back book (Balance Sheet) where MTM (Mart-to-Market) is not necessary daily for all books.

One can only remember in Japan when stocks/bonds went illiquid and they simply readjusted the laws for “Bad Debt” which was once 30days without payments extending it to 180 days (six months) before it was declared a default. Don’t think we are quite there yet but the longer it takes the further it goes. Therefore, we may see yet an attempt to extend the deadline for default to pretend Brussels and the Euro are still OK for now. If the INF simply extends the payment date by 6 months, then magically there is no Greek default. So let the games begin.

Professional Analysis vs. a Fool’s Game

The way people try to judge one analyst against another is like saying, “Oh, he is right and someone else is wrong.” That is unprofessional because OPINION is irrelevant and NO ONE can be correct all the time. It is humanly impossible to forecast the future based upon what someone “thinks” will or will not happen. As soon as anyone tries to engage in such comparisons, they reveal their own stupidity for it is a pointless exercise in nonsense. The only possible way to forecast any market is (1) by means of a quantitative model never fundamentally; and (2) such a model cannot work on a single market in isolation.
The analysis provided on this site is NOT my OPINION for absolutely NO ONE can stay on top of everything all the time to the point that they are NEVER wrong. The entire object of our model is to monitor the world and that takes observational power that is really beyond human capability. Once you begin to see the world in a connected way, your reality will change for what lies behind the curtain is complex and proof positive that while people will try to manipulate the world, it will never be tamed or broken.
The greatest part of the learning curve in utilizing our forecasting: (1) understand it is a computer monitoring the world simultaneously; (2) the model has three primary components Time, Price, and Pattern Recognition, and (3) the absence of human emotion and subjective “I think” analysis or prognostication. Analysts must yield the stark realization that they must yield to their human inability to always be right, as politicians must yield to the fact that they are the problem because of their human inability to resist power and self-interest.
Using The Models
The threshold to opening your mind to be able to trade CONSISTENTLY is to avoid subjective analysis. Comprehending that our analysis is a quantitative model and not simply personal opinion. That is the ONLY way to achieve consistency. All forecasting must be presented very black and white – IF THIS; THEN THAT; OR ELSE THAT WILL HAPPEN. This style of analysis removes human subjective judgment. Under this methodology, we allow the market to show us the correct path. Any other form of analysis is a vain attempt to judge the market based upon what you may think will happen. That cannot be consistent because the majority must always be wrong for that is the very fuel that drives the market like a pendulum going back and forth.
Each aspect of PRICE, TIME, and Pattern Recognition (Global Market Watch) is entirely independent. Therefore, we gave three levels on the Dow the 18500, 23000, and 32000/40000. When we introduce TIME, the first opportunity for a major high was 2015.75 and the three price targets would then come into play. So while the maximum objective would have been 32000/40,000 as early as 2015, we have been unable to get through the first target at 18500. Hence, if we saw a price advance to 23,000 with the TIME of the ECM (October 1, 2015), then we should expect a correction because we met both TIME and PRICE. Failing to reach that next threshold at 23,000 means the next TIME target becomes 2017. Exceeding 23,000 before TIME means you then go to the next target in PRICE, being the 32,000/40,000 area.
We identify time windows and for such targets; to form important highs or lows there MUST be the alignment of both TIME and PRICE unfolding often according to Pattern Recognition.
We use the Reversals to step in and out, letting the market guide us. So the entire object is to eliminate HUMAN emotion and judgment, which includes myself. I would sell against a Bullish Reversal based upon TIME or buy against one below also with TIME.
This is how the Reversals were situated for the 1987 Crash. We can see there was a huge gap. Breaking that PRICE target of 286.10 on the S&P 500 futures meant you then go to the next level and that was 180. The TIME was just 2 days to the ECM and that was precisely what took place.
That forecast, which became famous, was not based upon my personal opinion. It was based entirely upon this system of three separate approaches.
No, we do not use Elliot Wave or technical analysis trading patterns. Such methods are highly subject to debate and rest only upon the plain and simple observation and thus OPINION. Therefore, subjective methods of this nature are unsuitable for definitive management or trading.

Greek Referendum in Vote on Grexit

Greek Protesters
Brussel’s worst nightmare is coming true. The one thing the Troika has fought so hard to do is kill any democratic vote on the euro by the people in every country. This is not about the terms of austerity, which they still cannot understand is DEFLATIONARY and supports debt holders at the expense of society because politicians borrow forever, waste money, and the hand the bills to the people – TAXATION WITHOUT REPRESENTATION.
Freedom - Brave Heart Gibson
They are trying to scare the Greeks that they will be the loser, when in fact it is really the other way around. Protests in support of a NO vote (Grexit) are not only crowding the streets in Athens, they are coming out in Britain in support of Greece. What comes to mind is Mel Gibson’s classic movie “Braveheart” where Gibson played William Wallace, the hero of Scotland. At the end of the film, as he is being disemboweled, his last words are “FREEDOM!”
They broke down in negotiations followed by a rejected extension proposal put forward by Greek Finance Minister Yanis Varoufakis. Meanwhile, the Greek parliament voted on Prime Minister Alexis Tsipras’ proposed referendum to secure popular support for their staunch negotiation position. The government won approval for the vote, which will be held on Sunday July 5. This vote may decide the fate of Greek’s future in the Eurozone, not whether to accept the terms.
Yet it is true that Greece is holding a referendum on a proposal that no longer exists according the Troika. What makes sense here is that the people are entitled to vote. This is what everyone forgets. We are supposed to be in a “free society” and politicians believe only in their power rather than the will of the people. Even the trade deal handed to Obama is of the same nature removing the right of the people to even participate.
This is the Crisis in Democracy I have warned of since the mid-1980s. It never matters what form of government we adopt. It ALWAYS, and without exception, expands its rights against the people and that sets in motion the perpetual cycle of civil unrest and revolution. This is why there has never been a single form of government to endure throughout time.
It is time for Greece to yell “FREEDOM!” for the brain-dead concepts of the Troika cannot even see a solution. All they see is their own power and jobs. They assume they will be fine as long as they suppress the people and strangle the economy by authoritarianism. They fail to see that their collapse is INEVITABLE for they cannot sustain a system that is economically impracticable any more than Communism was sustainable. They can tell the press to stop calling them the Troika, but that is what they remain – the three-headed monster of old.

Can We Help Greece?

A slew of emails have been coming in asking if we would help Greece if they leave the euro. ABSOLUTELY YES! This week we have people in Athens meeting as I write, offering at this stage an informal proposal should the people vote to leave the euro. This would be the GREATEST of all events that would not merely restore the dignity of Greece, it would quickly show the way out. So yes, we are presenting in Athens as I write the general outline of our proposal that was submitted to Cyprus, which then newly elected President had run on a platform of joining the euro. He sacrificed his nation and his people on the political altar in Brussels.
If Greece would accept our Cyprus Proposal principle, we in fact would move our headquarters to Athens in a blink of an eye. Every hedge fund would move from Cayman Islands, who will begin to report on them to the rest of the world RETROACTIVELY on the date of the ECM – October 1, 2015.
During the Great Depression, Britain abandoned austerity (gold standard) and its economy was the first to reverse out of the lows. This was observed by George Warren, and was used to advise Franklin Roosevelt (FDR) to devalue the dollar. Then too, FDR’s Brains Trust argued for austerity to maintain confidence in the bond market which had collapsed thanks to the Sovereign Debt Crisis of 1931. We are making the very same stupid mistake – oppressing the economy and the people, causing massive unemployment, and a lost generation of the youth who all try to support debt that will NEVER be repaid.
This is the perfect opportunity for Greece to once again lead the world: abandon the euro, readopt the drachma, suspend all payment of debt, convert debt ro coupon exchangeable for shares in domestic corporate investment only (debt to private equity swap), and eliminate federal taxation; do this and you will hear the loudest sucking sound as assets pour into Greece. All we need to do is look even at the U.S. economy pre-1913, before the introduction of the income tax. The Founding Fathers FORBID direct taxes in the Constitution for a reason. This is not some hair-brain idea; this is abandoning Marxist theory of manipulating society.
What lies ahead is more than simply forecasting markets. We face a swing to the very hard left that is stripping us all of our freedom and rights. The people in charge are not some devious cabal, but politicians who never see government as the problem – only the solution. Yet, “A” students end up working for “C” students or dropouts (non-conformists); “B” students, as well as “D” students, work for government.
We stand ready to show the way out of this nightmare. That is the only worthwhile purpose left in life. What good is making all the greatest trades in history, making a fortune, if you cannot spend it or travel because you are desperately in need of money? What kind of a world will we leave behind? National debts only strip us of all liberty, for we have no right to even vote upon debts created before us. We are saddled with debt and interest payments that have reached 70% of the total national debt, leading to many people losing half of their income to support an onerous debt that we never created, nor benefited from. This is TAXATION WITHOUT REPRESENTATION. Is this a world we really want to leave to our children?

The Solvency of the ECB is at Stake


Western Presstitutes Dumbfounded by Vladimir Putin’s 89% Approval Rating


Guest Column by The Saker

Global Economic And Financial System On The Verge Of Total Collapse


Reign Of The Almighty Dollar Is Over

Monday, June 29, 2015

Chris Hedges: The Lonely American


Paul Craig Roberts: In the Western World Capitalism Has Devolved Into Looting


July 4: Land of the free, home of the brave? Ok; are you free and brave enough to demand arrests of US .01% War Criminals?


9-minute video from Tragedy & Hope (adult language):


Putin Gobsmacks Uncle Sam … Again


Obama Makes More Americans Eligible for Overtime

June 29, 2015

The New York Times

NYTimes.com »

Breaking News Alert

June 29, 2015

Obama Makes More Americans Eligible for Overtime

Monday, June 29, 2015 9:49 PM EDT

President Obama announced Monday night a rule change that makes millions more Americans eligible for overtime pay.
The rule would raise the salary threshold below which workers automatically qualify for time-and-a-half overtime wages to $50,440 a year from $23,660, according to an op-ed by the president in The Huffington Post.
The administration has the power to issue the regulation, which would restore the overtime salary threshold to roughly where it stood in 1975 in terms of purchasing power, without congressional approval.
Read more »

Heresies Against the Imperium



Yanis Reveals EU Denial of any Right of the People to Vote

Varoufakis Yanis

Greece’s Finance Minister Yanis Varoufakis has come out and revealed the quite shocking and anti-Democratic events that took place during the last Eurogroup meeting. First, they do hate Yanis’ guts for he does understand far more about the economy than anyone in Brussels. Any further discussions they demand will be without him. What led to the EU breaking off was exactly what we reported previously – they do not want any member state to EVER allow the people to vote on the Euro. Brussels has become a DICTATORSHIP and is so arrogant without any just cause that they know better than the people.
We are watching the total collapse of Democracy and the birth of a new era – Economic Totalitarianism from Arrogant people who are totally clueless beyond their own greed for power and money.

The Greek Tragedy Continues to Set the Tone = World In Review

The Greek drama, ot Greek Tragedy, continues with a rumored agreement to continue the stimulus in return for promised reforms only to have Greek Prime Minister Alexis Tsipras announce a surprise referendum on July 5: after June 30 which puts the IMF payment into default. Late last week EurAsia Group’s Ian Bremmer remained confident that the Greek Parliament will approve the agreement at the last minute. Meanwhile Greek politicians demonstrate their commitment to election promises of anti-austerity while the Troika talks tough on reforms to appease their own electorate. Monday is the Eurozone Summit while Tuesday the Greek IMF payment will go into default. Next week promises to be a volatile week in the markets with the arrays showing a turning point in many markets on Wednesday.
ECM Greece
Summer volatility has continued as the market gyrates with subsequent news reports on Greek negotiations. The entire Greek debt tragedy began precisely on the Pi target to the day of our Economic Confidence Model. Everything remains stunningly on track.
Global stock markets (MSCI WD) were flat on the week ending June 26 up 13 bps as strength in Europe (MXEU up 2.78%) offset declines in North America which fell 41 bps. European markets were led by the DAX which ended the week up 4.1% holding onto gains early in the week. Despite recent strength the MXEU is down 4.8% from highs in mid-April led by the DAX down 8.3% from its peak. Meanwhile German Bund futures continued to fall 1.2% on the week bringing QTD losses on Bund futures to 5.4%. In a sign of geographic divergence, the S&P finished the week down 40 bps. Meanwhile strength in the Japanese stock market (NKY up 2.64%) offset weakness in Hong Kong and Australia as the MXAP finished the week relatively flat at +43 bps.

Precious metals gold and silver rallied to resistance in mid-June as peripheral bond yields rose. They have since turned back down as European political risk subsides with the expected Greek agreement. Industrial metals continued their sell-off demonstrating global economic weakness. Palladium prices are down 12.6% MTD while copper prices are down over 10% since mid-May despite the recent bounce.
SHNGHI-W 6-27-2015
While Greek negotiations captured the attention of the media, the big shift in trend is the sell-off of Chinese stock indices with the Shanghai composite down 7.4% on Friday bringing losses to 19% since the peak on June 12. While we elected the Daily Bearish Reversals from the high, we have not yet elected a Weekly Bearish. The rally to the high was right on target 17.2 weeks from the February low (2 * 8.6).
SHNGHI-M 6-27-2015
The Chinese A share market has been historic, rising 150% in less than a year versus the 1928-29 US market rally of 100% which occurred over 18 months. This rally has been fueled by margin trading, with margin debt up 464.57% over the past year — from $R400 million last June 19 to $R2.2 billion on June 19 of this year. In an apparent response to the stock correction, China lowered benchmark interest rates and reduced bank reserve requirements on Saturday.
While the Chinese market has been the global outperformer over the past year, long term performance has lagged, with the Shanghai index failing to break the high of 6,124 set on October 16, 2007. The recent rally halted after hitting the Monthly Bullish Reversal at the 4695820.closing May at 4611744. Penetrating the low of May technically will bring the market back through the Breakout Channel. Indeed, the market has not exceeded the Breakout Line from the 2008 low. 
Bond Markets Flash Caution      
Much like the Chinese share market, developed world economies have been sustained by debt. While the press emphasizes high equity valuations, the debt market is the bubble.  According to the Institute for International Finance, developed economy debt/GDP is at 245% excluding financial debt. While the financial sector has reduced leverage materially, the public sector debt-to-GDP ratio has increased 50 percent points in aggregate since 2000.

While emerging markets have stronger balance sheets, the rapid rise in debt is concerning, as total debt to GDP has risen precipitously from roughly 50% in 2000 to 80% at the end of 2014 as shown in the chart to the right. China has been a major driver, as debt has risen 72 percentage points versus GDP excluding financial companies.

Today the bond market displays the warning signs of rising volatility with low volumes on rallies. The German Bund has broken through its upward channel from the beginning of the 2014 and testing the 2008 trend line.  Liquidity in the bond markets is dismal as brokerage houses continue to reduce inventories, reminiscent of the 2008 bond market collapse. This time, the lack of liquidity has spread to sovereign bonds including the German bund and US treasuries. The Central Banks assume they can control the sovereign bond markets, yet rates continue to rise despite OECD rate cuts and continued bond purchases in Germany and Japan.

So what will cause the bond market to correct in the absence of growth? Fixed income investors have enjoyed a 34 year (4 * 8.6) rally with rates falling since 1981 (1980 for the US). The bond markets like all markets are based upon confidence. When bond investors start losing money and realize that governments may not be able to repay their debts, they will lose confidence. Tax increases only cause economic contraction as seen in Japan and Europe. Low sovereign yields fail to protect investors from falling prices causing corporate bonds to outperform. US HY has a total return of 3.3% YTD meanwhile the Barclays 20+ treasury total return index is down 6.9%.

Central Bankers in Norway, Russia, South Korea and New Zealand have all cut rates in the past month. Yet developed market interest rates continue to rise. Eventually central bankers will be forced to raise rates to attract capital as the emerging markets are doing now. Brazil and several African countries (Namibia, Uganda and Kenya) raised rates in June to stabilize FX markets. The Brazilian real is down 15% YTD and almost 30% over the past year. While central bankers speak of inflation, the inflation is partially a consequence of a falling currency as seen in the graph above correlating inflation rates with the exchange rate of the Brazilian Real. Higher interest rates will add further pressure to government finances globally given short term financing.
Assuming a temporary agreement is made which is looking bleak, look for Greek pressures to intensify once again in the fall along with the turn of Martin Armstrong’s Economic Confidence Model on October 1, 2015.

So why remain so confident of an eventual Greek default? With no fiscal union, the currency union is merely a currency peg. ALL currency pegs break under their own weight. While Greek polls suggest the Greeks want to remain in the EU, a large percentage of the population either works for the government or receives a government pension which are being supported by support from the Troika. According to the Brookings Institute, roughly one million people were either employed by the Greek Government or were pensioners of the public sector in 2013 as compare to a total working population of 3.8 million total workers; this is unsustainable. The Brookings institute reports that “The pension of a 55-year-old retired senior police officer is around 1,650 euros per month. A lecturer working in a university is earning around 1,200 euros (net, after tax and social security contributions).” Has anyone else noticed the absence of youth in the Greek protests? A Grexit will be painful as the government will be forced to shrink due to the lack of capital. Meanwhile, increased visibility and attractive prices will create an opportunity for entrepreneurs bringing investment capital to Greece.
Weak economic growth is fueling civil unrest globally while austerity in Europe is causing increased discontent with the EMU throughout Europe. One of the frontrunners for France’s Presidential elections, Marine Le Pen is appealing to the anti-Euro movement calling for a Frexit if the EU does not return “monetary, legislative, territorial and budget sovereignty.”  When the Greek economy recovers following a Grexit, anti-Euro sentiment will only increase.
Most developed countries would be envious of 2.9% GDP growth in today’s environment, Iceland is doing just that with 1Q 2015 GDP growth of 2.9% supported by consumption and investment up 6.4% and domestic demand up 10%. Recall Iceland allowed its banks to default. In addition, Iceland only spends 9.1% of GDP on healthcare whereas the US spend 17.9% according to the CIA World Factbook of August 2014.
GRKFOR-W 6-27-2018
Markets are expected to remain volatile through the summer leading to the ECM of October 1, 2015 so pay attention to the arrays and reversals. This week of June 29th has been a target on the arrays for months in Greece, Euro, and bond markets. However, the first week of July has been a target in the Greek share market and curiously we have the referendum suddenly called for July 5th. A Grexit will cause investors to question the viability of other periphery countries such as Portugal, Spain and Italy thus pushing capital to the US. While a rally in the Euro through the summer is possible, economic weakness and political issues in Europe will continue to fuel a further rally in the USD hurting countries and corporates with USD denominated liabilities. While the bond markets may benefit from a risk-off scenario, now is the time to study corporate balance sheets and understand their exposure to higher interest rates and currency movements. All this uncertainty and volatility should cause one to pull back waiting for some clarity this next week. We remain bearish in the metals and the Chinese indices.

EU Banning Selfies Under Copyright of Architect?

Remembrance Photos in front of the Reichstag or other famous buildings in Europe could in future be banned. The European Parliament will vote on the abolition of the so-called panorama freedom. Thus a Facebook publication of vacation pictures with buildings in the background would be allowed only with the permission of the architect.
So under their insane proposed law I would need approval of Michelangelo to take this picture as I did in Rome at Christmas. This law is going down with Utah’s law which prohibits you from ordering a drink before ordering dinner.
This is why we should eliminate career politicians. They have to keep busy so they create stupid laws out of boredom.

Here Comes Puerto Rico Monday – Next Greece

Puerto Rico is set to release a key report on its financial stability Monday, and its Governor, Gov. Alejandro Garcia Padilla told The New York Times that the island would probably seek significant concessions from as many as all of its creditors because “the debt is not payable.”
Puerto Rico is the next Greece where the “vulture” investors bought their bonds back in 2013 when its roughly $70 billion in outstanding debt suffered a huge plunge in bond prices over the summer.
All government follow the same model and this is BIG BANG, where government debt at every level will begin a death spiral. Governments since World War II have borrowed continuously never managing anything properly. They have just assumed that the great herd of taxpayers had deep pockets that were endless. This attitude is causing the collapse in Socialism whereas all the promises of pensions cannot be maintained. The majority of people assumed that working for government was the safest. They are now starting to see that it is the worst of all for you cannot even prosecute them for mismanagement and fraud as you would if a private employer pulled the same nonsense.
Liquidity Crisis
The smart money smells a rat. Capital has rushing out of long bonds since May and pouring into the very short-term federal paper pushing rates back negative to the crisis level of 2009. BIG BANG is being furthered by the worst collapse in liquidity I have ever witnessed in my entire career.

Greece Imposes Capital Controls

Alexis Tsipras has imposed capital controls as Greek banks are to remain closed. The European Central Bank (ECB) said it was not increasing emergency funding to Greek banks, clearly trying to hurt the Greek people to force them to stay in the Euro to protect jobs in Brussels.
Greece is due to make a €1.6bn payment to the International Monetary Fund (IMF) on Tuesday – the same day that its current bailout expires. The EU refuses to understand the source of the problem is their stupidity and design of the Euro. Greece risks default and moving closer to a possible exit from the Eurozone because of the brain-dead decisions of the EU Finance ministers.