Meredith Whitney: 50-100 Municipalities Could Default (60 Minutes Video)

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Watch this must see 60 Minutes video "State Budgets: Day of Reckoning" featuring analyst Meredith Whitney, New Jersey Governor Chris Christie, Illinois state Comptroller Dan Hynes etc.
"How accurate is the financial information that's public on the states? And municipalities," Kroft asked.

"The lack of transparency with the state disclosure is the worst I have ever seen," Whitney said. "Ultimately we have to use what's publicly available data and a lot of it is as old as June 2008. So that's before the financial collapse in the fall of 2008."

There's not a doubt in my mind that you will see a spate of municipal bond defaults," Whitney predicted.

Asked how many is a "spate," Whitney said, "You could see 50 sizeable defaults. Fifty to 100 sizeable defaults. More. This will amount to hundreds of billions of dollars' worth of defaults."

I've been covering the municipal financial crisis for 2.5 years now. Click:
Municipalities or Municipal bonds for the archive. Watch the 60 minutes video from 12/19/2010 after the jump.

Marcus Millichap: Cap Rate/Treasury Spread Means Buy Commercial Real Estate (CNBC Video, 12/15/2010)

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According to Hessam Nadji at Marcus & Millichap, commercial real estate is a buy based on valuation. The spread between Cap Rates (Net Operating Income/Purchase Price) and Treasury Yields is at 480 basis points (4.8%), which has historically been a "buy" signal for commercial real estate. So higher CRE prices will close the Cap Rate/Treasury gap. I see that the ten most active markets in the U.S. have cap rates between 6.35%-7.79% (avg = 7.19%) at Real Capital Analytics. The 10-year yield is at 3.33%. I found a chart of the NCREIF Cap Rate to Treasury spread in a September blog post. Also read this Bloomberg article. Is NCREIF cap rate data available anywhere?

I'm curious how CRE analysts factor in the Federal Reserve subsidizing Treasury yields and the risk of bond vigilantes, at some point in the future, abruptly ending the 30 year bull market in bonds. What happens if Treasury Bond volatility spikes (MOVE Index) and Treasury Yields/Cap Rates invert? Would that affect CRE prices? Reggie Middleton of the BoomBustBlog mentioned this not too long ago on Bloomberg TV (video below).

CSPAN Interview With Rep. Ron Paul On The Federal Reserve (Newsmakers)

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Rep. Ron Paul, incoming Chairman of the Financial Services Subcommittee on Domestic Monetary Policy (who "will have Congressional oversight of the Federal Reserve"), was interviewed by CSPAN's Newsmakers for thirty minutes. Video after the jump.

"On C‑SPAN's Newsmakers, he shares his concerns regarding the agency's monetary policies. In the past, the representative has been very vocal in his criticism of the way the Fed is handled and has gone so far as to propose that it be eliminated in his latest book, "End the Fed." Source: Newsmakers

2011 S&P Forecasts (1250 to 1450), 10y Yield, EPS and GDP (Links)

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It looks like the expert consensus for 2011 is to own stocks. Buy Buy Buy? The S&P closed at $1,243 on 12/17/2010 and the 10y Note Yield closed at 3.33%.

Barron's 2011 Outlookpic source

Brian Belski - Oppenheimer Asset Management
2011 S&P 500 Target 1,325, SPX EPS 88.5, 15x, GDP 3%, 10y yield 3.75%

David Bianco - B of A Merrill Lynch
2011 S&P 500 Target 1,400, SPX EPS 93, 15x, GDP 2.8%, 10y yield 4%

*Douglas Cliggot - Credit Suisse
2011 S&P 500 Target 1,250, SPX EPS 91 (2012 91), 13.7x, GDP 2.8%, 10y yield 3.5%

Barry Knapp - Barclays Capital
2011 S&P 500 Target 1,420, SPX EPS 91, 15.6x, GDP 3.1%, 10y yield 3.5%

David Kostin - Goldman Sachs
2011 S&P 500 Target 1,450, SPX EPS 94 (2012 104), 15.4x, GDP 2.7%, 10y yield 3.25%

Michael Ryan - UBS Wealth Management
2011 S&P 500 Target 1,350, SPX EPS 90, 15x, GDP 2.7%, 10y yield 3.25%

James Paulsen - Wells Capital Management
2011 S&P 500 Target 1,425, SPX EPS 95 (2012 103), 15x, GDP 4%, 10y yield 4%

Henry Mcvey - Morgan Stanley Investment Management
2011 S&P 500 Target 1,362.5, SPX EPS 93.5, 14.57x, GDP 4%, 10y yield 4%

Jeff Knight - Putnam
2011 S&P 500 Target 1,350, SPX EPS: 95 (2012 105), 14.21x, GDP 3.5%, 10y yield 4.25%

David Kelly - JPMorgan Funds
2011 S&P 500 Target 1,400, SPX EPS: 98 (2012 103), 14.28x, GDP 3.7%, 10y yield 4.25%


Nicholas Snowden vs. Josh Brown on Copper (CNBC Video)

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Copper Outlook: Josh Brown of Fusion Analytics (and and Nicholas Snowden of Barclays Capital had a debate over Copper on CNBC. Both had interesting views. They talked about supply/demand fundamentals, mines, new physical copper ETFs, China demand, and market psychology. Copper is up 230% from the January 2009 low and is testing the 2008 high (reflation trade). Watch the debate after the jump and read Josh's article at - Brown: The Financialization of Copper.

High Grade Copper HG (courtesy of

Einhorn's Presentation On Why He's Short St. Joe Vs. Bruce Berkowitz Who Owns 30% ($JOE)

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St. Joe ($JOE) Valuation War/David Einhorn vs. Bruce Berkowitz: David Einhorn of Greenlight Capital thinks $JOE is worth $650-950 million or $7-10 per share and needs to take significant impairment charges. It closed at $21.27 today. St. Joe is the largest private land owner in the State of Florida with 577,000 acres of land. Einhorn gave a detailed presentation at the Value Investing Congress on 10/13/2010 on why he was short. View the 138 slide presentation PDF ("Field of Schemes: If You Build It, They Won't Come") here. To your left is a snapshot of the 134th slide (click for larger view). also embedded the speech audio.

On the bullish side, Bruce Berkowitz of Fairholme Capital (Fairholme Fund/$FAIRX) owns 29% of the company and is extremely bullish. He gave reasons why in a Morningstar interview on 5/29/2009. He said the new Northwest Florida Beaches International Airport (Southwest hub) will be the upside catalyst for the company and surrounding area. More from the Morningstar interview:
"Really this company should be more a liquidating trust. I think a private real estate family would love to get their hands on this company to keep them busy for 50, 75 years"

and he recently told Reuters via Business Insider
"if we were able, we would buy the whole company"

St. Joe articles and $JOE stock chart after the jump. Will it crack the downtrend line or proceed to 7 smackers?

Wikileaks vs. Bank of America/Merrill Lynch

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Bank of America says it won't process payments intended for WikiLeaks (Kansas City Star)
Bank of America says cuts off WikiLeaks (Reuters)


Source @wikileaks on Twitter 1, 2 (wow, fight club?)

Monthly CMBS Delinquency Report- December (RealPoint)

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Remember CMBS? The December CMBS (commercial mortgage-backed securities) Monthly Delinquency Report is out on RealPoint's website. It is full of charts. RealPoint is a Nationally recognized credit-rating agency owned by Morningstar. Here is the 

"In November 2010, the delinquent unpaid balance for CMBS increased by an additional $1.94 billion, up to $61.11 billion from $59.18 billion a month prior (a 3.3% increase). This followed the previous month’s substantial decrease of $3.02 billion - the first reported decrease in over a year. The delinquent unpaid balance for CMBS at such time had decreased uncharacteristically to $59.18 billion from $62.19 billion a month prior, mostly attributed to the resolution of the $4.1 billion Extended Stay Hotel loan from the WBC07ESH transaction, which had been 90+-day’s delinquent".... [read it free at]

The Shape of the World in 2020 - Guest Post

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Guest post by Global Intelligence Report

The Shape of the World in 2020

None can foretell the future, and yet the shape of what we face can be shrewdly estimated with enough attention to historical trends; with broad contextual understanding; and with sufficient insight into the character of leaders, their societies, and the structures which define their basis.

These estimates will be tempered by the sudden acts of nature, the sudden emergence of true leadership from unexpected quarters, or key breakthroughs in science. Still, we can hazard reliable views on the shape of the world in, say, a decade - in 2020 - if present trends and characters remain, and on a knowledge of certain baseline levels of wealth and capability which presently exist.

In 2011, the world will probably remain beset by the lingering of the present crisis of currency levels and economic performance. This is essentially a mass psychological crisis, based around the perceptions which create trust, particularly trust in asset values and institutions.

In some respect, historical trends have given populations in modern societies excessive trust in the ability of their institutions to remain operational, untended by their populations. As a result, governments have grown larger and less efficient, and have arrogated to themselves more and more of the resources of societies, thereby inhibiting productivity. At some point, those societies, when beleaguered and impoverished, lose faith in the institutions of governance and leadership succession.

Katsenelson: Japanese Yields Will Rise, U.S. Market In Secular Trading Range

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Vitaliy Katsenelson, CIO at Investment Management Associates and writer at, was on Tech Ticker on December 10. He thinks Japanese Government Bond yields (JGBs) will rise in the future as rates re-price to compete with other Government bonds. With Japan's Debt/GDP at 200% and funded mostly internally by their aged population, when they're forced to tap outside sources to buy their debt, investors will demand higher rates. If demand is soft, Japan will reach the "Keynesian endpoint" and have to monetize their debt by raising taxes and printing money, which leads to "high" inflation. Watch the video below. Interesting, so when does the secular bear market begin in the Yen?

Regarding the U.S., Vitaliy believes QE2 will result in stagflation (TT video #2) and equities are stuck in a secular trading range just like 1966-1982 (Barron's December 11, 2010).

Flagstar Has Special Meeting On December 21 To Authorize Share Increase (FBC, FBC-P)

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After volume spiked in Flagstar Bancorp's common (FBC) and convertible preferred (FBC-P) stock yesterday, I found out there's a "Special Meeting" (proxy vote) on December 21 that would authorize an increase of 400 million shares to common stock outstanding (from 300 to 700 million shares, +133%). It would allow the preferred stock to convert to common and fend off any takeover attacks (100 million shares). Here are quotes from the release I found important. I also embedded the DEF-14A filing from November 15. Flagstar will be interesting to watch in 2011 as the market either prices in continued economic growth or a new recession.

  • "The Special Meeting is for the purpose of considering and acting upon the following matters:

    1. to amend the Amended and Restated Articles of Incorporation of the Company to increase the number of authorized shares of common stock, par value $0.01 per share (the “Common Stock”), from 300,000,000 shares to 700,000,000 shares; and

    2. to transact such other business as may properly come before the Special Meeting or any adjournments thereof.

    NOTE: The Board of Directors is not aware of any other business to come before the Special Meeting.

Volume Spikes In Flagstar Common and Preferred Stock (FBC, FBC-P)

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Remember the big volume in Flagstar (FBC) on 
September 17 before the public offering? Since then, Flagstar raised $400 million in common (at $1) and convertible preferred stock and "entered into an agreement to sell approximately $474 million of non-insured non-performing residential first mortgage loans". They expect to receive 44% of the book value (source).

MatlinPatterson owns 66.2% of Flagstar's common stock. It will be interesting to see if the directors and management can turn this distressed bank around. Only the strong regional banks survive at this point. FBC and FBC-P 1-day charts are after the jump, as well as the 5-year disaster.
"TROY, Mich., Dec. 15, 2010 /PRNewswire/ -- Flagstar Bancorp, Inc. (NYSE:FBC - News) (the "Company") today announced that in light of the unusual market activity in its common and preferred stock this afternoon, the NYSE has contacted the Company in accordance with its usual practice, and the Company has stated that its policy is not to comment on unusual market activity." (Source: Yahoo Finance)

Watch "Steel on Wheels" Video Live (Dylan Ratigan Show)

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If interested the "Steel on Wheels" stream starts at 7pm Eastern time via the Dylan Ratigan Show. The theme of the town hall is "How to get America Working Again". It features: Dan DiMicco (CEO of Nucor Steel), Duncan Moore (Center for Entrepreneurship at the University of Rochester), Andrew Jenks (from MTV series "The World of Jenks") and Chrystia Freeland (Reuters Global Editor-At-Large who recently interviewed Jim Rogers of Rogers Holdings and John Taylor of FX Concepts at the Reuters Investment Outlook Summit). Live video after the jump.

Violent Riots Hit Greece Today, Protesting Austerity Measures (Videos)

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Videos courtesy of Russia Today (12/15/2010)

Breakdown in Retail (XRT) Would Signal Economic Weakness, Chart Watch

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click for larger view
XRT broke above the June 2007 high (45.51) and April 2010 high (45.64) recently. It closed at 47.26 yesterday. Keep an eye on those support levels just in case it rolls over. I'm thinking if retail stocks break down, that would signal economic weakness ahead (consumer). Also check out the steep channel from the March 2009 low and the near term wedge. XRT hasn't violated any levels yet, so how high will it go in this channel? I'm also watching the risk race: 

Watch XRT (SPDR Retail ETF) trade live here:

Muni Bond ETF Got Crushed Again, GO Bond Yields Moving Higher (MUB, MMA 10y GO Bond Index)

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Municipal bond ETFs got crushed again yesterday. It could be due to the rise in municipal bond credit risk (
Cali fiscal emergency?), re-pricing of bond yields, potential end to Build America Bonds or forced selling somewhere. If you've been reading this blog for a while this shouldn't come as a surprise (see index: municipal bonds, municipalities)$MUB (National Municipal Bond ETF) is down 8.2% since early October, which on the chart looks kind of bloody.

On October 3 I told you to watch the MMA (Municipal Market Advisors) AAA 10-year General Obligation Bond Index Yield (MMAI10Y) when it was at 2.65%. Since then it rose to 3.22%, which is a decent amount (+57 basis points or 21.5%). The Bond Buyer 20-year GO Index (BBWK20GO) went from 3.84% to 4.86% (102 bps, +26.5%). Bond yields have been rising across the board (see GO Yields/Treasury Yields chart below).  It doesn't look like MCDX spreads (muni bond credit default swap index that reference revenue and GO bonds) made new highs since my post in July. Charts are after the jump as well three interesting articles.

Ashraf Laidi's Outlook on British Pound Sterling, QE Expectations and UK Inflation (Videos)

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Ashraf Laidi, Chief Strategist at CMC Markets said, "overall I think into next year, it's not so much that they're going to raise rates, it's really fading expectations of further QE that would provide the Pound with a decent base" (CNBC video after the jump).

John Taylor (FX Concepts) Sees U.S. Recession By Mid-2011 (Reuters Investment Outlook Summit)

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John Taylor, who runs $8.5 billion currency hedge fund FX Concepts, was interviewed by Chrystia Freeland at the 2011 Reuters Investment Outlook Summit. He believes the U.S. will be in a new recession by the middle of 2011 (video embedded below). Here's a summary of what he said and links to video clips at

*His trades are betting that the U.S. economy will be in a recession next year
*Commodities could come off affecting the Australian Dollar (AUD) and CAD
*British Pound Sterling becomes more valuable in Euros in next year (GBP/EUR)
*Predicts Euro/US Dollar will hit 1.0, sell EUR/CHF (Swiss Franc)
*In the long term he thinks the US Dollar will go down (U.S. austerity, fiscal problems)
*Gold will drop LESS than other assets
*After Ireland, bailouts hit Portugal, Spain, Italy or Belgium, France (10 year event)

In the short term he sees weakness in commodities, commodity currencies and a boost in the US Dollar as carry trades unwind during the next U.S. recession (mid-2011). In the longer term John is bearish on the U.S. Dollar due to fiscal problems.

John Taylor: Euro problems to spread (2:56) Reuters Video
John Taylor: Gold to "drop less" (1:16) Reuters Video
John Taylor on 2011 currency moves (7:14) Reuters Video
John Taylor: Recession back in 2011 (2:04) Reuters Video (embedded below)

FOMC Statement 12/14/2010 (Federal Reserve)

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"Release Date: December 14, 2010

For immediate release

Information received since the Federal Open Market Committee met in November confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment. Household spending is increasing at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have continued to trend downward.

Jim Rogers At 2011 Reuters Investment Outlook Summit (Video)

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Jim Rogers was at the 2011 Reuters Investment Outlook Summit. I embedded part #1 after the jump. He said:

*Prices of everything are going up, BLS numbers are fraudulent
*Commodity prices will move higher on shortages and money printing (if economy gets worse)
*Betting against Treasuries
*Expects interest rates to go "much much higher" over next few years (
*More optimistic on agricultural commodities
*World is running out of known reserves of oil
*Federal Reserve needs to go, says don't listen to Bernanke
*Ireland and their banks should go bankrupt, don't put bailout expense on tax payers
*Iceland went bankrupt and now they're booming
*U.S. might have another lost decade
*Don't get an MBA, become a farmer
*Worried about a bubble in urban coastal real estate in China, price bubble NOT credit bubble
*He owns the Euro right now as bailouts continue (Euro is doomed in long term)
*Favors investing in Asia (largest creditor nations)

Jim Rogers, CEO Rogers Holdings Pt 1 (8:17) (Reuters Videos)
Jim Rogers, CEO Rogers Holdings Pt 2 (6:41)
Jim Rogers, CEO Rogers Holdings Pt 3 (4:56)
Jim Rogers, CEO Rogers Holdings Pt 4 (10:36)

Cameron Hanover Daily Oil Recap (12/13/2010)

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Cameron Hanover Daily Oil Recap (courtesy of

"The fact that China did not raise interest rates this morning seems to have buoyed investors’ hopes, and Opec’s decision to maintain quotas at existing levels seems to have given oil traders a reason to be bullish for supply and demand reasons. The US dollar was under selling pressure all day long, starting first thing Monday morning and lasting past noon. In the process, the dollar gave up about 125 points - or 1.25 euro cents. Even the DJIA was higher on Monday, gaining 18.24 to end at 11,428.56. The surprise was that oil prices did not gain more. The bulls were trying to put prices in position to break important resistance as we move through the week."

Gold Makes Record Run (GLD, XAU/USD) - Guest Post

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By GIR Analysts for

Gold Makes Record Run

INCIDENT: On 7 December, gold hit an all-time high above US$1,425 per ounce (London morning fix), after having risen from under $300 per ounce at the beginning of the millennium and from just over $700 per ounce only a little over two years ago (all figures in current dollars).

SIGNIFICANCE: While the recent spike in the price of gold has already been somewhat redressed, new drivers in the market suggest increasing demand for the precious metal.

BACKGROUND: The price of gold is up 27% this year in dollar terms, as worry spreads over the debasement of currency values worldwide following the US Government's decision to pump trillions of dollars into the global economy. About two-fifths of all newly produced gold is used in investment vehicles, but demand is rising not only for that reason. While a tenth of new gold production goes to industrial uses, half is consumed by the jewelry industry. Increasing numbers of middle-class consumers in what used to be called the developing world have helped to drive world demand. The Indian marriage season, for example, exerts regular annual influences on price variation.

Hussman On The Overvalued, Overbought, Rising-Yields Syndrome

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From John Hussman's most recent Weekly Market Comment titled "Warning - An Updated Who's Who of Awful Times to Invest" ( I agree, the market is overvalued.

"In recent weeks, the U.S. stock market has been characterized by an overvalued, overbought, overbullish, rising-yields syndrome that has historically been hostile to stocks. Last week, the situation became much more pointed. Past instances have been associated with such uniformly negative outcomes that the current situation has to be accompanied by the word "warning."

"The following set of conditions is one way to capture the basic "overvalued, overbought, overbullish, rising-yields" syndrome:

1) S&P 500 more than 8% above its 52 week (exponential) average
2) S&P 500 more than 50% above its 4-year low
3) Shiller P/E greater than 18
4) 10-year Treasury yield higher than 6 months earlier
5) Advisory bullishness > 47%, with bearishness < 27% (Investor's Intelligence)"

Continue Reading:

European Leveraged Loan Market Update (12/10/2010)

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Below is an update from S&P/LCD on the S&P European Leveraged Loan Index, new issuance volume for leveraged loans and high yield bonds, sovereign risk volatility, default rates and trends. Video after the jump.

Option Activity In EWJ $11 January 2012 Calls (Japan ETF), NIKKEI/S&P Ratio Update

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On Friday (12/10) a trader bought 50,000 $11 $EWJ January 2012 Calls for $0.69 with 18,800 open on the International Securities Exchange (ISE). I first found out about this at ("Bullish Japan ETF Options Jump to 2010 High in U.S. Trading on Single Bet"). EWJ closed at $10.58 on Friday. To be profitable, EWJ needs trade above $11.69 before expiration or the calls need an upside implied volatility jolt. See the ISE quote with volatility measures here.

I've been watching the NIKKEI 225 Index and Japanese Yen recently, or mainly the NIKKEI/S&P ratio after it broke above the 50 day moving average. Since then it rallied towards the downtrend line, made a high of 8.557, and sold off. The ratio is back below the 2008 and 2009 lows so there needs to be a confirmed inverted head and shoulders pattern to officially battle that downtrend line. Also, a week ago I saw activity in FXY (Yen ETF) June 2011 Puts. Interesting Japanese market maneuverings going on.

I'm watching the 50DMA and downtrend line on $NIKK:SPX. EWJ looks similar to SPY. Is Japan set to exceed growth expectations in 2011? Read this Guardian article from 12/9/2010: "World's third largest economy grew at an annualised rate of 4.5% last quarter, up from the inital estimate of 3.9%". I charted out EWJ (Japan iShares) and $NIKK:$SPX after the jump.

Let Citadel Group Electronify Derivatives Trading

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From the New York Times: A Secretive Banking Elite Rules Trading in Derivatives by Louise Story
"Mr. Griffin (Citadel Group) said last week that customers have so far paid the price for not yet having electronic trading. He puts the toll, by a rough estimate, in the tens of billions of dollars, saying that electronic trading would remove much of this “economic rent the dealers enjoy from a market that is so opaque.”

“It’s a stunning amount of money,” Mr. Griffin said. “The key players today in the derivatives market are very apprehensive about whether or not they will be winners or losers as we move towards more transparent, fairer markets, and since they’re not sure if they’ll be winners or losers, their basic instinct is to resist change.”

*Read Zero Hedge's response: Secret Banking Derivative Cabal Redux, And Why HFT In CDS Has So Far Been A Failure (CDS contract notional values in $1K increments coming to an online brokerage near you!)

David Einhorn on "Too Big to Bail" and Corn, Oil Bubble Forming Due to Easy Money Policies, Also Long and Short Ideas (Greenlight Capital)

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David Einhorn of $7 billion hedge fund Greenlight Capital, who gave reasons to short Lehman Brothers (
12/07 VIC, 5/08 Ira Sohn speech6/08 CNBC) and Allied Capital (2002 Ira Sohn Conference speech) before they eventually collapsed, was on CNBC on 12/6/2010 (clips 1, 2, 3, 4), Reuters Insider on 12/8/2010 and Charlie Rose on 12/12/2010 giving views on the market. 

He believes "zero rates are a very dangerous long term policy" and "too big to fail" policies will eventually lead to something that is "too big to bail" (G-3 country or Spain), which could spark the next systemic crisis. He's bullish on gold as a currency alternative: "We're going to continue to own gold as long as we think the monetary and fiscal policies don't make sense" (clip 1 below).

Also, watch Einhorn tell Former Fed Governor Laurence Meyer that he's worried about a bubble forming in corn and oil due to easy money policies (clip 3 below). Fiscal and monetary headwinds aside, he still sees opportunities in stocks (clip 4). His fund is net long 70/30. Einhorn, do you think Shiller's S&P Cyclically Adjusted P/E (CAPE) ratio will hit bottom at 6 like it did in 1932 and 1982? It hit a low of 13 in March 2009 and is now back at 22. Also, how would a systemic sovereign debt crisis affect the pricing of risk assets? Open question..

Long positions mentioned: Sprint (S), Apple (AAPL), Gold, Pfizer (PFE), Vodafone (VOD), CareFusion (CFN), Interest Rates (see Reuters Insider Video)

Short positions mentioned: St. Joe (JOE) Moody's (MCO) and McGraw Hill (MHP)

James Altucher Sees S&P 500 At $1,600, Wants Apology From Bears At Bull Market Hors D'oeuvres Party

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James Altucher has been right so far with his strong bullish views on the market and economy. For example, watch this CNBC video I posted in July 2010 featuring Roubini and Altucher. On Tech Ticker on Friday, James demanded some credit and an apology from all the bears who disagreed with him (or called him a wacko/douchebag lol) at a bull market hors d'oeuvres party. Hopefully for those long the recovery in size (with help from the Bernank), the S&P hits $1,600+ as he predicts but without hyperinflation attached. See the Tech Ticker video after the jump or go to the post.

Fed Schedule of First $105 Billion in Treasury Purchases (QE2)

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From the New York Federal Reserve as part of the planned $600 Billion in Treasury purchases (QE2). Click the image.

"Tentative Outright Treasury Operation Schedule

Across all operations in the schedule listed below, the Desk plans to purchase approximately $105 billion. This represents $75 billion in purchases of the announced $600 billion purchase program and $30 billion in purchases associated with principal payments from agency debt and agency MBS expected to be received between mid-December and mid-January."

If you're still confused about what's going on, here are two articles analyzing QE2:

QE2 Will Either Fix the Economy or Destroy It - Minyanville
Thoughts on "An Open Letter to Ben Bernanke" - Pragmatic Capitalism

John Williams: Panic Selling of U.S. Dollar Will Trigger Hyperinflation

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Alert (hat tip 
Zero Hedge): John Williams, economist at, said on BNN today that the United States will experience a hyper-inflationary great depression "due to decades of extraordinary fiscal abuse" and actions used to keep the financial system from collapsing. "When you see panic selling of the U.S. Dollar that's when you have to be very careful", he said. To protect yourself, he said maintain your purchasing power. "You look to put your (U.S) Dollars in hard assets like physical gold and silver. Getting the Dollar in other currencies such as the Canadian Dollar, the Australian Dollar, Swiss Franc". He also said, "it's probably a good idea to store goods that you would normally consume for several months, just to protect yourself, your family and have goods for barter". Wow. To see the video click the link below.

Also see a video reenactment of what a Dollar collapse/hyperinflation would look like: The Day the Dollar Died (Video by NAI). We are already seeing inflation in commodities. Monitor the U.S. Dollar Index chart at stockcharts.comIt hasn't broken down yet. Stack up on beans!

Related: Gary Shilling vs. Peter Schiff (Deflation vs. Inflation), Charles Nenner sees a deflationary crisis and David Rosenberg predicts a period of price stability. Who will be right.

Jon Stewart: The Fed Isn't Printing Money, It's Imagineering Money (Daily Show Clip), Morgan Stanley Explanation (BASE, M2, MZM)

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After Fed Chairman Ben Bernanke told
60 Minutes on Sunday (12/5/2010) that the Fed wasn't printing money, Jon Stewart of The Daily Show wondered why Bernanke told 60 Minutes 21 months ago that the Federal Reserve was effectively printing money to lend to banks. Stewart described QE2 as "imagineering" money ha. It is confusing. David Greenlaw, Managing Director and Chief U.S. Fixed Income Economist at Morgan Stanley, explained how the Fed wasn't printing money. I added links to charts at the St. Louis Fed. From
"In the US, the Fed pays for bond purchases by crediting the reserve account of the bank that sold it the securities. Assuming that the rest of the Fed's balance sheet doesn't change, this leads to an increase in bank reserves. So, the monetary base - which consists of currency plus bank reserves - goes up by the amount of the open market purchase. In every textbook written prior to 2009 that we have come across, the rise in the monetary base is assumed to be transmitted into a roughly equivalent rise in the money supply (M2, MZM). But, as we now know, this assumption is not always valid. In the first round of Fed balance sheet expansion, which began in late 2008 and continued into 2009, the monetary base more than doubled and the money supply barely budged. In textbook terminology, the so-called money multiplier - the ratio of the money supply to the monetary base - declined by about the amount that the monetary base rose. The Fed can create excess reserves, but it can't force the banks to turn these funds into loans or securities holdings. In this case, the excess reserves are being stockpiled in banks' cash accounts. " (read more at PragCap, Morgan Stanley)

Also of note, apparently U.S Dollars are committing suicide on the printing press. Watch The Daily Show video from 12/8/2010 after the jump.

Blackstone's Steve Schwarzman on Where the World is Headed (Link)

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For Schwarzman, the Action Is Anywhere but Here (spoke at the Goldman Sachs U.S. Financial Services conference) - NYT DealBook

Hat tip Business Insider

Janet Tavakoli FHFA Presentation: Repairing the Damage of Fraud as a Business Model - 12/8/2010

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Read Janet Tavakoli's presentation to the Federal Housing Finance Agency Supervision Summit. She runs Tavakoli Structured Finance and warned repeatedly about the financial crisis. Here it is: "Repairing the Damage of Fraud as a Business Model" (12/8/2010).

Click for PDF presentation

ht @rcwhalen

Gary Shilling vs. Peter Schiff (Inflation vs. Deflation), How About Hyperinflation in Commodities Causes Hyperdeflationary Collapse?

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Gary Shilling (on the deflation side) vs. Peter Schiff (on the inflation side) on Tech Ticker. We at Distressed Volatility believe we see disinflation in the CPI, hyperinflation in commodities and then a hyperdeflationary collapse (a little exaggeration there, but a final reset in asset prices in real, unmanipulated terms). Thoughts? I also added the Todd Harrison vs. Michael Pento debate.

Put Activity In $FXY (March, June 2011), Japanese Yen ETF

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FXY (Japanese Yen ETF) puts were active today (read this 
article for more information). FXY closed at 118.43 today.

In January 2011 (not pictured), 2,000 $135 Calls traded with 186 open (closed -0.25 to 0.05) and 1,000 $125 Puts traded with 21 open (closed -0.65 to 7.05). In March 2011, 1,500 $119 Puts traded with 137 open (closed +0.35 to 3.05) and in June 2011, 5,000 $115 Puts traded with 106 open (closed +0.65 to 2.55).

Is this trade hedging (or betting on) a continued slide to $115? FXY just rallied to the 50 day moving average resistance level and sold off. I'm also watching the NIKKEI:SPX ratio (and USD/JPY). Optionmonster also mentioned FXY volatility. Charts and option chain snapshots after the jump.

Full Obama Press Conference Video on Tax Deal (12/7/2010), Agreement Overview From Fact Sheet

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The first video is the full 32 minute press conference by President Obama on the tax cut agreement with a question and answer session (12/7/2010). The second video is the statement made by the President yesterday on tax cuts and unemployment benefits (12/6/2010). I also added the overview of the tax agreement from the fact sheet released today.

David Rosenberg: Equities In Secular Bear Market, Canadian Corporate Bonds Are A Good Investment (Video)

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David Rosenberg, former Chief North American Economist at Merrill Lynch who is now Chief Economist and Strategist at
Gluskin Sheff, was featured on Consuelo Mack's WealthTrack show on 11/26/2010. Rosenberg believes we are entering a period of price stability (zero inflation) as ongoing debt de-leveraging, excess capacity and high unemployment converge with strong reflationary policies by the Fed. However, there is still a chance we could experience outright deflation, he said. Rosenberg thinks equities are in a structural bear market.
"The story is that in the secular primary uptrend in the stock market, sell-offs are opportunities to get in the better price. Now, we’re in a secular bear market where it’s different, and it means you are going to get rallies, but these are rallies that you rent. You don’t own them." (source)
He didn't completely write off equities though. He said he'd still be 20% allocated toward equities but only in safe sectors like utilities, staples, health care and stable industries that "spin off an income stream". He is taking the other side of the bond bubble trade! He favors high quality corporate bonds backed by strong balance sheets. During the interview he recommended high quality Canadian corporate bonds which would benefit from a lower U.S. Dollar (USD/CAD). He was also bullish on gold for a variety of reasons. Watch the video after the jump.

Governor Schwarzenegger Declares Fiscal Emergency, 12/6/2010 Press Release, Expenditure Reduction Proposal #California

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Read the $7.4 billion expenditure reduction proposal in the report below from the Department of Finance. For more information on California's fiscal crisis ($20 billion annual operating shortfall through 2015/2016) read this post from 11/17/2010.

"Governor Schwarzenegger Presents Special Session Budget Plan

Declares Fiscal Emergency, Calls Legislature into Special Session to Address Deficit

Governor Arnold Schwarzenegger today declared a fiscal emergency and called the legislature into a special session to address California’s budget deficit and presented a package of solutions to help solve it.

“Our state is again facing a budget deficit that will force difficult decisions by California’s elected officials. If there is one thing we have learned over these past few years, it is that the longer we wait to tackle the problem, the larger and more difficult it is to solve,” said Governor Schwarzenegger. “That is why I have called a special session today, so the legislature can get a head start on the problem. California taxpayers cannot afford another lengthy delay. I look forward to working with Republicans and Democrats to get this done.”

Market in Process of Forming Top, Deflation Coming (Charles Nenner Video)

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Charles Nenner, technical analyst and founder of the Charles Nenner Research Center, is confident the U.S. will experience a deflationary crisis even with strong reflationary policies in place by the Federal Reserve. From Bernanke's speech in
Jackson Hole a few months ago: "the FOMC will strongly resist deviations from price stability in the downward direction". Also don't forget the trillions in Fed loan programs, TARP bailouts and securities purchases that helped reflate the economy and asset markets. Watch Bernanke on 60 Minutes last night. He's leaving the option open for additional Treasury purchases.

Nenner believes additional Treasury purchases won't make a difference. So, add Nenner to the deflation camp with Robert Prechter, Gary Shilling, and David Rosenberg. He didn't mention commodities but he sees a stronger Dollar. So I assume commodities would fall with the market. If that's the case, it will be interesting to see how commodities and the Dollar react during a deflationary crisis and forceful policy response.

Nenner mentioned on CNBC last week that the NASA sunspot cycle forecast was predicting another major crisis in 2013. On Tech Ticker, Nenner gave a more detailed outlook on Gold, the U.S. Dollar, Dow, S&P, semiconductors, 10-year Treasury bonds, deflation and geopolitical conflict down the road. Below are important points he made and the embedded videos from 11/30/2010.

Make Free Calls From iPhone Using Viber App (Free SMS Coming Soon)

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Check this out. The free, ad-less, Viber application on your iPhone allows you to make free phone calls to other iPhone users with the Viber app installed. Free calls are made using your 3G data plan or Wi-Fi network. You can also make free calls internationally and they say the sound quality is better than your cell service. Android and Blackberry versions are coming soon, as is free SMS (text messaging). Could Viber put a huge dent in phone bills every month? I guess it all depends on data plans. It fuses with your iPhone and contacts perfectly it looks like. How will the whole world not use this? Watch the intro videos below via Youtube.

Chris Whalen on Dylan Ratigan Show (Fed Bailouts, Banks and Spain)

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Chris Whalen of Institutional Risk Analytics was featured on Dylan Ratigan's show on MSNBC on 12/3/2010. Here are key quotes by Chris Whalen on the recently released details of the Fed bailouts. The video is after the jump.
"Goldman would've failed"

"The Fed is now there to support the speculators and they let the real economy go to hell, that's the bottom line"

"The impact, the negative effect of the speculation, especially in residential mortgages, was so awful that the Fed had to come to the aid of big corporations too which were cut off from commercial paper"

"Wait til we get to Spain. Spain is worse than Ireland"

Groupon Rejects Google's $6 Billion Bid, Coupon 2.0 Wave is Here

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I just read that Groupon rejected Google's $6 billion bid. Read more at 
ChicagoBreakingBusiness, All Things Digital, BusinessWeek, WSJ, Dealbook, CNNMoney.

Couldn't Google build their own location based coupon service?Coupons would pop-up on your phone if you pass a store or restaurant based on search history, purchase history or personal settings. You'd pay with your e-coupon on your phone (phone = new credit card). Your phone would analyze purchase history to help make coupons more relevant. Also a search algorithm could provide real-time competitive coupon deals when a product, store or restaurant is searched for on Google. Local and nationwide businesses would be forced to provide the best deals. The coupon flood is just getting started in my opinion. Especially with the unemployment rate at 9.8%.

Analysis of November HSBC China PMI, OECD Leading Indicator Trending Down Since February (Charts)

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From the November HSBC China Manufacturing PMI release at (the service sector and composite output PMI declined, see below):

"The Chinese manufacturing sector strengthened further in November, with overall business conditions improving at the strongest pace in eight months. This was signalled by the headline HSBC Purchasing Managers’ IndexTM (PMITM) posting 55.3, up from 54.8 in October. Considerable price pressures were also indicated by November’s survey, with both output and input prices rising at substantial and accelerated rates."

A read above 50 means the Chinese manufacturing sector is growing. Under 50 means contracting. Price pressures were expected as consumer prices in China rose 4.4% in October, a 25 month high. Also read: China 'set to tighten monetary policy' (BBC News 12/3/2010). In a similar fashion, the official China PMI reported by the "China Federation of Logistics & Purchasing and National Bureau of Statistics" hit 55.2 in November, up from 54.7 in October. See the chart and data at - CPMINDX.

Details of Liquidity Facilities Used By the Fed During Financial Crisis

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The Federal Reserve released "detailed information about the liquidity and credit programs and other monetary policy tools that the Federal Reserve used to respond to the financial crisis that emerged in the summer of 2007".Find it all at

"Facilities and Programs
Agency Mortgage-Backed Securities (MBS) Purchase Program
Term Auction Facility (TAF)
Central Bank Liquidity Swap Lines
Primary Dealer Credit Facility (PDCF)
Term Securities Lending Facility (TSLF) and TSLF Options Program (TOP)
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF)
Commercial Paper Funding Facility (CPFF)
Term Asset-Backed Securities Loan Facility (TALF)
Money Market Investor Funding Facility (MMIFF)
Bear Stearns, JPMorgan Chase, and Maiden Lane LLC
American International Group (AIG), Maiden Lane II and III
Bank of America

And check this out... "@WSJ: We've created a searchable database of the Fed's emergency lending data. Every loan:"

Bank of America Broke Support, CDS Up, Wikileaks? [BAC Charts]

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BAC closed at $10.95, -3.95% and just below support. BAC 5Y CDS (credit default swap) was up 7.21% at 214.338 basis points (+114% YTD).

Is Bank Of America WikiLeaks’ Next Target? (Forbes)

Bank's Stock Declines on WikiLeaks Anticipation (WSJ)

BofA Mortgage Morass Deepens After Employee Says Trustee Didn't Get Notes (Bloomberg)

WikiLeaks Says It Holds Documents From Bank of America Executive - (Bloomberg)

Wikileaks: 5GB of Dirt on Bank of America - (The Big Picture)

Wikileaks chief said he has 5GB of secret docs on Bank of America - exclusive - (Raw Story)

BofA CDS 5Y - CBAC1U5 (Bloomberg)

Charles Nenner: Next Crisis Hits in 2013 When Sunspot Cycle Peaks, Predicts Dow 5,000 (Video)

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Did you know sunspot cycles move in tandem with the stock market? You learn something new every day. Charles Nenner of Charles Nenner Research believes the market will "muddle through" until 2013 when the sunspot cycle peaks. He then predicts the Dow will drop to 5,000 (break the March low).

The less sunspots there are, the more depressed people are, and that in turn affects the economy. Was there a Sunspot/Dow divergence from 2002-2007? Here's the actual prediction by NASA/Marshall Solar Physics which was updated on 11/3/2010:

"Current prediction for the next sunspot cycle maximum gives a smoothed sunspot number maximum of about 66 in June of 2013."

Click on the chart for a closer view of the sunspot forecast. In the first segment, Nenner said EUR/USD will move lower as the U.S. economy grows faster than Europe. Watch the CNBC video after the jump.

George Bush Talks His Book at Facebook HQ With Zuckerberg (Video)

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I'm watching former President George W. Bush shamelessly promote his new book, "Decision Points", with Mark Zuckerberg at Facebook headquarters. Good marketing move. Video after the jump.

WikiLeaks' Next Target is a Major Bank!

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Prepare yourselves... From Forbes.
"In a rare, two-hour interview conducted in London on November 11, Assange said that he’s still sitting on a trove of secret documents, about half of which relate to the private sector. And WikiLeaks’ next target will be a major American bank." (full story)

Spain Government Bond Yields Spike, 10-Year at 5.42%, EUR/USD at 200DMA

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The European debt crisis is hitting Spain. Spain Government Bond yields and credit default swaps made new highs today. Spain's 10-year bond yields 5.427%, which is up 122 basis points or 29% in a month. Spain's 5-year bond yields 4.81%, up 168 basis points or 53.6% in a month. Data and snapshots are courtesy of I added news links at the end of the post. EUR/USD (Euro/US Dollar) is currently testing the 200 day moving average and Dennis Gartman told CNBC today that any Euro rallies should be sold (video after the jump).

Spain 5y Bond Yield (GSPG5YR:IND)

Spain 10y Yield (GSPG10YR:IND)

EUR/USD (Euro/US Dollar)

Reads: Sheila Bair's Warning, Russell on Equities, Ireland Gets Bailout, Korea Conflict, AAII Elevated

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Continued from the 11/24/2010 powerlinks fest.

Will the next fiscal crisis start in Washington? by Sheila Bair (FDIC Chairman) - Washington Post

Lee Myung Bak (South Korea President) Vows to Make North Korea Pay for Attack as China Urges Talks - Bloomberg

Richard Russell - Stocks Repeating 1930, Gold Building Base (Dow Theory Newsletter) - King World News

Ireland gets a $113 Billion bailout; Germany Drops Threat on Bonds - Bloomberg

Irish to Pay 5.8% for Bailout as Taxes, Senior Debt Protected - Bloomberg

Following Hungary And Ireland, France Is Next To Seize Pension Funds - Zero Hedge

Robust Sales for Holiday Weekend - NYT

AAII Bullish sentiment rebounded to 47.4% (remains elevated) - PragCap

The Day the Dollar Died (Video by NAI), Bernanke Beware of This Hyperinflation Scenario!

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Watch this fictional yet horrifying video made by the National Inflation Association ( depicting a hyper-inflationary Dollar collapse. It is titled: "The Day the Dollar Died: The first 12 hours of a U.S. dollar collapse". The NAI believes there's a serious risk of hyperinflation in the U.S if the Fed keeps pumping trillions in excess reserves into the banking system (we're at QE4 in the video). Watch it after the jump. They did another video in August on the similarities and differences between Japan in 1990 (beginning of Japan's lost deflationary decade) and the U.S. today. Some economists, like David Rosenberg, believe ongoing debt de-leveraging will outweigh reflationary policies for many years, which will force price stability. Bernanke has everything under control, right?

Protests Against Austerity in UK, Austria and Ireland (Videos, 11.27.2010)

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On Friday, in the UK, there were violent student protests against the proposed tuition hike that would triple fees. People then took to the streets in Ireland and Austria protesting against tax hikes and budget cuts (protest reflexivity). See videos after the jump. People protested against bailouts as well (related:
Ireland Bank CDS widened on Friday). So, when does the austerity party and protests start in the U.S.? On a currency note, BlackRock's Larry Fink thinks the Euro (EUR/USD) could hit 1.20 as a result of the EU debt crisis and contagion ( Watching Portugal and EspaƱa.

1) Students in UK rioting proposed tuition hike (courtesy of RussiaToday)
2) 50,000 people march through Dublin protesting austerity measures (speeches)
3) Thousands protest proposed budget cuts in Vienna, Austria (courtesy of

Text of FOMC Minutes; GDP, Unemployment, PCE Projections (11/3/2010)

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Below is an excerpt from the Federal Open Market Committee (FOMC) Minutes on 11/2/2010 and 11/3/2010. The quoted text does not include staff reviews. Here is the FOMC Statement.

"Participants' Views on Current Conditions and the Economic Outlook
In conjunction with this FOMC meeting, all meeting participants--the six members of the Board of Governors and the heads of the 12 Federal Reserve Banks--provided projections of output growth, the unemployment rate, and inflation for each year from 2010 through 2013 and over the longer run. Longer-run projections represent each participant's assessment of the rate to which each variable would be expected to converge, over time, under appropriate monetary policy and in the absence of further shocks. Participants' forecasts are described in the Summary of Economic Projections, which is attached as an addendum to these minutes.

XRT/HYG (Retail Index/High Yield Bond ETF) Testing April High - Chart

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XRT/HYG, what do you think y'all. Can the ratio pry through April, 2010 resistance? Or will retail sales disappoint and stocks fall faster (or rise slower) than high yield bonds.

Futures Down, Dollar Up on South Korea Attack (ES, USDJPY, EURUSD, EURJPY - Charts)

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S&P futures are down and the US Dollar is up on Korea tensions. EUR/JPY is testing the downtrend line. See charts after the jump (ESZ10 -0.73% at 1,189.25). Will provide an update after the close.

North Korea Fires at South Korean Island (Video and Links)

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Update: North Korea attacked a South Korean Island. Below are links and a video clips after the jump (added a live MBC News stream).

N. Korean attack sets S. Korean island ablaze, at least 1 dead - BNO News
S. Korea Scrambles Jets, Returns Fire After North Shells Island - Bloomberg
Marines killed one person, injured 13 people.. army on alert - (title translated)
NK Fires Coastal Artillery at S.Korean Island (Yeonpyeong) - KBS World (
North Korea fires on South Korea – live coverage - Guardian
North and South Korea Exchange Dozens of Artillery Shells - New York Times
North Korea and South Korea exchange fire, raising tensions - FT/BeyondBrics Blog
North Korea bombs South Korean island - The Telegraph
North Korea Fires Rockets at Island - WSJ
Two Koreas exchange fire across maritime border - Reuters
'Artillery firing' on Korea border - Al Jazeera English

Analyst Mary Meeker on Internet Trends at 2010 Web 2.0 Summit (Video/Slides)

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The Web 2.0 Summit is great. See web venture capitalists Fred Wilson and John Doerr battle it out in my previous post. Mary Meeker, an technology analyst at Morgan Stanley, did a presentation on "internet trends" (globality, mobile, social ecosystem, advertising, commerce, media, pace of change etc). I embedded the video and presentation slides after the jump. Mobile is blowing up..

"Global Unit Shipments of Smartphones > Desktop/Notebook PCs by 2012". Also, internet ad spending is "out of whack" with consumption, using TV, print and radio as comparables (chart in the report).

Other interviews at the Web 2.0 Summit include Eric Schmidt (CEO of Google) and Mark Zuckerberg (Facebook).

Gregor Macdonald on IEA's Oil Projection (65% of Future Supply Coming From Fields Not Yet Discovered)

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Gregor Macdonald of and Macrotwits Hour was on Max Keiser's show on 11/20/2010 talking about the IEA's recent world oil production projection (w/ chart) out to 2035. I embedded Part 1 after the jump, see parts 2 and 3 at IEA = International Energy Agency.
"The IEA very surprisingly and I must say rather strangely, has forecasted that the bulk of future oil supply will come from fields not yet discovered or developed" (65% of that future oil)

Has The Market Been Rigged For Decades? (Hedge Fund Raids/Tech Ticker Video)

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"The most valuable commodity I know of is information" -Gordon Gekko. Nothing new going on here people.

1) U.S. in Vast Insider Trading Probe

2) FBI Visit Exposes Trade-Probe Tactics

3) FBI Raids Two Hedge Funds (Diamondback Capital Management LLC and Level Global Investors LP) Amid Insider-Trading Case.

4) FBI raids Loch Capital

5) SAC Capital, Janus, Wellington Receive Inquiries on Insider Trading, SAC Discloses Government Subpoena

6) Citadel Receives Subpoena

Expert Networks:

1) Expert-Broker Chu Steered Hedge Fund to Asia, U.S. Says
"Don Ching Trang Chu, the “expert- network” executive arrested yesterday on insider-trading charges, had a roster of Asia-based employees of North American technology companies to feed information to clients, according to court documents."

2) U.S. Trading Probe Puts Research, Expert Networks in Spotlight

3) Consultant of 'Expert Network' Gerson Lehrman Group May Be Drawn Into Insider-Trading Probe (*update 11/30/2010)

Tech ticker video talking about it after the jump.

Bernanke's ECB Speech: Global Imbalances, Unemployment Pose Risk to Recovery, Defends Policy (11/19/2010)

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Bernanke gave an interesting speech at an ECB conference on Friday. He mentioned a few things that could "undermine" the global recovery: global trade imbalances, currency undervaluation, temporary cyclical unemployment turning into long-term structural unemployment and further disinflationary pressures (source: I also embedded a video clip from

Chairman Ben S. Bernanke
At the Sixth European Central Bank Central Banking Conference, Frankfurt, Germany

November 19, 2010

Rebalancing the Global Recovery

The global economy is now well into its second year of recovery from the deep recession triggered by the most devastating financial crisis since the Great Depression. In the most intense phase of the crisis, as a financial conflagration threatened to engulf the global economy, policymakers in both advanced and emerging market economies found themselves confronting common challenges. Amid this shared sense of urgency, national policy responses were forceful, timely, and mutually reinforcing. This policy collaboration was essential in averting a much deeper global economic contraction and providing a foundation for renewed stability and growth.

In recent months, however, that sense of common purpose has waned. Tensions among nations over economic policies have emerged and intensified, potentially threatening our ability to find global solutions to global problems. One source of these tensions has been the bifurcated nature of the global economic recovery: Some economies have fully recouped their losses while others have lagged behind. But at a deeper level, the tensions arise from the lack of an agreed-upon framework to ensure that national policies take appropriate account of interdependencies across countries and the interests of the international system as a whole. Accordingly, the essential challenge for policymakers around the world is to work together to achieve a mutually beneficial outcome--namely, a robust global economic expansion that is balanced, sustainable, and less prone to crises.