Full Video of CNN Tea Party Republican Debate

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Watch the CNN videos after the jump. The Republican presidential candidates are Michele Bachmann, Herman Cain, Newt Gingrich, Jon Huntsman, Ron Paul, Rick Perry, Mitt Romney and Rick Santorum. Legalize and tax "alternative medicine"!

Based on CDS, Greece's Default Probability is 97.64% (CMA)

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According to CMA's Sovereign Risk Monitor (see it free), Greece has the highest default probability percentage at 97.64%. Greece's 5Y credit default swap mid spread is at 7318.25, with Portugal right behind it at 1308.51 (default probability 63.75%). You can see Ireland, Italy and Spain are further down the list. Membership in the highest default probability club hasn't changed much since June 2010 (minus Dubai, Iraq, Illinois and California), but spreads and the CPD% have increased substantially for the PIIGS.

Read these articles for more info:

Greece Default Risk Jumps to 98% as Euro Crisis Deepens (Bloomberg)
Greece – The First of the Dominoes? (Pragmatic Capitalism)

Source: CMA Datavision

Fed Minutes on Additional Policy Tools; Bernanke's Speech at Economic Club of Minnesota (9/8/2011)

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FOMC Meeting (Philadelphia Fed)
Fed Watch: Ben Bernanke, Chairman of the Federal Reserve, gave his outlook for U.S. economic growth, inflation and monetary policy during a speech at the Economic Club of Minnesota on 9/8/2011. I quoted the portion on monetary policy and provided an excerpt from the FOMC Minutes on 8/9/2011 (released 8/30/2011), which discussed additional tools the Fed could use to "promote a stronger economic recovery in a context of price stability."

Some Fed participants believe "providing additional stimulus at this time would risk boosting inflation without providing a significant gain in output or employment." The next Federal Open Market Committee meeting is on September 21-22. Also read the transcript of Ben Bernanke's
Jackson Hole Speech, which was delivered on 8/26/2011. What are the odds of QE3?

Chairman Ben S. Bernanke at the Economic Club of Minnesota Luncheon, Minneapolis, Minnesota (September 8, 2011) - Source
"Monetary Policy

BNP Paribas Is Down 12% On Possible Moody's Downgrade, EURUSD Bounced Off 1.34986

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Source: Google Finance
Large European banks, BNP Paribas (BNP), Societe Generale (GLE), Credit Agricole (ACA), Deutsche Bank (DBK) and UniCredit (UCG), are down 8-13% today with traders pricing in possible 
credit rating downgrades by Moody's and Greece's ongoing debt crisis. Greece needs to meet its budget goals to receive the next bailout tranche from the EU/IMF, or it will run out of cash in mid-October (Deputy Finance Minister). However, it appears that French banks will not be affected by a Greek default (Noyer Says French Banks Can Contend With Any Greek Problem, French banks can weather Greece default: SocGen CEO Frederic Oudea). Do they hold Portuguese, Irish, Italian and Spanish debt? To be sure, I'd monitor European bank credit default swaps or default insurance premiums. I see SocGen is planning to sell off $4 billion euros worth of assets by 2013. EUR/USD hit a low of 1.34986 and bounced back hard to 1.36252. I'll be monitoring la situation.

EUR/WTF! Traders Nervous Over Greece (Euro/US Dollar At 1.35719)

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EUR/USD is still selling off pretty hard. See the linkfest in my previous post for news on Greece and European banks. I'm not sure where support is for the pair, but it's starting to price in an important catalyst ahead. Hopefully it is clean.

Charts are courtesy of freestockcharts.com

Links: Greece Default Risk, French Banks, Jim Rogers (CNBC), China's Empty City, ECB

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Linkfest for 9/11/2011 (R.I.P to the innocent lives lost during the 9/11/2011 attacks). Market Update: EUR/USD is at 1.35870 -0.49%, Japan's Nikkei Index is down 1.9% at 8,572, Hong Kong's Hang Seng Index is down 3% at 19,270, and the E-mini S&P September 2011 Future is down 1% at 1,146.

Germany May be Ready to Surrender Over Greece (Bloomberg)

Greek ‘Orderly’ Default Can’t Be Ruled Out, Roesler Tells Welt (Bloomberg)

Greece Announces New Tax As Unrest Flares (DJ @ Nasdaq)

Moody's May Downgrade Top French Banks (WSJ)

Goldman's Complete Economic Outlook From Now Through 2012 (Business Insider)

China's empty city of Ordos (Al Jazeera English Video + embedded after the jump)

The Party is Over (iBankCoin)

Jim Rogers (on CNBC) Explains Why He Is Short Stocks, Long Commodities, And Wants Europe To Fail (Zero Hedge)

China official: Swiss intervention won't work (Market Watch)

The investor’s dilemma: Earnings, valuation and what to do now (Barry Ritholtz @ Washington Post)

Europe Banks Valued at Post-Lehman Low (Bloomberg)

Greece 5Y CDS Spikes to 3,399 bps, Judgment Day is Near (Chart, 9/9/2011)

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Greece's five year credit default swap spiked to 3,399 basis points today, up 20.37%. The detailed quote on Bloomberg.com today showed the contract hitting a high of 3,623 basis points. In other words, the cost to insure 5-year Greek government bonds rose to 33.99% per year, or $3,399,000 to insure $10 million of Greek five year bonds. Judgment day is near. Will selling off (or collateralizing) state assets prevent a default? Links: "Greece says to speed up privatisation plan" (AFP, 9/7), "Greek state assets seen as collateral for new bailout" (EurActiv, 8/26). GGB yields are very high as well.

1-year Greece Government Bond yield, 97.964% (Bloomberg)
2-year Greece Government Bonds Yield, 56.97% (Bloomberg)
5-year Greece Government Bond Yield, 25.62% (Bloomberg)
10-year Greece government Bond Yield, 20.55% (Bloomberg)

"German Finance Minister Prepares for Possible Greek Bankruptcy" (Spiegel)
"Germany Is Said to Prepare Plan to Assist Banks If Greece Defaults on Debt" (Bloomberg)
"Papandreou to Defend Austerity as Greek Default Bets Mount" (Bloomberg)
"Greece Dismisses Default ‘Rumors,’ Says Committed to Agreements" (Bloomberg)
"Market Chatter Of Greek Default Over The Weekend" (Zero Hedge)
"Truglia Says Greece Is `Very Close' to Debt Default" (Washington Post/BloombergTV)
"A Greek T-bill oddity" (FT Alphaville)  - 3, 6-month bill yields aren't updating on Bloomberg.com

Greece 5Y CDS (Source: Bloomberg.com)

Euro Looks Broken For Now (EURUSD), Ashraf Laidi Gives Update on BNN

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EUR/USD (courtesy of FreeStockCharts)
China steps in here, EUR/USD looks broken to me, at least for a while. It broke the uptrend line from June 2010, so it needs an injection from somewhere to get back on path. You can see the nasty sell off that occurred recently in the first chart and the near-term downtrend line to break for a relief rally. It could roll on down to test support in the descending channel.  On BNN yesterday, Ashraf Laidi, of Intermarket Strategy, had interesting views on the Euro.
"Only a very aggressive QE from the U.S. will do the trick for the Euro. Meaning, only something so aggressive easing policy of the Fed will be bad enough for the Dollar to come down and good enough for the Euro. We think the Fed is not going to be that aggressive and we think that the Euro is going to come back down."
"But the big trades we are talking about right now is, Euro/Dollar is going to test 1.37. If we do break below that, I think we are going to look at 1.30." (Ashraf Laidi on BNN)

Here is analysis on the ECB.
"The European Central Bank, or ECB, is most likely to reverse its recent rate hikes due to weak economic outlook and fading upside risks to price stability, Jennifer McKeown, a senior economist at Capital Economics, said." (INO.com)

"If it remains a market crisis, the ECB may just give banks more liquidity but if it spreads to the real economy, they may even cut rates,” said Chris Scicluna, deputy head of economic research at Daiwa Capital Markets Europe in London." (Bloomberg)

Obama's Speech on the $447 Billion American Jobs Act (Video, Full Text, Fact Sheet)

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Below I embedded Presiden't Obama's speech on the American Jobs Act. If you can't watch it, I put up the full speech transcript and fact sheet with a table showing where the $447 billion would be allocated.
"THE PRESIDENT: Mr. Speaker, Mr. Vice President, members of Congress, and fellow Americans:

Tonight we meet at an urgent time for our country. We continue to face an economic crisis that has left millions of our neighbors jobless, and a political crisis that’s made things worse.

This past week, reporters have been asking, “What will this speech mean for the President? What will it mean for Congress? How will it affect their polls, and the next election?”

But the millions of Americans who are watching right now, they don’t care about politics. They have real-life concerns. Many have spent months looking for work. Others are doing their best just to scrape by -- giving up nights out with the family to save on gas or make the mortgage; postponing retirement to send a kid to college.

David Tepper Has a Large Cash Position, Update on Appaloosa's Q2 Holdings

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David Tepper (Appaloosa Mgmt)
Yesterday, an article in 
Institutonal Investor mentioned that David Tepper, founder of $15 billion hedge fund Appaloosa Management, was 30-40% in cash.

"Sources say he has gone 30 percent to 40 percent in cash, which is very high for him. Some of his cash is invested in U.S. Treasuries, which have in turn risen in value in recent weeks."

"Word is he will remain cautious until there is improvement in the European bank crisis." (continue reading)

This doesn't surprise me. On 6/13/2011 he told CNBC:

"Basically Bernanke said no QE3. If SPX is down a couple hundred points and financial conditions tightened maybe they would reconsider. There is no logic to QE3 now and the only result might be more food and energy inflation. We're in a difficult investing environment."

2012 Republican Presidential Candidates Debate (Full Video, 9/7/2011)

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Watch the full debate below on MSNBC.
"NBC’s Brian Williams and Politico’s John Harris moderate a debate between 2012 GOP presidential candidates live from the Reagan Presidential Library in Simi Valley, California."

Republican Candidates: Jon Huntsman, Rick Perry, Mitt Romney, Herman Cain, Michele Bachmann, Rick Santorum, Ron Paul and Newt Gingrich.

Links 9/7/2011 (Yahoo, Eurozone, Swiss Franc, Jim Rogers, Bill Gross)

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Swiss Central Bank Move 'Huge Mistake': Jim Rogers (CNBC)

Swiss Franc Ceiling (1.20) May Not Heal Eastern Europe Mortgage Pain (Bloomberg)

In Euro Zone, Banking Fear Feeds on Itself (New York Times)
“This crisis has the potential to be a lot worse than Lehman Brothers,” said George Soros"

Bill Gross of PIMCO: ‘Helicopter Ben’ risks destroying credit creation (Financial Times)

Obama Said to Seek $300 Billion Jobs Package (Bloomberg)

CMA: Greece Cumulative Probability of Default is 88% (PragCap)

Albert Edwards Says It's Time To "Stiffen Up The Sinews, Summon Up The Blood, And Gird Your Loins" (Business Insider)

Chris Whalen: Bank Of America Should Declare Bankruptcy (Business Insider)

2-Year Greek Bond Yields 50%, 10-Year Treasury Yields 1.93% (Both At Records)

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2-year Greek Government Bonds yield 50% which is a record high. Is it pricing in a default? The cost of insurance on 5Y Greek debt is testing the July highs at 2,500 bps (Greek 5Y CDS). The 10-year U.S. Treasury Note yield is at 1.93% which is a record low. See my previous post on 8/15/2011: "10 Year Treasury Note Yield Near 1941, 2008 Lows (1.95%, 2.04%)". Investors are rushing into Treasury bonds as a safe haven to hedge against recessions and euro-zone default risk, unless there's a war coming somewhere. This UBS report at Zero Hedge probably has the answers: "Bring Out Your Dead - UBS Quantifies Costs Of Euro Break Up, Warns Of Collapse Of Banking System And Civil War". Watch gold and the U.S. Dollar. Is China going to save the euro-zone and European banks?

3-year chart of 2-year GGB Yield (courtesy of Bloomberg.com)

Intraday chart of 10-year UST Yield (Courtesy of Bloomberg)

Hussman: Under Extreme Secular Undervaluation S&P Hits 400

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John Hussman
John Hussman, of
Hussman Funds, had an interesting Weekly Market Comment out last week (there's a new one out tonight) that included a range of S&P targets based historical "prospective returns". He also thinks there's a possiblity that the S&P could revert back its secular valuation lows, with the potential of overshooting. He's not alone, Felix Zulauf sees the S&P reverting back to book value. In this case, Hussman values the S&P 500 between 600 and 1000 based on the historical prospective returns listed below; but under extreme secular undervaluation and/or macroeconomic conditions, he thinks the S&P could hit 400!

"Historically, the typical bull-bear market cycle has produced a range of 10-year prospective returns in a band between about 7.5% and 13%. That band presently corresponds to a range for the S&P 500 index between 600 and 1000. A 10% prospective return is right in the middle, at about 800 on the S&P. Once you recognize that profit margins are in fact cyclical, that range is about right, as uncomfortable as it may be to contemplate. Jeremy Grantham of GMO estimates that fair value is "no higher than 950." A tighter norm for prospective return between 9-11% maps to an S&P 500 between 750 and 850.

Finally, while I certainly would not expect it in the absence of extreme macroeconomic upheaval, major secular undervaluation as we observed in 1950, 1974 and 1982 would presently map to about 400 on the S&P 500. When you think of "once in a generation" valuations and "secular bear market lows" - that number, not anything near present levels, should be what crosses your mind. I am well aware that even discussing numbers like these, given the present mindset of investors, is likely to be dismissed as utterly ridiculous. Frankly, I would rather risk the ridicule of those who pay lip-service to research, cash flows, fundamentals, and value than to pretend these outcomes are impossible, when the historical record (and even the experience of the past decade) strongly indicates otherwise." (continue reading at HussmanFunds.com)

Links: Euro Crisis, Post Office Crisis, Employment Crisis, Banks Sued By US, China Services PMI

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LaSalle Street Chicago (Flickr)
Crisisfest for 9/5/2011

The worst of the euro crisis is yet to come (
Financial Times)

HSBC China Services PMI (Markit Economics)
"August data pointed to another marginal expansion of Chinese private sector activity, with the headline seasonally adjusted HSBC Composite Output Index recording 50.4. The index was unchanged on July’s 28-month low, and much lower than the long-run trend for the series"

Postal Service Is Nearing Default as Losses Mount (New York Times)
"the agency is so low on cash that it will not be able to make a $5.5 billion payment due this month and may have to shut down entirely this winter unless Congress takes emergency action to stabilize its finances."

ABN Amro Complains About Interbank Liquidity Crunch, As CEO Says End Of Euro Would Make 1930s Seem Like "A Trifle" (Zero Hedge)

Senior IMF Official - "I Expect A Hard Greek Default This Year" - Chart of 3-month USD LIBORs (Zero Hedge)

Here It Is: Presenting Goldman's "The World Is Ending So Let's All Profit" Report (Zero Hedge)

SPY, SPX, and ES_F — charts do not get much clearer or uglier than these (Peter Brandt)

Another Historic, Incredibly Boring Bond Market Event! (10-year yield below 2%, 1950 level) (WSJ Market Beat Blog)

ECB's Coene says crisis heading to 2008/9 level: report (International Business Times)

BofA, JPMorgan Among 17 Banks Sued by U.S. for $196 Billion (Bloomberg)

FHFA Sues 17 Firms to Recover Losses to Fannie Mae and Freddie Mac (FHFA Statement)
"Ally Financial Inc. f/k/a GMAC, LLC, Bank of America Corporation, Barclays Bank PLC, Citigroup, Inc., Countrywide Financial Corporation, Credit Suisse Holdings (USA), Inc., Deutsche Bank AG, First Horizon National Corporation, General Electric Company, Goldman Sachs & Co., HSBC North America Holdings, Inc., JPMorgan Chase & Co., Merrill Lynch & Co. / First Franklin Financial Corp., Morgan Stanley, Nomura Holding America Inc., The Royal Bank of Scotland Group PLC, Société Général.."

David Rosenberg on the employment report, recession and Fed (Bloomberg Video)

El-Erian Calls U.S. Employment Report ‘Grim and Scary’ (Bloomberg Video),

Non-Farm Payroll Report (BLS.gov)
"Nonfarm payroll employment was unchanged (0) in August, and the unemployment rate held at 9.1 percent. Employment in most major industries changed little. Health care continued to add jobs; a decline in information employment reflected a strike. Government employment continued to trend down."

California Employment at Record Low (Bloomberg)

Unemployed face tough competition: underemployed (AP)

Nouriel Roubini Sees 60% chance of Recession Next Year (Bloomberg Video/ Baltimore Sun Blog)

European Bank Exposure to Sovereign Debt Dragging Down EUR/USD

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EURUSD is at 1.43125, down 0.38% at 3:25am (eastern). It is continuing its descent from Tuesday after breaking through the initial uptrend line. It is now testing the second one as you can see. To be long EUR/USD I need to see a confirmed breakout above 1.453. Until then, a break below the second trend line (around 1.430) could be a decent short to test the major uptrend line from 2010. There are fears that European banks have to take large writedowns on their holdings of Greek, Italian, Irish, Spanish and Portuguese sovereign debt, and a contagion effect could make it even worse. Read the FT article for details. The ECB and European governments think their estimates are BS since they're not factoring in the rise in German debt. The market will decide... Will China step in here?

"IMF and eurozone clash over estimates" (Financial Times)
"International Monetary Fund staff have provoked a fierce dispute with eurozone authorities by circulating estimates showing serious damage to European banks’ balance sheets from their holdings of troubled eurozone sovereign debt."
"Peeling the Onion on the Accounting for Greek Bonds" - (Accounting Onion Blog) *similar article, hat tip Zero Hedge

EURUSD Sells Off Sharply At Resistance, ECB Could End Rate Hikes (Links/Charts)

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EURUSD couldn't break above the 7/26 high (1.45358) this morning and sold off sharply. It testing the first uptrend line on the chart. I'm not sure what the exact catalyst was, but this could be it: "Euro Weakens as Trichet Spurs Bets Interest Rate Rises Over; Franc Gains" (Bloomberg.com). Read more articles after the charts.

EUR/USD (courtesy of FreeStockCharts.com)

Euro-Zone Economic Sentiment Slumps -European Commission (NASDAQ)

EU Seeks Action on Greek Deal (Finland is demanding collateral for Greece's second bailout) (WSJ)

FOREX: Euro retreats from day's high, stung by econ risks (Reuters)

European Banking Authority (EBA) chief Andrea Enria says inject EFSF capital directly into banks  (Welt.de, Financial Times Germany translate)

Futures Drop Before Data, Fed Minutes (WSJ)

Jakobsen Says ECB May Enact QE to Help Bank Funding (Bloomberg Video)

European Banks Need Bigger Greek-Bond Writedowns, IASB Says (Bloomberg)

FOREX: Euro at Risk as Debt Fears Return, US Dollar May Rebound (Daily FX)

Richard Sulík (SaS): Slovakia resists Greece rescue (Welt.de, translate) 8/27/2011

Corn ETF Breaks Out On Lower Yield Projections (USDA, Pro Farmer Tour), Corn Future Near June Highs

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Illinois Corn (courtesy of Randy Wick on Flickr)
Have you noticed that the Teucrium Corn Fund ETF (CORN:NYSE), which invests in corn futures, broke out recently? I noticed the setup when I was
writing about Adecoagro (NYSE:AGRO) on 8/20/2011, a South American farm company that owns over 283 thousand hectares of farmland and majority owned by Soros Fund Management. When equities were crashing this month, corn was being propped up by lower yield projections. On August 11, the USDA (Google doc) lowered its national corn yield projection to 153 bushels per acre (12.914 billion bushels):

USDA Corn Projections (8/11)
"U.S. feed grain supplies for 2011/12 are projected lower this month with sharp drops in forecast corn and sorghum production. Corn production for 2011/12 is forecast 556 million bushels lower with a reduction in harvested area and lower expected yields. The national average yield is forecast at 153.0 bushels per acre, down 5.7 bushels from last month’s projection as unusually high temperatures and below average precipitation during July across much of the Corn Belt sharply reduced yield prospects." (click here for the latest report at USDA)

And then on 8/26/2011 (last Friday), the 2011 Pro Farmer Tour estimated that corn yields would be even lower at 147.9 bushels per acre (12.484 billion bushels).

"Pro Farmer pegs 2011 U.S. corn crop at 12.484 billion bushels; average yield 147.9 bu. per acre +/- 1% = 146.45 bu. to 149.4 bu. per acre; 12.36 billion to 12.61 billion bushels."
"NOTE: Pro Farmer editors believe USDA will eventually lower harvested acres for both corn and soybeans, but USDA’s Aug. 1 harvested acreages were used in making these estimates...." (continue reading at Agweb.com/profarmer)

So that explains the strength in corn recently. Below are charts of the Corn ETF and future (ZC), and then links to articles. You can see how the Corn ETF broke out earlier this month and ZC is close to testing the June high. Also, the U.S. Dollar is testing June, July and August support. If it rolls over here it could test the May lows (72.70). Will the euro zone debt crisis ever affect the Euro? EUR/USD is currently trading at 1.45.

Bernanke's Jackson Hole Speech Text; No QE3 But Reiterated Low Rates, Policy Tools (8/26/2011)

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Bernanke didn't mention QE3, but reiterated that "economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013"; and "the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus. We discussed the relative merits and costs of such tools at our August meeting. We will continue to consider those and other pertinent issues, including of course economic and financial developments, at our meeting in September." The S&P 500 and gold both closed higher on Friday.

"Chairman Ben S. Bernanke
At the Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming

August 26, 2011

The Near- and Longer-Term Prospects for the U.S. Economy

Good morning. As always, thanks are due to the Federal Reserve Bank of Kansas City for organizing this conference. This year's topic, long-term economic growth, is indeed pertinent--as has so often been the case at this symposium in past years. In particular, the financial crisis and the subsequent slow recovery have caused some to question whether the United States, notwithstanding its long-term record of vigorous economic growth, might not now be facing a prolonged period of stagnation, regardless of its public policy choices. Might not the very slow pace of economic expansion of the past few years, not only in the United States but also in a number of other advanced economies, morph into something far more long-lasting?

I can certainly appreciate these concerns and am fully aware of the challenges that we face in restoring economic and financial conditions conducive to healthy growth, some of which I will comment on today. With respect to longer-run prospects, however, my own view is more optimistic. As I will discuss, although important problems certainly exist, the growth fundamentals of the United States do not appear to have been permanently altered by the shocks of the past four years. It may take some time, but we can reasonably expect to see a return to growth rates and employment levels consistent with those underlying fundamentals. In the interim, however, the challenges for U.S. economic policymakers are twofold: first, to help our economy further recover from the crisis and the ensuing recession, and second, to do so in a way that will allow the economy to realize its longer-term growth potential. Economic policies should be evaluated in light of both of those objectives.

EUR/USD Action Before Bernanke's Jackson Hole Speech, GDP Report

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EUR/USD is testing the upper-bound of the descending channel. It is currently fighting the first near-term trend line.

EUR/USD 5-Month Chart (freestockcharts.com)

EUR/USD Longer Term (freestockcharts.com)

European Bank Credit Default Swaps (RBS CDS Spread) Make New Highs Even After Bailouts!

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Royal Bank of Scotland 5Y CDS (bloomberg.com)
UPDATE: I found charts of European Bank CDSs (bond insurance premiums) online at Bloomberg.com.

Royal Bank of Scotland 5Y CDS
Lloyds TSB Bank PLC Bank 5Y CDS
BNP Paribas SA 5Y CDS
UniCredit SpA 5Y CDS
Societe Generale SA 5Y CDS
Banco Santander SA 5Y CDS
Credit Agricole 5Y CDS
Banco Popolare SC 5Y CDS
Commerzbank AG 5Y CDS
Bank of Ireland 5Y CDS
Deutsche Bank 5Y CDS

Two and a half years later, after taxpayers bailed out all of these banks, their credit default swap spreads are at record "wides" again! Read these articles at The Telegraph and PragCap: "Cost of insuring RBS debt reaches historic high" (Telegraph 8/24, Bloomberg chart), Market crash 'could hit within weeks', warn bankers" (Telegraph, 8/24), "CDS Market To Euro Banks – This Is Worse Than 2008" (Prag Cap, 8/22 with Danske Bank chart of Barclays, Credit Agricole, Societe Generale, Unicredit, Banco Santander, BNP Paribas CDS). With Royal Bank of Scotland's CDS making new highs, why the hell was its stock (RBS:NYSE) up 7.37% yesterday? Here are charts of RBS's stock and 5Y CDS. Its stock looks like Bank of America, no?

Royal Bank of Scotland Stock (stockcharts.com)
Europe Financials Debt Insurance Costs Rise To Record Highs (Dow Jones, 8/24/2011)

"Investors are worried that during times of quickly deteriorating asset prices, high volatility, and rising risks to the economic recovery, banks could be left with too little capital and a potential lack of support since governments are constrained by high indebtedness," UniCredit credit strategist Christian Weber said."

Steve Jobs Resigns as CEO of Apple (Resignation Letter), Tim Cook Named CEO (Press Release)

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Steve Jobs for Fortune magazine
Courtesy of tsevis on Flickr (for Fortune)
Big news for Apple fans and shareholders: Steve Jobs resigned as Apple's CEO and Tim Cook (COO) is taking over. Below is his
resignation letter and Apple's press release. I also embedded a video of Steve Jobs' 2005 Stanford commencement speech, which I thought was interesting. E-mini Nasdaq is down 1% tonight.

"Letter from Steve Jobs

To the Apple Board of Directors and the Apple Community:

I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know. Unfortunately, that day has come.

I hereby resign as CEO of Apple. I would like to serve, if the Board sees fit, as Chairman of the Board, director and Apple employee.

As far as my successor goes, I strongly recommend that we execute our succession plan and name Tim Cook as CEO of Apple.

I believe Apple’s brightest and most innovative days are ahead of it. And I look forward to watching and contributing to its success in a new role.

I have made some of the best friends of my life at Apple, and I thank you all for the many years of being able to work alongside you.


Apple's press release naming Tim Cook as CEO and Jobs' 2005 commencement speech.

Gold ETF is Testing Resistance On Two Trend Lines (GLD, GLD/SPY, USD, UUP Charts) 8/23/2011

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I'm watching GLD again after its two month parabolic move and 20 day spike in 
SPY terms. Gold (XAU/USD) hit 1,910 on Monday and then fell to 1,820 yesterday. From July 1 to August 22, gold moved parabolically from 1,500 to 1,900 (+26%). Is it exhausted yet using DeMark indicators? I bet gold sees volatile swings soon. Let's see 7% days. I put trend lines and channels on GLD, GLD/SPY, $USD and UUP charts using multiple time frames below. GLD is trading at uptrend resistance levels on two trend lines, one from 2006 and the other from 2009. If GLD moves vertically here through resistance, it will be in a whole new world. The overall trend is up until GLD breaks major uptrend lines. Gold has been in a bull market for 11 years. Get ready for crazy moves in gold, the U.S. Dollar and equities on Friday when Bernanke gives his Jackson Hole speech. The US Dollar ETF is testing an important downtrend and floor support level. A catalyst will determine its fate very soon. Charts are courtesy of StockCharts.com.

Recap of Today's BofA Drama; BAC Blames Henry Blodget For Stock Sell Off

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Source: Flickr
Today was somewhat interesting for Bank of America, BAC analysts and financial bloggers. Below is Bank of America's press release (via WSJ's 
Market Beat) blaming today's stock sell off on Henry Blodget's blog post. Bank of America should explain why its credit default swap spreads (insurance premiums on its bonds that trade over-the-counter) are near record highs.

"Mr. Blodget is making “exaggerated and unwarranted claims,” which is what the SEC stated publicly when he was permanently banned from the securities industry in 2003.

The sovereign exposure is off by a factor of 10.

The commercial real estate figures are off by a factor of four.

The mortgage analysis was provided by a hedge fund that has acknowledged it will benefit if our stock price declines.

The blogger’s recommendations on goodwill accounting would be prohibited by generally acceptable accounting practices.

Traditional bank valuation relies upon tangible book value per share, which excludes by definition 100 percent of goodwill and other intangibles. As of June 30, our tangible book value per share was $12.65."

These posts supposedly moved BAC today. Did they move BAC's credit default swaps as well? (lol)

Bank of America CDS Back at 2009 Highs (XLF, BAC, C, WFC, BAC CDS, Clog Index Charts)

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BAC 5Y CDS (source: Bloomberg)
The banks that were bailed out in 2008/2009 are now under pressure again. Is Bernanke going to save the day on Friday during his Jackson Hole speech? Bank of America ($BAC) and its 5Y credit default swaps are leading the way back to early 2009 levels. BAC is trying to unload its stake in China Construction Bank Corp to raise capital (BofA to maintain stake of at least 5% in CCB:
China Daily, Bloomberg).

The end of QE2, global economic slowdown, recent equity crashes, euro zone sovereign debt and banking crises, falling ABX and CMBX prices / rising premiums (credit default swap indexes insuring pools of subprime residential and commercial mortgage securitizations from 2005-2008) and the recent sunspot cycle correction are probably all responsible for the volatility recently (why sunspots). I want to show you charts of XLF, BAC, BAC CDS, C, WFC and the Financial Clog Index. See the CMBX Index and more at Zero hedge (links below). S&P, Dow and Nasdaq futures are up big tonight, while gold and the dollar are down. The next big moves will probably be Gold (going parabolic), EUR/USD (triangle squeeze coming) and DXY (testing floor support, downtrend). Those charts deserve a separate post. Traders are placing bets on whether the Fed continues to support the stock market and economy (Bloomberg).

XLF (Financials Select SPDR) broke through a 2-year channel. It looks ugly... Will the Fed backstop channel support?

Felix Zulauf Sees S&P Bottoming at 500 (Book Value), Bullish On Gold (Price/Book Ratio Chart)

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Felix Zulauf, founder of hedge fund Zulauf Asset Management, was interviewed by McAlvany Weekly Commentary on July 6 and had interesting views on the market. Listen to the full 53 minute interview here or read the full transcript ("Felix Zulauf: Marching Full Speed into Calamity"). Zulauf thinks the S&P bottoms at book value, or about 500, during the secular bear market, and believes gold is the best hedge against an "inflationary depression" as central banks keep printing money to prop up the system. He also discusses the euro zone sovereign debt crisis and the possible end-game. During a Barron's roundtable discussion on 8/13/2011 (see below), Zulauf gave his short term views on the market (hat tip PragCap). I also put up a chart of the S&P 500 price/book ratio.

Quotes from the McAlvany interview:

"But even during the 1970s and early 1980s, the last major secular lows in the stock market, we were trading slightly below book value at maybe 90% of book value or something like that. I did expect the stock market to decline into a secular low to around a book value of slightly below that. Book value is roughly 500 or a little bit over 500, depending on how you define it.

Libyan Opposition Forces Now In Control of Tripoli (Al Jazeera English Video Clips)

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According to Al Jazeera English, Tripoli is now in the hands of the opposition, but there are still pro-Gaddafi "sleeper cells". Muammar Gaddafi, and his sons Saif and Mohammed, have been detained by rebel forces (Update: Saif escaped! See below). Gaddafi's 40 year regime could be over. Watch the the events unfold live in Tripoli's Green Square, Benghazi's Freedom Square and Misrata on Al Jazeera English. I embedded video clips below. Also monitor the Twitter conversation on Gaddafi.

South American Farmland Co. Adecoagro is Soros' Largest Holding As of 6/30/2011

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AGRO vs. CORN, CCI Index, S&P GSCI Commodities Index (StockCharts)
I've been tracking Adecoagro (NYSE:AGRO) since it went
public in January and it is Soros Fund Management's largest holding as of 6/30/2011, worth $264.4 million (13F SEC Filing). The fund sold 2.62% of its shares during Q2, so we'll see if Soros dumped it or added to his position after June 30 (See AGRO's institutional holdings at nasdaq). The stock is down 26% from its post IPO high of $13.5 smackers. Is this action pricing in future food price declines from a global recession (if that's what markets are pricing in) and monetary tightening in China?

AGRO fell in tandem with the World Bank Food Index, S&P GSCI Commodities Index and Reuters-CRB CCI Commodities Index after the World Bank Food Index peaked in February 2011. The CORN ETF, on the other hand, is testing the June highs which is interesting. The recent USDA corp production report was bullish for corn, read more at AgJournal. In the World Bank report, China, Ethiopia, Guatemala and Vietnam saw huge food price moves. Ethiopian food prices are up 45% year-over-year and its currency depreciated against the Dollar. So, back to the original topic of this post. Adecoagro is a huge agricultural commodities play if the ag boom continues.

Philadelphia Fed Manufacturing Index Falls To -30.7, Lowest Since March 2009

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The diffusion index of the Philadelphia Fed Business Outlook Survey fell to -30.7 in August from 3.2 in July. Read the report here in pdf form. The survey covers eastern Pennsylvania, southern New Jersey and Delaware. During the past few weeks the S&P has been trying to price in this economic weakness. It is currently down 4.91% today. Here's an interactive historical chart of the index. It hit a high of 43.4 in March; nice volatility.

German DAX Composite Down 20.62% Since Beginning Of August (Chart)

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The DAX is down 3.38% this morning. I can't believe it lost 23% in eleven days. A 20% price decline is considered a bear market.

German DAX Composite (StockCharts.com)

Morgan Stanley “Dangerously Close to Recession” – Lowers GDP Estimates (HedgeAnalyst)

German Bund Yield Slides to 11-Month Low Amid Concern Growth is Faltering (Bloomberg)

Germany's discouraging GDP data adds to fears (Bloomberg News/Deleware Online)

German Slowdown Sapped Euro-Zone Growth in Second Quarter (Spiegel)

It’s a Technical Mess All Over the World: Yamada (Breakout Video)

EUR/USD Formed New Channel, Waiting For Big Catalyst (Technical Update, Articles)

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EUR/USD is waiting for a big catalyst that will force it out of a symmetrical triangle. Yesterday, EUR/USD spiked to 1.45173 after piercing through the 8/15 high (1.44772), but since then it retraced a bit and is currently trading at 1.44105 (where it's been for months). The top yesterday formed a new descending channel, and if you connect the recent downtrend with the major uptrend from June 2010/January 2011, you have a symmetrical triangle inflection point. The two recent highs, 1.45173 and 1.45358, are now important resistance levels to break if EUR/USD wants to proceed to 1.50 and beyond.

Euro zone news:

Finns Set Greek Collateral Trend as Austria, Dutch, Slovaks Follow Demands - Bloomberg

German Finance Minister, Wolfgang Schaeuble: No need to further strengthen the EFSF - Capital.gr (translated)

"Morgan Stanley cuts 2011 Eurozone GDP forecast to 1.7% from prev. forecast of 2%, sees material risks of outright recession" - Ran Squawk

S&P Confirms France's AAA Rating, Stable Outlook - WSJ

Markets give eurozone plan cool reception - Financial Times

Debt Crisis Could Leave Eurozone With No Triple-A Sovereigns - Euromoney

ECB’s Nowotny Says Italy Not Greece, Too Early for Euro Bonds - Bloomberg

George Soros interviewed at Der Spiegel: #1: 'You Need This Dirty Word, Euro Bonds, #2: 'You Can Count on China To Back the Euro'

Chavez is Nationalizing Venezuelan Gold, Rusoro Mining Chart, China Forecasts Cut (Links)

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Rusoro Mining (RML) Courtesy of StockCharts.com
Chavez is nationalizing Venezuela's gold sector. According to
Reuters, TSX listed Rusoro Mining Ltd. (RML.V), which is run by Russia's Agapov family, is the "only large gold miner operating in Venezuela and produced about 100,000 ounces of gold in Venezuela last year. The company said export limits by the Government hurt its ability to finance attractive mining projects. Rusoro's stock closed at $0.125 per share today, down 93% in 4 years.

Venezuela news:

  • Chavez to nationalize Venezuelan gold industry (Reuters)
  • Chavez Emptying Bank of England Vault as Venezuela Brings Back Gold Hoard (Bloomberg)
  • As Chavez Pulls Venezuela's Gold From JP Morgan, Is The Great Scramble For Physical Starting? CME Group metal depository statistics table - (Zero Hedge
  • Venezuela Plans to Move Reserve Funds (WSJ)
  • Venezuela moves reserves to BRIC nations (Reuters)
  • Venezuela expects $4 bln loan from Russia - Chavez (Reuters)
  • Pension scandal shakes up Venezuelan oil giant PDVSA - (Reuters)
China analysis:

  • China Forecasts Cut by Morgan Stanley, Deutsche (Bloomberg)
  • Bad Debt at China Banks Growing: Jain (Bloomberg)
  • Local Govt Loan Risks 'Under Control': CBRC - (China Daily)

Technical Views From Louise Yamada and Tom DeMark (8/16/2011)

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Source: Flickr
Technical Analysis: Louise Yamada, founder of Louise Yamada Technical Research Advisors, believes a new cyclical bear market has been confirmed. Watch her three interviews on Breakout (Yahoo Finance).
  1. Market in Death Cross Mode: Stay on the Sidelines
  2. It’s a Technical Mess All Over the World: Yamada
  3. Gold, Oil & the Dollar: Correlation Breakdown Is Concerning
"We've finished the bull market, the cyclical bull, and we're in a new cyclical bear. Most of the global markets are down 20% or more. The New York Stock Exchange, the Russell 2000 are already at the bear market 20% threshold. And having in place our three momentum sell signals on a monthly basis for most of the markets except the U.S. at this point, suggests that we're in a cyclical bear market."

Tom DeMark, founder of Market Studies, thinks the S&P makes a new low during this sell-off and then breaks above the April high. Overall though DeMark said the "trend is down." Peter Lee, Chief Technical Analyst at UBS, also sees one more high in the S&P before it completes its cyclical bull run. Interesting.

DeMark Says Stock Rally May Begin in Weeks, Europe Banks 'Buys' (SFGate/Bloomberg)

"We're at the point right now where the next trip down will probably generate a buy signal," said DeMark, founder of Market Studies LLC. "Everything we follow is indicating the Dow Jones and the S&P should make a minor new recovery high, and probably the Nasdaq, too." (read article at SF Gate)

Prechter: Wave 3 is Broader and Stronger, Deflation Gaining Upper Hand Again

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Robert Prechter, founder of Elliott Wave International, hasn't really changed his views since last
year. Did QE2 backstop wave 3? The S&P is actually right back where it was before QE2 started. During his CNBC interview he said, "if the decline of 2007-2009 was the first wave down, under the Elliott Wave model the second decline, which we call the third wave, is usually a lot broader and a lot stronger, so that's why I was trying to position people for a really dramatic turn to the downside, and probably one that's going to last a while" (through 2016). He also said "deflation is gaining the upper hand again" and to stay in cash or short rallies. He thinks we are in the early stages of a depression, but sees one of the greatest buying opportunities ahead. I embedded the video from Elliott Wave's site after the jump (w/ EW's news feed).

Soros: US Markets See Recession Ahead, Not Shorting Euro (China Has Interest)

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George Soros - World Economic Forum on Flickr
In a long interview with 
Spiegel on Monday, George Soros, chairman of Soros Fund Management, said the creation of euro bonds would save the euro zone, but "if the euro were to break up, it would cause a banking crisis that would be totally outside the control of the financial authorities" and cause a great depression. However, Soros is not shorting the euro because he sees China as the "mystery buyer" (the China put?).

At the end of last June, EUR/USD and equities rallied after Chinese Premier Wen Jiabao said China would continue to buy European government debt and support the euro (Bloomberg). I see EUR/USD as the next big trade once it gets forced out of the symmetrical triangle. Soros also said U.S. markets are predicting a double dip recession ahead... Read the full interview at Spiegel

10 Year Treasury Note Yield Near 1941, 2008 Lows (1.95%, 2.04%)

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The 10 Year Treasury Note Yield hit a low of 2.09% on August 10, 2011, which is 5 basis points above the low made in December 2008 (2.04%) and 14 basis points above the 1941 low of 1.95% (Robert Shiller's data pre-1953). The yield closed at 2.28% today. Mutlpl.com has the historical chart going back to 1881. The site also has the S&P 500 P/E ratio, dividend yield, earnings, inflation rate and more. A 10Y yield below 2% would be interesting to see.

Historical chart of 10 Year Treasury Note Yield (source table at multpl.com)

$TNX - 10 year Treasury Note Yield (2008, 2011 lows) - StockCharts.com

Linkfest For 8/15/2011

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  • Google (GOOG) to Acquire Motorola Mobility (MMI) for $12.5 Billion or $40/share (12,000 patents) - Google
  • Supercharging Android: Google to Acquire Motorola Mobility - Google Blog
  • ECB buys €22bn in eurozone bonds - FT.com
  • Berlin braces against calls for common 'eurobonds' - Deutsche Welle
  • World Bank's Zoellick Sees 'New Danger Zone' in Global Economy - SF Gate
  • Mutual Fund Brokers Hurt By Lack Of ‘Cash On Hand’ During Down Economy - Inquisitr
  • Zulauf: Own Gold, Treasuries, No Debt & Get Out Of Equities - Pragmatic Capitalism
  • Next Week's Market Charts That Matter (Goldman Sachs) - Zero Hedge
  • Hong Kong Recession Risk is Global Warning: Forecaster - Bloomberg
  • H.K. Apartment Sellers Cut Asking Prices - Bloomberg
  • Singapore Prime Minister: Global Recession Is 'A Possibility' - WSJ
  • Fannie Mae and Freddie Mac's fire sales are crippling metro Detroit communities - Detroit Free Press
  • London House Prices Plunge on Financial Turmoil - Bloomberg
  • Japan's Economy Shrinks but Beats Expectations - WSJ
  • George Soros: Three steps to resolving the eurozone crisis - FT.com
  • Italian unions threaten strike over new austerity - AP
  • Sterling No Refuge as King Eyes Stimulus - Bloomberg
  • Satyajit Das: The Real Debt Crisis is in Europe – Part 1 – “Solvency But Not In Our Time” - Naked Capitalism
  • Denial In Germany & France Only Increases The Risks In Europe - Pragmatic Capitalism
  • German government no longer rules out euro bonds - report - Reuters (?)
  • Warren Buffett: Stop Coddling the Super-Rich - NYT
  • ECB is euroland's last hope as bail-out machinery fails to resolve crisis - Telegraph
  • Eurobonds needed "fast," says German export group - Reuters
  • Are You Ready To Not Fight The Fed…… Again? - The Macro Trader

Secular P/E Ratio Bears vs. S&P Earnings Yield-Treasury Spread Bull

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A look at the bear market and 
monthly MA's from my previous post
Comstock Partners continues to believe we're in a secular bear market in their latest post titled "Lengthy Bullet Points on our Bear Case Regardless of Interim Rallys(8/4/2011):

"Although many on Wall Street believe the market is currently undervalued we disagree. The market expected the S&P 500 to earn $108 in early May of 2008 but due to the bursting of the bubble the earnings came in at $50 for operating earnings (excludes write-offs) and $15 for reported earnings (GAAP). The analysts that are using $100 this year and more next year for the S&P 500 and a P/E of 15 to magically come up with 1500 on the index are guilty of faulty reasoning. We believe we will trade at below 10 times depressed earnings which should take us down to the lows of 2009 or below. It is clear to us that there will have to be a global slowdown in the second half of this year and next. The reasoning for the slowdown is again the debt, but not just the sovereign debt, the private debt is even worse than the public debt." continue reading

John Hussman of Hussman Funds believes this as well. From tonight's note, "Two One-Way Lanes on the Highway to Hell":