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QE: A FAILED EXPERIMENT!

The MACRO Destabilizes the MICRO

GLOBAL RISK

GLOBAL MACRO TIPPING POINTS APRIL 2015

3/29/2015

1 April 2015 Edition


Copyright 2015 Gordon T. Long All Rights Reserved

Restricted & Confidential


general@GordonTLong.com

QE: A FAILED EXPERIMENT!


The MACRO De-Stabilizes the MICRO
GLOBAL MACRO TIPPING POINTS - APRIL 2015

TIPPING POINTS .................................................................................................................................... 28


GLOBAL MACRO: RISK ASSESSMENT .................................................................................................................................. 28
POSITIONAL FRAMEWORK: "WE ARE HERE!".................................................................................................................................................... 28
LIQUIDITY is Neither WEALTH nor COLLATERAL ................................................................................................................................................ 29
Our Assessment ................................................................................................................................................................................................ 29
James Rickards Global Risk Assessment ........................................................................................................................................................ 44
MACRO MONITORING INSTITUTIONS ................................................................................................................................................................. 93
LATEST FROM THE MONITORS ..................................................................................................................................................................... 93
RESEARCH OF NOTE .................................................................................................................................................................................. 97
NEW-MONITORS - Lagarde warns of lopsided global growth ................................................................................................................ 97
NEW-MONITORS - OECD Cuts Global Growth Projections Again .......................................................................................................... 98
NEW-MONITORS World Bank Global Growth Outlook ....................................................................................................................... 99
MONITORS - World Bank warns 100M Unemployed, 447M Working Poor, 600M Required for Population Growth Alone ............... 101
MONITORS - World Bank Says 300M Young People neither Working nor Studying ............................................................................. 102
MONITORS - IMF warns of new threats to global economy due to excessive risk taking ...................................................................... 103
BIS ................................................................................................................................................................................................................... 105
NEW-BIS - BIS Slams The Fed: The Solution To Bubbles Is Not More Bubbles ....................................................................................... 105
NEW-BIS - Former BIS Chief Economist: "The System Is Dangerously Unanchored................................................................................ 105
NEW-BIS - Even the BIS Is Shocked At How Broken Markets Have Become ........................................................................................... 108
NEW-BIS - Perhaps The BIS Can Share Its Next "Debt Trap" Warnings With Its Own Board Of Directors First ...................................... 111
NEW-BIS - The Next Time The BIS Wants To Warn About Monetary Kool-Aid, Bubbles, Lack Of Liquidity Or Complacency ................ 114
NEW-BIS - "Low Volatility Everywhere" - BIS Sounds Alarm Alert On Pervasive Complacency Masking Systemic Shocks .................... 115
BIS - BIS warns on 'violent' reversal of global markets ............................................................................................................................... 120
WEF WORLD ECONOMIC FORUM ............................................................................................................................................................ 124
CHARTS OF NOTE ..................................................................................................................................................................................... 124
NEW-WEF Global Business Risks ........................................................................................................................................................ 126
NEW-WEF The 2015 Global Risk Landscape ...................................................................................................................................... 127
NEW-WEF Evolving Risk Landscape (2007-2015) .............................................................................................................................. 128
NEW-WEF Global Risk Exposures By Region ..................................................................................................................................... 129
SITUATIONAL ANALYSIS ..................................................................................................................................................................................... 130
RESEARCH WE FOLLOWED ......................................................................................................................................................................... 130
CHARTS OF NOTE ......................................................................................................................................................................................... 132
NEW The economic balance of the world is shifting ................................................................................................................................... 132
NEW Global Conflict Intensity is heating up ................................................................................................................................................ 133
NEW World Conflict Map ............................................................................................................................................................................. 134
NEW World Conflict Map Details .............................................................................................................................................................. 135
NEW Global Conflict & Protest Intensity ...................................................................................................................................................... 136
NEW Deutsche Banks Key Global Risk ...................................................................................................................................................... 136
NEW Political and Financial Risk Now Outnumber Real Economy Risks .................................................................................................. 137
RESEARCH OF NOTE .................................................................................................................................................................................... 138
NEW Global Conflict Intensity Spikes To 7-Year High ................................................................................................................................ 138
NEW These Are 2015's "Black Swans" According To SocGen .................................................................................................................. 139
NEW "Globalization Is Turning In On Itself And It Is Each Man For Himself" ............................................................................................. 140
Putin Unleashes Fury at US Follies in Major Pivotal Speech ................................................................................................................... 143
Putin Warns Of Risk of Major Conflict, Says Dollar Losing Reserve Currency Status ............................................................................... 144
Putin Accuses U.S. of Blackmail, Weakening Global Order ....................................................................................................................... 146
REFERENCE PAPERS Position Reminders Lest We Forget ................................................................................................................... 148
FOURTH TURNING ACCELERATING ....................................................................................................................................................... 148
AMERICAS GLOBAL RETREAT ................................................................................................................................................................ 159
THE OLD WORLD ORDER IS OVER ......................................................................................................................................................... 162
THE DEMOGRAPHIC THREAT TO DEVELOPED NATIONS ................................................................................................................... 163
THE RISK CONTINUUM ............................................................................................................................................................................. 167
GLOBAL TRENDS THE SIX FRAMING MEGATRENDS ........................................................................................................................ 170
GLOBAL THEMES TEN STRUCTURALTHEMES FOR STRATEGY ..................................................................................................... 172
DEBT SATURATION - A COLLAPSING PONZI SCHEME......................................................................................................................... 174
WINTER 2015 EVENT RISK DOMINATES ........................................................................................................................................... 176

GLOBAL MACRO: RISK SIGNALS ......................................................................................................................................... 184


GEO-POLITICAL RISK Tensions & Conflicts ..................................................................................................................................................... 186
YEMEN ............................................................................................................................................................................................................ 186
CHARTS OF NOTE ..................................................................................................................................................................................... 186
NEW-YEMEN Strategic Position ........................................................................................................................................................... 186
NEW-YEMEN al-Houthis and Saleh Concentrations ............................................................................................................................ 187

April 2015 Edition


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NEW-YEMEN The Decisive Storm Coalition ...................................................................................................................................... 187


NEW-YEMEN Global Oil Chokepoints .................................................................................................................................................. 188
NEW-YEMEN Middle Eastern Oil Production & Chokepoints .............................................................................................................. 188
NEW-YEMEN Chinese Import Countries & Oil Routes ........................................................................................................................ 190
NEW-YEMEN Major Crude Oil Trade Flows in the South China Sea .................................................................................................. 191
NEW-YEMEN Regional Territorial Claims in the South China Sea ...................................................................................................... 192
RESEARCH OF NOTE ................................................................................................................................................................................ 193
NEW-YEMEN Risk of World War between NATO and Russia on Ukraine Escalation as Yemen Bombed for Third Day ................ 193
NEW-YEMEN Yemen Ground Invasion by Saudi, Egyptian Troops Imminent .................................................................................... 195
NEW-YEMEN Middle East Proxy War: Presenting The Massive "Decisive Storm" Coalition.............................................................. 198
NEW-YEMEN Saudi Arabia Imposes Naval Blockade on Red Sea Strait, Deploys 150,000 Troops ................................................. 199
NEW-YEMEN Another Middle East War Breaks Out: Saudis Begin Bombing Yemen, US Military Taking Action ............................. 201
NEW-YEMEN Presenting The Theater Of War; Who Controls Yemen? ............................................................................................. 206
NEW-YEMEN US-Armed Rebels Force Yemen President To Flee Country As Saudis Prepare For War .......................................... 208
UKRAINE EAST/WEST CONFLICT The New Colder War ..................................................................................................................... 213
RESEARCH WE FOLLOWED ..................................................................................................................................................................... 214
RESEARCH OF NOTE ................................................................................................................................................................................ 220
NEW-UKRAINE - Putin Is Becoming A "Vulture" Bond Investor ............................................................................................................. 220
NEW-UKRAINE - West Further Infuriates & Antagonizes Russia with Debt Restructuring Pressures................................................... 221
NEW-UKRAINE - Congress Approves Funding for Ukraine Arms Shipments ........................................................................................ 225
NEW-UKRAINE - US Taxpayers to Fund Ukraine Bailout via Bond Guarantee ..................................................................................... 229
NEW-UKRAINE - Congress Approves Funding for Ukraine Arms .......................................................................................................... 230
NEW-UKRAINE - White House Explains Where Your $1.3 Billion Went In Ukraine ................................................................. 233
NEW-UKRAINE - Putin Says Attempts To Tip Nuclear Balance Don't Scare Russia, Moscow Will Uncover "Schemes" ..................... 236
NEW-UKRAINE - Putin Security Council Slams Obama Attempts at "New World Order" ...................................................................... 237
NEW-UKRAINE- A Russian Viewpoint ................................................................................................................................................ 239
NEW-UKRAINE- This Is What Is Really Taking Place Behind The Scenes Of The Second US-Russian Cold War ............. 254
ISIS .................................................................................................................................................................................................................. 255
ISIS THE SUNNI / SHIA /KURD PROBLEM ............................................................................................................................................ 256
NEW-ISIS - Obama Says ISIS War Powers Request Not About 'Another Ground War' ........................................................................ 260
NEW-ISIS - President Obama Explains His "Boots On The Ground" ISIS-War Strategy ....................................................................... 260
ISIS- Kobani Overshadows Larger Battles .............................................................................................................................................. 261
SYRIA .............................................................................................................................................................................................................. 264
RESEARCH WE FOLLOWED ..................................................................................................................................................................... 264
NEW-SYRIA - Syria "Welcomes" Larger Russia Presence ..................................................................................................................... 265
SYRIA - This has the Earmarks of the Kennedy Ear "Cuban Missile" Crisis .......................................................................................... 266
SYRIA - Syrian War You Are Not Being Told About ................................................................................................................................ 267
SYRIA - 25 Quotes ................................................................................................................................................................................... 268
SYRIA - What Coalition? .......................................................................................................................................................................... 271
SYRIA - US Supporting Fully an "Al Qaeda Operation" .......................................................................................................................... 273
SYRIA - Decision Already Taken to Bomb Syria ..................................................................................................................................... 275
SYRIA - Market Patterns Before and Immediately After Conflict Begins ................................................................................................ 283
SOUTH CHINA SEA TERRITORIAL PROBLEMS ......................................................................................................................................... 285
GEO-POLITICAL RISK - Social, Economic & Financial ........................................................................................................................................ 289
NEW-GREECE - Greek Energy Minister Slams "Unscrupulous, Imperialist" Germany, Seeks "Bold Alternatives" In Russia ...................... 289
NEW-GREECE - Greece Prepares To Leave ................................................................................................................................................. 291
NEW-GREECE - Greek Deputy FinMin Confirms Athens Is "Prepared For Rift" With Europe ...................................................................... 293
NEW-GREECE - Will Greece Call A Referendum On Euro Membership?..................................................................................................... 294
NEW-GREECE - What Greece Owes, And More Importantly - When! .......................................................................................................... 297
NEW-GREECE - BofA's Modest Proposal For Greece: "A Negative Shock May Be Necessary" ................................................................. 300
NEW-GREECE - On Greek "Independence Day", Creditors Prepare To Seal Athens' Fate ......................................................................... 303
GEO-POLITICAL RISK Global Governance Failure ........................................................................................................................................... 306
ASIAN INFRASTRUCTURE INVESTMETN BANK A Threat to World Bank and US$ Reserve Status ..................................................... 306
RESEARCH WE FOLLOWED ..................................................................................................................................................................... 306
CHARTS OF NOTE ..................................................................................................................................................................................... 309
NEW-AIIB Demanding Infrastructure .................................................................................................................................................... 309
RESEARCH OF NOTE ................................................................................................................................................................................ 310
NEW-AIIB - The Nepo-Cold War, The World Bank and the AIIB Threat .................................................................................... 310
NEW-AIIB - Washington Blinks: Will Seek Partnership With China-Led Development Bank ................................................................. 312
NEW-AIIB - China "Is Not Another US", Does Not Seek "Yuan Hegemony" .......................................................................................... 313
NEW-AIIB - Obama administration proposes co-financing projects with new Asian Infrastructure Investment Bank.... 315
NEW-AIIB - Qatar, Jordan, Oman, Kuwait AND Saudi Arabia have applied Goodbye Petrodollar! .................................................... 318
NEW-AIIB - Obama continues to be humiliated by the rising anti-dollar alliance ................................................................... 320
NEW-AIIB - Did De-Dollarization Just Reach Escape Velocity? ............................................................................................................. 322
EMERGING BRICS ALLIANCE NEW MULTI-POLAR WORLD .................................................................................................................. 326
MULTI-POLAR-Money Supply The New World Economy ....................................................................................................................... 326
MULTI-POLAR-Financial Globalist Impose Monetary Hegemony .............................................................................................................. 328
MULTI-POLAR-Financial Globalists Controlling the Political Process ........................................................................................................ 330
ADVANCING GLOBAL FINANCIAL REPRESSION ....................................................................................................................................... 333
HENRY KISSINGER CALLS FOR NEW WORLD ORDER (NWO) ................................................................................................................ 335
KISSINGER- Henry Kissingers World Order ............................................................................................................................................. 335

GLOBAL MACRO: RISK LEVELS ........................................................................................................................................... 338


AGGREGATED GLOBAL FINANCIAL RISK INDEX ............................................................................................................................................. 338
NEW-BANKING RISK - LIBOR-OIS SPREAD ................................................................................................................................................ 339

April 2015 Edition


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general@GordonTLong.com

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NEW-BANKING RISK - TED SPREAD ........................................................................................................................................................... 339


NEW-CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS ....................................................................................................................... 340
NEW-CREDIT RISK - EU CREDIT DEFAULT SWAPS .................................................................................................................................. 340
NEW-CONSUMER RISK - HOUSING - RATE OF CHANGE ......................................................................................................................... 340
NEW-ECONOMIC RISK - ECRI LEADING INDEX ......................................................................................................................................... 341
NEW-INFLATION RISK - MONEY SUPPLY GROWTH - M3 ......................................................................................................................... 342
NEW-INFLATION RISK - MONEY VELOCITY ............................................................................................................................................... 343
MONETARY RISK - BANK LIABILITIES ......................................................................................................................................................... 343
NEW-COST OF MONEY RISK - INTEREST RATES .................................................................................................................................... 344
AGGREGATED RISK LEVEL ................................................................................................................................................................................ 345

TIPPING POINTS ..................................................................................................................................................................... 347


NEW-CHANGES TO RANKINGS Q2 2015 ........................................................................................................................................................ 347
NEW-CHANGES TO RANKINGS - Longer Term Benchmarks ............................................................................................................................ 349
NEW-CHANGES TO ROADMAPS - Longer Term Trends ................................................................................................................................... 351
NEW-CHANGES TO RANKINGS - Longer Term Benchmarks ............................................................................................................................ 353
TIPPING POINTS: TOP 5 FOCUS - APRIL 2015 ................................................................................................................................................. 356
NEW-I - RISK REVERSAL .............................................................................................................................................................................. 356
NEW-II - GEO-POLITICAL EVENT RISK ........................................................................................................................................................ 357
NEW-V - CHINA HARD LANDING .................................................................................................................................................................. 358
NEW-III - JAPAN DEBT DEFLATION ............................................................................................................................................................. 362
NEW-IV - EU BANKING CRISIS ..................................................................................................................................................................... 363

GLOBAL MACRO ................................................................................................................................. 370


GLOBAL MACRO: ECONOMIC OUTLOOK ............................................................................................................................ 372
RESEARCH WE FOLLOWED .............................................................................................................................................................................. 372
CHARTS OF NOTE ............................................................................................................................................................................................... 375
NEW-CHART: Serial Disappointments & Ratcheting Down of Global Growth ....................................................................................... 375
NEW-CHART: Continuous Weakening of Global GDP Estimates ............................................................................................................ 376
NEW-CHART: Reduced Demand Pressures on Energy Prices ................................................................................................................ 376
NEW-CHART: Reduced Demand Pressures on Commodities .................................................................................................................. 377
NEW-CHART: Global Corporate Profit Trends ........................................................................................................................................... 377
NEW-CHART: Stunning Growth in Debt of Developed Economies since Dotcom Bubble Burst ........................................................ 378
NEW-CHART: Worlds FDI Flooding Into Financial Products versus Productive Assets ..................................................................... 379
NEW-CHART: Growth of Asian Middle Class Dominates Next 20 Years ............................................................................................. 380
NEW-CHART: Global Domestic Demand Growth ....................................................................................................................................... 380
NEW-CHART: Global Asset Markets Reflecting a Major Demand Shock Has Hit .................................................................................. 381
CHART: World GDP 2014 Economic Growth Estimates ........................................................................................................................... 381
CHART: World GDP versus World MSCI Stock Index ............................................................................................................................... 382
CHART: Baltic Dry Perspective Slowing Global Aggregate Demand Growth Rate ............................................................................ 383
CHART: World Trade versus Central Bank Balance Sheet Growth ......................................................................................................... 383
CHART: Falling Global LEI (Leading Economic Indicator) ....................................................................................................................... 384
CHART: World GDP Economic Forecast 2014 ........................................................................................................................................... 385
CHART: World GDP Economic Expectations versus MSCI Equity Index ............................................................................................... 385
CHART: Fiscal Adjustments Required Deficit Reductions for Fiscal Sustainability .......................................................................... 386
CHART: Shifting Global GDP Share ............................................................................................................................................................ 387
CHART: Over $10 Trillion Pumped Into Global Economy by Developed Economies ............................................................................ 388
CHART: Eventually All this Debt Must be Rolled over or Paid Out ......................................................................................................... 388
CHART: Future Economic Growth a Sub 2% Trend .................................................................................................................................. 390
CHART: Debt and Fiscal Drag Are Significant Factors Affecting Global Growth .................................................................................. 390
CHART: Slowing Global Aggregate Demand Shows in Shrinking FDI .................................................................................................... 391
CHART: Liquidity Drain in US in 2H 2014 ................................................................................................................................................... 392
RESEARCH OF NOTE .......................................................................................................................................................................................... 393
NEW-GLOBAL OUTLOOK 3 of 10 Largest Economies Have Fallen into Recession ................................................................................ 393
NEW-GLOBAL OUTLOOK This is the Biggest Risk to the World's Economy............................................................................................ 395
NEW-GLOBAL OUTLOOK What is global market turbulence telling us? .................................................................................................. 399
NEW-GLOBAL OUTLOOK Darker Outlook Has Bond Market Rethinking Odds of Economic Downturn.................................................. 402
NEW-GLOBAL OUTLOOK The Last Days Of The Growth Story? ............................................................................................................. 404
NEW-GLOBAL OUTLOOK The Last Days Of The Growth Story? ............................................................................................................. 406
GLOBAL OUTLOOK - THE ECONOMIC ROADMAP AHEAD: It Isn't That Complicated! ............................................................................ 407
GLOBAL OUTLOOK - 20 Signs That the Global Economic Crisis Is Starting To Catch Fire ................................................................ 412
GLOBAL OUTLOOK - Problems Erupting Everywhere (Signs of Implosion) ......................................................................................... 414
GLOBAL OUTLOOK - Global Debt Crosses $100 Trillion, Rises By $30 Trillion Since 2007 ................................................................ 417
GLOBAL OUTLOOK The US as the Global Consumption Engine to See Sub 2% Trend Growth .................................................... 420
GLOBAL OUTLOOK - Credit Fueled Globalization in Retreat .................................................................................................................. 423
GLOBAL OUTLOOK - Rogoff's Sovereign Debt Default Levels ............................................................................................................... 426
GLOBAL OUTLOOK - Imbalances Continue to Increase Along With Financial Fragility .............................................................................. 429
GLOBAL OUTLOOK - A 67 Million Jobs Gap .............................................................................................................................................. 431
ECONOMIC CUTS ................................................................................................................................................................................................. 436
CHARTS OF NOTE ......................................................................................................................................................................................... 436
CHART IMFs Delusional Forecasting Record 3 ................................................................................................................................... 436

April 2015 Edition


Copyright 2015 Gordon T. Long
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CHART IMFs Delusional Forecasting Record 2 ................................................................................................................................... 439


CHART IMFs Delusional Forecasting Record - 1 .................................................................................................................................... 439
IMF To Slash Economic Growth Forecast... AGAIN - Still Full of Hockey sticks ............................................................................................ 439
IMF CUTS ECONOMIC OUTLOOK ............................................................................................................................................................ 445
OECD CUTS ECONOMIC OUTLOOK AGAIN!............................................................................................................................................ 455
OECD CUTS ECONOMIC OUTLOOK ........................................................................................................................................................ 457
ECONOMIC WARNINGS....................................................................................................................................................................................... 460
G20 WARNS Need to Add $2T in Economic Activity & Tens of Millions of Jobs ........................................................................................ 460
IMF WARNS .................................................................................................................................................................................................... 461
NEW-IMF sees risk of new eurozone .......................................................................................................................................................... 461
IMF Tells Central Europe to Spend More .................................................................................................................................................... 463
Japanese & Spanish Debt Unsustainable ................................................................................................................................................... 466
Global Recovery Faltering, Reduces Global Growth to Just Above 3% Global Recession Level .............................................................. 468
BIS WARNS ..................................................................................................................................................................................................... 470
Monetary Policy At Its Limits ........................................................................................................................................................................ 476
WORLD BANK WARNS ................................................................................................................................................................................. 477
Social Unrest Stems from Shrinking Disposable Income. Jobs are the central issue. ..................................................................... 479

GLOBAL MACRO: INDICATORS ............................................................................................................................................ 482


GLOBAL TRENDS ................................................................................................................................................................................................. 482
CHARTS OF NOTE ......................................................................................................................................................................................... 482
NEW-GLOBAL TRENDS Changes in 2014 2015 Profit (EPS) Forecasts By Country/Region .................................................... 482
NEW-GLOBAL TRENDS Changes in 2014 2015 Profit (EPS) Forecasts By Sector .................................................................... 482
NEW-GLOBAL TRENDS G7 Long Run GDP Growth Rates (PPP Weighted) .................................................................................... 483
NEW-GLOBAL TRENDS Falling Population Growth Rate in Developed Economies ........................................................................ 483
NEW-GLOBAL TRENDS Falling Labor Productivity Rate in Developed Economies ........................................................................ 484
NEW-GLOBAL TRENDS Falling Workers Per Retiree in Developed Economies ................................................................................... 484
RESEARCH OF NOTE .................................................................................................................................................................................... 485
NEW-GLOBAL TRENDS The curse of weak global demand .................................................................................................................. 485
NEW-GLOBAL TRENDS Is economic growth permanently lower? Do We Have Secular Stagnation ................................................. 489
GLOBAL TRENDS - The Facts are Clear - the US Standard of Living is Falling ................................................................................. 493
GLOBAL EMPLOYMENT....................................................................................................................................................................................... 494
CHARTS OF NOTE ......................................................................................................................................................................................... 494
CHART Global Employment Rates ........................................................................................................................................................ 494
CHART Global Unemployment ................................................................................................................................................................. 495
CHART Global Unemployment EU Comparison ................................................................................................................................... 495
CHART Unemployment in Advanced Countries .................................................................................................................................. 496
CHART Global Labor Participation Rates ............................................................................................................................................ 496
CHART Global Youth Unemployment By Country ........................................................................................................................... 497
CHART Global Chance of Finding a Job Within Year ......................................................................................................................... 497
RESEARCH OF NOTE .................................................................................................................................................................................... 498
GLOBAL UNEMPLOYMENT - The Beginnings of the Welfare Myth Unwind ........................................................................................ 498
GLOBAL UNEMPLOYMENT - The Unsustainable Welfare Myth ............................................................................................................ 501
GLOBAL UNEMPLOYMENT - Global Financial Sector Job Cuts ............................................................................................................... 503
GLOBAL SENTIMENT ........................................................................................................................................................................................... 505
CHARTS OF NOTE ......................................................................................................................................................................................... 505
NEW-GLOBAL SENTIMENT Global Business Activity Future Expectations ................................................................................... 505
GLOBAL SENTIMENT Global Jog Prospects Reach 50% - First Time In 7 Years ........................................................................... 505
GLOBAL SENTIMENT Global Consumer Confidence by Country .................................................................................................... 507
GLOBAL SENTIMENT Global Consumer Confidence Trends by Country ....................................................................................... 508
GLOBAL SENTIMENT Northern American Spending Intentions Rise According to Nielsen ......................................................... 509
RESEARCH OF NOTE .................................................................................................................................................................................... 510
NEW-GLOBAL SENTIMENT Global Business Confidence Collapses To Post-Lehman Lows .............................................................. 510
GLOBAL SENTIMENT The State Of Economic 'Misery' Around The World ........................................................................................... 512
GLOBAL SENTIMENT Highest Level Since 2007 ................................................................................................................................ 517
GLOBAL SENTIMENT - Complacent ........................................................................................................................................................ 518
GLOBAL SENTIMENT - Complacent ........................................................................................................................................................ 520
GLOBAL SENTIMENT - Nielsens Global Consumer Confidence, Concerns & Spending Intentions ........................................................ 521
GLOBAL CONSUMPTION ..................................................................................................................................................................................... 533
CHARTS OF NOTE ......................................................................................................................................................................................... 533
NEW-GLOBAL CONSUMPTION Rising Consumer Prices are Hurting Global Demand .................................................................. 533
NEW-GLOBAL CONSUMPTION Global Home Prices Are Rolling Over ............................................................................................ 533
NEW-GLOBAL CONSUMPTION Real Domestic Demand US, Japan & EU .................................................................................... 534
RESEARCH OF NOTE .................................................................................................................................................................................... 535
GLOBAL GROWTH ............................................................................................................................................................................................... 536
CHARTS OF NOTE ......................................................................................................................................................................................... 536
NEW-GLOBAL GROWTH Global Leading Indicator Signals Contraction ............................................................................................... 536
NEW-GLOBAL GROWTH Eurozone PMI and GDP ................................................................................................................................ 537
GLOBAL GROWTH World PMI Rankings ................................................................................................................................................ 538
GLOBAL GROWTH Global Leading Indicator Has Now Rolled Over ...................................................................................................... 539
GLOBAL GROWTH Global PMI Business Surveys Fall .......................................................................................................................... 539
GLOBAL GROWTH Baltic Dry Index Collapses 50% .............................................................................................................................. 540
GLOBAL GROWTH Global Slowdown on Verge of Contraction.............................................................................................................. 541
GLOBAL GROWTH - GDP Forecasts Continue to Be Taken Down........................................................................................................... 541

April 2015 Edition


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GLOBAL GROWTH Global Leading Indicator Goldmans Swirlogram Getting More Serious ......................................................... 541
GLOBAL GROWTH Global Industrial Production Rolling Over ............................................................................................................. 542
GLOBAL GROWTH Consensus 2014 GDP Forecast - Differential ......................................................................................................... 543
GLOBAL GROWTH G10 Macro Change ................................................................................................................................................. 543
RESEARCH OF NOTE .................................................................................................................................................................................... 544
NEW-GLOBAL GROWTH - World's Busiest Freight Route Rates Plunge To 2014 Lows ......................................................................... 544
NEW-GLOBAL GROWTH - Goldman Global Leading Indicator Drastically Revised, Collapses into "Confirmed Slowdown" .................. 545
GLOBAL GROWTH - The Wal-Mart Measure or How the US Consumer Is the Global Engine .......................................................... 547
GLOBAL GROWTH Potential of a Global Recession Mounting ............................................................................................................ 548
GLOBAL GROWTH What the hint of a Fed Taper Did to Global Growth Estimates....................................................................... 552
GLOBAL GROWTH - Uneconomic Energy Problematic ......................................................................................................................... 554
GLOBAL GROWTH - Global Growth Cycle ................................................................................................................................................. 556
GLOBAL GROWTH - Global GDP Contribution .......................................................................................................................................... 557
GLOBAL GROWTH - Slowing Global Growth - Air Cargo Shipments ........................................................................................................ 558
GLOBAL CREDIT .................................................................................................................................................................................................. 559
CREDIT CYCLE - HY Leading the Way ........................................................................................................................................................ 559
CREDIT CYCLE - Reversal Ahead ................................................................................................................................................................ 562

GLOBAL MACRO: MONETARY POLICY & CENTRAL BANKING .......................................................................................... 566


GLOBAL CENTRAL BANKING ............................................................................................................................................................................ 566
RESEARCH WE FOLLOWED Global Banking Risk .................................................................................................................................... 566
CHARTS OF NOTE ......................................................................................................................................................................................... 570
NEW-CHARTS Central Bank Policy Rates ............................................................................................................................................ 570
CHARTS Days of Chinese Credit-Driven Growth are numbered ....................................................................................................... 570
CHARTS Major Central Bank Assets versus GDP Forecast .............................................................................................................. 572
CHARTS Major Central Bank Y-o-Y Balance Sheet Growth ............................................................................................................... 572
CHARTS Cumulative Change in Central Bank Balance Sheets Since 2008 .................................................................................. 573
CHARTS Global Central Bank Assets versus World Equity Prices .................................................................................................. 573
CHARTS Cumulative Change in Central Bank Balance Sheets Since 2000 .................................................................................. 574
RESEARCH OF NOTE .................................................................................................................................................................................... 575
NEW-CENTRAL BANKS Economic policies are diverging in the developed world as deflation looms .................................................. 575
NEW-CENTRAL BANKS Central banks can't raise growth potential, says ECB's Weidmann ................................................................ 577
CENTRAL BANKS Axel Merks 2014 Outlook ....................................................................................................................................... 578
CENTRAL BANKS - Japan May Eclipse China Again, as Largest Holder of US Treasuries .............................................................. 581
CENTRAL BANKS - Austerity Now Officially Dead Public Policy ........................................................................................................... 582
CENTRAL BANKS - A Serious Shortage of Quality Collateral - A $10T US Problem Over 10 Years ............................................... 583
CENTRAL BANKS - Global Balance Sheet Expansion .......................................................................................................................... 585
TROUBLING DEVELOPMENTS ..................................................................................................................................................................... 590
TROUBLING DEVELOPMENTS Insider Says Central Banks Making it Up as They Go! ....................................................................... 590
TROUBLING DEVELOPMENTS 2007 Redux: Total public and private debt levels are 30pc higher in the advanced economies
...................................................................................................................................................................................................................... 591
TROUBLING DEVELOPMENTS Polish Pension Confiscation: Coming to a Theater near You .......................................................... 594
TROUBLING DEVELOPMENTS Global Tax Overhaul .......................................................................................................................... 596
BOE - UK ............................................................................................................................................................................................................... 597
CHARTS OF NOTE ......................................................................................................................................................................................... 597
NEW-UK Dissent within BOE Set to Continue ..................................................................................................................................... 597
RESEARCH OF NOTE .................................................................................................................................................................................... 597
UK - BOE Faces Labor Market Conundrum as Wage Growth Stalls .......................................................................................................... 597
UK - Mark Carney and "Flexible Inflation Targeting" ............................................................................................................................. 599
FED - US ................................................................................................................................................................................................................ 601
CHARTS OF NOTE ......................................................................................................................................................................................... 602
NEW-CHARTS June 2015 Fed Rates Hikes Diminish ......................................................................................................................... 602
NEW-CHARTS Inflation Expectations 1 Yr, 5010Yr, 5Yr/5Yr ........................................................................................................... 602
RESEARCH OF NOTE .................................................................................................................................................................................... 603
US MONETARY - -CAPITAL DISTORTION - Global Acceptance of the Bernankean Theory ............................................................. 603
US MONETARY - FINANCIAL REPRESSION - The Suspension of Price Discovery ........................................................................... 605
US MONETARY - The Fed is stuck in a QE Trap .................................................................................................................................... 608
US MONETARY - 2nd Worst Decade In US Growth in Over 220 Years (And Getting Worse) ........................................................... 610
US MONETARY - Mathematically, The Fed Can Only Fail ..................................................................................................................... 612
US MONETARY - QE Standing Between Inflated Equity Markets and A Recession .......................................................................... 618
US MONETARY - QE Programs versus S&P 500 Movements ............................................................................................................... 619
US MONETARY - BAML Warns If The US Economy Does Not Significantly Accelerate Now, It Never Will ..................................... 621
US MONETARY - Debt Increases $1 Trillion in One Year ...................................................................................................................... 623
GLOBAL ABE-NOMICS The Road Ahead ....................................................................................................................................................... 626
CHARTS OF NOTE ......................................................................................................................................................................................... 626
JAPAN The Third Arrow of ABE-Nomics -I ........................................................................................................................................... 626
JAPAN The Third Arrow of ABE-Nomics II ......................................................................................................................................... 627
JAPAN Japanese Households Remain Pessimistic ............................................................................................................................ 628
RESEARCH OF NOTE .................................................................................................................................................................................... 629
GLOBAL ABE-NOMICS Monetary Expansion Extremely Difficult to Stop Once Started ........................................................................ 629
GLOBAL ABE-NOMICS Monetary Policy Below the Event Horizon ................................................................................................... 631
BOJ JAPAN ......................................................................................................................................................................................................... 633
CHARTS OF NOTE ......................................................................................................................................................................................... 633
NEW- JAPAN Japans Inflation Pressure Ebbs Away .............................................................................................................................. 633

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NEW- JAPAN BOJ QE Expansion In Context Debt Monetization......................................................................................................... 634


NEW- JAPAN Japanese Trade Balance .................................................................................................................................................. 635
NEW- JAPAN Japanese Real & Nominal Household Income ................................................................................................................. 635
JAPAN CPI Shoots To 3.3% Y-o-Y ......................................................................................................................................................... 636
JAPAN Japan Government Investment Fund Asset Reallocation ..................................................................................................... 636
JAPAN Falling Real Rates as Financial Repression Takes Hold ....................................................................................................... 636
JAPAN Real Wages Plummet as Financial Repression Takes Hold .................................................................................................. 637
RESEARCH OF NOTE .................................................................................................................................................................................... 639
NEW-JAPAN - "Godfather" Of Abenomics Admits Japanese Policy "Is A Ponzi Game ............................................................................. 639
NEW-JAPAN - How a Limo Ride With Paul Krugman Changed the Course of Abenomics ....................................................................... 641
NEW-JAPAN - Kurodas Former Boss Urges Ditching of BOJ 2% Inflation Target .................................................................................... 644
JAPAN - No Way Out But to Expand the Monetary Base ....................................................................................................................... 646
JAPAN - BOJ to "Own" 100% Of GDP In 5 Years .................................................................................................................................... 647
JAPAN - Adjusted trade deficit the worst in Bloomberg's 20 year history .......................................................................................... 650
JAPAN - Some Policies Have Clearly Hit the Limit ................................................................................................................................. 652
JAPAN - Foreshadows Next Global Crisis .................................................................................................................................................. 653
JAPAN - Japan's Prime Minister Shinzo Abe prepares to print money for the whole world ....................................................................... 658
JAPAN - Shinzo Abes Monetary-Policy Delusions ..................................................................................................................................... 659
JAPAN - BOJ Governor Job Suddenly Available in Historical "Abenomics U-Turn" .................................................................................. 662
JAPAN - Japanese Economic Policy Goes The Full Ponzi ......................................................................................................................... 663
ECB - EU ................................................................................................................................................................................................................ 665
CHARTS OF NOTE ......................................................................................................................................................................................... 665
NEW-CHARTS Euro-Area Output Still Slightly Below Pre-Crisis Levels ................................................................................................. 665
NEW-CHARTS 5 Year Inflation Swaps Suggests Deflation in the EU ..................................................................................................... 666
NEW-CHARTS Euro-Area Inflation Rate on the Decline Since 2011 ...................................................................................................... 666
NEW-CHARTS Euro-Area Inflation Expectations Decline ....................................................................................................................... 667
NEW-CHARTS Euro-Area Private Sector Loan Creation ........................................................................................................................ 668
NEW-CHARTS Euro-Area Money Supply, Private Sector Lending Growth ............................................................................................ 668
NEW-CHARTS Euro-Area 10 Yr Sovereign Bond Yields......................................................................................................................... 669
CHARTS Slovenia May BE the Next EU Debt Hotspot ............................................................................................................................ 669
CHARTS Spain & Portugal NPL ............................................................................................................................................................... 670
CHARTS ECBs Turn to Expand Its Balance Sheet ................................................................................................................................. 671
CHARTS ECBs Balance Sheet Contracted Y-o-Y ............................................................................................................................... 671
CHARTS Expect Major ECB Policy Announcement in Q2 2014 .............................................................................................................. 672
CHARTS ECB Set to Stay on Hold as Inflation Seen Lower ................................................................................................................... 673
RESEARCH OF NOTE .................................................................................................................................................................................... 674
NEW-EU MONETARY - Draghi Key Statements ........................................................................................................................................ 674
NEW-EU MONETARY - Draghi throws ECB door open to money printing as global prospects dim ......................................................... 675
NEW-EU MONETARY - Economic Recovery Too Weak for ECB to Avoid New Action ............................................................................ 677
EU MONETARY - Euro-Area Data Deterioration Points toward QE ........................................................................................................... 679
EU MONETARY - EU Version of QE Coming -> UST Purchases To Drive Euro Down ............................................................................ 681
MACRO MONETARY INFLATION ..................................................................................................................................................................... 683
CHARTS OF NOTE ......................................................................................................................................................................................... 683
NEW-CHARTS Global Consumer Prices are Rising Significantly ........................................................................................................... 683
CHARTS Global Country Inflation Rates .................................................................................................................................................. 683
CHARTS Two Worlds if Inflation EM and DM ....................................................................................................................................... 683
CHARTS Developed Country Inflation Rates ........................................................................................................................................... 685
RESEARCH OF NOTE .................................................................................................................................................................................... 686
INFLATION - Asset & Property inflation means shops have to pay higher rents with higher product prices ............................................. 686

GEO-ECONOMIC INSTABILITIES........................................................................................................................................... 687


GEO-ECONOMIC INDEX ...................................................................................................................................................................................... 687
GEO-ECONOMICS OF ENERGY & PETRO$ - Petro$$ Coming Unglued .......................................................................................................... 688
NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................... 688
RESEARCH OF NOTE .................................................................................................................................................................................... 690
NEW-RUSSIA Energy War ................................................................................................................................................................... 690
NEW-PETRODOLLAR "There Will Be Blood": Petrodollar Death Ignites Liquidity And Oil-Exporting Crisis ................... 693
PETRODOLLAR Collapsing PetroDollar Foundation ........................................................................................................................... 699
UKRAINE - Pulled between EU v Russia ................................................................................................................................................ 703
UKRAINE - Pulled between An Ethnic Eastern and Western Ukraine .................................................................................................... 703
UKRAINE - Pulled between Economic Inequality Factors ....................................................................................................................... 704
UKRAINE - Pulled between the Global Military Balance ......................................................................................................................... 705
UKRAINE - Pulled by Global Financial Markets ...................................................................................................................................... 706
UKRAINE - A Deep State Analysis .......................................................................................................................................................... 709
NEW-ENERGY - OPEC Presents: QE4 And Deflation ........................................................................................................................... 712
NEW-ENERGY - The Sellside Chimes In On The Crude Crush: "This Will Reverberate For Years" ..................................... 716
NEW-ENERGY - OPEC Decision "Major Strike Against", Russian Tycoon Says Shale Oil Doesnt Work < $80bl ............................ 717
NEW-ENERGY - Energy Quakes as OPEC Stands Pat ......................................................................................................................... 719
NEW-ENERGY - World's Largest Rig Operator, The "Recovery" Is Now Worse Than The Post-Lehman Crash ................................. 722
NEW-ENERGY - US "Secret" Deal with Saudis Backfires After Oil Minister Says US Should Cut First ................................................ 725
NEW-ENERGY - The 2014 Oil Price Crash Explained ..................................................................................................................... 729
NEW-ENERGY - Crude and Credit Warn Of The Elongated Cycle Double Peak ....................................................................... 734
ENERGY - Major Inflection Point Coming Near-Term In Energy Prices ................................................................................................. 741
ENERGY - Russia Prepares Mega-Deal with India after Locking Up China With "Holy Grail" Gas Deal ............................................... 744

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ENERGY - Putin Prepares To Announce "Holy Grail" Gas Deal With China ................................................................................... 746
ENERGY - The Growing Rift with Saudi Arabia Threatens To Severely Damage the Petrodollar ................................................ 748
CHARTS OF NOTE ......................................................................................................................................................................................... 752
NEW-ENERGY Petro$$ Capital Exports Go Negative for First Time in 18 Years ................................................................................... 752
NEW-ENERGY Falling Inflation Adjusted Gasoline Prices ...................................................................................................................... 753
NEW-ENERGY US v Saudi Oil Production now Equal at near 12B bl/Day ............................................................................................. 754
NEW-ENERGY US Shale Oil Breakeven Prices ...................................................................................................................................... 755
NEW-ENERGY OPEC Announcement Crushes Ruble & WTI Crude ..................................................................................................... 755
NEW-ENERGY USDRUB Rise Means Russian Loans in US$ In Big Trouble- Investment Collapse ..................................................... 756
NEW-ENERGY EM Oil Producers Being Crushed ................................................................................................................................... 756
NEW-ENERGY Market Cap Impacts of OPEC Decision ......................................................................................................................... 757
NEW-ENERGY Oil Supply / Demand and Price....................................................................................................................................... 758
GOLD WARS Failing Developed Economies versus Rising Emerging Economies .................................................................................. 759
NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................... 759
CHARTS OF NOTE ......................................................................................................................................................................................... 760
NEW-GOLD WARS Plummeting Gold Holdings at NY Fed from Foreign Repatriation........................................................................... 760
NEW-GOLD WARS Gold : Debt Ratio Correlation Something Seriously Amiss! ................................................................................. 760
NEW-GOLD WARS Nominal & Real Price of Gold 1790-2013 ............................................................................................................. 762
NEW-GOLD WARS Gold v S&P 500 Against True Austrian Money Supply ........................................................................................... 762
NEW-GOLD WARS Swiss National Bank Gold, FX & Total Assets ........................................................................................................ 763
NEW-GOLD WARS Sovereign Gold Holdings According to the World Gold Council ............................................................................. 763
NEW-GOLD WARS European Countries Gold Reserves Repatriation ................................................................................................... 764
RESEARCH OF NOTE .................................................................................................................................................................................... 766
NEW-GOLD WARS - Federal Reserve Confirms Biggest Foreign Gold Withdrawal in Over Ten Years ................................................... 766
NEW-GOLD WARS - European Nations Repatriate Gold Reserves from United States Vaults ................................................................ 767
NEW-GOLD WARS - Gold Shortage, Worst in 21st Century, And India Just Made It Worse .................................................................... 770
NEW-GOLD WARS - Deutsche Bank's Modest Proposal To Central Banks: "Purchase The Gold Held By Private Households" ........... 772
CHINAs CREDIT GROWTH Reverses Direction ............................................................................................................................................ 774
NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................... 774
CHARTS OF NOTE ......................................................................................................................................................................................... 775
NEW-CHINA LIQUIDITY Chinese Bank Asset Growth Dwarfs Developed Economies Central Banks .................................................. 775
NEW-CHINA LIQUIDITY Chinas Official GDP Growth Rate Continues to Fall ...................................................................................... 776
NEW-CHINA LIQUIDITY Chinas Deleveraging ....................................................................................................................................... 776
NEW-CHINA LIQUIDITY Chinas Inflation Rate versus Real Interest Rate ............................................................................................. 777
NEW-CHINA LIQUIDITY Bank Loan Growth ........................................................................................................................................... 777
NEW-CHINA LIQUIDITY Policy Rate, RRR and Loan Growth ................................................................................................................ 778
NEW-CHINA LIQUIDITY Declining Private Sector Fixed Asset Investment ............................................................................................ 778
CHINA LIQUIDITY - Third of Chinese GDP Now Goes to Repay Interest and Principle on Existing Loans .............................................. 779
CHINA LIQUIDITY Infrastructure Investment Offsets Weak Real Estate ................................................................................................ 780
CHINA LIQUIDITY Shadow Banks Step Back Into Light ......................................................................................................................... 780
CHINA LIQUIDITY Hopes that Credit Growth Will Spur Property Sales .................................................................................................. 781
CHINA LIQUIDITY Transport, Construction Data Point to Slower Growth .............................................................................................. 781
CHINA LIQUIDITY Little Impetus for Turnaround in Investor Sentiment ................................................................................................. 782
CHINA LIQUIDITY Industrial Output & Exports Continue to Trend the Wrong Way ............................................................................... 783
CHINA LIQUIDITY GDP Growth Trend .................................................................................................................................................... 783
RESEARCH OF NOTE .................................................................................................................................................................................... 785
NEW-CHINA LIQUIDITY - Reverses Direction and Begins Easing ............................................................................................................ 785
NEW-CHINA LIQUIDITY - One Rate Cut Probably Not Sufficient to Sustain China's Growth ................................................................... 786
NEW-CHINA LIQUIDITY - Troubling Signs of Deflation in China ............................................................................................................... 787
NEW-CHINA LIQUIDITY - The Next Phase of Chinas Financial Deepening ............................................................................................. 788
NEW-CHINA LIQUIDITY - Steady decline in private sector activity ............................................................................................................ 789
CHINA LIQUIDITY - China Credit Risk Overshadows Outlook for Emerging Equities ............................................................................... 790
CHINA LIQUIDITY - Easy Money Wont Solve Chinas Hard Problems ................................................................................................ 793
CHINA LIQUIDITY - Housing Bubble Restricting PBOC Actions .......................................................................................................... 795
CHINA LIQUIDITY - PBOC Squeezing Banks towards Reducing Speculative Risk ............................................................................ 798
CHINA LIQUIDITY - Overnight Repo at 25% ............................................................................................................................................ 799
CHINA LIQUIDITY - Red Flags ................................................................................................................................................................... 800
CHINA LIQUIDITY - Credit Fueled Growth ............................................................................................................................................... 802
CHINA LIQUIDITY - Shadow Banking System Showing Signs of Implosion ....................................................................................... 807
CHINA LIQUIDITY - PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze ........................ 810
CHINA LIQUIDITY - Potentially De-Stabilizing Cash Crunch ................................................................................................................. 812
CHINA LIQUIDITY - Chinese Liquidity Pump Unplugged ...................................................................................................................... 813
PRIOR REPORT MINOR UPDATES & EDITIONS ........................................................................................................................................... 815
US$ RESERVE STATUS & ERODING INFLUENCE............................................................................................................................................ 815
NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................... 815
RESEARCH OF NOTE .................................................................................................................................................................................... 816
RESERVE CURRENCY - The World Is Beginning To Bypass America's Financial & Legally-Leveraged Political Power ....................... 816
RESERVE CURRENCY - Putin Adviser Proposes "Anti-Dollar Alliance ................................................................................................... 817
RESERVE CURRENCY - Chinese, Swiss Central Banks Sign Bilateral Swap Agreement ....................................................................... 818
RESERVE CURRENCY - France, Brazil, India & Now South Korea Join Russia & China In Post-Dollar World Order ............................ 819
RESERVE CURRENCY - Frances Noyer Says BNP May Prompt Shift Away From Dollar ...................................................................... 821
RESERVE CURRENCY - More Russian Companies Set To Drop Dollar, Switch To Chinese Yuan ........................................................ 822
RESERVE CURRENCY - Russia, China sign deal to bypass U.S. dollar .................................................................................................. 823
RESERVE CURRENCY - Japan May Eclipse China Again, as Largest Holder of US Treasuries ...................................................... 824

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INTERNATIONAL BANKING & SHADOW BANKING ........................................................................................................................................... 826


NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................... 828
NEW-DEBT Growth of Financial Services ................................................................................................................................................ 829
DEBT REITS & CMBS Growth ................................................................................................................................................................. 829
DEBT - GLOBAL DEBT 313% of GDP........................................................................................................................................................ 831
DEBT - 202M GLOBALLY UNEMPLOYED DEBTORS .............................................................................................................................. 833
FOOD PRICES & SHORTAGES Potential Disruption..................................................................................................................................... 834
NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................... 834
CHARTS OF NOTE ......................................................................................................................................................................................... 834
NEW-CHARTS Cost of Thanksgiving Food ............................................................................................................................................. 835
NEW-CHARTS Consumer Price Increases Predominately Food in Emerging Economies ..................................................................... 835
NEW-CHARTS Sticker Shock in Isle 1 ..................................................................................................................................................... 836
NEW-CHARTS Food Importers ................................................................................................................................................................ 836
NEW-CHARTS US Beef Production To Reach 5 Years of Decline ......................................................................................................... 837
CHARTS US CPI Turns Up on Food & Energy ........................................................................................................................................ 838
CHARTS CRB US Spot Foodstuff Index One Year .............................................................................................................................. 838
CHARTS CRB Food Index One Year .................................................................................................................................................... 840
CHARTS Global Food Price Change 2007-2013 ..................................................................................................................................... 841
CHARTS Food Prices Spiking Up ............................................................................................................................................................ 842
CHARTS Food Prices Spiking Up ............................................................................................................................................................ 843
CHARTS Retail Food Services and Drinking Place Sales ....................................................................................................................... 843
CHARTS Retail CRE Price/ Cost Pressures ............................................................................................................................................ 844
CHARTS Retail CRE Price/ Cost Pressures - 2 ....................................................................................................................................... 845
CHARTS Spiking Beef Prices ................................................................................................................................................................... 846
CHARTS Coffee Futures .......................................................................................................................................................................... 846
CHARTS Lean Hog Futures ..................................................................................................................................................................... 847
CHARTS Ukraine Corn and Wheat Prices Up 15% Since YB .............................................................................................................. 847
CHARTS Global Food Imports versus % Y-o-Y US$ Change ................................................................................................................. 848
CHARTS UK Food Retailers v Commodity Food Price Index .................................................................................................................. 848
RESEARCH OF NOTE .................................................................................................................................................................................... 849
FOOD INFLATION - Food Prices Surge as Drought Exacts a High Toll on Crops .................................................................................... 849
FOOD INFLATION - Food Prices, Driver of Social Unrest ....................................................................................................................... 852
FOOD INFLATION - Food Price Manipulation in Thailand.......................................................................................................................... 853
EMERGING & FRONTIER MARKETS - Unfolding 2015 Crisis ....................................................................................................................... 855
NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................... 855
CHARTS OF NOTE ......................................................................................................................................................................................... 859
CHARTS BRIC Countries Responsible for 43% of Global Growth .......................................................................................................... 859
CHARTS BRIC & Emerging Market Inflation Rates ................................................................................................................................. 859
CHARTS Emerging Market Default Probability ........................................................................................................................................ 860
CHARTS Emerging Market versus Developed Market Public Debt and External Borrowing Positions .................................................. 860
CHARTS Emerging Market Outflows........................................................................................................................................................ 861
CHARTS Emerging Market Outflows -2 ................................................................................................................................................... 861
CHARTS Developed versus Emerging Equity Markets 1990-2014 ...................................................................................................... 862
CHARTS Total GEM Flows....................................................................................................................................................................... 862
CHARTS The Emerging Markets Have Been Weakening Since 2011 .................................................................................................... 863
RESEARCH OF NOTE .................................................................................................................................................................................... 864
EMERGING MARKETS - Fragile Five: The new focus of currency wars ............................................................................................... 864
EMERGING MARKETS - Crisis Redux? ..................................................................................................................................................... 865
EMERGING MARKETS - Losing Their Punch ......................................................................................................................................... 870
EMERGING MARKETS - Risk-On!............................................................................................................................................................. 872
EMERGING MARKETS - Asia, BRIC, Emerging Markets Crater IBM Earnings .................................................................................... 873
EMERGING MARKETS - Crisis Temporarily Halted ................................................................................................................................ 875
EMERGING MARKETS - Increasing Liquidity Problems In Selected Markets .................................................................................... 876
EMERGING MARKETS - The plight of four Asian countries - China, India, Indonesia and Japan. ................................................... 882
EMERGING MARKETS - The Impact of "TAPER" ................................................................................................................................... 887
EMERGING MARKETS - EM Crisis will make the 1997 Asian Crisis Seem like an Early Warning ..................................................... 891
EMERGING MARKETS - Global Deleveraging Accelerating and Developing Nations Feeling the Pain .......................................... 893
CYBER SPYING .............................................................................................................................................................................................. 896
CURRENCY WARS BACK ON Rate Wars Reversed With Un-Taper ............................................................................................................... 897
NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................... 897
CURRENCY WARS - A Major Shift ............................................................................................................................................................... 897
BATTLEFIELD - Combatants & Belligerents............................................................................................................................................... 902
BATTLEFIIELD - The Race to Debase ......................................................................................................................................................... 903
JAPAN - The Destabilizing Agent .................................................................................................................................................................... 905
EUROPE - Euro Exposed ................................................................................................................................................................................ 905
ARGENTINA - Here we Go Again! .................................................................................................................................................................. 907
VENEZUELLA - Bad Situation ......................................................................................................................................................................... 908
BRAZIL - No One Wants to Listen ................................................................................................................................................................... 908
SWITZERLAND - No Choice ........................................................................................................................................................................... 908
SINGAPORE - Hot Money ............................................................................................................................................................................... 909
UK- Pound Joins War .................................................................................................................................................................................... 910
CYBER WARS Growing Threat & the Security-Surveillance Complex .............................................................................................................. 911
NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................... 911
SECURITY-SURVEILLANCE COMPLEX - NSA Whistleblower Example: Booz Hamilton ....................................................................... 914

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SECURITY SURVEILLANCE COMPLEX - Growing Without Public Control or Supervision! ................................................................. 917

REGIONAL ............................................................................................................................................. 919


EU DEFLATION IS REAL A Major Problem for Banks & Government Debt .................................................................................................. 920
CHARTS OF NOTE ......................................................................................................................................................................................... 922
NEW--CHARTS - Draghi Had To Deliver or it would have been a Collateral Massacre ............................................................................ 922
NEW--CHARTS EU Disconnect Between Equity Prices & Earnings and Dividends ............................................................................... 922
NEW--CHARTS Eurozone is the Biggest Drag on Global Profits ............................................................................................................ 923
NEW--CHARTS Eurozone Government & Private Debt 276% of GDP (Excluding Financials) .............................................................. 923
NEW--CHARTS EU PMIS Rolling Over ................................................................................................................................................... 924
NEW--CHARTS Eurozone Banks Too Big To Be Bailed Out! ................................................................................................................. 925
NEW--CHARTS Eurozone Area Consumer Confidence May Be Misleading .......................................................................................... 926
NEW--CHARTS Eurozone GDP & Recession Pattern ............................................................................................................................. 926
CHARTS EU-Area PMI Shows Sustained Deterioration .......................................................................................................................... 927
th
CHARTS Euro Area CPI Seen Below 1% for 11 Month ......................................................................................................................... 927
CHARTS Euro Area Domestic Demand has lagged US & Japan by 9% since 2010 .............................................................................. 928
CHARTS Euro Area Inflation Levels ......................................................................................................................................................... 929
CHARTS Geo-Political Tensions May Weigh on Confidence .................................................................................................................. 930
CHARTS Stalling Euro-Area Recovery Heightens ECB QE Pressure ..................................................................................................... 930
CHARTS Industrial Production Slows In Line With PMIs ......................................................................................................................... 931
CHARTS ZEW Expectations Signals Slowdown Ahead .......................................................................................................................... 932
CHARTS Euro-Area July PMI ................................................................................................................................................................... 932
CHARTS Corporate Borrowing Spreads Remain Wide ........................................................................................................................... 933
CHARTS ECB Less Accommodative Than the Fed ................................................................................................................................. 933
CHARTS EU Financial Conditions Deteriorating ...................................................................................................................................... 934
CHARTS EU Confidence .......................................................................................................................................................................... 935
CHARTS - Slow Money Growth May Stoke Deflation Concerns ................................................................................................................ 936
CHARTS - Euro-Area Inflation at Lowest Level Since 2009 Individual Countries ................................................................................... 936
CHARTS - Euro-Area Inflation Aggregate ................................................................................................................................................ 937
CHARTS - 10M Part-Time Workers Underemployed in EU ........................................................................................................................ 938
CHARTS - Euro-Area Housing Prices Decline ............................................................................................................................................ 939
CHARTS - Euro-Area Trade Surplus ........................................................................................................................................................... 940
CHARTS - Euro-Area Composite PMI ......................................................................................................................................................... 941
CHARTS - EU Area Weakness ................................................................................................................................................................... 942
CHARTS - EU Area GDP ............................................................................................................................................................................. 943
CHARTS - EU Area PMI .............................................................................................................................................................................. 944
CHARTS - EU Area PMI .............................................................................................................................................................................. 945
CHARTS - EU Real Rates ........................................................................................................................................................................... 946
CHARTS - EU -NON Euro Members GDP RELIANCE ............................................................................................................................... 947
CHARTS - EU GLOBAL GDP GROWTH CONTRIBUTION ....................................................................................................................... 948
CHARTS - EU PMI ....................................................................................................................................................................................... 948
CHARTS - EU CPI ....................................................................................................................................................................................... 950
CHARTS - Regional Risk-Reward ............................................................................................................................................................... 951
CHARTS - Europe's "Core" Problem is France ...................................................................................................................................... 952
CHARTS - Germany's Preoccupation with Inflation is More Than It Would Seem ............................................................................. 955
CHARTS - Evidence OF Global Slowing Now Indisputable ................................................................................................................... 956
CHARTS - EU Credit Downgrades, France and UK On Tap ..................................................................................................................... 958
CHARTS - Perceived Reduction in Risk, A Temporary Aberration ............................................................................................................. 960
CHARTS - Dangerous Delusional Divergences ...................................................................................................................................... 962
CHARTS - IMF Projections for Euro Area and GIIPS ................................................................................................................................. 963
CHARTS - Air Cargo Shipments Confirm Slowing Global Growth .............................................................................................................. 964
CHARTS - Eurozone Misery Indices Never Been Higher ....................................................................................................................... 965
CHARTS - Euro Currency ............................................................................................................................................................................ 967
RESEARCH WE FOLLOWED ......................................................................................................................................................................... 972
RESEARCH OF NOTE .................................................................................................................................................................................... 974
NEW--RESEARCH The Broken Model of the Eurozone .......................................................................................................................... 974
NEW--RESEARCH The Japanization of Europe in 9 This Time It Is Different Charts ......................................................................... 975
NEW--RESEARCH Eurozone on cusp of triple-dip recession as German exports crumble ................................................................... 976
RESEARCH Euro Areas Stalling Industry No Support for GDP.............................................................................................................. 978
RESEARCH Early Warnings of Euro-Area Downturn Strengthen ECBs QE Case ................................................................................ 978
RESEARCH ECB Rate Decision ............................................................................................................................................................ 980
RESEARCH Euro-Area Data Deterioration Points Toward QE ............................................................................................................... 983
RESEARCH ECB v FEDERAL RESERVE ............................................................................................................................................... 984
RESEARCH The ECBs Negative Deposit Rate.................................................................................................................................... 986
RESEARCH EU Version of QE Coming -> UST Purchases to Drive Euro Down ............................................................................. 988
RESEARCH Beware of EU Banks! ........................................................................................................................................................... 990
RESEARCH Emerging Markets Aggravates Festering Banking Problems ...................................................................................... 991
RESEARCH European Banks Have $3 Trillion of Exposure To Emerging Markets ........................................................................ 993
RESEARCH - EFSF Downgraded to AA+ ................................................................................................................................................. 995
RESEARCH - EU Stabilization Programs Are Presently Very Fragile ........................................................................................................ 996
RESEARCH - Spreads Widened in Peripherals and Significantly in Portugal and Greece ................................................................ 999
SITUATIONAL ASSESSMENT ..................................................................................................................................................................... 1001
PROGNOSIS: Why the European Situation Will Get Worse ..................................................................................................................... 1001
PROGNOSIS: Increasing Structural Imbalances ...................................................................................................................................... 1004
PROGNOSIS: $22T Unaccounted - A Hidden World of Contingent Liabilities, Government Backing & Guarantees. ................. 1006

10

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PROGNOSIS: Monetary Malpractice - ECB's LTRO Not a Solution but ................................................................................................... 1011
PROGNOSIS: Monetary Malpractice - ECB's SMP Effort Futile ............................................................................................................... 1015
PROGNOSIS: Monetary Malpractice - ECB Accepts BBB Collateral ....................................................................................................... 1018
PROGNOSIS: EU Banking Overbanked, Undercapitalized and Now Insolvent ....................................................................................... 1019
PROGNOSIS: Monetary Malpractice - TARGET2 "Contingent Liabilities" ........................................................................................ 1020
PROGNOSIS: Bailouts - Unsustainable & Unfundable ............................................................................................................................. 1027
ITALY FALLS BACK INTO A TRIPLE-DIP RECESSION ................................................................................................................................. 1029
CHARTS OF NOTE ....................................................................................................................................................................................... 1029
NEW--CHARTS - ITALY 30 Year Bond Yield At 2.3% - Historic Low .................................................................................................... 1029
NEW--CHARTS - ITALY Italian Unemployment ..................................................................................................................................... 1030
NEW--CHARTS - ITALY Italian Core Inflation ........................................................................................................................................ 1030
NEW--CHARTS - ITALY Italian Industrial Porduction ............................................................................................................................ 1031
CHARTS - ITALY Meal Affordability Deteriorates .................................................................................................................................. 1032
CHARTS - ITALY Falling Oil & Gas Consumption ................................................................................................................................. 1033
CHARTS - ITALY Italian Bond Yields ..................................................................................................................................................... 1033
CHARTS - ITALY Slips Back Into Recession ......................................................................................................................................... 1034
CHARTS - ITALY 10 Year Bond Yields Fall to Record Low .................................................................................................................. 1035
CHARTS - ITALY - Forced Rate Cuts ....................................................................................................................................................... 1036
RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1037
RESEARCH OF NOTE .................................................................................................................................................................................. 1037
NEW--RESEARCH Italy Falls Back Into Recession, Raising Concerns for Eurozone .......................................................................... 1037
RESEARCH - Italys Downward Spiral ...................................................................................................................................................... 1040
RESEARCH - Italys Budget Failures, Weak Growth Outlook Call Debt Sustainability Into Question ..................................................... 1042
SITUATIONAL ASSESSEMENT ................................................................................................................................................................... 1046
ITALIAN ELECTION - What You Need to Know ....................................................................................................................................... 1046
ITALIAN ELECTION - Europe Capitulates On Austerity- Never Had The Stomach For It ................................................................. 1047
ITALIAN ELECTION - Message Given By the People ............................................................................................................................ 1049
ITALIAN ELECTION - Bad Debt Continue to Soar .................................................................................................................................... 1053
ITALIAN ELECTION - Italians React Badly to Austerity, Elections Hardly a Surprise!........................................................................... 1056
ITALIAN ELECTION - EUROPEAN FEEDBACK - #1 ............................................................................................................................. 1056
ITALIAN ELECTION - EUROPEAN FEEDBACK - #2 ............................................................................................................................. 1058
ITALIAN ELECTION - Regional Financial Cracks in Sicily .................................................................................................................. 1062
FRANCE ECONOMIC MALAISE SPARKING POTENTIAL POLITICAL CRISIS ............................................................................................ 1064
CHARTS OF NOTE ....................................................................................................................................................................................... 1064
NEW--CHARTS FRANCE Bankruptcies Soar as Profitability Slumps ................................................................................................ 1064
NEW--CHARTS FRANCE Post Hollande Election Results Jobseekers and 10 Year Yield ............................................................ 1064
NEW--CHARTS FRANCE French Job Seekers .................................................................................................................................. 1065
NEW--CHARTS FRANCE Inflation Expectations ................................................................................................................................ 1065
CHARTS - FRANCE Hollande Popularity Gap Heading for a Record Low ........................................................................................... 1067
CHARTS - FRANCE Austerity Doesnt Get You Re-Elected ................................................................................................................. 1067
CHARTS - FRANCE Worlds Worst PMI Ranking in June ..................................................................................................................... 1068
CHARTS - FRANCE Near-record high bankruptcies and record-low profitability .................................................................................. 1069
CHARTS - FRANCE Frances PMI Trend Weakness Beginning to Stand Out...................................................................................... 1069
CHARTS - FRANCE Manufacturing Divergence With Germany Widens .............................................................................................. 1070
CHARTS - FRANCE - GDP ....................................................................................................................................................................... 1071
CHARTS - FRANCE - UNEMPLOYMENT ................................................................................................................................................ 1072
CHARTS - FRANCE - BUDGET DEFICIT ................................................................................................................................................. 1073
CHARTS - FRANCE - TAX v GDP ............................................................................................................................................................ 1074
CHARTS - FRANCE - BUSINESS CONFIDENCE.................................................................................................................................... 1075
RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1076
RESEARCH OF NOTE .................................................................................................................................................................................. 1076
NEW--RESEARCH Economic Malaise Sparks Political Crisis in France .............................................................................................. 1076
RESEARCH - France In "Political Turmoil" After Hollande Unexpectedly Dissolves Government .......................................................... 1078
RESEARCH Prime Minister Manuel Vall Resigns .................................................................................................................................. 1080
RESEARCH - European Voters Are Revolting; France Warns "Situation Is Grave for France, Europe" ................................................. 1080
RESEARCH - Steady Breakdown Underway ......................................................................................................................................... 1083
RESEARCH - France Loses its Coveted and NEEDED AAA Rating ................................................................................................... 1087
SITUATIONAL ASSESSMENT ..................................................................................................................................................................... 1089
FRANCE - What You Need to Know ......................................................................................................................................................... 1089
FRANCE - Key Indicators .......................................................................................................................................................................... 1090
FRANCE: Sharpest Drop in Private Sector Output in Four Years ............................................................................................................ 1093
FRANCE - Quits on Austerity - Never a Doubt This Would Happen...................................................................................................... 1096
FRANCE - Socialism is Expensive ......................................................................................................................................................... 1097
FRANCE - Has Turned back to Socialism ................................................................................................................................................. 1099
FRANCE - Losing Its Way through Political Illusions and Lies ................................................................................................................. 1100
FRANCE - Uncompetitive .......................................................................................................................................................................... 1101
FRANCE - Titan Tire Calls Out French Labor ........................................................................................................................................... 1103
FRANCE - France Responds to Titan Tire ................................................................................................................................................ 1105
FRANCE - What Happens In France When Companies Fire People ....................................................................................................... 1107
FRANCE - Hollande's Economically Insane campaign Promise ............................................................................................................... 1108
GERMANY GERMANY IN RECESSION.......................................................................................................................................................... 1110
CHARTS OF NOTE ....................................................................................................................................................................................... 1110
NEW--CHARTS - GERMANY - 1.179% 30 Year Bond Yield ................................................................................................................... 1110
NEW--CHARTS - GERMANY 2 Year Sovereign Yield Goes Negative ................................................................................................. 1111
NEW--CHARTS - GERMANY 10 Year Sovereign Bund versus US10 Treasury ................................................................................... 1111

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NEW--CHARTS - GERMANY German & Japanese Yield Curves Are Remarkably Close ................................................................... 1112
NEW--CHARTS - GERMANY 10 Y European Yields ............................................................................................................................. 1113
NEW--CHARTS - GERMANY German Unemployment ......................................................................................................................... 1114
NEW--CHARTS - GERMANY German Core Inflation ............................................................................................................................ 1114
NEW--CHARTS - GERMANY 10 Year Sovereign Bund versus US10 Treasury ................................................................................... 1114
CHARTS - GERMANY Expectations Component Peaked In January ................................................................................................... 1115
CHARTS - GERMANY Ifo Rolls-Over..................................................................................................................................................... 1115
CHARTS - GERMANY 10 Year Bund Below 1% ................................................................................................................................... 1116
CHARTS - GERMANY - Inflation ............................................................................................................................................................... 1116
CHARTS - GERMANY - IFO Investor Confidence .................................................................................................................................... 1117
CHARTS - GERMANY - ZEW Expectations .............................................................................................................................................. 1118
RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1120
RESEARCH OF NOTE .................................................................................................................................................................................. 1120
NEW--RESEARCH - Five charts that show Germany is heading into recession 10-19-14 The Guardian ............................................... 1120
RESEARCH - Draghi signaled additional monetary easing is likely to materialize - Possibly by September .......................................... 1123
RESEARCH - Germany close to recession as ECB admits recovery is weak.......................................................................................... 1125
RESEARCH - Merkel's Third Chancellorship Challenges .................................................................................................................... 1126
RESEARCH - German Election - Merkel Begins Hunt for Coalition Partners........................................................................................... 1130
RESEARCH - Europe's Shadow Economy: As Big As Germany.............................................................................................................. 1131
SITUATIONAL ASSESSEMENT ................................................................................................................................................................... 1135
GERMANY - Anti Euro AfD Party May Cost Merkel in Critical September Election ......................................................................... 1136
GERMANY - The Euro Crisis Escalation over Cyprus May Politically Cripple Merkel ..................................................................... 1137
GERMANY - Call for End of "Coercive Euro Association" ........................................................................................................................ 1139
UK EXPECT RATE INCREASE BY SPRING 2015.......................................................................................................................................... 1141
CHARTS OF NOTE ....................................................................................................................................................................................... 1141
NEW--CHARTS - UK - Deficit One of Worst of Developed Economies .................................................................................................... 1141
NEW--CHARTS - UK Private Sector Surplus Eliminated ....................................................................................................................... 1141
CHARTS - UK Self-Employment At Record High ...................................................................................................................................... 1142
CHARTS - UK Rate Voting Shows Preference for Inflation Report Months ............................................................................................. 1143
CHARTS - UK Below 2% Target But 2nd Highest in EU ......................................................................................................................... 1143
CHARTS - UK CPI Below Target for 7th Month ...................................................................................................................................... 1144
CHARTS - UK Real-Wage Decline Longest Since At Least 1964 ......................................................................................................... 1145
CHARTS - UK Wage-Neutral Unemployment Rate Falling .................................................................................................................... 1145
CHARTS - UK CPI Too Low for BOE and Falling .................................................................................................................................. 1146
CHARTS - UK GDP ................................................................................................................................................................................ 1147
CHARTS - UK Population Growth .......................................................................................................................................................... 1147
CHARTS - UK - Crushed Disposable Income ........................................................................................................................................... 1148
CHARTS - UK - BOE Balance Sheet Growth ............................................................................................................................................ 1149
CHARTS - UK - Lending ............................................................................................................................................................................ 1150
CHARTS - UK - Unemployment ................................................................................................................................................................ 1150
CHARTS - UK - GDP - Pre and Post Recession Levels ........................................................................................................................... 1151
CHARTS - UK - GDP ................................................................................................................................................................................. 1151
CHARTS - UK - BOE Rates ....................................................................................................................................................................... 1152
RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1153
RESEARCH OF NOTE .................................................................................................................................................................................. 1153
NEW--RESEARCH Consensus See UK Rate Increase in February 2015 Possibility of November .................................................. 1153
RESEARCH BOE Faces Labor Market Conundrum as Wage Growth Stalls ........................................................................................ 1155
RESEARCH - UK workers' wage squeeze is longest since the 1870s ..................................................................................................... 1158
SITUATIONAL ASSESSEMENT ................................................................................................................................................................... 1159
UK - What you need to Know..................................................................................................................................................................... 1159
UK - Joins Currency War - Down 8% YTD ............................................................................................................................................. 1160
UK - Specter of Stagflation Haunts UK ...................................................................................................................................................... 1161
UK - Public Policy turns Against Austerity and PM Cameron ............................................................................................................ 1162
UK - Doomsday Debt Machine .................................................................................................................................................................. 1163
UK - QE Extension Coming ....................................................................................................................................................................... 1166
UK - Small Business Credit Squeeze Now Acute - Loan Rejections Rising ..................................................................................... 1168
UK - Technically in a Depression ........................................................................................................................................................... 1169
IBERIAN PENINSULA LOW RATES MASK SERIOUS PERCULATING PROBLEMS ................................................................................... 1172
CHARTS OF NOTE ............................................................................................................................................................................................. 1172
NEW--CHARTS - SPAIN 30 Year Bond Yield At 2.5% - Historic Low ........................................................................................................ 1172
NEW--CHARTS - SPAIN 10 Year Bond Yield At 2.37% - Historic Low .................................................................................................. 1172
CHARTS - PORTUGAL Yields Hit Low After BES Bailout ..................................................................................................................... 1173
CHARTS - PORTUGAL - Deficit Problem ................................................................................................................................................. 1174
RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1175
RESEARCH OF NOTE .................................................................................................................................................................................. 1175
RESEARCH - Presidential Warning Spikes Yields To 8 Months Highs .............................................................................................. 1175
RESEARCH - Clear Signs of Desperation In Spain from a Growing Collateral Contagion.............................................................. 1177
RESEARCH - The Spanish Government's 'Bad Bank' Scam .............................................................................................................. 1178
SITUATIONAL ASSESSEMENT ................................................................................................................................................................... 1180
IBERIA - Credit Downgrades - At Precipice of "Non Investment Grade" .................................................................................................. 1180
IBERIA - Regional Bailout Bailouts a Massive Problem ...................................................................................................................... 1181
IBERIA - NPL Going Ballistic .................................................................................................................................................................. 1182
IBERIA - Spanish Funding Problem ....................................................................................................................................................... 1183
IBERIA - The Giant Spanish Housing Bubble, Now Beginning to Implode ............................................................................................... 1188
IBERIA - Mal-Investment Coming Home to Roost..................................................................................................................................... 1190

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IBERIA - Bank Deposits Were Leaving, Now they Are Fleeing ................................................................................................................ 1191
IBERIA - Now a Capital Investment Problem ............................................................................................................................................ 1192
IBERIA - Banks on Artificial "Ponzi Bond" Life Support ............................................................................................................................ 1193

ASIA FALLING CURRENCIES, RISING DEBT & SLOWING GROWTH.............................................................................. 1202


CHINA THE NEXT PEG TO FALL ............................................................................................................................................................... 1202
RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1202
CHARTS OF NOTE ....................................................................................................................................................................................... 1215
NEW--CHARTS - CHINA Falling Chinese Industrial Profits .................................................................................................................... 1215
NEW--CHARTS - CHINA Something Up (or rather down) with Chinese Currency? .............................................................................. 1215
NEW--CHARTS - CHINA Rising Margin Debt/Market Cap Ratio Suggests Liquidity m& Credit Risks .................................................. 1216
NEW--CHARTS - CHINA Corporate Bond Yields ................................................................................................................................... 1216
NEW--CHARTS - CHINA New Retail Stock Trading Accounts ............................................................................................................... 1217
NEW--CHARTS - CHINA Credit Growth 30% Above Trend for Private Sector Debt to GDP ................................................................ 1217
NEW--CHARTS - CHINA Falling Foreign Currency Reserves ................................................................................................................ 1218
NEW--CHARTS - CHINA 2 Year Yield Goes Negative .......................................................................................................................... 1219
th
NEW--CHARTS - CHINA China Used More Cement in Last 3 Years than US in Entire 20 Century .................................................. 1220
NEW--CHARTS - CHINA China Real Activity Indicators Steel, Cement & Electricity ........................................................................ 1220
NEW--CHARTS - CHINA Chinese Coal Consumption Falls .................................................................................................................. 1221
NEW--CHARTS - CHINA Chinese Y-o-Y Outstanding Credit & M2 ...................................................................................................... 1221
NEW--CHARTS - CHINA Chinas Bank Reserve Requirement Ratio ................................................................................................... 1222
NEW--CHARTS - CHINA New Stock Market Trading Accounts ............................................................................................................ 1223
CHARTS Yuan Falls as Economy Weakens .......................................................................................................................................... 1224
CHARTS Yuans Currency Basket Composition .................................................................................................................................... 1224
CHARTS Yuan Diverges From Currency Basket ................................................................................................................................... 1225
CHARTS Industrial Output A Concern.................................................................................................................................................... 1225
CHARTS China On A Path Since 2008 That Historically Leads to A Currency Crisis........................................................................... 1226
CHARTS Borrowing Costs for Firms Remain High ................................................................................................................................ 1227
CHARTS Chinas Q1 GDP Deflator Falls to Zero .................................................................................................................................. 1227
CHARTS - Credit is Running Well Ahead of Economic Growth ................................................................................................................ 1229
CHARTS Productivity is Slumping As Debt Levels Soar........................................................................................................................ 1229
CHARTS Chinas Gross Fixed Capital Formation Problem ................................................................................................................... 1229
CHARTS Chinese Investment Peaking .................................................................................................................................................. 1230
CHARTS China Equity Flows ................................................................................................................................................................. 1231
CHARTS Credit Accumulation Rate Growth Comparisons ................................................................................................................. 1231
CHARTS Chinese Credit Growth ............................................................................................................................................................ 1232
CHARTS 5 Year Debt Growth versus GDP ............................................................................................................................................ 1232
CHARTS 5 Year Credit Growth .............................................................................................................................................................. 1233
CHARTS Growth Propensity of Credit Growth..................................................................................................................................... 1234
CHARTS Chinas Bad Loans - NPL........................................................................................................................................................ 1235
CHARTS Slowing Steel Consumption .................................................................................................................................................... 1236
CHARTS Shadow Banking System ........................................................................................................................................................ 1236
CHARTS Dramatic Chinese Housing Slowdown ................................................................................................................................... 1238
CHARTS - CHINA - A Global Slowdown on the Verge of Contraction...................................................................................................... 1239
CHARTS - CHINA - Chinese Credit Market .............................................................................................................................................. 1240
CHARTS - CHINA - PMI ............................................................................................................................................................................ 1240
CHARTS - CHINA - PMI-2 ......................................................................................................................................................................... 1242
CHARTS - CHINA - GDP ........................................................................................................................................................................... 1243
CHARTS - CHINA Industrial Output ....................................................................................................................................................... 1244
CHARTS - CHINA - Urban Fixed Asset Investment .................................................................................................................................. 1245
CHARTS - CHINA Retail Sales .............................................................................................................................................................. 1246
RESEARCH WE FOLLOWED THIS TRI-SEMSTER .................................................................................................................................... 1247
RESEARCH OF NOTE .................................................................................................................................................................................. 1248
NEW--CHINA The Next Peg To Fall The Yuan or Hong Kong Dollar? ...................................................................................... 1248
NEW--CHINA Yuan Diverging From Its Trading Basket .................................................................................................................... 1254
NEW--CHINA Signs of Madness in the Global Financial System .................................................................................................... 1256
NEW--CHINA Reverses Direction and Begins Easing....................................................................................................................... 1257
NEW--CHINA China's Economic Reporting Possibly a Deception .................................................................................................. 1258
CHINA Yuan Diverging From Its Trading Basket ............................................................................................................................... 1260
CHINA - China Credit Risk Overshadows Outlook for Emerging Equities ................................................................................................ 1263
CHINA - Easy Money Wont Solve Chinas Hard Problems ...................................................................................................................... 1265
CHINA - China's Rehypothecation............................................................................................................................................................. 1268
CHINA - Asian Marginal Utility ................................................................................................................................................................... 1270
CHINA - Is China is Exporting Deflation Worldwide by Driving Down Yuan? ........................................................................................... 1272
CHINA - Someone Is Betting That The Chinese Currency Collapses By The End Of 2014Low-Hanging Fruit ............................. 1275
CHINA - Problems in the Target Redemption Forwards Derivatives market & Dim-Sum Bonds ................................................... 1276
CHINA - Absence Of A Letter Of Credit!.................................................................................................................................................... 1277
CHINA - China Cracks down on Commodity Credit .................................................................................................................................. 1280
CHINA - Falling Yuan ................................................................................................................................................................................. 1282
CHINA - What Happens After the Low-Hanging Fruit Has Been Picked? .......................................................................................... 1284
CHINA SHADOW BANKING - CCFD (Chinese Commodity Funding Deals) ....................................................................................... 1287
CHINA - Cracks Beginning to Show ....................................................................................................................................................... 1289
CHINA - Has an Inflation Problem ............................................................................................................................................................. 1290
CHINA - Chinese Coal Producer Collapse a Major Shadow Banking Problem ................................................................................. 1291
CHINA - China Orders Its Smaller Banks to Load Up On Cash .......................................................................................................... 1294
CHINA - How the Chinese Economic Disaster Scenario Could Unfold ............................................................................................. 1299

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CHINA - Skilled Labor Shortages & Losing Labor Cost Advantage ................................................................................................... 1301
CHINA - Launches Crackdown On "Off Balance Sheet" Credit .......................................................................................................... 1306
CHINA - China's Stunning $15 Trillion in New Liquidity - Part II......................................................................................................... 1309
CHINA - China's Stunning $15 Trillion In New Liquidity ...................................................................................................................... 1312
RESEARCH OF NOTE PREVIOUS REPORT (Reference) ...................................................................................................................... 1316
RESEARCH - China's Stunning $15 Trillion in New Liquidity ............................................................................................................. 1316
RESEARCH - Dr. Copper Ready to Top and Head Lower .................................................................................................................... 1319
RESEARCH - China's $1 Trillion GDP Lie .............................................................................................................................................. 1320
RESEARCH - What the Deceleration Could Portend ............................................................................................................................ 1322
RESEARCH - Credit Bubble: 240% Of GDP And Soaring .................................................................................................................... 1325
RESEARCH - Forget Taper risk: China is a bigger threat ....................................................................................................................... 1329
RESEARCH - Sustainability Requires a Slowdown in Investment ............................................................................................................ 1331
RESEARCH - China Likely to Continue Interest Rate Liberalization ........................................................................................................ 1333
RESEARCH - China #1 in Broad Array of Key Areas ............................................................................................................................... 1336
RESEARCH - Global Business Confidence Sliding Rapidly ............................................................................................................... 1337
RESEARCH - Investors Worried and Losing Confidence .................................................................................................................... 1340
RESEARCH - China Stampeding into Gold ........................................................................................................................................... 1341
RESEARCH - China "Will introduce some measures to arrest the slowdown of growth in the next couple of quarters" ........... 1343
RESEARCH - Slower Growth In the Cards & Endorsed by New Chinese Leadership ..................................................................... 1344
RESEARCH - Is a PBOC Controlled Speculation Bust Possible or Will It Get Out of Control ........................................................ 1346
RESEARCH - PBOC Liquidity Squeeze ................................................................................................................................................. 1347
RESEARCH - Chinese Housing Bubble Restricting PBOC Actions .................................................................................................... 1349
RESEARCH - PBOC Squeezing Banks towards Reducing Speculative Risk .................................................................................... 1351
RESEARCH - Chinese Overnight Repo at 25% ...................................................................................................................................... 1353
RESEARCH - Red Flags ........................................................................................................................................................................... 1354
RESEARCH - Credit Fueled Growth in China ....................................................................................................................................... 1356
RESEARCH - PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze ................................ 1361
RESEARCH - A Potentially De-Stabilizing Cash Crunch ..................................................................................................................... 1363
SITUATIONAL ANALYSIS & KEY NOTES ................................................................................................................................................... 1364
CHINA SHADOW BANKING - Shadow Banking System Showing Signs of Implosion ..................................................................... 1366
CHINA SHADOW BANKING - Shadow Banking and Credit Growth .................................................................................................... 1369
CHINA SHADOW BANKING - The US Sub-Prime / CDO All Over Again ............................................................................................. 1372
CHINA SHADOW BANKING - Report ....................................................................................................................................................... 1376
CHINA SHADOW BANKING - Situation ................................................................................................................................................. 1377
CHINA RESERVES - Distorted Foreign Reserve Levels ...................................................................................................................... 1378
CHINA RESERVES - Declining Reserve Accumulation ............................................................................................................................ 1380
CHINA RESERVES - Has Caught the Gold Bug big time! .................................................................................................................... 1382
CHINA CURRENCY WARS - Hot Money into China .............................................................................................................................. 1384
CHINA - Withdraws Liquidity .................................................................................................................................................................. 1385
CHINA - Socit General Sees a Likely Soft Landing! ......................................................................................................................... 1387
CHINA - True Debt is Orders of Magnitude More than Officially Being Reported ............................................................................ 1397
CHINA - Evidence OF Slowing Now Indisputable ................................................................................................................................ 1400
CHINA - PMI Improvement....................................................................................................................................................................... 1401
CHINA - Political Transition & Ongoing Emergence as a Super Power ............................................................................................ 1404
CHINA - An Implicit Social Contract .......................................................................................................................................................... 1406
CHINA - Manipulated Statistics due to Upcoming Decade Long Regime Change ........................................................................... 1408
CHINA - Increasing Leverage is China's Way of Monetary Easing .................................................................................................... 1409
CHINA - Possible Interest-Rate Liberalization........................................................................................................................................... 1410
CHINA - Global Impact of China's Slowdown ....................................................................................................................................... 1411
CHINA - Shanghai Composite at 2008 Low Levels .............................................................................................................................. 1413
CHINA - Shanghai Composite Warnings Signs .................................................................................................................................... 1414
CHINA - Credit to GDP ............................................................................................................................................................................. 1416
CHINA - A Slow Recovery Through 2013 ................................................................................................................................................. 1417
CHINA - Manufacturing PMI in Contraction Territory .......................................................................................................................... 1419
JAPAN: JAPAN GOES ALL IN ............................................................................................................................................................................ 1424
RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1425
CHARTS OF NOTE ....................................................................................................................................................................................... 1431
NEW--CHARTS - JAPAN 1.174% 30 Year Bond Yield ......................................................................................................................... 1431
NEW--CHARTS - JAPAN 2 Year Yield Goes Negative.......................................................................................................................... 1431
NEW--CHARTS - JAPAN Savings Rate Goes Negative ........................................................................................................................ 1432
NEW--CHARTS - JAPAN Stagnate Housing Starts with Historic Low 35 Year Mortgages ................................................................... 1432
NEW--CHARTS - JAPAN Non-Resident Net Investment in Japanese Stocks ...................................................................................... 1433
NEW--CHARTS - JAPAN Shifting Demographics - Birth versus Deaths ............................................................................................... 1433
NEW--CHARTS JAPAN Nikkei Strength is all Relative .................................................................................................................... 1434
NEW--CHARTS - JAPAN Trade Balance ............................................................................................................................................... 1434
NEW--CHARTS - JAPAN 10 Year Treasury Approaching Zero (12-27-14) .......................................................................................... 1435
NEW--CHARTS - JAPAN BOJ Reserve Balances ................................................................................................................................. 1436
NEW--CHARTS - JAPAN Macro Crisis Zones ....................................................................................................................................... 1437
NEW--CHARTS - JAPAN Demographics ............................................................................................................................................... 1437
NEW--CHARTS - JAPAN Fiscal Deficit versus BOJ Balance Sheet ..................................................................................................... 1438
NEW--CHARTS - JAPAN Japans Economy versus the Rest of the World ........................................................................................... 1438
NEW--CHARTS - JAPAN Japans Decline in Real Interest Rates ......................................................................................................... 1439
NEW--CHARTS - JAPAN Japanese GDP Annualized Q-o-Q ................................................................................................................ 1440
NEW--CHARTS - JAPAN Bankruptcies Due to Depreciating Yen ......................................................................................................... 1441
NEW--CHARTS - JAPAN Japanese & German Yield Curves Are Remarkably Close ........................................................................... 1441
CHARTS Q2 GDP Downturn Even Worse Than Though or Looks........................................................................................................ 1443

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CHARTS Real Incomes Falling at Fastest Rate in a Decade ................................................................................................................ 1443


CHARTS Japan Exports Remained Subdued ........................................................................................................................................ 1444
CHARTS Past Yen Strength Pushed Production Off-Shore .................................................................................................................. 1444
CHARTS Japans Export Majors Lost Tech Battle ................................................................................................................................. 1445
CHARTS Japans Stalled Inflation Adds Pressure for Second Round of Stimulus ................................................................................ 1446
CHARTS Japan Adjusted Trade Balance ............................................................................................................................................... 1446
CHARTS Japan BoP Current Account Balance .................................................................................................................................. 1447
CHARTS 5T Yen of JGB Selling ............................................................................................................................................................. 1447
CHARTS Sovereign Debt % of Tax Revenue ........................................................................................................................................ 1448
CHARTS Public Sector Debt Issuances 2013 as % GDP ...................................................................................................................... 1449
CHARTS - GDP Trend ............................................................................................................................................................................... 1449
CHARTS - CPI Trend ................................................................................................................................................................................. 1450
CHARTS - JAPAN - GDP Resurgence ...................................................................................................................................................... 1450
CHARTS - JAPAN - BOJ Balance Sheet .................................................................................................................................................. 1451
RESEARCH WE FOLLOWED THIS TRI-SEMESTER ................................................................................................................................. 1452
RESEARCH OF NOTE .................................................................................................................................................................................. 1453
NEW--JAPAN The BOJ Ups The Ante ................................................................................................................................................. 1453
NEW--JAPAN Is Japan Kaput? ............................................................................................................................................................. 1454
JAPAN - Pace of 60 to 70 trillion yen a year May Become "Open Ended" ............................................................................................... 1457
JAPAN - Japanese Financial Repression - Changes in Allocation of Japanese Retirement Accounts Coming ...................................... 1459
JAPAN - 3 Arrows of ABE-nomics Not Working ........................................................................................................................................ 1462
JAPAN - Stalled Inflation Adds Pressure for Second Round of Stimulus ................................................................................................. 1464
JAPAN - Japanese Financial Repression - Changes in Allocation of Japanese Retirement Accounts Coming ...................................... 1465
JAPAN - Japan bond market liquidity dries up as BoJ holding crosses 200tn........................................................................................ 1467
JAPAN - Abe Approval Rating Plunges ................................................................................................................................................. 1469
JAPAN - What the Japanese been Buying ............................................................................................................................................. 1470
JAPAN - Japan May Matter More Than Tapering .................................................................................................................................. 1472
JAPAN - Japan Finances Worse than at Wars End ............................................................................................................................. 1475
JAPAN - BOJ: "The days of constructive ambiguity is over! ......................................................................................................... 1476
JAPAN - Abenomics Third Arrow Growth Strategy Underwhelms .......................................................................................................... 1477
JAPAN - 2nd ABE-nomics $200B Stimulus Package Approved ......................................................................................................... 1479
JAPAN - Worlds Biggest Pension Fund Sees Japan Fail on ABE-nomics' 2% Inflation Goal ....................................................... 1480
JAPAN - The Abe-nomics Failure ........................................................................................................................................................... 1483
SITUATIONAL ASSESSEMENT & KEY NOTES .......................................................................................................................................... 1485
JAPAN - What You Need to Know............................................................................................................................................................. 1487
JAPAN - No Way Out But to Expand the Monetary Base ..................................................................................................................... 1490
JAPAN - BOJ to "Own" 100% of GDP in 5 Years .................................................................................................................................. 1490
JAPAN - Adjusted trade deficit the worst in Bloomberg's 20 year history ........................................................................................ 1494
JAPAN - How Japan's National Debt Grew ............................................................................................................................................... 1495
JAPAN - ABE-nomics About Lowering Real Interest Rates ................................................................................................................ 1496
JAPAN - Japanese Bonds Have Lost Their Ability to Price Risk ........................................................................................................ 1497
JAPAN - Japanese Structural Problems a "Canary" for Western Developed Economies ................................................................ 1501
JAPAN - Shinzo Abe Hasn't the Stomach for the Heavy Lifting Needed to Accompany ABE-nomics........................................... 1503
JAPAN - A Credit Squeeze Leads Deflationary Leg Down .................................................................................................................. 1506
JAPAN - Some Japanese Policies Have Clearly Hit the Limit ............................................................................................................. 1507
JAPAN - The ABE (Asset Bubble Evaluator) Index ............................................................................................................................... 1509
JAPAN - Regional Risk-Reward ................................................................................................................................................................ 1510
JAPAN - Now the Frontrunner of Outright Monetization. .................................................................................................................... 1511
JAPAN - Yen Devaluation ........................................................................................................................................................................ 1512
JAPAN - New Bank of Japan Policy - 2% Inflation in 2 Years ............................................................................................................. 1513
JAPAN - Appoints BOJ Governor Firmly Committed to Printing Money ........................................................................................... 1515
JAPAN - Third Straight Quarter of Recession ....................................................................................................................................... 1517
JAPAN - Full Out War on Deflation ......................................................................................................................................................... 1517
JAPAN - First Test of the new found dominance of the Central Banks .......................................................................................... 1519
JAPAN - BOJ Was Next Up. No Surprise .............................................................................................................................................. 1522
JAPAN - Negative Current Account Balance and -3.5% Recession ................................................................................................... 1524
JAPAN - A 50% Over-Valued Yen Has Undermined Self Confidence & Drive ................................................................................... 1527
JAPAN - Proves QE's Low Cost of Capital Does Structural Damage to Economy ........................................................................... 1529
JAPAN - BOJ Being Pressured to "Rip-Up Government Debt"1 ........................................................................................................ 1531
JAPAN - Easy Money Has Hurt Corporate Profitability in the Longer Term ..................................................................................... 1537
JAPAN - The Biggest Debtor with the Biggest Problem! .................................................................................................................... 1540
JAPAN - A Magnitude Larger Problem than Europe ................................................................................................................................. 1544
JAPAN - QE 9 A Complete Failure - Actually "Tightens" versus It's Intended Easing .............................................................................. 1550
JAPAN - Japanese Yen Continuously Under Attack ................................................................................................................................. 1554
JAPAN - Vast foreign US$ Coming Home for "Claim" .............................................................................................................................. 1555
JAPAN - PMI Breakdown ........................................................................................................................................................................... 1557
JAPAN - Exports Continue To Tumble .................................................................................................................................................. 1559
JAPAN - Intervention Fails Again - It's a Whole new Ball Game ........................................................................................................ 1560
JAPAN - First Signs of Massive Debt Monetization After Next Election ................................................................................................... 1563
JAPAN - Japan to the ESM's Rescue ..................................................................................................................................................... 1563

EMERGING MARKETS RUSSIA UNDER FINANCIAL SIEGE ..................................................................................................... 1565


RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1565
BRICS ............................................................................................................................................................................................................ 1571
NEW--BRICS Population, GDP,GDP per Capita ................................................................................................................................. 1571
BRICS Responsible for 43% of Global Growth in 2013 .................................................................................................................... 1572

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BRICS A Short Term Dead Cat Bounce? ........................................................................................................................................ 1572


BRICS Inflation Problems Abound ...................................................................................................................................................... 1574
BRICS - EU Major Contributor to EM Current Account Deficit Growth .............................................................................................. 1575
BRICS - Insufficient Levels Prompt Russian-Chinese Support .......................................................................................................... 1576
BRICS - A Development Bank-Forex Reserve Pool-African Integration ............................................................................................ 1578
BRICS - 40% of World Population and 25% of World GDP .................................................................................................................. 1579
BRICS - $3 to $13B GDP in Ten Years ................................................................................................................................................... 1582
BRICS- A World Wide Distrust of Financial Markets Building ............................................................................................................ 1584
BRAZIL........................................................................................................................................................................................................... 1586
NEW-BRAZIL - Brazils Economy Just Imploded! ..................................................................................................................................... 1586
NEW-BRAZIL - Brazils economy slips into recession .............................................................................................................................. 1588
BRAZIL - Inflation will remain high thanks to a "growth mismatch". .......................................................................................................... 1591
BRAZIL - Sharpest Decline in 2013 Growth Forecast ............................................................................................................................... 1592
RUSSIA - Russia Has Stopped Trying to Protect Ruble Has FX Reserves Depleted. ................................................................................. 1595
NEW - RUSSIA 2015 Russia Consensus GDP Forecast ...................................................................................................................... 1596
NEW - RUSSIA Foreign Exchange Reserves ........................................................................................................................................ 1596
NEW - RUSSIA Exchange and Interest Rate ......................................................................................................................................... 1597
NEW - RUSSIA - Real GDP and Car Sales .............................................................................................................................................. 1597
NEW - RUSSIA Inflation Rate ................................................................................................................................................................. 1598
NEW - RUSSIA GDP Forecast versus USDRUB ................................................................................................................................... 1598
NEW - RUSSIA WTI Crude versus Ruble .............................................................................................................................................. 1599
NEW - RUSSIA Russian Stocks versus Ruble, Russian 10 Y Yield versus 5Y CDS ............................................................................ 1599
NEW - RUSSIA Russian CDS Spreads .................................................................................................................................................. 1600
NEW - RUSSIA Winners and Losers of Oil Price Plunge....................................................................................................................... 1601
NEW - RUSSIA CDS Spreads Has Widened 250bp Since Mid-June .................................................................................................... 1602
NEW - RUSSIA Russian 5Y CDS versus USDRUB versus Russian Stocks ......................................................................................... 1603
NEW - RUSSIA Crude Oil in Rubles....................................................................................................................................................... 1604
NEW - RUSSIA Russian Reserves versus USDRUB ............................................................................................................................ 1604
NEW - RUSSIA Falling Oil Price Weighs on Economy and the Ruble .................................................................................................. 1605
NEW - RUSSIA Russian Ruble versus Reserves .................................................................................................................................. 1606
NEW - RUSSIA Russian Breakeven Oil Prices versus Liquids Production ........................................................................................... 1607
NEW - RUSSIA Russian Refining & Upstream Economics-1 ................................................................................................................ 1608
NEW - RUSSIA Russian Refining & Upstream Economics-2 ................................................................................................................ 1608
NEW - RUSSIA Russian Holdings of US Treasuries ............................................................................................................................. 1609
NEW - RUSSIA Russian 9 Year Gold Buying Spree .............................................................................................................................. 1610
NEW - RUSSIA Net YTD Gold Purchases by the Central Bank of Russia ............................................................................................ 1610
RUSSIAN RESEARCH WE FOLLOWED THIS TRI-SEMESTER ............................................................................................................ 1611
INDIA.............................................................................................................................................................................................................. 1611
NEW-INDIA CAPEX Bottom Out? .......................................................................................................................................................... 1611
INDIA Real GDP and Car Sales ............................................................................................................................................................. 1612
INDIA Inflation ......................................................................................................................................................................................... 1613
INDIA - Inflation .......................................................................................................................................................................................... 1614
INDIA - WPI ................................................................................................................................................................................................ 1615
INDIA - Will be fine as long as it continues to reduce its deficit. ............................................................................................................... 1616
INDIA - Panic in India ................................................................................................................................................................................. 1617
INDIA - India Rupee Collapse Showing Signs of Exhaustion ............................................................................................................. 1619
INDIA - Watch Out For RE-Emergence of Food Price Inflation ........................................................................................................... 1620
SOUTH AFRICA ............................................................................................................................................................................................ 1622
EMERGING MARKETS ....................................................................................................................................................................................... 1624
CHARTS OF NOTE ....................................................................................................................................................................................... 1624
NEW--CHARTS Falling EM Currencies .................................................................................................................................................. 1624
CHARTS Post-China 16 ......................................................................................................................................................................... 1625
CHARTS Economies Now Need More Debt to Generate Growth ......................................................................................................... 1626
CHARTS Emerging Markets Benchmark Underperforms US Index ...................................................................................................... 1626
CHARTS - Reserves versus World ............................................................................................................................................................ 1626
CHARTS - Current Account Balances versus GDP .................................................................................................................................. 1628
CHARTS - Emerging Markets Index versus MSCI World Index ............................................................................................................... 1629
CHARTS - SINGAPORE - Inflation ............................................................................................................................................................ 1630
CHARTS - SINGAPORE - Exports ............................................................................................................................................................ 1631
CHARTS - SOUTH KOREA ....................................................................................................................................................................... 1632
CHARTS - TURKEY - Spreads .................................................................................................................................................................. 1633
RESEARCH OF NOTE .................................................................................................................................................................................. 1634
EMERGING MARKETS - Forced Changes & Advancements in the Normal "Plundering" Strategy ............................................... 1634
EMERGING MARKETS - Crisis Temporarily Halted .............................................................................................................................. 1635
EMERGING MARKETS - The plight of four Asian countries - China, India, Indonesia and Japan. ................................................. 1636
EMERGING MARKETS - Negative Current Accounts + Weak(ening) International Investment Positioning ........................................... 1641
EMERGING MARKETS - "TAPER" Shock Waves Across Asia ........................................................................................................... 1641
EMERGING MARKETS - Global Bond Yields React Together ............................................................................................................. 1643
EMERGING MARKETS - A Bumpy Ride for Emerging Markets ............................................................................................................... 1645
EMERGING MARKETS - Stunning Withdrawals.................................................................................................................................... 1651
EMERGING MARKETS - Bond Outflows Accelerating ......................................................................................................................... 1652
EMERGING MARKETS - This will make the 1997 Asian Crisis Seem Like an Early Warning .......................................................... 1654
EMERGING MARKETS - Developing Nations Feeling the Pain of Global Deleveraging Acceleration ........................................... 1656
EMERGING MARKETS - The Impact of "TAPER" ................................................................................................................................. 1658
SITUATIONAL ASSESSEMENT ................................................................................................................................................................... 1663
EMERGING MARKETS - What you Need to Know ...................................................................................................................................... 1663

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EMERGING MARKETS - Comparative Ease of Doing Business........................................................................................................... 1665


EMERGING MARKETS - Importance of Employment, Equality and Per Capital Income ................................................................. 1666
ASEAN ........................................................................................................................................................................................................... 1669
NEW--ASEAN: A New Common Market.................................................................................................................................................... 1669
ASIA ............................................................................................................................................................................................................... 1673
ASIA: CHARTS - REVENUE ..................................................................................................................................................................... 1673
ASIA: CHARTS EXPENDITURES .......................................................................................................................................................... 1673
ASIA: CHARTS SPENDING GAPS ........................................................................................................................................................ 1675
ASIA: CHARTS DEBT SERVICE ........................................................................................................................................................... 1675
ASIA: CHARTS - SINGAPORE ................................................................................................................................................................. 1677
ASIA: CHARTS INDONESIA CPI May 2014 .................................................................................................................................... 1678
ASIA: CHARTS INDONESIA CPI Aug 2013 .................................................................................................................................... 1678
ASIA: CHARTS A Short Term Dead Cat Bounce? .......................................................................................................................... 1679
ASIA: CHARTS Inflation Problems Abound ........................................................................................................................................ 1680
ASIA: CHARTS Healthier Public Debt and Borrowing Positions than DM ...................................................................................... 1680
ASIA: CHARTS - AUSTRALIA ................................................................................................................................................................... 1681
ASIA - Regional Risk-Reward .................................................................................................................................................................... 1683
ASIA - Credit Contraction Problems ...................................................................................................................................................... 1684
ASIA - Corporate Debt Levels Reflect Unintended Consequences of Mispricing & Mal-Investment ............................................. 1686
ASIA - Synchronized Markets .................................................................................................................................................................... 1688
ASIA - Caution Advised Regarding Positive South Korea Export Turnaround ......................................................................................... 1690
ASIA - Export Growth Looks Similar to Pre-2008 ................................................................................................................................. 1691
ASIA - Global Slowing Quickly a Worsening Situation Across Asia ................................................................................................. 1695
ASIA - Risks All on the Downside for Asia ........................................................................................................................................... 1696
ASIA - Demographic Headwinds ............................................................................................................................................................ 1699
ASIA - Pronounced Flight to Singapore Safety ......................................................................................................................................... 1700
LATIN AMERICA ........................................................................................................................................................................................... 1702
VENEZUELA Signs of a Crack-up Boom and Dictatorship .............................................................................................................. 1702
VENEZUELA - Shortages & Hyperinflation ............................................................................................................................................ 1702
MIDDLE EAST ............................................................................................................................................................................................... 1704
TURKEY ..................................................................................................................................................................................................... 1704

US ECONOMY ..................................................................................................................................... 1705


THE GLOBAL MACRO OVERLAY ........................................................................................................................................ 1707
MACRO - US Macro Data .................................................................................................................................................................................... 1707
CHARTS OF NOTE ....................................................................................................................................................................................... 1707
NEW-MACRO Commodity Indexs Nosedive Points to Clear Global Slowdown ................................................................................... 1707
NEW-MACRO Goldman Sachs Global Leading Indicator Has Plummeted ........................................................................................... 1708
NEW-MACRO Goldmans GLI Momentum versus Global Industrial Production Goes Into Contraction ............................................... 1708
NEW-MACRO 2015 World GDP Growth versus World Stocks .............................................................................................................. 1709
NEW-MACRO World GDP Annual Estimates versus World Stocks ...................................................................................................... 1709
NEW-MACRO World Economies Cutting Rates to Avoid Economic Contraction .................................................................................. 1710
NEW-MACRO World Economies Cutting Rates to Avoid Economic Contraction By Country ............................................................ 1710
NEW-MACRO US Macro in Q1 2015 versus Prior First Quarters Says Something is Wrong ........................................................... 1711
NEW-MACRO US Q4 GDP versus S&P 500 Suggests a Major Divergence Must Be Corrected ......................................................... 1711
MACRO Divergence between Income/Job Growth and Fed Balance Sheet & Financial Markets ........................................................ 1712
MACRO US Economic Surprises Rising While EMU Declines .............................................................................................................. 1712
MACRO US Macro Surprise Index ......................................................................................................................................................... 1712
MACRO Growing Unallocated Global Currency Reserves? ................................................................................................................ 1713
MACRO World Trade Volumes ............................................................................................................................................................... 1715
MACRO Marginal Utility .......................................................................................................................................................................... 1715
MACRO Global Manufacturing PMI ........................................................................................................................................................ 1716
MACRO Credit Markets Diverging .......................................................................................................................................................... 1716
MACRO US Macro Complacency ........................................................................................................................................................... 1717
MACRO Macro Implied Vols ................................................................................................................................................................... 1717
MACRO Markets Stretched .................................................................................................................................................................... 1718
RESEARCH OF NOTE ........................................................................................................................................................................................ 1719
NEW-MACRO Recovery? Central Banks Are Easing Policy For 50% of The World's Population............................................................ 1719
MACRO A World Recession? ..................................................................................................................................................................... 1721
MACRO - US the Safehaven in a Best of a Bad Lot Choice ...................................................................................................................... 1722
MACRO The Ambivalent Superpower ..................................................................................................................................................... 1724
MACRO Things Worse than Slow Growth ................................................................................................................................................. 1726
MACRO - US & Global Growth Will Slow Dramatically on a Per Capita Basis ............................................................................................ 1729
MACRO - Serious Structural US Problems Impeding Global Competitiveness ........................................................................................... 1731
MACRO - Output Gap .................................................................................................................................................................................... 1738

US INVESTMENT CYCLE ...................................................................................................................................................... 1747


CHARTS OF NOTE ............................................................................................................................................................................................. 1747
NEW-CHART Current Economic Cycle Is Getting Old In The Tooth ...................................................................................................... 1747
NEW-CHART US Recession Cycle Suggests Cycle May Be Close To Ending ......................................................................................... 1748
CHART US Recession Cycle Suggests Cycle May Be Close To Ending ................................................................................................... 1748
CHART $77T in Household Net Worth Growth Keeps an Illusion Going ................................................................................................... 1749
CHART - Economy in Decline from Consuming More than it Produces ....................................................................................................... 1750

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GORD'S BIG PICTURE ECONOMIC CYCLE ..................................................................................................................................................... 1750


ECONOMIC INDICATORS .................................................................................................................................................................................. 1752
MONTHLY INDICATORS OF NOTE ............................................................................................................................................................. 1752
RESEARCH - The US Economy Continues to Tank under Obama.......................................................................................................... 1752
REFERENCE CHARTS ............................................................................................................................................................................. 1754
THE CURRENT BUSINESS CYCLE - SITUATIONAL ANALYSIS ..................................................................................................................... 1759
BUSINESS CYCLE - JOBS > CONFIDENCE > CONSUMPTION > GROWTH CYCLE.................................................................................... 1759
BUSINESS CYCLE - JOBS ................................................................................................................................................................................. 1761
NEW-SOME HIGHLIGHTS............................................................................................................................................................................ 1761
CHARTS & TABLES OF NOTE ..................................................................................................................................................................... 1764
NEW-CHARTS Big January Jump In Number of People Who Went from Not in the Labor Force to Employed ................................ 1764
NEW-CHARTS Non-Farm Payrolls Monthly and Yearly Change ....................................................................................................... 1764
NEW-CHARTS Civilian Unemployment Rate ......................................................................................................................................... 1764
NEW-CHARTS JOLTS-Total Job Openings ........................................................................................................................................... 1765
NEW-CHARTS New Jobless Claims w/ 4 Week Moving Average......................................................................................................... 1765
NEW-CHARTS Non-Farm Payrolls ........................................................................................................................................................ 1766
CHARTS US Monthly Job Growth .......................................................................................................................................................... 1767
CHARTS Labor Market Improving with Troublesome Signs .................................................................................................................. 1767
CHARTS Non-Farm Payrolls & Unemployment Rate ............................................................................................................................ 1768
CHARTS - Corporate Profits versus Wages .............................................................................................................................................. 1768
CHARTS - Standard of Living Decline and Bear Market in Real Terms Reflect Labor Participation ....................................................... 1768
CHARTS - Underemployment Gap ............................................................................................................................................................ 1770
CHARTS - Participation Rate..................................................................................................................................................................... 1771
CHARTS - Part Time Employment ............................................................................................................................................................ 1771
NEW-CHARTS - U3 & U6 .......................................................................................................................................................................... 1772
NEW-CHARTS - Employment Situation Summary ................................................................................................................................... 1773
RESEARCH OF NOTE .................................................................................................................................................................................. 1778
NEW-RESEARCH - Gallup CEO: "America's 5.6% Unemployment Is One Big Lie"................................................................................ 1778
NEW-RESEARCH - This Is Why Hewlett-Packard Is Firing 58,000 ......................................................................................................... 1779
NEW-RESEARCH - American Express to cut more than 4,000 jobs........................................................................................................ 1780
RESEARCH - US Employment Trend Remains Chronic .......................................................................................................................... 1781
RESEARCH - Labor Force Participation Rates ......................................................................................................................................... 1784
RESEARCH - Bridging Jobs to Confidence & Sentiment.......................................................................................................................... 1787
RESEARCH - Participation Rate at 1979 Carter Levels ........................................................................................................................... 1790
SITUATIONAL SUMMARY & ANALYSIS ..................................................................................................................................................... 1791
BUSINESS CYCLE - CONSUMER & BUSINESS SENTIMENT ......................................................................................................................... 1797
A GRAPHIC HIGHLIGHT .............................................................................................................................................................................. 1797
CHARTS & TABLES ...................................................................................................................................................................................... 1798
NEW-CHARTS UMich Consumer Sentiment Tumbles Most In 16 Months ........................................................................................... 1798
NEW-CHARTS Consumer Comfort Plunges Most In 10 Months ........................................................................................................... 1799
CHARTS Only 16% Think Future Employment Opportunities Will Be Better ........................................................................................ 1800
CHARTS Inequality Eventually Leads to Economic Adjustments Often Precipitously ....................................................................... 1800
CHARTS - NFIB Small Business Sentiment .............................................................................................................................................. 1801
CHARTS - Orange Book ............................................................................................................................................................................ 1801
RESEARCH OF NOTE .................................................................................................................................................................................. 1802
RESEARCH Small Business Confidence is a Major Problem in America ............................................................................................. 1802
RESEARCH Americas Crisis of Trust .................................................................................................................................................... 1803
NEW-SENTIMENT - Consumer, Investor & Trader ............................................................................................................................................. 1805
NEW-Consumer Confidence - Conference Board ........................................................................................................................................ 1805
NEW-Consumer Sentiment - Michigan ......................................................................................................................................................... 1810
NEW-Consumer Comfort - Bloomberg .......................................................................................................................................................... 1810
NEW-American Association of Independent Investors ................................................................................................................................. 1811
NEW-Investors Intelligence ........................................................................................................................................................................... 1811
NEW-National Association of Active Investment Managers (NAAIM) .......................................................................................................... 1812
NEW-Small Business Optimism .................................................................................................................................................................... 1814
NEW-Percentage Stocks above 50 & 200 DMA ........................................................................................................................................... 1816
NEW-Margin Levels ....................................................................................................................................................................................... 1817
NEW-Real Margin Debt as % of GDP ........................................................................................................................................................... 1823
NEW-Margin Debt versus S&P 500............................................................................................................................................................... 1823
NEW-Mutual Fund Cash Levels v S&P 500 .................................................................................................................................................. 1824
NEW-OSCILLATORS & BREADTH: Indicators of Importance .......................................................................................................................... 1826
NEW-NYSE Overbought / Oversold .............................................................................................................................................................. 1826
NEW-OEX Open Interest (Puts/Calls) ........................................................................................................................................................... 1827
NEW-TRIN ..................................................................................................................................................................................................... 1828
NEW-McClellan Oscillator ............................................................................................................................................................................. 1829
CHARTS OF NOTE ............................................................................................................................................................................................. 1830
NEW-CHARTS Asset Allocation Global Equities .................................................................................................................................... 1830
NEW-CHARTS Asset Allocation Global Bonds ....................................................................................................................................... 1830
NEW-CHARTS Active versus Passive Funds Allocation ........................................................................................................................... 1831
NEW-CHARTS Investors Intelligence Survey of % Bears ......................................................................................................................... 1831
NEW-CHARTS Sentiment at Post 2008 Crisis Highs ................................................................................................................................ 1833
NEW-CHARTS CNBC Viewership Steadily Falling .................................................................................................................................... 1834
NEW-CHARTS Investor Allocation Trends for Stocks, Bonds and Cash .................................................................................................. 1835

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NEW-CHARTS Uptick in Feds Financial Stress Index Composite ........................................................................................................... 1836


CHARTS Fear Barometer Diverges with VIX, CDS IG Index ................................................................................................................. 1837
CHARTS Extreme Complacency Seen Near End of Cycles .................................................................................................................. 1837
CHARTS Complacency Seen In PE/VIX ................................................................................................................................................. 1838
CHARTS Post Crisis Sentiment Profile Shows a Clear Ending Pattern ................................................................................................. 1838
CHARTS Smart Money Flows ................................................................................................................................................................ 1840
CHARTS Fed Assets versus Bullish Sentiment ..................................................................................................................................... 1840
CHARTS Macro Support Has Technically Broken Down ....................................................................................................................... 1841
CHARTS US Surprise Index Setting Up for Downturn ........................................................................................................................... 1841
CHARTS The Public No Longer Trusts the Market Feel it is Manipulated and Ineffectively Regulated ......................................... 1842
RESEARCH OF NOTE ........................................................................................................................................................................................ 1843
NEW-SENTIMENT: "Everything Is Awesome" American Consumers Are The Happiest In 11 Years ......................................................... 1843
NEW-SENTIMENT: For CNBC, 2014 Was The Worst Year. Ever. .............................................................................................................. 1844
NEW-SENTIMENT: An Astounding Number Of Americans Aren't Investing A Cent.................................................................................... 1845
SENTIMENT: US Households to Withdraw $430 Billion From Stocks In 2014 ............................................................................................ 1850
SENTIMENT: Elliott Wave's View from the Top ............................................................................................................................................ 1853
SITUATIONAL SUMMARY & ANALYSIS .................................................................................................................................................. 1857
BUSINESS CYCLE CONSUMPTION ............................................................................................................................................................... 1861
RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1861
LATEST ..................................................................................................................................................................................................... 1861
CHARTS & TABLES OF NOTE ..................................................................................................................................................................... 1865
NEW-CHARTS Retail Sales Have 2 Mo Change Drop Dating Back to 2009 ........................................................................................ 1865
NEW-CHARTS Retails Sales Mo-o-Mo Drops ....................................................................................................................................... 1865
NEW-CHARTS Estimated Change in Monthly Sales for Retail & Food Services by Kind .................................................................... 1866
NEW-CHARTS What Americans Spent Their "Gas Savings" On .......................................................................................................... 1866
NEW-CHARTS Retail Sales-Previous Month Comparisons ................................................................................................................... 1868
NEW-CHARTS No Offset to Plunging Gas Sales in Ex-Auto, Ex Gas .................................................................................................. 1869
NEW-CHARTS Deflated Retail (ex Auto) Christmas and Aftermath ...................................................................................................... 1869
NEW-CHARTS Retail Sales Control Group Y-o-Y and Sequential Change .......................................................................................... 1870
NEW-CHARTS Total Household Debt Added Since the Great Financial Crisis .................................................................................... 1870
NEW-CHARTS Total Household Debt Added in Q4 2014 ..................................................................................................................... 1871
NEW-CHARTS Real Personal Consumption ......................................................................................................................................... 1871
CHARTS Discretionary Retail Sales ....................................................................................................................................................... 1872
CHARTS False Signal of Consumer Re-Leveraging .............................................................................................................................. 1873
CHARTS Sub-Prime Lending Drives Spending ..................................................................................................................................... 1874
CHARTS Retail Sales ............................................................................................................................................................................. 1874
CHARTS Retail Sales - Details ............................................................................................................................................................... 1876
CHARTS Consumer Credit Growth Since Cycle Peak ........................................................................................................................... 1877
CHARTS Real Income is The Key Driver of Consumption Spending .................................................................................................... 1877
CHARTS Consumer Credit Drove Household Debt in Q2 Mortgage Debt Lagged ............................................................................ 1878
CHARTS Discretionary Spending Showing Signs of Cracking .............................................................................................................. 1878
CHARTS - Real Disposable Personal Income .......................................................................................................................................... 1879
CHARTS - Real Consumption Expenditure ............................................................................................................................................... 1881
CHARTS - Consumer Credit Deleveraging ............................................................................................................................................... 1882
CHARTS - Core Retail Growth .................................................................................................................................................................. 1883
RESEARCH OF NOTE .................................................................................................................................................................................. 1884
NEW-RESEARCH - Headwinds for US Consumers & Home Buyers ....................................................................................................... 1884
NEW-RESEARCH - Golden Era of the 1950s/60s Was an Anomaly, Not the Default Setting ................................................................. 1885
RESEARCH - Golden Era of the 1950s/60s Was an Anomaly, Not the Default Setting .......................................................................... 1886
RESEARCH - 95% of Consumer Credit Lending Going towards Student & Car Loans ........................................................................... 1888
RESEARCH - Thanksgiving Retail Sales Results ..................................................................................................................................... 1890
RESEARCH - Gallup Survey Shows -10% Reduction in Christmas Buying Plans ................................................................................... 1893
RESEARCH - The Wal-Mart Measure or How the US Consumer Is the Global Engine .......................................................................... 1894
RESEARCH - A Sequential Decline in Wages .......................................................................................................................................... 1895
RESEARCH - Final Sales Signals Pending Potential Recession on the Horizon ..................................................................................... 1896
RESEARCH - Consumers Using Savings to Maintain Life Style .............................................................................................................. 1896
RESEARCH - The Destruction of America's Middle Class ....................................................................................................................... 1899
RESEARCH - Dramatic Slowing in Restaurant Business ......................................................................................................................... 1899
RESEARCH - Signs of Serious Troubles .................................................................................................................................................. 1900
RESEARCH - Falling Real Disposable Income means Falling Consumption ........................................................................................... 1903
SITUATIONAL SUMMARY & ANALYSIS ..................................................................................................................................................... 1905
BUSINESS CYCLE - GROWTH .......................................................................................................................................................................... 1910
RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1910
LATEST ..................................................................................................................................................................................................... 1911
CHARTS & TABLES OF NOTE ..................................................................................................................................................................... 1914
xNEW-CHARTS Ratio of Coincident-to-Lagging Conference Board Indices ........................................................................................ 1914
NEW-CHARTS GDP Q4 2014 Revised Components Table .................................................................................................................. 1915
NEW-CHARTS Quarterly Change in % Contributions to GDP .............................................................................................................. 1915
NEW-CHARTS Three Reasons CAPEX is Faltering .............................................................................................................................. 1915
NEW-CHARTS ISM Rally Has Petered Out & Expected Inflation Has Fallen ....................................................................................... 1916
NEW-CHARTS Philly Fed Rolling Over .................................................................................................................................................. 1917
NEW-CHARTS US Profits & Sales Have Stalled ................................................................................................................................... 1917
NEW-CHARTS Real GDP versus CAPEX ............................................................................................................................................. 1918
NEW-CHARTS Change In Inventories Inflated from Lack of Demand ............................................................................................... 1919
NEW-CHARTS US GDP Revision for Q4-2014 ..................................................................................................................................... 1919

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NEW-CHARTS Quarterly GDP by Component Breakdown ................................................................................................................... 1920


CHARTS Long Term US GDP Growth Estimates FOMC versus CBO ............................................................................................... 1921
CHARTS US Real Domestic Product Running Out of Runway .......................................................................................................... 1921
CHARTS Steadily Falling Real US Growth Estimates ........................................................................................................................... 1923
CHARTS US Power Consumption Tells the Real Story of US Growth & De-Industrialization .............................................................. 1924
CHARTS US Real Trade Gap (Ex-Petroleum) ....................................................................................................................................... 1924
CHARTS Consecutive Quarters of Contracting Growth Looming .......................................................................................................... 1925
CHARTS Bloombergs Consensus GDP Forecasts 2011-2014.......................................................................................................... 1926
CHARTS GDP Growth During Current Recovery Lags Past Expectations ........................................................................................... 1926
CHARTS Trends of Output, Hours and Productivity .............................................................................................................................. 1927
CHARTS Weak US Capacity Utilization ................................................................................................................................................. 1928
CHARTS A US Recession Likely IF Liquidity is not increased and TAPER Sustained ......................................................................... 1928
CHARTS Barrons Sees 4% Growth The Ultimate Contrarian Indicator ............................................................................................. 1929
CHARTS Firms Revising Lower Q1 Growth on Weakening Retail Sales .............................................................................................. 1930
CHARTS Negative Economic Surprises Began in November ............................................................................................................... 1930
CHARTS What Americans Experience Daily and its Isnt Growth ......................................................................................................... 1931
CHARTS - Manufacturing .......................................................................................................................................................................... 1932
CHARTS - Exports ..................................................................................................................................................................................... 1932
CHARTS - Durable Goods ......................................................................................................................................................................... 1933
CHARTS - NFIB Small Business CAPEX .................................................................................................................................................. 1933
CHARTS - US Manufacturing Conditions Deteriorating ............................................................................................................................ 1934
RESEARCH OF NOTE .................................................................................................................................................................................. 1935
NEW-RESEARCH - BEA Revises 4th Quarter 2014 GDP Growth Downward to 2.18% ......................................................................... 1935
NEW-RESEARCH - The U.S. Economy is Dead ...................................................................................................................................... 1936
NEW-RESEARCH - Q4 GDP Revised Down To 2.2% From 5.0%: Full Breakdown ............................................................................... 1939
RESEARCH - US Q1 GDP ........................................................................................................................................................................ 1941
RESEARCH - US GDP Growth Forecasts ................................................................................................................................................ 1946
RESEARCH - Economic Recoveries Don't Look Like This! ...................................................................................................................... 1946
RESEARCH - 2nd Worst Decade in Over 220 Years (And Getting Worse) ............................................................................................. 1947
RESEARCH - US Economy is being fundamentally transformed ............................................................................................................. 1949
RESEARCH - Shrinking CAPEX, Expanding Buybacks and Dividends ................................................................................................... 1952
REFERENCE - Prior Posts ............................................................................................................................................................................ 1956
RESEARCH - US Economic Recovery Has Peaked ................................................................................................................................. 1956
SITUATIONAL SUMMARY & ANALYSIS ..................................................................................................................................................... 1961
ECONOMIC CYCLE, INVESTMENT CYCLE, SECTOR ROTATION ................................................................................................................. 1965

US PUBLIC POLICY STATE OF THE UNION DIRECTION & PRIORITES .......................................................................... 1972
RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1973
NEW-LATEST ............................................................................................................................................................................................ 1973
BEGINNINGS OF SOCIAL UNREST & THE MILITARIZATION OF POLICE .......................................................................................... 1973
CORPORATE INVERSIONS ..................................................................................................................................................................... 1974
FERGUSON ............................................................................................................................................................................................... 1974
MILITARIZATION OF POLICE .................................................................................................................................................................. 1975
POLLS ........................................................................................................................................................................................................ 1976
INCARCERATION ..................................................................................................................................................................................... 1976
FLAWED TAX POLICY .............................................................................................................................................................................. 1977
MINIMUM WAGE ....................................................................................................................................................................................... 1977
SOCIAL CANCERS ................................................................................................................................................................................... 1977
CORRUPTION & MALFEASANTS ............................................................................................................................................................ 1977
INEQUALITY .............................................................................................................................................................................................. 1977
CREEPING SOCIALISM ............................................................................................................................................................................ 1977
POLICIAL PARALYSIS .............................................................................................................................................................................. 1978
STATE OF THE UNION ............................................................................................................................................................................. 1978
NSA-SECURITY-SURVEILLANCE COMPLEX......................................................................................................................................... 1978
OBAMACARE ............................................................................................................................................................................................ 1979
GENERAL PUBLIC POLICY...................................................................................................................................................................... 1981
STATE OF THE UNION - Direction & Priorities ............................................................................................................................................ 1982
NEW-STATE OF THE UNION Remarks by the President in State of the Union Address January 20th, 2015 .................................. 1982
NEW-STATE OF THE UNION Free College Wasn't Just a Give Away It Was A Trial Balloon .......................................................... 1992
CHARTS & TABLES OF NOTE ..................................................................................................................................................................... 1995
NEW-CHARTS The Cost of Healthcare By Country Spending Per Person........................................................................................ 1995
NEW-CHARTS The Bankrupt US Healthcare System......................................................................................................................... 1995
NEW-CHARTS Rise in Number of Homeless Children .......................................................................................................................... 1996
NEW-CHARTS One-Third of All Homeless Live in These 10 Cities ...................................................................................................... 1997
NEW-CHARTS Trends in American Public Schooling Since 1970 ........................................................................................................ 1998
NEW-CHARTS Size of US Army Since 1946 ......................................................................................................................................... 1998
CHARTS Lack of Trust in Government to Handle International & Domestic Problems ......................................................................... 1999
CHARTS Changing Presidential Stance ................................................................................................................................................ 2000
CHARTS Public Support to Withdraw from Union .................................................................................................................................. 2000
CHARTS - US Incarceration Rate Out of Control ...................................................................................................................................... 2001
RESEARCH OF NOTE .................................................................................................................................................................................. 2002
NEW-POLICY - A 'Shadow" State of the Union ........................................................................................................................................ 2002
NEW-POLICY - Banks Remove the "Heart" of Dodd-Frank ...................................................................................................................... 2005
NEW-POLICY - Wall Street Moves to Put Taxpayers on the Hook for Derivatives Trades ...................................................................... 2009
NEW-POLICY - The Death Cross of American Business ......................................................................................................................... 2012

20

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POLICY - The Death Cross of American Business ................................................................................................................................... 2012


POLICY - The State of the Union I have a Dream! .............................................................................................................................. 2015
POLICY - A self-destructive path toward oblivion...................................................................................................................................... 2019
POLICY - Indictment of US Public, Fiscal & Monetary Policy ................................................................................................................... 2024
POLICY - The Crisis of Trust Continues to Worsen .................................................................................................................................. 2037
POLICY - The Stunning Truth about Inequality In America....................................................................................................................... 2038
POLICY - Pointing US towards Government Dependence ....................................................................................................................... 2039
POLICY - Yet another Game of Deception ................................................................................................................................................ 2043
POLICY - Obamacare A Flawed Public Policy Implementation ................................................................................................................ 2046
POLICY - Financial Repression and Manipulated Illusions ....................................................................................................................... 2049
Manipulating Bad Financial Data ........................................................................................................................................................... 2049
Manipulating Bad Nuclear Facts ............................................................................................................................................................ 2050
Manipulating Oil Spill Info ....................................................................................................................................................................... 2051
Manipulating Data on Other Environmental Issues ............................................................................................................................... 2051
Manipulating Food Safety Data .............................................................................................................................................................. 2052
Manipulating Health Safety Data ........................................................................................................................................................... 2052
Manipulating Metrics for War ................................................................................................................................................................. 2052
The Core Problem .................................................................................................................................................................................. 2052
POLICY - US Economic Decline is Obvious to Anyone Caring to Look ................................................................................................... 2053
POLICY - Policy Uncertainty and Confidence in Monetary Policy Direction is exposed........................................................................... 2056
POLICY - "What is good for GM is good for America" is no longer correct .............................................................................................. 2058
POLICY - Where is the Logic In US Public Policy ..................................................................................................................................... 2059
POLICY - What is the Real Driving Force Behind the New Immigration Law? ......................................................................................... 2062
POLICY - Crony Capitalism and How America Lost its Way! ................................................................................................................... 2065
SITUATIONAL SUMMARY & ANALYSIS ..................................................................................................................................................... 2069

MONETARY POLICY TAPER IGNITES GLOBAL DOLLAR STRENGTH ........................................................................... 2074


RESEARCH WE FOLLOWED ............................................................................................................................................................................. 2074
NEW-LATEST ................................................................................................................................................................................................ 2074
TAPER IMPLEMENTATION & 2ND HALF LIQUDITY SQUEEZE ................................................................................................................. 2075
THE BERNANKE YELLEN/FISHER TRANSITION ................................................................................................................................... 2077
FED POST DECEMBER TAPER ............................................................................................................................................................... 2079
FED PRE-DECEMBER TAPER ................................................................................................................................................................. 2080
TAPER ........................................................................................................................................................................................................... 2083
CHARTS & TABLES OF NOTE ........................................................................................................................................................................... 2086
NEW-CHARTS: Fed is Allowing Adjusted Monetary Base to Fall ................................................................................................................ 2086
NEW-CHARTS: Federal Reserve Monetary Base Since 1918 ..................................................................................................................... 2087
NEW-CHARTS: US Nominal GDP & Credit Market Debt Owed Since 1952 ............................................................................................... 2087
NEW-CHARTS: Fed Balance Sheet & Policy Rate Target ........................................................................................................................... 2088
NEW-CHARTS: Cash Balances versus Total Reserve Balances................................................................................................................. 2088
NEW-CHARTS: Fed Balance Sheet and QE Versions ................................................................................................................................. 2089
NEW-CHARTS: Major US Financial Institutional Leverage Ratios ............................................................................................................... 2090
NEW-CHARTS: Fed Balance Sheet Composition ........................................................................................................................................ 2091
NEW-CHARTS: Cash Bank Holdings............................................................................................................................................................ 2092
CHARTS: Debt Needed to Create $1 GDP ................................................................................................................................................... 2093
CHARTS: Markets May be Ahead of Slowing Liquidity Flow Rates ............................................................................................................. 2093
CHARTS: Primary Dealer Repo Fails............................................................................................................................................................ 2094
CHARTS: Repo Volumes .............................................................................................................................................................................. 2094
CHARTS: Repo volumes Agency + MBS ................................................................................................................................................... 2095
CHARTS: Repo volumes Agency + MBS ................................................................................................................................................... 2095
CHARTS: Feds Reverse Repo Agreements ................................................................................................................................................ 2096
CHARTS: Why Does the Fed Need Such a Large Options Trading Contract with ALL Exchanges? .......................................................... 2097
CHARTS: 10 Year Yield Suggests End to Yellen Honeymoon ..................................................................................................................... 2098
CHARTS: Capitalism Doesnt Work Without Savings for Investment Where is the Savings? ................................................................. 2098
CHARTS: Net National Savings Rate............................................................................................................................................................ 2099
CHARTS: Mispricing of Risk Reaching Extremes ......................................................................................................................................... 2099
CHARTS: Unless you were a Banker, ZIRP Has Accomplished Zilch! ........................................................................................................ 2100
CHARTS: Ratio of Capital v Consumer Goods Production .......................................................................................................................... 2101
CHARTS: Feds Targeted Credit Growth Opportunities................................................................................................................................ 2102
CHARTS: 90 Day Delinquent Loans by Type Student Loans a Growing Problem .................................................................................... 2102
CHARTS: A Third of US GDP is Now Going to Repay Interest & Principle on Loans ................................................................................. 2103
CHARTS: M2 Money Velocity ....................................................................................................................................................................... 2105
CHARTS: Net Foreign Purchases of US Treasuries ..................................................................................................................................... 2105
CHARTS: US Increase in Money Printing versus GDP ................................................................................................................................ 2106
CHARTS: US Consumers Failed Attempt at Deleveraging .......................................................................................................................... 2107
CHARTS: Traditional Bank Liabilities v GDP ................................................................................................................................................ 2108
NEW- RATES: Is There a Zero Bound for US Rates? .................................................................................................................................. 2109
RATES: Historical Policy Rates ..................................................................................................................................................................... 2110
RATES: Debt ................................................................................................................................................................................................. 2111
RATES: Stages of Fed Forward Guidance ................................................................................................................................................... 2111
RATES: Real Interest Rates .......................................................................................................................................................................... 2112
RATES: Eight Rate Issues for the Fed Up or Down................................................................................................................................... 2113
NEW-INFLATION: Market-Based Inflation Expectations on the Rebound ................................................................................................... 2114
NEW-INFLATION: US Inflation Education-Medical-Food-Housing versus CPI ......................................................................................... 2114
INFLATION: Price Inflation through Decline in Purchasing Power of the Dollar .......................................................................................... 2116

21

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INFLATION: Official Inflation Picture Remains Subdued .............................................................................................................................. 2116


INFLATION: Cost of Eating ........................................................................................................................................................................... 2117
INFLATION: The Cost of Breakfast ............................................................................................................................................................... 2118
th
INFLATION: July 4 Cost of Beef Burger ...................................................................................................................................................... 2119
INFLATION: Bloombergs July 4th Barbecue Index ....................................................................................................................................... 2119
INFLATION: Butter on a Roll ......................................................................................................................................................................... 2120
INFLATION: Back to School Shocker............................................................................................................................................................ 2121
INFLATION: Where Inflation Isnt (Yet) - Energy .......................................................................................................................................... 2122
INFLATION: Most Commonly Used Items are rising faster than CPI ........................................................................................................... 2123
INFLATION: Back to School Shocker............................................................................................................................................................ 2123
RESEARCH OF NOTE ........................................................................................................................................................................................ 2124
NEW-RESEARCH Global Currency Wars & Deflationary Pressures ........................................................................................................ 2124
NEW-RESEARCH Debt is a promise of something of value in the future ................................................................................................. 2129
NEW-RESEARCH Is NIRP Coming To America? ..................................................................................................................................... 2137
NEW-RESEARCH Deflation is a Problem for the Fed With Shrinking Growth Rates ............................................................................... 2140
SITUATIONAL SUMMARY & ANALYSIS ............................................................................................................................................................ 2147
REPO FAILS .................................................................................................................................................................................................. 2148
REVERSE REPO Feds Stealth Program to Protect Markets .................................................................................................................... 2149

FISCAL POLICY A SHRINKING BUDGET DEFICIT IS NOT ALL GOOD NEWS ................................................................. 2151
RESEARCH WE FOLLOWED ............................................................................................................................................................................. 2151
A SHRINKING BUDGET DEFICIT IS NOT ALL GOOD NEWS ................................................................................................................... 2151
20 U.S. companies that paid 0% in taxes ............................................................................................................................................................ 2151
FISCAL MATTERS ........................................................................................................................................................................................ 2153
CHARTS & TABLES OF NOTE ........................................................................................................................................................................... 2155
NEW-CHARTS US Federal Government Debt to GDP ............................................................................................................................. 2155
NEW-CHARTS Mandatory versus Discretionary Spending ....................................................................................................................... 2155
NEW-CHARTS Drivers of US Debt ............................................................................................................................................................ 2156
NEW-CHARTS State & Local Tax Revenues ............................................................................................................................................ 2157
NEW-CHARTS Total Government Expenditures versus Real GDP .......................................................................................................... 2157
NEW-CHARTS How Banks Use Dividend Arbitrage to Reduce Client Tax ............................................................................................ 2158
NEW-CHARTS US Debt About to Pass $18T and 102% of GDP ............................................................................................................. 2158
NEW-CHARTS 7 Corporate CEOs Paid More Than Corporation Paid Tax .............................................................................................. 2159
NEW-CHARTS
Americas 100 highest-paid CEOs, 29 received more in pay than company federal income taxes ............................ 2160
CHARTS Employed Population of America Tax Exposure ..................................................................................................................... 2163
CHARTS Interest Costs to Dwarf Virtually Every Federal Expense .......................................................................................................... 2163
CHARTS Looming Increases in Baby-Boomer Driven Deficits .................................................................................................................. 2163
CHARTS Federal GAAP Based Deficit Growth & Federal Obligations Growth ......................................................................................... 2164
CHARTS US Has the Highest Nominal Corporate Tax Rate in the Industrialized World ....................................................................... 2165
CHARTS US Non-Financial Debt-to-GDP Since 1952 .............................................................................................................................. 2165
CHARTS - US Government Budget Surplus / Deficit .................................................................................................................................... 2166
CHARTS - Government Receipts & Outlay Growth Improves Significantly .................................................................................................. 2166
CHARTS - Federal Budget Surplus / Deficit .................................................................................................................................................. 2166
CHARTS - Real Federal Government Purchases ......................................................................................................................................... 2167
CHARTS - US Trade Balance Improvement ................................................................................................................................................. 2167
CHARTS - Growth & Jobs ............................................................................................................................................................................. 2168
CHARTS - Taxes & Spending ....................................................................................................................................................................... 2172
CHARTS - Politics & Policy ........................................................................................................................................................................... 2175
CHARTS - The Stakes ................................................................................................................................................................................... 2176
CHARTS - Official Fiscal Deficit & Debt ........................................................................................................................................................ 2178
CHARTS - Payroll Tax Holiday ...................................................................................................................................................................... 2179
CHARTS - Tax Rate Comparisons ................................................................................................................................................................ 2180
CHARTS - Risk Perceptions .......................................................................................................................................................................... 2181
CHARTS - 2013 Quarterly Impact ................................................................................................................................................................. 2182
CHARTS - Budget Deficit .............................................................................................................................................................................. 2183
CHARTS - Sovereign Debt ............................................................................................................................................................................ 2185
CHARTS - State & Local Government Drag ................................................................................................................................................. 2186
CHARTS - Government Dependence ........................................................................................................................................................... 2189
CHARTS - Coming Demographic Shock ....................................................................................................................................................... 2189
CHARTS - Fiscal Cliff Outcome .................................................................................................................................................................... 2193
BUDGET - What You Need to Know ................................................................................................................................................................... 2195
BUDGET - Political Budget Cowardice and Capitulation .............................................................................................................................. 2196
BUDGET - Political Budget Cowardice and Capitulation - 2 ......................................................................................................................... 2198
BUDGET - The Ultimate in Political Can-Kicking! ......................................................................................................................................... 2200
BUDGET - The Next Step in the Collapse Of The Dollar .............................................................................................................................. 2203
BUDGET - As Represented and Spun for the Public .................................................................................................................................... 2206
BUDGET - Implications .................................................................................................................................................................................. 2207
BUDGET - A Budget That Institutionalizes Big Government ........................................................................................................................ 2210
BUDGET - The Secrets in The Budget ......................................................................................................................................................... 2214
RESEARCH OF NOTE ........................................................................................................................................................................................ 2217
NEW-RESEARCH Private Pension Fund Levels Fall Behind .................................................................................................................... 2217
NEW-RESEARCH - State & Local Government Crisis ................................................................................................................................. 2221
NEW-RESEARCH - CROMNIBUS - The Real Reason Why It Needed to be Passed ................................................................................. 2227

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NEW-RESEARCH - $89.5 trillion in liabilities ................................................................................................................................................ 2229


NEW-RESEARCH - The Federal Government is "cooking the books"! ........................................................................................................ 2233
NEW-RESEARCH Professor Laurence Kotlikoff on the $210T Fiscal Gap ............................................................................................ 2237
NEW-RESEARCH NIA 2015 U.S. Debt Crisis Report ............................................................................................................................... 2240
RESEARCH - Budget Deficit Shrinking ......................................................................................................................................................... 2249
RESEARCH - Avoiding Taxes ....................................................................................................................................................................... 2251
RESEARCH - A Confluence Of Risky Economic Events .............................................................................................................................. 2252
RESEARCH - Everyone Hates Sequestration, But Few Can Agree On What to Cut .................................................................................. 2253
RESEARCH - $70T Off-Balance Sheet Federal Liabilities ........................................................................................................................... 2255
BUDGET SELLOUT ............................................................................................................................................................................................. 2258
BUDGET AGREEMENT ................................................................................................................................................................................ 2261
GOVERNMENT SHUTDOWN ....................................................................................................................................................................... 2262
SITUATIONAL SUMMARY & ANALYSIS ............................................................................................................................................................ 2263

KEY DRIVERS MUST HAVE CATALYSTS OF CHANGE ................................................................................................... 2265


EMPLOYMENT .................................................................................................................................................................................................... 2269
RESEARCH WE FOLLOWED ....................................................................................................................................................................... 2270
LATEST ..................................................................................................................................................................................................... 2270
CHARTS & TABLES ...................................................................................................................................................................................... 2273
NEW-CHARTS Industries That Have Been Hiring ................................................................................................................................. 2273
NEW-CHARTS Top 5 Industry Cuts ....................................................................................................................................................... 2273
NEW-CHARTS Employees in the US by Industry .................................................................................................................................. 2273
NEW-CHARTS Workers Aged 55 and Over ........................................................................................................................................... 2274
NEW-CHARTS Percentage of Over 65 in Labor Force.......................................................................................................................... 2275
NEW-CHARTS Non Participation Has Stabilized? ................................................................................................................................. 2275
NEW-CHARTS Share of Population Retired .......................................................................................................................................... 2275
NEW-CHARTS Goods Producing Workers versus Government Payroll ............................................................................................. 2276
NEW-CHARTS Not in the Labor Force................................................................................................................................................... 2276
NEW-CHARTS Labor Force Participation versus Not in the Labor Force ............................................................................................. 2277
CHARTS Small Business Not the Focus of A Consolidating Banking Industry ..................................................................................... 2279
CHARTS Those Leaving Work Force Likely Not to Return .................................................................................................................... 2279
CHARTS Workers Not In the Labor Force Soars ................................................................................................................................... 2280
CHARTS The Trend of a Breadwinner Economy ................................................................................................................................ 2280
CHARTS Trend of a Goods Producing Economy .................................................................................................................................. 2281
CHARTS Trend of a Part Time Working Economy .............................................................................................................................. 2281
CHARTS Jobs in HES = Health, Education and Social Services .......................................................................................................... 2282
CHARTS NFP Jobs Less HES ............................................................................................................................................................... 2282
CHARTS 1,446,000 Fewer People Working Full Time Aug 14 the Aug 08.......................................................................................... 2283
CHARTS Employment is Part Time in Food Services and Drinking Places .......................................................................................... 2283
CHARTS QE Has A Diminishing Effect on US Job Creation ................................................................................................................. 2284
CHARTS Labor Participation Rate ......................................................................................................................................................... 2284
CHARTS US Industrial Production versus Manufacturing Jobs............................................................................................................. 2285
CHARTS Total Compensation Growth Lingering at 2.9 Percent ........................................................................................................... 2285
CHARTS The Startling Long Term Unemployed Statistics .................................................................................................................... 2286
CHARTS Finding Work That Pays Enough to Support a Family Is Nearly Impossible ......................................................................... 2287
CHARTS Labor Force Participation by Age ........................................................................................................................................... 2288
CHARTS - America Becoming a Country of Part Time Workers .............................................................................................................. 2289
CHARTS - Wages & Salary Accruals / GDP ............................................................................................................................................. 2290
CHARTS US Employment/Population Ratio Total in Labor Force ......................................................................................................... 2290
CHARTS US Industrial Production v Manufacturing Jobs...................................................................................................................... 2290
CHARTS - Part-Time Employment ............................................................................................................................................................ 2291
CHARTS - Nonfarm Payrolls Y-O-Y DECLINE ......................................................................................................................................... 2291
CHARTS - Hiring Stalled at 200K Per Month (Approximates ONLY the New People Entering Workforce)............................................ 2292
CHARTS - The Under-Employment Gap ................................................................................................................................................... 2292
CHARTS Staycations A Sign of the FEAR of Job Loss & Competition for Jobs ................................................................................... 2293
RESEARCH OF NOTE .................................................................................................................................................................................. 2294
EMPLOYMENT - Job = Just Over Broke................................................................................................................................................... 2294
EMPLOYMENT - Working Age Americans without a Job Has Risen By 27 Million Since 2000 .............................................................. 2297
EMPLOYMENT - At the Core of the US Chronic Unemployment is a Lack of Private Investment.......................................................... 2299
EMPLOYMENT - With and Without Obama's Recovery Plan ................................................................................................................... 2301
EMPLOYMENT - Millennials Devastated As American Dream Becomes Nightmare for Most ................................................................ 2302
EMPLOYMENT - 30 Mind-blowing Statistics about Americans Under The Age Of 30............................................................................. 2304
EMPLOYMENT - Going Nowhere Even With All Jobs Becoming Temporary Jobs and the Participation Rate Plummeting .................. 2307
EMPLOYMENT - Low-Wage Jobs Bias Continues to Hamper U.S. Recovery......................................................................................... 2308
EMPLOYMENT - A REAL Family Wage versus Part Time & HES ........................................................................................................... 2309
EMPLOYMENT - It is as much About the Quality, as the Quantity of Jobs .............................................................................................. 2316
REFERENCE - Prior Posts ............................................................................................................................................................................ 2319
1- CAPITAL SPENDING ............................................................................................................................................................................ 2319
2- SMALL BUSINESS OPTIMISM ............................................................................................................................................................. 2322
3- DEMOGRAPHIC SHIFT ........................................................................................................................................................................ 2326
REAL DISPOSABLE INCOME ............................................................................................................................................................................ 2337
RESEARCH WE FOLLOWED ....................................................................................................................................................................... 2337
LATEST ..................................................................................................................................................................................................... 2337
STUDENT LOANS ..................................................................................................................................................................................... 2337
CHARTS & TABLES ...................................................................................................................................................................................... 2340

23

April 2015 Edition


Copyright 2015 Gordon T. Long
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All Rights Reserved

NEW-CHARTS Real Median Household Income in the United States .................................................................................................. 2340
NEW-CHARTS Food Stamps Number of Participants ........................................................................................................................ 2340
NEW-CHARTS Food Stamps Number of Participants per Employed ................................................................................................ 2341
NEW-CHARTS Food Stamps Cost Per Participant per Month ........................................................................................................... 2341
NEW-CHARTS Food Stamps Annual Program Cost .......................................................................................................................... 2342
NEW-CHARTS Education, Medical, Food, Housing Costs versus CPI ................................................................................................. 2342
NEW-CHARTS Rising Sub-Prime .......................................................................................................................................................... 2343
NEW-CHARTS Early Delinquencies on US Car Loans Has Been Rising ............................................................................................. 2344
NEW-CHARTS Student Loan Default Rates By Graduating Year ......................................................................................................... 2345
NEW-CHARTS Student Loan Graduating Debt Levels Class 2009 ................................................................................................... 2345
NEW-CHARTS Student Loan Borrowing Trends ................................................................................................................................... 2347
NEW-CHARTS Increasing Government Entitlement Dependency ........................................................................................................ 2347
CHARTS Increasing Government Entitlement Dependency .................................................................................................................. 2348
CHARTS US Household Balance Sheet ................................................................................................................................................ 2348
CHARTS Middle Class Not Sharing In Per Capita GDP ........................................................................................................................ 2349
CHARTS Real Personal Consumption Expenditures ............................................................................................................................. 2350
CHARTS Inflation Adjusted Net Worth for Typical Family Falls 36% in 10 Years ................................................................................. 2351
CHARTS Even Wal-Mart Discounting Cant Keep Up With Government Inflation ................................................................................ 2351
CHARTS Food Stamps Now Part of the American Way of Life ............................................................................................................. 2352
CHARTS Inflation Adjusted Hourly Earnings Remain Weak .................................................................................................................. 2353
CHARTS the Countrys Central Economic Challenge according to EPI ................................................................................................ 2354
CHARTS The New Sub-Prime Boom Auto Loans ............................................................................................................................... 2354
CHARTS Real Median Income Falls as Real Rates Turn Negative....................................................................................................... 2355
CHARTS Disposable Personal Income Per Capita ................................................................................................................................ 2355
CHARTS Real Disposable Income is Now Contracting ......................................................................................................................... 2356
CHARTS This is a Structural .................................................................................................................................................................. 2356
CHARTS Growing Temp Wages Impacting Real Disposable Income in America .............................................................................. 2357
CHARTS Real Disposable Income per Capita ....................................................................................................................................... 2358
CHARTS - Household Incomes a Sign of a Collapsing Middle Class ....................................................................................................... 2358
CHARTS - Food Stamps Now 14% of US Grocery Store Sales ............................................................................................................... 2359
RESEARCH OF NOTE .................................................................................................................................................................................. 2360
NEW-RESEARCH Fed's Household Credit Report Confirms It Is A Student And Car Loan "Recovery".............................................. 2360
RESEARCH How Can a 70% Consumption Have a Recovery When Real DI/Capital Falls ................................................................. 2362
RESEARCH - The Facts are clear. The US Standard of Living is Falling ................................................................................................ 2363
RESEARCH - The Facts are clear. The US Standard of Living is falling .................................................................................................. 2364
RESEARCH - Standards of Living and Artificial Expectations .................................................................................................................. 2366
RESEARCH - A Lack of Demand in US Economy .................................................................................................................................... 2368
RESEARCH - Full Time Jobs or Food Stamps & Disability? .................................................................................................................... 2369
REFERENCE - Prior Posts ............................................................................................................................................................................ 2371
STANDARD OF LIVING - Salary Compression ........................................................................................................................................ 2371
DISPOSABLE INCOME - 66M (20%) Below $28.8/Year Subsistence Level ........................................................................................... 2372
FOOD STAMPS - 46,405,204 Individuals, 22,257,647 Households below Poverty Line ......................................................................... 2373
DISPOSABLE INCOME - Bad Even in Nominal Terms ............................................................................................................................ 2375
INFLATION - It's There but the Government Doesn't Account for it. ........................................................................................................ 2375
US RESIDENTIAL REAL ESTATE ...................................................................................................................................................................... 2377
RESEARCH WE FOLLOWED ....................................................................................................................................................................... 2377
LATEST ..................................................................................................................................................................................................... 2377
CHARTS & TABLES ...................................................................................................................................................................................... 2381
NEW-POLICY San Francisco Y/Y Price Increase Indicator ................................................................................................................... 2381
NEW-POLICY Meaningful Housing Recovery On Hold Until Spring...................................................................................................... 2382
NEW-POLICY Housing Starts ................................................................................................................................................................ 2382
NEW-POLICY Existing & New Home Sales ........................................................................................................................................... 2383
NEW-POLICY Home Ownership Rate versus Rental Rate ................................................................................................................... 2383
NEW-POLICY Mortgages Past Due and Foreclosure Starts .............................................................................................................. 2384
NEW-POLICY Mortgage Spreads .......................................................................................................................................................... 2384
NEW-POLICY Lumber Sales .................................................................................................................................................................. 2385
CHARTS Total Real Estate Sales Activity vs. Mortgage Rates ............................................................................................................. 2387
CHARTS Home Price Slowdown Underlines Weak Demand ................................................................................................................ 2388
CHARTS National Home Price Medians & Indexes ............................................................................................................................... 2389
CHARTS Multi-Family Shift Underway In America ................................................................................................................................. 2389
CHARTS Housing Completions Show Shift to Multi-Family Units ......................................................................................................... 2389
CHARTS New Home Prices ................................................................................................................................................................... 2390
CHARTS Housing Starts and Completions ............................................................................................................................................ 2391
CHARTS DJ Home Construction Index .................................................................................................................................................. 2391
CHARTS Consumer Attitudes About Home Ownership ......................................................................................................................... 2392
CHARTS Trailing 12 Month Average Median US New Home Sale Prices ............................................................................................ 2393
CHARTS US New Home Demand Still Flagging .................................................................................................................................... 2393
CHARTS Housing Completions Single Family Versus Multifamily ..................................................................................................... 2394
CHARTS Troubling Technicals in Housing Starts .................................................................................................................................. 2394
CHARTS NAHB Sentiment versus Mortgage Applications .................................................................................................................... 2395
CHARTS - Serious Housing & Household Spending Headwinds ............................................................................................................. 2395
CHARTS - Double Top in Construction Index ........................................................................................................................................... 2395
CHARTS - The Real Cost of Buying a Home 6.7 X Average Salary......................................................................................................... 2396
CHARTS - Household Formations ............................................................................................................................................................. 2396
CHARTS Falling Originations ................................................................................................................................................................. 2397
CHARTS Falling Credit Scores ............................................................................................................................................................... 2398

24

April 2015 Edition


Copyright 2015 Gordon T. Long
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Restricted & Confidential


All Rights Reserved

CHARTS Falling Down payments ........................................................................................................................................................... 2398


CHARTS Household Formations & First Time Buyers Collapse............................................................................................................ 2399
CHARTS Classic Technical Analysis Chart Showing Housing in an Uncompleted Corrective Wave ................................................... 2399
CHARTS - Housing Starts ......................................................................................................................................................................... 2400
CHARTS - Composition of Housing Sales ................................................................................................................................................ 2400
CHARTS - New Home Sales ..................................................................................................................................................................... 2401
CHARTS - Existing Residential Supply ..................................................................................................................................................... 2401
CHARTS - Housing Starts ......................................................................................................................................................................... 2402
RESEARCH OF NOTE .................................................................................................................................................................................. 2404
RESEARCH - BlackRock's Fink Warns Housing More "Unsound" Now Than During Last Bubble ......................................................... 2404
RESEARCH - A Single Family Income Insufficient and In Many Cases Two Is Insufficient ..................................................................... 2405
RESEARCH - Insight: A new wave of U.S. mortgage trouble threatens ................................................................................................... 2407
RESEARCH - Household Formation Drives Residential Real Estate ....................................................................................................... 2409
SITUATIONAL SUMMARY & ANALYSIS ..................................................................................................................................................... 2412
OVERVIEW ................................................................................................................................................................................................ 2412
CURRENT HOME OWNERSHIP TRENDS .............................................................................................................................................. 2417
$6.5 TRILLION IN MIDDLE CLASS NET WORTH EVAPORATES .......................................................................................................... 2420
NATIONAL STATISTICS: PRICE .............................................................................................................................................................. 2421
NATIONAL STATISTICS: EXISITNG HOME SALES ............................................................................................................................... 2423
NATIONAL STATISTICS: NEW HOME SALES ........................................................................................................................................ 2425
HOUSING: Even a Never Seen Before 30 Year Mortgage Rate can't Help Housing ............................................................................... 2426
HOUSING: Soaring FHA Delinquencies .................................................................................................................................................... 2427
US COMMERCIAL RETAIL REAL ESTATE ....................................................................................................................................................... 2432
RESEARCH WE FOLLOWED ....................................................................................................................................................................... 2432
LATEST ..................................................................................................................................................................................................... 2432
CHARTS & TABLES OF NOTE ..................................................................................................................................................................... 2436
NEW-CHARTS Vacancy Rate - Indoor Malls versus Strip Malls ........................................................................................................... 2436
CHARTS McDonalds Global Sales Fall 2.5% - 35,000 Franchise Operators In Trouble...................................................................... 2436
CHARTS McDonalds US Same Store Sales Down ~4% Y-o-Y ............................................................................................................ 2437
CHARTS Top US Franchise Defaulters ................................................................................................................................................. 2437
CHARTS Online Retailers Beginning to Dominate Worlds Largest Retailers by Market Cap .............................................................. 2438
CHARTS Shippers Being Squeezed By Online Retailers ...................................................................................................................... 2439
CHARTS Consumer Discretionary Underperforming Consumer Staples Signs of Increasing Squeeze ............................................ 2439
CHARTS Discretionary Retail Sales Trend ............................................................................................................................................ 2439
CHARTS US Retail Sales Ex-Auto & Parts ............................................................................................................................................ 2440
CHARTS Retail Sales Ex-Auto Adjusted for Inflation & Population Growth .......................................................................................... 2442
CHARTS Retail Space Opened Pre-2008 versus Current Rate ............................................................................................................ 2443
CHARTS CMBS Recovered Somewhat but Malls In Trouble ................................................................................................................ 2443
CHARTS Department Store Sales Continue to Erode ........................................................................................................................... 2444
RESEARCH OF NOTE .................................................................................................................................................................................. 2446
COMMERCIAL REAL ESTATE - Capture market share and get the most out of the consumers that are in our stores ......................... 2446
COMMERCIAL REAL ESTATE - McDonalds Has Worst Month In A Decade ......................................................................................... 2447
COMMERCIAL REAL ESTATE - August Retail Sales: Post-Winter Bounce Fading Fast ....................................................................... 2447
COMMERCIAL REAL ESTATE - Weakness reported in restaurants, food service and processors and some retailers ........................ 2452
COMMERCIAL REAL ESTATE - Why Aren't "Confident" Consumers Spending? ................................................................................... 2453
COMMERCIAL REAL ESTATE - Retail Sales Have not Recovered to the 2007 Pre-Recession Level .................................................. 2455
COMMERCIAL REAL ESTATE - Why Retail Sales Are Faltering - 60% of Households Have No Real Income Gains .......................... 2458
COMMERCIAL REAL ESTATE - Wal-Mart Reduces Guidance - Again! ................................................................................................. 2461
COMMERCIAL REAL ESTATE - 35,000 Franchise Operators in Trouble ............................................................................................... 2462
COMMERCIAL REAL ESTATE - Retail Furniture Sales Collapse ............................................................................................................ 2463
COMMERCIAL REAL ESTATE - Lower Prices & Discounting Taking a Toll ........................................................................................... 2464
COMMERCIAL REAL ESTATE - Retail Sales Weaken on Price Discounting.......................................................................................... 2465
COMMERCIAL REAL ESTATE - Wal-Mart Looks to Grow by Embracing Smaller Stores ...................................................................... 2466
COMMERCIAL REAL ESTATE - INEQUALITY leads to Economic Adjustments .................................................................................... 2472
COMMERCIAL REAL ESTATE - A Bad Start to the Q Earnings Season ................................................................................................ 2473
COMMERCIAL REAL ESTATE - Gallup Highlights Consumers are straining against rising prices" ..................................................... 2474
COMMERCIAL REAL ESTATE - Markets Being "Duped" by Misinterpreting Misleading Data ............................................................... 2477
COMMERCIAL REAL ESTATE - Rising Beef Costs ................................................................................................................................. 2478
COMMERCIAL REAL ESTATE - - Rising "Prime" Retail Rents ............................................................................................................... 2482
COMMERCIAL REAL ESTATE - Tablets Are Making Waiters Obsolete ................................................................................................. 2484
COMMERCIAL REAL ESTATE - Weakness in RETAIL Broadens ........................................................................................................... 2486
COMMERCIAL REAL ESTATE - Credit Spending Marginally Increasing - But Now on More Expensive Non-Discretionary ................. 2487
COMMERCIAL REAL ESTATE - Darden Results Disappoint as Olive Garden Sales Keep Declining & Sells Red Lobster .................. 2488
COMMERCIAL REAL ESTATE - Commercial Mortgage-Backed Securities: Hot ... But Very Dangerous .............................................. 2490
COMMERCIAL REAL ESTATE - The Dollar Tree Uptick in its earnings before following economic downturns ..................................... 2497
COMMERCIAL REAL ESTATE - E-Commerce Industry Is About To Explode......................................................................................... 2499
COMMERCIAL REAL ESTATE - Retailers' Profits Miss By Most In 13 Years: "Consumer Is Not Back" ................................................ 2500
COMMERCIAL REAL ESTATE - Imploding Retail Floor Space Requirements ....................................................................................... 2502
COMMERCIAL REAL ESTATE - Family Dollar to cut jobs, shut 370 stores as sales fall ........................................................................ 2505
COMMERCIAL REAL ESTATE - The Death of a 71% Consumption Driven Economy ........................................................................... 2507
COMMERCIAL REAL ESTATE - Getting Worse Fast .............................................................................................................................. 2509
COMMERCIAL REAL ESTATE - Unfolding Implosion .............................................................................................................................. 2511
COMMERCIAL REAL ESTATE - Unfolding Implosion - II ......................................................................................................................... 2512
COMMERCIAL REAL ESTATE - Financial Crisis II Coming..................................................................................................................... 2517
COMMERCIAL REAL ESTATE - Indoor Mall Retail in Trouble ................................................................................................................ 2524
COMMERCIAL REAL ESTATE - Mortgage bonds reflect diverging fortunes of US malls ....................................................................... 2527

25

April 2015 Edition


Copyright 2015 Gordon T. Long
general@GordonTLong.com

Restricted & Confidential


All Rights Reserved

COMMERCIAL REAL ESTATE - Dead Mall Syndrome: The Self-Reinforcing Death Spiral of Retail ..................................................... 2529
COMMERCIAL REAL ESTATE - The First Domino to fall: Retail-CRE (Commercial Real Estate) ......................................................... 2531
COMMERCIAL REAL ESTATE - After Seven Lean Years: US Commercial Real Estate: The Present Position and Future Prospects 2536
COMMERCIAL REAL ESTATE - Retail Sales Cannibalization ................................................................................................................ 2543
COMMERCIAL REAL ESTATE - Tsunami of Retail Store Closings and Downsizings Coming ............................................................... 2544
COMMERCIAL REAL ESTATE - Thanksgiving Retail Sales Results ....................................................................................................... 2547
SITUATIONAL SUMMARY & ANALYSIS ..................................................................................................................................................... 2551
OVERVIEW ................................................................................................................................................................................................ 2551
NATIONAL STATISTICS: COMMERCIAL REAL ESTATE ....................................................................................................................... 2552

SPECIAL FOCUS .................................................................................................................................................................. 2558


NEW-YELLENS HUMPHREY HAWKINS TESTIMONY .................................................................................................................................... 2558
NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................. 2558
The Testimony was More about Whether to Audit the Fed or Not? .......................................................................................................... 2558
AUDIT THE FED .................................................................................................................................................................................................. 2558
CHARTS OF NOTE ....................................................................................................................................................................................... 2560
NEW-HUMPHREY-HAWKINS 5-to-10 Year Forward Inflation .............................................................................................................. 2560
NEW-HUMPHREY-HAWKINS Wealth to Income Ratio ......................................................................................................................... 2560
NEW-HUMPHREY-HAWKINS Consumer Sentiment and Income Expectations .................................................................................. 2561
NEW-HUMPHREY-HAWKINS Private Housing Starts and Permits ...................................................................................................... 2562
NEW-HUMPHREY-HAWKINS New and Existing Home Sales .............................................................................................................. 2562
NEW-HUMPHREY-HAWKINS Mortgage Interest Rates and Refinance Activity .................................................................................. 2563
NEW-HUMPHREY-HAWKINS US Trade and Current Account ............................................................................................................. 2564
NEW-HUMPHREY-HAWKINS US Net Financial Flows ......................................................................................................................... 2564
NEW-HUMPHREY-HAWKINS Change is Real Government Expenditures On Consumption and Investment .................................... 2565
NEW-HUMPHREY-HAWKINS Yield On Nominal US Treasury Securities ............................................................................................ 2565
NEW-HUMPHREY-HAWKINS Bank Holding Company Profitability...................................................................................................... 2566
RESEARCH OF NOTE .................................................................................................................................................................................. 2567
NEW-HUMPHREY-HAWKINS Prepared Testimony - Transcript .......................................................................................................... 2567
NEW-HUMPHREY-HAWKINS Congressional Monetary Report ........................................................................................................... 2570
NEW-HUMPHREY-HAWKINS Yellen Secures More Flexibility for 'Patient' Fed .................................................................................. 2571
NEW-HUMPHREY-HAWKINS Should the Fed be Independent? 100 Points In Examining the Feds Track Record .......................... 2573
NEW-HUMPHREY-HAWKINS Yellen Encourages More Levered Risk Taking in Markets ................................................................... 2582

SPECIAL SUPPLEMENT....................................................................................................................................................... 2589


FLOWS ................................................................................................................................................................................................................. 2589
NEW-LIQUIDITY FLOWS QE Is Debt Cancellation ................................................................................................................................... 2589
NEW-LIQUIDITY FLOWS The Most Profitable Organization In History .................................................................................................... 2590
NEW-LIQUIDITY FLOWS Now On The Endangered Species List: Bond Traders .................................................................................... 2591
NEW-LIQUIDITY FLOWS The ECBs Bazooka Should Send European Stocks Higher ........................................................................... 2594
NEW-LIQUIDITY FLOWS Downdraft Hits Emerging-Market Capital Flows - Bloomberg ......................................................................... 2595
NEW-LIQUIDITY FLOWS 2015 Could Be A Tough Year For Stocks ........................................................................................................ 2596
NEW-LIQUIDITY FLOWS EU Stocks negatively correlated to the ECB's own B/S .................................................................................. 2597
NEW-LIQUIDITY FLOWS Positive Thoughts on 2015............................................................................................................................... 2600
NEW-LIQUIDITY FLOWS Global Liquidity Is Drying Up ............................................................................................................................ 2603
NEW-LIQUIDITY FLOWS This Is What 6 Years Of Central Bank Liquidity Injections Look Like ............................................................. 2605
NEW-LIQUIDITY FLOWS Austrian Money Supply Growth Sending Early Warning ................................................................................. 2606
NEW-LIQUIDITY FLOWS Drying Up Quickly On Multiple Front................................................................................................................ 2611
NEW-LIQUIDITY FLOWS A Dramatic Change in the Liquidity Environment ............................................................................................ 2612
NEW-LIQUIDITY FLOWS China Central Bank Cuts Interest Rates to Support Growth ........................................................................... 2617
LIQUIDITY FLOWS 3 Month Advanced Fed Balance Sheet versus S&P 500 .......................................................................................... 2618
LIQUIDITY FLOWS Lurking Problems in Repo Land Rising Failures .................................................................................................... 2619
LIQUIDITY FLOWS Eating the Seed Corn of Capitalisms Savings. .................................................................................................... 2624
LIQUIDITY FLOWS Reverse Repos The Feds New Magic Trick ........................................................................................................ 2627
LIQUIDITY FLOWS Fed Magic Trick ....................................................................................................................................................... 2629
LIQUIDITY FLOWS - Current QE Experiment is simply not working!! .......................................................................................................... 2631
LIQUIDITY FLOWS Liquidity is Becoming a Serious Issue Due to Japanese Bond Market Problems .................................................... 2635
LIQUIDITY FLOWS - In A Sea Of Money Printing, What Happened To All The Liquidity? .......................................................................... 2638
LIQUIDITY FLOWS - Why "Tapering" Is a Mirage and the Fed May Be Loosening Instead ....................................................................... 2641
LIQUIDITY FLOWS Half a Trillion More Demand than Supply Means Lower US Treasury Yields .......................................................... 2643

26

April 2015 Edition


Copyright 2015 Gordon T. Long
general@GordonTLong.com

Restricted & Confidential


All Rights Reserved

MONTHLY PROCESS OF ABSTRACTION


The Global Macro Tipping Points (GMTP) Service is an integral part of our monthly Process of Abstraction research
methodology. The process starts monthly with the Tipping Points and completes with a final Synthesis. The
sequence is optimized to align with the established Macro Economic Data releases.

Plan

Release
Date

III.

Monday following
3rd Saturday
of the Month

IV.

II.

27

1st Day of the


Month

Day Following
Monthly Labor
Report
(~ 1st Saturday)

Service

Focus

Coverage

Tipping Points

Tipping Points

Abstraction

Global Macro

Abstraction

US Economy

Technical Analysis

Technical Analysis

Market Analytics

Fundamental Analysis

Market Analytics

Risk Analysis

Synthesis

Commentary

Synthesis

Commentary

Thesis

Conclusions

Global Macro Tipping Points


(GMTP)

Market Analytics & Technical


Analysis (MTA)

Monthly Market Commentary

April 2015 Edition


Copyright 2015 Gordon T. Long
general@GordonTLong.com

(MMC)

Restricted & Confidential


All Rights Reserved

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