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Joseph Stuber  

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  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    It is not a matter of what you or I think regarding "stronger antibiotics", the decision has been made already. We are going to deal with the deficit -- at least a little bit and we can't contract spending and stay positive on GDP. We did increase taxes and we did cut spending - about 60% of the fiscal cliff's worst case scenario.

    And again, the Fed's printing has not kept us positive on GDP. $1 trillion dollar deficits have though. That is about 6% of GDP and the law of diminishing returns is in full play here.

    Stagflation is what you are asking for with continued policy. We are at a point now where we have stagflation in US. 3 out of 4 quarters last year were negative on GDP from prior quarter and we finished the year flat in spite of fiscal and monetary stimulus but inflation was still slighly positive.

    Evidence that the policies aren't working as is the shrink in M2 despite the Fed's print.

    Mar 31, 2013. 12:05 AM | Likes Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    This is an excerpt from the co-authored paper written on December 10, 2012. It explicitly defines how troubled banks wil be dealt with and that mean deposit confiscation if needed.

    “Under the strategies currently being developed by the U.S. and the U.K., the resolution authority could intervene at the top of the group. Culpable senior management of the parent and operating businesses would be removed, and losses would be apportioned to shareholders and unsecured creditors. In all likelihood, shareholders would lose all value and unsecured creditors should thus expect that their claims would be written down to reflect any losses that shareholders did not cover. Under both the U.S. and U.K. approaches, legal safeguards ensure that creditors recover no less than they would under insolvency.” (Note: “unsecured creditors” means depositors.)

    “It should be stressed that the application of such a strategy can be achieved only within a legislative framework that provides authorities with key resolution powers. The FSB Key Attributes have established a crucial framework for the implementation of an effective set of resolution powers and practices into national regimes. In the U.S., these powers had already become available under the Dodd-Frank Act. In the U.K., the additional powers needed to enhance the existing resolution framework established under the Banking Act 2009 (the Banking Act) are expected to be fully provided by the European Commission’s proposals for a European Union Recovery and Resolution Directive (RRD) and through the domestic reforms that implement the recommendations."

    Mar 30, 2013. 11:55 PM | 1 Like Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    What do you want from me - an account statement? I started writing for SA in September so that is the only supporting evidence I can provide and I probably won't do that.

    Mar 30, 2013. 11:48 PM | Likes Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    Austerity has always been bad for economic growth - it is not a lesson we are just now learning and you know that.

    The Europeans don't have an effective way to step on the printing press. It is a very flawed configuration. M3 in aggregate euros fell sharply at the start of the recession and hasn't recovered.

    Add to that the fact that without Germany they can't even deal with the banks and you can be assured the euro money supply will shrink further. What is unusual is that the euro will lose value when M3 contracts which is not the normal expectation.

    The reason it will fall - even with austerity - is that the EZ banks are in serious trouble and the "template" for fixing these problems has now been defined and it is to confiscate deposits. That is already causing downward pressue on the euro and will continue as the word gets out that all the EZ banks will be dealt with in the same way as Cyprus.

    For that matter so will UK banks, Canadian banks and US banks. The FDIC and the BOE co-authored a paper that spells this out in explicit detail. It defines how things will work going forward and it establishes that depositors will be hit if necessary and the banks closed. The paper was written December 10, 2012 and what it says is exactly what happened in Cyprus.

    Mar 30, 2013. 10:49 PM | 2 Likes Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    What do you mean don't remember it - I was there. Just kidding.

    I was where you are 6 months ago but the fact is that borrow, spend and print hasn't worked and that is a fact. It has driven corporate profits and that too is a fact as the massive deficit spending has propped GDP and the major corporations are the beneficiary of that policy.

    In other words we are not horribly overpriced based on earnings but a 5% top line fall in sales will contract profits by 25% and unless we are willing to pay a higher multiple - a lot higher - stocks will fall with a top line sales decline.

    You probably know that but assume that the psychology of traders is that the stock market will continue to climb as investors believe the Fed will keep it climbing regardless of earnings. I don't think so.

    Mar 30, 2013. 10:34 PM | 1 Like Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    Of course austerity is bad for the economy - that is a no brainer. It contracts money supply which makes the sovereigns currency worth more. That is basic Econ 101.

    That is what the EZ is doing and yet their currency is falling - not going up - in spite of austerity. In the US we are expanding like crazy and money supply is still falling. Here are the numbers since the first of the year - Fed balance sheet +$273 billion and M2 -$56 billion.

    What that tells me is that the Fed's efforts are no longer working. In fact it was never the Fed to begin with - it was always fiscal stimulus. The Fed's money printing hasn't driven the economy or earnings. It is a complete and total fantasy. Money velocity, excess reserves, shrinking M2 despite the Fed's print are all proof of the Fed's exercise in futility. Please people - look at the numbers.

    The reason the dollar is going higher is due to a lack of money supply growth and no money velocity along with a desire to be in the dollar over the yen or euro.

    The reason the euro is going lower is in part due to the dollars strength but part of the dollars strength is coming from a flight out of the euro in spite of the fact that euro money supply is contracting. It is a fear induced flight.

    You have really got to think this stuff through to get it right. Try hard to look at that expanation without preconceived bias and get back to me and I am not trying to be a smart ass here either - I just want you to think about what I said.

    Mar 30, 2013. 10:20 PM | 3 Likes Like |Link to Comment
  • Sell The SPY On High? [View article]

    The higher the market goes the higher the percentage of bull to bear comments. This article is about 3:1 bull to bear.

    Back in November the numbers were about 1:3 bull to bear. You want to generate some serious hate mail these days just point out the truth about the economy. We know that the retail trader gets most bullish at the top and most bearish at the bottom. Always been that way - I guess it always will.

    Nice article Markos.

    Mar 30, 2013. 09:59 PM | 1 Like Like |Link to Comment
  • Gold's Dull Future [View article]

    You apparently think gold has a bright future? Based on what?

    If it is the Fed's money printing then these numbers might be of interest to you. Since the 1st of the year the Fed balance sheet has increased by $273 billion and M2 has fallen by $56 billion.

    The Fed's printing all right but money supply is shrinking. If you can't explain that then maybe you should reconsider your bullish stance on gold.

    In any event you shouldn't get upset at those whose views you don't agree with. You really believe authors comments can move markets. Even Bernanke doesn't have an impact on markets based on his comments for more than 30 minutes.

    The data counts and the investors sentiment count - not rhetoric.

    Mar 30, 2013. 06:46 PM | 4 Likes Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]
    Just look at an M2 chart dating back to QE3. Money supply measured by M2 has declined in spite of QE3-4 in recent months. Not a good sign for the equity bulls, gold bulls or the inflation alarmists.

    Money supply is falling globally despite efforts to prevent that from happening. A paradigm shift in policy has taken place but not yet obvious to the herd.

    The Japanese and the US are printing and the EU is imposing austerity. That should be devaluing the dollar and the yen against the euro but it isn't happening right now and in fact it is going the other way in pretty dramatic fashion.

    Mar 30, 2013. 02:16 PM | Likes Like |Link to Comment
  • Book Review: 'The Battle Of Bretton Woods' [View article]

    "And what about the call for a new Bretton Woods? Well, Steil gives us lots of things to think about. First of all, how do you convince a lot of nations to come together to discuss global problems…or, at least problems that involve quite a few countries? The answer seems to be that you need some kind of a crisis that forces leaders to try and work something out…to make things function more effectively…or to function at all."

    I have remarked on numerous occassions that we are at a point where I believe the crisis is inevitable and in fact a paradigm shift is occurring at the moment that will produce that crisis.

    Monetary policy has been wholly ineffective. We are in much the same situation today as we were at the time of Bretton Woods - excessive debt - and we have been ineffective at monetizing that debt with policy. The mess we are in is resistant to monetary policy because of the diverse and inadequate configurations today - the most inadequate of all being the euro system. It is a horribly flawed arrangement - a convoluted monetary system and no fiscal system.

    It doesn't help that our efforts to expand money supply have been thwarted by our status as the reserve currency of choice. Japan has the same problem.

    Again, I think Bernanke/Draghi, et al see this and are now resolved to complete the deleverage cycle which will prove calamitous to economies globally. Everyone will be receptive to a new system and that will bring us a new non-sovereign reserve currency - probably the Special Drawing Rights units.

    Speculation I suppose but as Steil notes it won't happen without a crisis and the crisis seems imminent.

    Mar 30, 2013. 12:28 PM | Likes Like |Link to Comment
  • Why Slovenia Could Be The Next Cyprus [View article]

    Actually there is an equity provision - this is from the Economic Times:

    "Big depositors in Cypriot lender Bank of Cyprus will get shares in the bank worth 37.5 per cent of their deposits over 100,000 euros, a source with direct knowledge of the matter said on Friday.

    The rest of their big deposits may never be paid back. About 22.5 per cent of deposits over 100,000 euros will attract no interest. The remaining 40 per cent will continue to attract interest, but will not be repaid unless the bank does well.

    Conditions of the conversion of deposits into equity, a pre-requisite for Cyprus receiving 10 billion euros in bailout funds from the European Union and the International Monetary Fund, were expected to be announced by authorities on Saturday."

    That is pretty much the way the co-authored FDIC/BOE paper explained the process. This is certainly the mode of operation going forward and should produce a mass exodus of the euro as understanding of the agenda becomes more widespread.

    We have a paradigm shift going on at the present and the Cyprus deal was the smallest possible sovereign available to see how the citizenry responded and they responded with flying colors - no riots or injuries that I am aware of.

    Mar 29, 2013. 11:41 PM | 4 Likes Like |Link to Comment
  • A Pending Market Crash Waiting For A Catalyst - The EU Delivers [View article]

    My basis for the call is purely fundamental. It has to do with massive leverage, probabaly off the chart and off the balance sheet derivative risks carried by the banks, a horribly failed monetary policy that has done virtually nothing except monetize the US new debt issuance.

    This has been building for some time now - decades of excess leverage. I was a believer in the Fed's aggressive monetary policy until QE3. That demonstrated sheer desperation.

    The Fed has accomplished absolutley nothing it intended to accomplish and leaves no other choice but to continue the deleveragaing that must now occur. As far as I am concerned this is not a guess - it is math - and an absolute certainty. I won't hedge on that call.

    I still think the catalyst that turns this market down is the Troika decision to confiscate deposits. Ellen Brown's article mentioned a document that takes this out of the supposition realm and explains that the agenda going forward is to confiscate deposits. The document is a must read if you want to know what is going on.

    Mar 29, 2013. 07:46 PM | Likes Like |Link to Comment
  • Why Slovenia Could Be The Next Cyprus [View article]

    Great article - not so great comments. It seems the mistake in your population number is more relevant to readers than your very prescient warning on what is to come.

    Ellen Browns article that brought my attention to this document -Resolving Globally Active, Systemically Important, Financial Institutions - suggests there are more to come. Here is the link and if you don't read it you have only yourself to blame. It is stunning in its specificity on what will be done going forward.

    I recently wrote that Cyprus was a big deal and not an isolated case but rather a paridigm shift in dealing with troubled banks by confiscating deposits. At the time I wrote the article it was suppostion on my part based on reading between the lines. The document referenced here takes if from supposition to fact.

    The article co-authored by the FDIC and the BOE clearly defines how troubled banks will be dealth with in the future and it is exactly the way that they dealt with Cyprus down to the smallest detail including the good/bank bad bank scenario.

    You have identified the next to fall. Thanks for a well written and perceptive article.

    Mar 29, 2013. 07:18 PM | 5 Likes Like |Link to Comment
  • It Can Happen Here: The Confiscation Scheme Planned For U.S. And U.K. Depositors [View article]

    Great advice. One problem - we don't know how leveraged these banks are as much of this is off balance sheet risk.

    Smaller community banks would be good - big banks bad. I would be frightened with deposits in the big banks - JP Morgan, Bank of America, Wells Fargo.

    Mar 29, 2013. 05:44 PM | 3 Likes Like |Link to Comment
  • It Can Happen Here: The Confiscation Scheme Planned For U.S. And U.K. Depositors [View article]

    Please don't interefere with the peoples preconceived views on how things are. It is to uncomfortable for them to acknowledge what is really going on.

    I can't beleive the comments here that are really unrelated to the message - the FDIC and the BOE told us what the future holds if they discover that a bank is insolvent due to off balance sheet risks - we will be asked to pay up and they have construed things in such a way that they will do that.

    They write it down in a document that relates to all banks and then run a trial balloon test on a tiny little country to gauge public response just 3 months after.

    Stunning revelation Ellen - my views based on suppostion are no longer that but based on fact.

    Mar 29, 2013. 05:18 PM | 8 Likes Like |Link to Comment