RPT GMTP 2014 03 Peek

The Taper Tantrum Ten
New Acronym & Vehicles, Same Game
GLOBAL RISK - Risk & Tipping Points
GLOBAL MACRO TIPPING POINTS - MARCH 2014
2/28/2014
1 March 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved
Restricted & Confidential

general@GordonTLong.com
The Taper Tantrum Ten

THE FRAGILE FIVE AND FORGOTTEN TEN
GLOBAL MACRO TIPPING POINTS - MARCH 2013
TIPPING POINTS .................................................................................................................................... 17

GLOBAL MACRO: RISK ASSESSMENT .................................................................................................................................. 17
POSITIONAL FRAMEWORK: "WE ARE HERE!".................................................................................................................................................... 17
MACRO MONITORING INSTITUTIONS ................................................................................................................................................................. 24
WEF (WORLD ECONOMIC FORUM) - JANUARY 2014 ................................................................................................................................. 24
WEF GLOBAL RISKS The World Economic Forum - Inequality has become a global challenge .................................................... 24
WEF GLOBAL RISKS The World Economic Forum - 10 Global Risks of Highest Concern .............................................................. 28
WEF GLOBAL RISKS Global Competitive Rankings Fragile 5 & Forgotten 4........................................................................................ 30
WEF GLOBAL RISKS The 17 Biggest Risks to Our Hyper-Connected World .......................................................................................... 32
WEF GLOBAL RISKS Global Economic, Geo-Political & Societal Risks .................................................................................................. 40
IMF, WORLD ECONOMIC OUTLOOK - JANUARY 2014 ................................................................................................................................ 47
IMF, FINANCIAL STABILITY REPORT OCTOBER 2013.......................................................................................................................... 53
OECD, WORLD ECONOMIC OUTLOOK NOVEMBER 2013 ....................................................................................................................... 56
G-20 SUMMIT FEBRUARY 2014 ......................................................................................................................................................................... 59
RESEARCH WE FOLLOWED ........................................................................................................................................................................... 59
Group of Twenty IMF Note-- Meetings of G-20 Finance Ministers and Central Bank Governors ................................................................ 60
OUR ASSESSEMENT ....................................................................................................................................................................................... 62
SITUATIONAL ANALYSIS ....................................................................................................................................................................................... 65
RESEARCH WE FOLLOWED ........................................................................................................................................................................... 65
RESEARCH OF NOTE ...................................................................................................................................................................................... 66
THE RISK CONTINUUM ............................................................................................................................................................................... 66
GLOBAL TRENDS THE SIX FRAMING MEGATRENDS .......................................................................................................................... 68
GLOBAL THEMES TEN STRUCTURALTHEMES FOR STRATEGY ....................................................................................................... 70
DEBT SATURATION - A COLLAPSING PONZI SCHEME........................................................................................................................... 72
WINTER 2014 EVENT RISK DOMINATES ................................................................................................................................................. 74
RISK SIGNALS .......................................................................................................................................................................... 81

GEO-POLITICAL RISK - Social, Economic & Financial .......................................................................................................................................... 81
THE TAPER TANTRUM TEN (EMERGING MARKETS) .................................................................................................................................. 81
TAPER TANTRUM - Here's What The "Hint" Of A Fed Taper Did To Global Growth Hope .................................................................... 83
TAPER TANTRUM - "TAPER" Shock Waves across Asia .................................................................................................................... 84
TAPER TANTRUM - Why Asian Markets Are Collapsing ..................................................................................................................... 92
TAPER TANTRUM - The Capital-Flow Conundrum .................................................................................................................................. 95
TAPER TANTRUM - The "Original Sin" in EM International Finance Has Been Consummated ...................................................... 98
CHARTS OF NOTE ..................................................................................................................................................................................... 104
CHARTS Its a Different World than Most Westerners Yet Fully Appreciate ....................................................................................... 104
CHARTS Analysts Have Been Slashing Forecasts for Asian Growth .................................................................................................. 104
CHARTS Greater External & Domestic Vulnerabilities ......................................................................................................................... 105
CHARTS Falling Financial Conditions in External Deficit EMEs .......................................................................................................... 105
CHARTS Net International Investment v Negative Current Account Balances.................................................................................... 106
CHARTS Emerging Markets Share of Corporate Debt ........................................................................................................................ 106
CHARTS Asia (Ex-Japan) Corporate Leverage ................................................................................................................................... 107
THE FRAGILE FIVE..................................................................................................................................................................................... 108
Brazil ......................................................................................................................................................................................................... 108
India .......................................................................................................................................................................................................... 111
South Africa .............................................................................................................................................................................................. 113
Indonesia .................................................................................................................................................................................................. 116
Turkey ....................................................................................................................................................................................................... 117
THE FORGOTTEN FIVE ............................................................................................................................................................................. 118
Venezuela................................................................................................................................................................................................. 118
Argentina .................................................................................................................................................................................................. 119
Mexico ...................................................................................................................................................................................................... 120
Malaysia & Philippines ............................................................................................................................................................................. 121
GEO-ECONOMIC RISK Financial ...................................................................................................................................................................... 125
RESERVE CURRENCY & GLOBAL IMBALANCE ......................................................................................................................................... 125
RESERVE CURRENCY - Japan May Eclipse China Again, as Largest Holder of US Treasuries ...................................................... 125
PETRODOLLAR COLLAPSE .......................................................................................................................................................................... 127
UKRAINE ..................................................................................................................................................................................................... 128
UKRAINE - Pulled between EU v Russia ................................................................................................................................................ 128
UKRAINE - Pulled between An Ethnic Eastern and Western Ukraine .................................................................................................... 128
UKRAINE - Pulled between Economic Inequality Factors ....................................................................................................................... 129
UKRAINE - Pulled between the Global Military Balance ......................................................................................................................... 130
March 2014 Edition

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UKRAINE - Pulled by Global Financial Markets ...................................................................................................................................... 131

UKRAINE - A Deep State Analysis .......................................................................................................................................................... 133
PETRODOLLAR Collapsing PetroDollar Foundation ............................................................................................................................... 137
INTERNATIONAL BANKING & SHADOW BANKING .................................................................................................................................... 140
DEBT REITS & CMBS Growth ................................................................................................................................................................. 142
DEBT - GLOBAL DEBT 313% of GDP........................................................................................................................................................ 143
DEBT - 202M GLOBALLY UNEMPLOYED DEBTORS .............................................................................................................................. 145
MIDDLE EAST ................................................................................................................................................................................................. 146
SYRIA........................................................................................................................................................................................................... 147
SYRIA - This has the Earmarks of the Kennedy Ear "Cuban Missile" Crisis .................................................................................. 147
SYRIA - Syrian War You Are Not Being Told About ........................................................................................................................... 148
SYRIA - 25 Quotes .................................................................................................................................................................................. 149
SYRIA - What Coalition? ........................................................................................................................................................................ 152
SYRIA - US Supporting Fully an "Al Qaeda Operation" ..................................................................................................................... 154
SYRIA - Decision Already Taken to Bomb Syria ................................................................................................................................. 155
SYRIA - Market Patterns Before and Immediately After Conflict Begins ................................................................................................ 165
CYBER SPYING .............................................................................................................................................................................................. 167
GLOBL GOVERNANCE RISK Failure of Political Leadership & Public Policies ............................................................................................... 168
LEADERSHIP - 'Value Transformer' Politicians are avoiding politics OR the voters are rejecting .............................................. 168
LEADERSHIP - The Consequences Of A Dysfunctional Political System ....................................................................................... 169
LEADERSHIP - Mapping the Collapse of European Democracy ...................................................................................................... 173
GLOBAL MACRO: RISK LEVELS ........................................................................................................................................... 174

AGGREGATED GLOBAL FINANCIAL RISK INDEX ............................................................................................................................................. 174
BANKING RISK - LIBOR-OIS SPREAD (Updated) ........................................................................................................................................ 175
BANKING RISK - TED SPREAD (Updated).................................................................................................................................................... 175
CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS (Updated) ................................................................................................................ 176
CREDIT RISK - EU CREDIT DEFAULT SWAPS (Updated) .......................................................................................................................... 176
CONSUMER RISK - HOUSING - RATE OF CHANGE (Updated) ................................................................................................................. 177
ECONOMIC RISK - ECRI LEADING INDEX (Updated) ................................................................................................................................. 179
INFLATION RISK - MONEY SUPPLY GROWTH - M3 (Updated) .................................................................................................................. 180
INFLATION RISK - MONEY VELOCITY (Updated) ........................................................................................................................................ 180
MONETARY RISK - BANK LIABILITIES (Updated) ........................................................................................................................................ 181
COST OF MONEY RISK - INTEREST RATES (Updated) ............................................................................................................................ 181
AGGREGATED RISK LEVEL ................................................................................................................................................................................ 183
TIPPING POINT MAPPING: 2014 YEAR BEGINNING UPDATE ......................................................................................................................... 184
TIPPING POINTS: TOP 5 FOCUS - MARCH 2014 ................................................................................................................... 194

I - RISK REVERSAL .............................................................................................................................................................................................. 194
II - JAPAN DEBT DEFLATION .............................................................................................................................................................................. 196
III-BOND BUBBLE ................................................................................................................................................................................................. 198
IV - EU BANKING CRISIS ..................................................................................................................................................................................... 199
V - SOVEREIGN DEBT .......................................................................................................................................................................................... 200
VI - CHINA HARD LANDING ................................................................................................................................................................................. 202
GLOBAL MACRO ................................................................................................................................. 206

GLOBAL MACRO: ECONOMIC OUTLOOK ............................................................................................................................ 208
GLOBAL OUTLOOK Research We Followed ................................................................................................................................................... 208
GLOBAL OUTLOOK - Research of Particular Note ............................................................................................................................................. 211
GLOBAL OUTLOOK - An Extremely Fragile Stability .......................................................................................................................................... 211
GLOBAL OUTLOOK - EM Crisis will make the 1997 Asian Crisis Seem like an Early Warning ......................................................................... 212
GLOBAL OUTLOOK - Global Deleveraging Accelerating and Developing Nations Feeling the Pain ............................................................ 215
GLOBAL OUTLOOK - Problems Erupting Everywhere (Signs of Implosion) ...................................................................................................... 217
GLOBAL OUTLOOK - Credit Fueled Globalization in Retreat ............................................................................................................................. 220
GLOBAL OUTLOOK - Rogoff's Sovereign Debt Default Levels .......................................................................................................................... 223
GLOBAL OUTLOOK - Fiscal Adjustments Required ........................................................................................................................................... 226
GLOBAL OUTLOOK - Imbalances Continue to Increase Along With Financial Fragility .................................................................................... 226
GLOBAL OUTLOOK - A 67 Million Jobs Gap ...................................................................................................................................................... 229
GLOBAL OUTLOOK - Center of Global Manufacturing Confirmed to be Shifting Away from developed Countries .......................................... 232
GLOBAL OUTLOOK - Mercantilist China the Clear Winner Globally, Mercantilist Germany Regionally .......................................................... 233
ECONOMIC CUTS ................................................................................................................................................................................................. 235
IMF To Slash Economic Growth Forecast... Again - Still Full of Hockey sticks ............................................................................................. 235
OECD CUTS ECONOMIC OUTLOOK ............................................................................................................................................................ 240
IMF CUTS ECONOMIC OUTLOOK ................................................................................................................................................................ 243
ECONOMIC WARNINGS....................................................................................................................................................................................... 254
IMF WARNS - May 2013 ................................................................................................................................................................................. 254
March 2014 Edition

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Japanese & Spanish Debt Unsustainable ................................................................................................................................................... 256

Global Recovery Faltering, Reduces Global Growth to Just Above 3% Global Recession Level .............................................................. 258
BIS WARNS - June 2013................................................................................................................................................................................. 260
Monetary Policy At Its Limits ........................................................................................................................................................................ 266
WORLD BANK WARNS - June 2013 ............................................................................................................................................................ 267
Social Unrest Stems from Shrinking Disposable Income. Jobs are the central issue. .............................................................................. 269
GLOBAL MACRO: INDICATORS (CHARTS) .......................................................................................................................... 271

GLOBAL GROWTH ............................................................................................................................................................................................... 271
GLOBAL GROWTH - GDP Forecasts Continue to Be Taken Down .............................................................................................................. 271
GLOBAL GROWTH - Uneconomic Energy Problematic ................................................................................................................................. 271
GLOBAL GROWTH - Clearly Slowing ............................................................................................................................................................. 274
GLOBAL GROWTH - Trend is clearly Down ................................................................................................................................................... 275
GLOBAL GROWTH - Global Growth Cycle .................................................................................................................................................... 276
GLOBAL GROWTH - Global GDP Contribution .............................................................................................................................................. 277
GLOBAL GROWTH - Clear Signs of Degree of Slowing Since January ........................................................................................................ 278
GLOBAL GROWTH - Clearly Slowing and near Contraction without BRICS ................................................................................................. 279
GLOBAL GROWTH - PMI Barely Above Stagnation ...................................................................................................................................... 281
GLOBAL GROWTH - Chinese Slowing moves to CONTRACTION .............................................................................................................. 284
GLOBAL GROWTH - Slowing Global Economies .......................................................................................................................................... 285
GLOBAL GROWTH - Global GDP Growth Trending Down by Region and Cumulatively ............................................................................. 286
GLOBAL GROWTH - Global PMI .................................................................................................................................................................... 286
GLOBAL GROWTH - Global Recession ......................................................................................................................................................... 289
GLOBAL GROWTH - Slowing Global Growth - Air Cargo Shipments ........................................................................................................... 290
GOBAL UNEMPLOYMENT ................................................................................................................................................................................... 291
GLOBAL UNEMPLOYMENT - A Problem ....................................................................................................................................................... 291
GLOBAL UNEMPLOYMENT - The Beginnings of the Welfare Myth Unwind ................................................................................................ 292
GLOBAL UNEMPLOYMENT - The Unsustainable Welfare Myth ................................................................................................................... 294
GLOBAL UNEMPLOYMENT - Global Financial Sector Job Cuts................................................................................................................... 296
GLOBAL UNEMPLOYMENT - Global Unemployment Rising -Now 202 Million ............................................................................................ 298
GLOBAL TRENDS ................................................................................................................................................................................................. 300
GLOBAL TRENDS - Profound Changes in Global Youth As Japan Leads the Way...................................................................................... 300
GLOBAL TRENDS Brands & Commodities Tell the Global Story ............................................................................................................... 303
Cooper - Rio Tinto ........................................................................................................................................................................................ 303
Aluminum - Alcoa, Rio Tinto ........................................................................................................................................................................ 305
Iron Ore and Thermal Coal - Rio Tinto ........................................................................................................................................................ 307
Consumable Brands - P&G.......................................................................................................................................................................... 309
Parcel Volumes - FEDEX ............................................................................................................................................................................. 310
Shipping - Baltic Dry Index........................................................................................................................................................................... 311
GLOBAL SENTIMENT ........................................................................................................................................................................................... 315
GLOBAL SENTIMENT - Global Business Confidence Sliding Rapidly .......................................................................................................... 315
Must be a Buy Signal... .............................................................................................................................................................................. 315
GLOBAL SENTIMENT - Complacent ............................................................................................................................................................. 318
GLOBAL SENTIMENT - Nielsen's Global Consumer Confidence, Concerns & Spending Intentions .......................................................... 319
GLOBAL INFLATION ............................................................................................................................................................................................. 330
GLOBAL INFLATION - Food Prices, Driver of Social Unrest ......................................................................................................................... 330
GLOBAL INFLATION - Food Price Manipulation in Thailand ......................................................................................................................... 332
GLOBAL CREDIT .................................................................................................................................................................................................. 333
CREDIT CYCLE - HY Leading the Way .......................................................................................................................................................... 333
CREDIT CYCLE - Reversal Ahead ................................................................................................................................................................. 336
GLOBAL MACRO: MONETARY POLICY & CENTRAL BANKING .......................................................................................... 339

TROUBLING DEVELOPMENTS ........................................................................................................................................................................... 339
TROUBLING DEVELOPMENTS Venezuela: Shortages & Hyperinflation .................................................................................................. 339
TROUBLING DEVELOPMENTS 2007 Redux: Total public and private debt levels are 30pc higher in the advanced economies ........... 340
TROUBLING DEVELOPMENTS Polish Pension Confiscation: Coming to a Theater near You ................................................................. 343
TROUBLING DEVELOPMENTS Global Tax Overhaul................................................................................................................................ 345
GLOBAL ABE-NOMICS The Road Ahead ......................................................................................................................................................... 346
GLOBAL ABE-NOMICS Monetary Expansion Extremely Difficult to Stop Once Started ............................................................................ 346
GLOBAL ABE-NOMICS Monetary Policy Below the Event Horizon ............................................................................................................ 348
The "OMF" Trial Balloon Raised ...................................................................................................................................................................... 350
OPMF - A Reversing Wealth Effect May Force OPMF & Global Abenomics ................................................................................................. 351
OPMF - Financial Times: Martin Wolf - "The Case For Helicopter Money" .................................................................................................... 352
OPMF - Financial Times: Martin Wolf - "The Case To Reset Basis of Monetary Policy" ............................................................................... 355
OPMF - Financial Times: Gavyn Davies On Why Helicopters Are Dangerous .............................................................................................. 356
OPMF - A Conundrum for the World's Central Bankers ................................................................................................................................. 359
GLOBAL CENTRAL BANKING .............................................................................................................................................................................. 361
RESEARCH WE FOLLOWED Global Banking Risk .................................................................................................................................... 361
RESEARCH OF PARTICULAR INTEREST .................................................................................................................................................... 362
CENTRAL BANKS - Drop Tightening Talk as Easy Money Goes On ............................................................................................................ 362
CENTRAL BANKS - Balance Sheet Growth .................................................................................................................................................. 365
CENTRAL BANKS - Austerity Now Officially Dead Public Policy ................................................................................................................... 366
CENTRAL BANKS - They are the Market ....................................................................................................................................................... 366
CENTRAL BANKS - The longer QE persists, the greater the magnitude of the left-tail event & a Minsky Trap .......................................... 369
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CENTRAL BANKS - We May Have Reached a Risk-Off Leverage Pivot ....................................................................................................... 370
CENTRAL BANKS - The Macro Landscape ................................................................................................................................................ 372
CENTRAL BANKS - A Serious Shortage of Quality Collateral - A $10T US Problem Over 10 Years .......................................................... 373
CENTRAL BANKS - Global Balance Sheet Expansion ................................................................................................................................. 375
CENTRAL BANKS - Where Do these Deflators Come From? ...................................................................................................................... 379
CENTRAL BANKS - First Remove Gold Standard, Now Remove Debt ........................................................................................................ 380
BOE - UK ................................................................................................................................................................................................................ 384
UK - Mark Carney and "Flexible Inflation Targeting" ....................................................................................................................................... 384
FED - US ................................................................................................................................................................................................................ 385
US MONETARY - The Fed is Stuck in a QE Trap .......................................................................................................................................... 385
US MONETARY - 2nd Worst Decade In US Growth in Over 220 Years (And Getting Worse) ..................................................................... 387
US MONETARY - Mathematically, The Fed Can Only Fail ............................................................................................................................ 389
US MONETARY - QE Standing Between Inflated Equity Markets and A Recession..................................................................................... 395
US MONETARY - QE Programs versus S&P 500 Movements ...................................................................................................................... 396
US MONETARY - BAML Warns If The US Economy Does Not Significantly Accelerate Now, It Never Will ................................................ 398
US MONETARY - Debt Increases $1 Trillion in One Year ............................................................................................................................ 400
US MONETARY - Congress Asks Bernanke for Full Risk Analysis On Fed's Soaring Balance Sheet ......................................................... 402
BOJ - JAPAN .......................................................................................................................................................................................................... 407
JAPAN - No Way Out But to Expand the Monetary Base ............................................................................................................................... 407
JAPAN - BOJ to "Own" 100% Of GDP In 5 Years .......................................................................................................................................... 408
JAPAN - Adjusted trade deficit the worst in Bloomberg's 20 year history....................................................................................................... 411
JAPAN - Some Policies Have Clearly Hit the Limit ......................................................................................................................................... 413
JAPAN - Foreshadows Next Global Crisis ...................................................................................................................................................... 414
JAPAN - Japan's Prime Minister Shinzo Abe prepares to print money for the whole world ........................................................................... 419
JAPAN - Shinzo Abes Monetary-Policy Delusions ......................................................................................................................................... 420
JAPAN - BOJ Governor Job Suddenly Available in Historical "Abenomics U-Turn" ...................................................................................... 423
JAPAN - Japanese Economic Policy Goes The Full Ponzi ............................................................................................................................. 424
ECB - EU ................................................................................................................................................................................................................ 426
EU MONETARY - EU Equities Responding to Current Account Differential .................................................................................................. 426
EU MONETARY - Patterns: While Everyone Was Worrying About the US and Washington .... ................................................................... 427
EU MONETARY - ECB Monetary transmission mechanisms in Europe are completely broken ................................................................... 429
EU MONETARY - EU Lending Volumes Collapse .......................................................................................................................................... 431
EU MONETARY - Eurozone Funding Shortfall Rises To Over $4 Trillion ...................................................................................................... 432
EU MONETARY - DRIVER$ ........................................................................................................................................................................... 433
EU MONETARY - Japan Will Effectively Monetize European Debt ............................................................................................................... 434
EU MONETARY - TARGET-2 Imbalances - "The Debt Crisis Is Eating Its Way Ever Further Into Europe's Core" ...................................... 434
EU MONETARY - Draghi Will Soon Be Forced to Start Printing - Again! ....................................................................................................... 436
GEO-ECONOMIC CONCERNS & TENSIONS ......................................................................................................................... 441

EMERGING MARKETS - Unfolding 2014 Crisis ................................................................................................................................................. 441
RESEARCH WE FOLLOWED ......................................................................................................................................................................... 441
EMERGING MARKETS - Crisis Only Temporarily Averted ............................................................................................................................ 444
EMERGING MARKETS - Fragile Five: The new focus of currency wars ....................................................................................................... 444
EMERGING MARKETS - Crisis Redux? ......................................................................................................................................................... 445
EMERGING MARKETS - Losing Their Punch ................................................................................................................................................ 450
EMERGING MARKETS - Risk-On! ................................................................................................................................................................. 452
EMERGING MARKETS - Asia, BRIC, Emerging Markets Crater IBM Earnings ............................................................................................ 453
EMERGING MARKETS - Crisis Temporarily Halted ....................................................................................................................................... 455
EMERGING MARKETS - Increasing Liquidity Problems In Selected Markets .............................................................................................. 456
EMERGING MARKETS - The plight of four Asian countries - China, India, Indonesia and Japan. ............................................................... 462
EMERGING MARKETS - The Impact of "TAPER".......................................................................................................................................... 467
PETRODOLLAR US-Saudi Oil Alliance Strained ............................................................................................................................................... 471
GEO-POLITICAL - The Growing Rift With Saudi Arabia Threatens To Severely Damage The Petrodollar .................................................. 471
GLOBAL BOND SCARE Un-Taper Reverses Fear ............................................................................................................................................ 475
BOND SCARE - Volatility and Instability Increase Risk .................................................................................................................................. 475
BOND SCARE - Inflation Expectations Contributing to Volatility .................................................................................................................... 477
BOND SCARE - The Financial Times Headlines Tell An Interesting Story .................................................................................................... 478
BOND SCARE - A LONG Supply and Demand Problem BUT Heavy SHORT Demand ............................................................................... 479
BOND SCARE - Long Term Support Trendline Achieved .............................................................................................................................. 480
BOND SCARE - Retail Investors Running for the Exit .................................................................................................................................... 481
CHINA LIQUIDITY - Global Tightening Scare ....................................................................................................................................................... 483
CHINA LIQUIDITY - Housing Bubble Restricting PBOC Actions .................................................................................................................... 483
CHINA LIQUIDITY - PBOC Squeezing Banks towards Reducing Speculative Risk ...................................................................................... 487
CHINA LIQUIDITY - Overnight Repo at 25% .................................................................................................................................................. 488
CHINA LIQUIDITY - Red Flags ....................................................................................................................................................................... 489
CHINA LIQUIDITY - Credit Fueled Growth ..................................................................................................................................................... 491
CHINA LIQUIDITY - Shadow Banking System Showing Signs of Implosion.................................................................................................. 496
CHINA LIQUIDITY - PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze....................................... 499
CHINA LIQUIDITY - Potentially De-Stabilizing Cash Crunch ......................................................................................................................... 501
CHINA LIQUIDITY - Chinese Liquidity Pump Unplugged ............................................................................................................................... 502
March 2014 Edition

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CURRENCY WARS BACK ON Rate Wars Reversed With Un-Taper ............................................................................................................... 504
CURRENCY WARS - A Major Shift................................................................................................................................................................. 504
BATTLEFIELD - Combatants & Belligerents............................................................................................................................................... 508
BATTLEFIIELD - The Race to Debase .......................................................................................................................................................... 509
JAPAN - The Destabilizing Agent .................................................................................................................................................................... 512
EUROPE - Euro Exposed ................................................................................................................................................................................ 512
ARGENTINA - Here we Go Again! .................................................................................................................................................................. 514
VENEZUELLA - Bad Situation ......................................................................................................................................................................... 515
BRAZIL - No One Wants to Listen ................................................................................................................................................................... 515
SWITZERLAND - No Choice ........................................................................................................................................................................... 515
SINGAPORE - Hot Money ............................................................................................................................................................................... 516
UK- Pound Joins War .................................................................................................................................................................................... 517
CYBER WARS Growing Threat & the Security-Surveillance Complex .............................................................................................................. 518
SECURITY-SURVEILLANCE COMPLEX - NSA Whistleblower Example: Booz Hamilton ............................................................................ 521
SECURITY SURVEILLANCE COMPLEX - Growing Without Public Control or Supervision! ........................................................................ 523
SYRIA & IRAN Complete Middle East Domination ............................................................................................................................................ 524
SYRIA - This has the Earmarks of the Kennedy Ear "Cuban Missile" Crisis .................................................................................................. 526
SYRIA - Syrian War You Are Not Being Told About ....................................................................................................................................... 527
SYRIA - 25 Quotes .......................................................................................................................................................................................... 528
SYRIA - What Coalition? ................................................................................................................................................................................. 531
SYRIA - US Supporting Fully an "Al Qaeda Operation" .................................................................................................................................. 534
A War 20 Years In the Making ..................................................................................................................................................................... 534
The Last Humanitarian War....................................................................................................................................................................... 534
The Bottom Line ........................................................................................................................................................................................... 535
SYRIA - Decision Already Taken to Bomb Syria ............................................................................................................................................. 536
SYRIA - Market Patterns Before and Immediately After Conflict Begins ........................................................................................................ 545
MIDDLE EAST - Watch Out for a "False Flag" or "Covert" Activity Event ...................................................................................................... 547
MIDDLE EAST - Who Is Threatening Who Here? .......................................................................................................................................... 548
REGIONAL ............................................................................................................................................. 550

EUROSIS - A Terminal Disease .......................................................................................................................................................................... 550
RESEARCH WE FOLLOWED THIS MONTH ................................................................................................................................................. 550
RESEARCH OF PARTICULAR IMPORTANCE ............................................................................................................................................. 551
RESEARCH - EFSF Downgraded to AA+ ....................................................................................................................................................... 551
RESEARCH - EU Stabilization Programs Are Presently Very Fragile ............................................................................................................ 552
RESEARCH - Spreads Widened in Peripherals and Significantly in Portugal and Greece ........................................................................... 555
PROGNOSIS: Why the European Situation Will Get Worse .......................................................................................................................... 557
PROGNOSIS: Increasing Structural Imbalances ............................................................................................................................................ 560
PROGNOSIS: $22T Unaccounted - A Hidden World of Contingent Liabilities, Government Backing & Guarantees. .............................. 562
PROGNOSIS: Monetary Malpractice - ECB's LTRO Not a Solution but ........................................................................................................ 567
PROGNOSIS: Monetary Malpractice - ECB's SMP Effort Futile..................................................................................................................... 571
PROGNOSIS: Monetary Malpractice - ECB Accepts BBB Collateral ............................................................................................................. 573
PROGNOSIS: EU Banking Overbanked, Undercapitalized and Now Insolvent ............................................................................................. 574
PROGNOSIS: Monetary Malpractice - TARGET2 "Contingent Liabilities" .............................................................................................. 576
PROGNOSIS: Bailouts - Unsustainable & Unfundable ................................................................................................................................... 583
MEDICAL CHARTS - Situation Critical .................................................................................................................................................................. 585
CHARTS - EU Area Weakness ....................................................................................................................................................................... 585
CHARTS - EU Area GDP ................................................................................................................................................................................ 586
CHARTS - EU Area PMI .................................................................................................................................................................................. 587
CHARTS - EU Area PMI .................................................................................................................................................................................. 588
CHARTS - EU Real Rates ............................................................................................................................................................................... 589
CHARTS - EU -NON Euro Members GDP RELIANCE ................................................................................................................................... 590
CHARTS - EU GLOBAL GDP GROWTH CONTRIBUTION ........................................................................................................................... 591
CHARTS - EU PMI .......................................................................................................................................................................................... 591
CHARTS - EU CPI ........................................................................................................................................................................................... 593
CHARTS - Regional Risk-Reward ................................................................................................................................................................... 594
CHARTS - Europe's "Core" Problem is France ............................................................................................................................................... 595
CHARTS - Germany's Preoccupation with Inflation is More Than It Would Seem ......................................................................................... 598
CHARTS - Evidence OF Global Slowing Now Indisputable ............................................................................................................................ 599
CHARTS - EU Credit Downgrades, France and UK On Tap ......................................................................................................................... 601
CHARTS - Perceived Reduction in Risk, A Temporary Aberration................................................................................................................. 603
CHARTS - Dangerous Delusional Divergences .......................................................................................................................................... 605
CHARTS - IMF Projections for Euro Area and GIIPS ..................................................................................................................................... 606
CHARTS - Air Cargo Shipments Confirm Slowing Global Growth.................................................................................................................. 607
CHARTS - Eurozone Misery Indices Never Been Higher ............................................................................................................................... 608
CHARTS - Euro Currency................................................................................................................................................................................ 610
ITALY Longest Recession on Record ................................................................................................................................................................. 615
RESEARCH - Italys Budget Failures, Weak Growth Outlook Call Debt Sustainability Into Question ........................................................... 616
CHARTS OF PARTICULAR IMPORTANCE ................................................................................................................................................... 620
CHARTS - ITALY - Forced Rate Cuts ............................................................................................................................................................. 620
March 2014 Edition

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SITUATIONAL ASSESSEMENT ..................................................................................................................................................................... 621

ITALIAN ELECTION - What You Need to Know ............................................................................................................................................. 621
ITALIAN ELECTION - Europe Capitulates On Austerity- Never Had The Stomach For It ............................................................................. 622
ITALIAN ELECTION - Message Given By the People .................................................................................................................................... 624
ITALIAN ELECTION - Bad Debt Continue to Soar ......................................................................................................................................... 628
ITALIAN ELECTION - Italians React Badly to Austerity, Elections Hardly a Surprise!................................................................................... 630
ITALIAN ELECTION - EUROPEAN FEEDBACK - #1 ................................................................................................................................... 631
ITALIAN ELECTION - EUROPEAN FEEDBACK - #2 ................................................................................................................................... 633
ITALIAN ELECTION - Regional Financial Cracks in Sicily ............................................................................................................................ 636
FRANCE - Hollande Losing Political Capital Fast Hapless President ................................................................................................................ 639
RESEARCH - Steady Breakdown Underway .................................................................................................................................................. 640
RESEARCH - France Loses its Coveted and NEEDED AAA Rating ............................................................................................................. 644
CHARTS - FRANCE - GDP ............................................................................................................................................................................. 646
CHARTS - FRANCE - UNEMPLOYMENT ...................................................................................................................................................... 647
CHARTS - FRANCE - BUDGET DEFICIT ...................................................................................................................................................... 648
CHARTS - FRANCE - TAX v GDP .................................................................................................................................................................. 649
CHARTS - FRANCE - BUSINESS CONFIDENCE ......................................................................................................................................... 650
SITUATIONAL ASSESSMENT ....................................................................................................................................................................... 651
FRANCE - What You Need to Know ............................................................................................................................................................... 651
FRANCE - Key Indicators ................................................................................................................................................................................ 652
FRANCE: Sharpest Drop in Private Sector Output in Four Years .................................................................................................................. 655
FRANCE - Quits on Austerity - Never a Doubt This Would Happen............................................................................................................... 658
FRANCE - Socialism is Expensive .................................................................................................................................................................. 659
FRANCE - Has Turned back to Socialism ....................................................................................................................................................... 661
FRANCE - Losing Its Way through Political Illusions and Lies ....................................................................................................................... 662
FRANCE - Uncompetitive ................................................................................................................................................................................ 663
FRANCE - Titan Tire Calls Out French Labor ................................................................................................................................................. 665
FRANCE - France Responds to Titan Tire ...................................................................................................................................................... 667
FRANCE - What Happens In France When Companies Fire People ............................................................................................................. 670
FRANCE - Hollande's Economically Insane campaign Promise .................................................................................................................... 671
GERMANY Merkel Short of Majority but Maintains Power ................................................................................................................................. 672
RESEARCH - German Election - Merkel Begins Hunt for Coalition Partners ................................................................................................ 673
RESEARCH - Europe's Shadow Economy: As Big As Germany ................................................................................................................... 675
CHARTS - GERMANY - Inflation ..................................................................................................................................................................... 678
CHARTS - GERMANY - IFO Investor Confidence .......................................................................................................................................... 678
CHARTS - GERMANY - ZEW Expectations ................................................................................................................................................... 679
GERMANY - Anti Euro AfD Party May Cost Merkel in Critical September Election ....................................................................................... 682
GERMANY - The Euro Crisis Escalation over Cyprus May Politically Cripple Merkel ................................................................................... 683
GERMANY - Call for End of "Coercive Euro Association" .............................................................................................................................. 685
IBERIAN PENINSULA Non-Performing Loans Everywhere .............................................................................................................................. 687
RESEARCH - Presidential Warning Spikes Yields To 8 Months Highs .......................................................................................................... 688
RESEARCH - Clear Signs of Desperation In Spain from a Growing Collateral Contagion ............................................................................ 690
RESEARCH - The Spanish Government's 'Bad Bank' Scam ......................................................................................................................... 691
CHARTS - PORTUGAL - Deficit Problem ....................................................................................................................................................... 693
IBERIA - Credit Downgrades - At Precipice of "Non Investment Grade" ........................................................................................................ 694
IBERIA - Regional Bailout Bailouts a Massive Problem.................................................................................................................................. 695
IBERIA - NPL Going Ballistic ........................................................................................................................................................................... 696
IBERIA - Spanish Funding Problem ................................................................................................................................................................ 698
IBERIA - The Giant Spanish Housing Bubble, Now Beginning to Implode..................................................................................................... 703
IBERIA - Mal-Investment Coming Home to Roost .......................................................................................................................................... 705
IBERIA - Bank Deposits Were Leaving, Now they Are Fleeing ...................................................................................................................... 706
IBERIA - Now a Capital Investment Problem .................................................................................................................................................. 707
IBERIA - Banks on Artificial "Ponzi Bond" Life Support .................................................................................................................................. 708
UK Carney Tales the Helm of BOE with Forward Guidance& Stern Warnings ................................................................................................. 717
RESEARCH - UK workers' wage squeeze is longest since the 1870s ........................................................................................................... 718
CHARTS - UK Population Growth ................................................................................................................................................................ 719
CHARTS - UK - Crushed Disposable Income ................................................................................................................................................. 719
CHARTS - UK - BOE Balance Sheet Growth.................................................................................................................................................. 720
CHARTS - UK - Lending .................................................................................................................................................................................. 720
CHARTS - UK - Unemployment ...................................................................................................................................................................... 721
CHARTS - UK - GDP - Pre and Post Recession Levels ................................................................................................................................. 722
March 2014 Edition

7

CHARTS - UK - GDP ....................................................................................................................................................................................... 722

CHARTS - UK - BOE Rates............................................................................................................................................................................. 723
UK - What you need to Know .......................................................................................................................................................................... 724
UK - Joins Currency War - Down 8% YTD ................................................................................................................................................... 725
UK - Specter of Stagflation Haunts UK ........................................................................................................................................................... 726
UK - Public Policy turns Against Austerity and PM Cameron ......................................................................................................................... 727
UK - Doomsday Debt Machine ........................................................................................................................................................................ 728
UK - QE Extension Coming ............................................................................................................................................................................. 731
UK - Small Business Credit Squeeze Now Acute - Loan Rejections Rising ................................................................................................. 733
UK - Technically in a Depression .................................................................................................................................................................... 734
CYRPUS - Latest EU Banking Crisis ..................................................................................................................................................................... 737
CYRPUS - What you Need To Know .............................................................................................................................................................. 737
CYRPUS - Basic Situational Charts ................................................................................................................................................................ 739
CYPRUS - Crumbling Property Rights ............................................................................................................................................................ 741
CYPRUS - Plan D Supersedes Plan C and B as Time running Out ............................................................................................................... 745
CYPRUS - Forgetting About Contract Law, Private Property Rights and Due Process ................................................................................. 748
CYPRUS - Russian Tax Haven ....................................................................................................................................................................... 749
CYPRUS - Plan B as Bad As Plan A ............................................................................................................................................................... 750
CYPRUS - Breaks Public Trust and Incites the Politics of Germany Dictating Terms ................................................................................... 751
CYPRUS - Does Anyone Care How a Capitalist System (versus a Crony Capitalist System) is Supposed to Work?.................................. 757
CYPRUS - Criminal "Confidence Game" Payouts to Everyone at the Tax Payers Expense ......................................................................... 758
CYPRUS - Cyprus Pushes EU Banking Crisis Back Near the Edge ........................................................................................................... 760
ASIA - SERIOUS CRACKS BELOW THE SURFACE ......................................................................................................................... 761

CHINA - Credit Tightening Panic Averted - Temporarily? ............................................................................................................................... 761
RESEARCH WE FOLLOWED THIS QUARTER ............................................................................................................................................ 761
CHARTS - CHINA - Chinese Credit Market ................................................................................................................................................... 766
CHARTS - CHINA - PMI .................................................................................................................................................................................. 767
CHARTS - CHINA - PMI-2 .............................................................................................................................................................................. 768
CHARTS - CHINA - GDP................................................................................................................................................................................. 769
CHARTS - CHINA - INDUSTRIAL OUTPUT ................................................................................................................................................... 770
CHARTS - CHINA - Urban Fixed Asset Investment ........................................................................................................................................ 771
CHARTS - CHINA - RETAIL SALES ............................................................................................................................................................... 772
RESEARCH - China's Stunning $15 Trillion In New Liquidity ......................................................................................................................... 773
RESEARCH - Dr. Copper Ready to Top and Head Lower ............................................................................................................................. 776
RESEARCH - China's $1 Trillion GDP Lie ...................................................................................................................................................... 777
RESEARCH - What the Deceleration Could Portend ..................................................................................................................................... 779
RESEARCH - Credit Bubble: 240% Of GDP And Soaring ............................................................................................................................. 782
RESEARCH - Forget Taper risk: China is a bigger threat ............................................................................................................................. 785
RESEARCH - Sustainability Requires a Slowdown in Investment ................................................................................................................. 787
RESEARCH - China Likely to Continue Interest Rate Liberalization .............................................................................................................. 789
RESEARCH - China #1 in Broad Array of Key Areas ..................................................................................................................................... 792
RESEARCH - Global Business Confidence Sliding Rapidly ........................................................................................................................... 793
Must be a Buy Signal... .............................................................................................................................................................................. 793
RESEARCH - Investors Worried and Losing Confidence ............................................................................................................................... 796
RESEARCH - China Stampeding into Gold .................................................................................................................................................... 797
RESEARCH - China "Will introduce some measures to arrest the slowdown of growth in the next couple of quarters" .............................. 799
RESEARCH - Slower Growth In the Cards & Endorsed by New Chinese Leadership .................................................................................. 800
RESEARCH - Is a PBOC Controlled Speculation Bust Possible or Will It Get Out of Control ....................................................................... 801
RESEARCH - PBOC Liquidity Squeeze .......................................................................................................................................................... 802
RESEARCH - Chinese Housing Bubble Restricting PBOC Actions ............................................................................................................... 804
RESEARCH - PBOC Squeezing Banks towards Reducing Speculative Risk ................................................................................................ 806
RESEARCH - Chinese Overnight Repo at 25% ............................................................................................................................................. 808
RESEARCH - Red Flags ................................................................................................................................................................................. 809
RESEARCH - Credit Fueled Growth in China ................................................................................................................................................. 811
RESEARCH - PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze ................................................ 816
RESEARCH - A Potentially De-Stabilizing Cash Crunch ................................................................................................................................ 818
SITUATIONAL ANALYSIS Positioning Reference ....................................................................................................................................... 819
CHINA SHADOW BANKING - Shadow Banking System Showing Signs of Implosion.................................................................................. 821
CHINA SHADOW BANKING - Shadow Banking and Credit Growth .............................................................................................................. 824
CHINA SHADOW BANKING - The US Sub-Prime / CDO All Over Again ...................................................................................................... 827
CHINA SHADOW BANKING - Report ............................................................................................................................................................. 831
CHINA SHADOW BANKING - Situation .......................................................................................................................................................... 832
CHINA RESERVES - Distorted Foreign Reserve Levels ................................................................................................................................ 834
CHINA RESERVES - Declining Reserve Accumulation ................................................................................................................................. 836
CHINA RESERVES - Has Caught the Gold Bug big time! ............................................................................................................................. 838
CHINA CURRENCY WARS - Hot Money into China ...................................................................................................................................... 840
CHINA - Withdraws Liquidity ........................................................................................................................................................................... 841
CHINA - Socit General Sees a Likely Soft Landing! .............................................................................................................................. 843
CHINA - True Debt is Orders of Magnitude More than Officially Being Reported .......................................................................................... 851
CHINA - Evidence OF Slowing Now Indisputable ........................................................................................................................................... 854
CHINA - PMI Improvement .............................................................................................................................................................................. 855
March 2014 Edition

8

CHINA - Political Transition & Ongoing Emergence as a Super Power ......................................................................................................... 858
CHINA - An Implicit Social Contract ................................................................................................................................................................ 861
CHINA - Manipulated Statistics due to Upcoming Decade Long Regime Change ........................................................................................ 863
CHINA - Increasing Leverage is China's Way of Monetary Easing ................................................................................................................ 864
CHINA - Possible Interest-Rate Liberalization ................................................................................................................................................ 865
CHINA - Global Impact of China's Slowdown ................................................................................................................................................. 866
CHINA - Shanghai Composite at 2008 Low Levels ........................................................................................................................................ 868
CHINA - Shanghai Composite Warnings Signs .............................................................................................................................................. 869
CHINA - Credit to GDP .................................................................................................................................................................................... 871
CHINA - A Slow Recovery Through 2013 ....................................................................................................................................................... 872
CHINA - Manufacturing PMI in Contraction Territory ...................................................................................................................................... 874
JAPAN: The New Currency War Front .................................................................................................................................................................. 877
RESEARCH - No Way Out But to Expand the Monetary Base ...................................................................................................................... 879
RESEARCH - BOJ to "Own" 100% Of GDP In 5 Years .................................................................................................................................. 880
RESEARCH - Adjusted trade deficit the worst in Bloomberg's 20 year history .............................................................................................. 883
RESEARCH - How Japan's National Debt Grew ............................................................................................................................................ 884
RESEARCH - ABE-nomics About Lowering Real Interest Rates ................................................................................................................... 885
RESEARCH - Japanese Bonds Have Lost Their Ability to Price Risk ............................................................................................................ 886
RESEARCH - Q2 GDP Misses By A Huge Margin ......................................................................................................................................... 889
RESEARCH - Japanese Structural Problems a "Canary" for Western Developed Economies ..................................................................... 890
Bank weakness ............................................................................................................................................................................................ 891
Age pressures .............................................................................................................................................................................................. 892
RESEARCH - Shinzo Abe Hasn't the Stomach for the Heavy Lifting Needed to Accompany ABE-nomics. ................................................. 893
RESEARCH - A Credit Squeeze Leads Deflationary Leg Down .................................................................................................................... 895
RESEARCH - Some Japanese Policies Have Clearly Hit the Limit ................................................................................................................ 896
RESEARCH - The ABE (Asset Bubble Evaluator) Index ................................................................................................................................ 898
CHARTS - JAPAN - GDP, IP and Exports ...................................................................................................................................................... 899
CHARTS - JAPAN - GDP Resurgence ........................................................................................................................................................... 900
CHARTS - JAPAN - BOJ Balance Sheet ........................................................................................................................................................ 902
JAPAN - What You Need to Know .................................................................................................................................................................. 905
JAPAN - Regional Risk-Reward ...................................................................................................................................................................... 907
JAPAN - Now the Frontrunner of Outright Monetization. ................................................................................................................................ 908
JAPAN - Yen Devaluation................................................................................................................................................................................ 909
JAPAN - New Bank of Japan Policy - 2% Inflation in 2 Years ........................................................................................................................ 910
JAPAN - Appoints BOJ Governor Firmly Committed to Printing Money ......................................................................................................... 912
JAPAN - Third Straight Quarter of Recession ................................................................................................................................................. 913
JAPAN - Full Out War on Deflation ................................................................................................................................................................. 913
JAPAN - First Test of the new found dominance of the Central Banks ........................................................................................................ 915
JAPAN - BOJ Was Next Up. No Surprise ....................................................................................................................................................... 917
JAPAN - Negative Current Account Balance and -3.5% Recession .............................................................................................................. 919
JAPAN - A 50% Over-Valued Yen Has Undermined Self Confidence & Drive .............................................................................................. 922
JAPAN - Proves QE's Low Cost of Capital Does Structural Damage to Economy ........................................................................................ 924
JAPAN - BOJ Being Pressured to "Rip-Up Government Debt"1 .................................................................................................................... 926
JAPAN - Easy Money Has Hurt Corporate Profitability in the Longer Term .................................................................................................. 932
JAPAN - The Biggest Debtor with the Biggest Problem!................................................................................................................................. 935
JAPAN - A Magnitude Larger Problem than Europe ....................................................................................................................................... 939
JAPAN - QE 9 A Complete Failure - Actually "Tightens" versus It's Intended Easing.................................................................................... 945
JAPAN - Japanese Yen Continuously Under Attack ...................................................................................................................................... 949
JAPAN - Vast foreign US$ Coming Home for "Claim" .................................................................................................................................... 950
JAPAN - PMI Breakdown................................................................................................................................................................................ 951
JAPAN - Exports Continue To Tumble ............................................................................................................................................................ 953
JAPAN - Intervention Fails Again - It's a Whole new Ball Game .................................................................................................................. 954
JAPAN - First Signs of Massive Debt Monetization After Next Election ......................................................................................................... 957
JAPAN - Japan to the ESM's Rescue ............................................................................................................................................................ 957
EMERGING MARKETS ECHO BOOM AHEAD.......................................................................................................................... 959

EMERGING MARKETS - Forced Changes & Advancements in the Normal "Plundering" Strategy .............................................................. 964
EMERGING MARKETS - Crisis Temporarily Halted ....................................................................................................................................... 965
EMERGING MARKETS - The plight of four Asian countries - China, India, Indonesia and Japan. ............................................................... 966
EMERGING MARKETS - Negative Current Accounts + Weak(ening) International Investment Positioning ................................................ 971
EMERGING MARKETS - "TAPER" Shock Waves Across Asia ..................................................................................................................... 971
EMERGING MARKETS - Global Bond Yields React Together ...................................................................................................................... 973
EMERGING MARKETS - A Bumpy Ride for Emerging Markets .................................................................................................................... 974
EMERGING MARKETS - Stunning Withdrawals ............................................................................................................................................ 980
EMERGING MARKETS - Bond Outflows Accelerating ................................................................................................................................... 981
EMERGING MARKETS - This will make the 1997 Asian Crisis Seem Like an Early Warning ...................................................................... 983
EMERGING MARKETS - Developing Nations Feeling the Pain of Global Deleveraging Acceleration..................................................... 985
EMERGING MARKETS - The Impact of "TAPER".......................................................................................................................................... 987
CHARTS - Reserves versus World ................................................................................................................................................................. 991
March 2014 Edition

9

CHARTS - Current Account Balances versus GDP ........................................................................................................................................ 992

CHARTS - Emerging Markets Index versus MSCI World Index ..................................................................................................................... 993
CHARTS - SINGAPORE - Inflation ................................................................................................................................................................. 994
CHARTS - SINGAPORE - Exports .................................................................................................................................................................. 995
CHARTS - SOUTH KOREA............................................................................................................................................................................. 996
CHARTS - TURKEY - Spreads ....................................................................................................................................................................... 997
EMERGING MARKETS - What you Need to Know ........................................................................................................................................ 998
EMERGING MARKETS - Comparative Ease of Doing Business ................................................................................................................. 1000
EMERGING MARKETS - Importance of Employment, Equality and Per Capital Income ............................................................................ 1001
ASIA ............................................................................................................................................................................................................... 1004
ASIA: CHARTS - SINGAPORE ..................................................................................................................................................................... 1004
ASIA: CHARTS - INDONESIA ....................................................................................................................................................................... 1005
ASIA: CHARTS - AUSTRALIA ...................................................................................................................................................................... 1006
ASIA - Regional Risk-Reward ....................................................................................................................................................................... 1007
ASIA - Credit Contraction Problems .............................................................................................................................................................. 1008
ASIA - Corporate Debt Levels Reflect Unintended Consequences of Mispricing & Mal-Investment ........................................................... 1010
ASIA - Synchronized Markets ........................................................................................................................................................................ 1012
ASIA - Caution Advised Regarding Positive South Korea Export Turnaround ............................................................................................. 1014
ASIA - Export Growth Looks Similar to Pre-2008 ......................................................................................................................................... 1015
ASIA - Global Slowing Quickly a Worsening Situation Across Asia ........................................................................................................... 1019
ASIA - Risks All on the Downside for Asia .................................................................................................................................................... 1020
ASIA - Demographic Headwinds ................................................................................................................................................................... 1023
ASIA - Pronounced Flight to Singapore Safety ............................................................................................................................................. 1024
BRICS ............................................................................................................................................................................................................ 1026
BRICS - EU Major Contributor to EM Current Account Deficit Growth ......................................................................................................... 1026
BRICS - Insufficient Levels Prompt Russian-Chinese Support ..................................................................................................................... 1027
BRICS - A Development Bank-Forex Reserve Pool-African Integration ...................................................................................................... 1029
BRICS - 40% of World Population and 25% of World GDP .......................................................................................................................... 1030
BRICS - $3 to $13B GDP in Ten Years ......................................................................................................................................................... 1033
BRICS- A World Wide Distrust of Financial Markets Building ....................................................................................................................... 1036
BRAZIL........................................................................................................................................................................................................... 1038
BRAZIL - Inflation will remain high thanks to a "growth mismatch". ............................................................................................................. 1038
BRAZIL - Sharpest Decline in 2013 Growth Forecast ................................................................................................................................... 1040
RUSSIA - Central bank will hike rates if inflation and oil prices continue to rise. ......................................................................................... 1043
INDIA - Inflation.............................................................................................................................................................................................. 1044
INDIA - WPI ................................................................................................................................................................................................... 1045
INDIA - Will be fine as long as it continues to reduce its deficit. ................................................................................................................... 1046
INDIA - Panic in India .................................................................................................................................................................................... 1047
INDIA - India Rupee Collapse Showing Signs of Exhaustion ....................................................................................................................... 1049
INDIA - Watch Out For RE-Emergence of Food Price Inflation .................................................................................................................... 1050
SOUTH AFRICA ............................................................................................................................................................................................ 1051
LATIN AMERICA ........................................................................................................................................................................................... 1053
VENEZUELA Signs of a Crack-up Boom and Dictatorship ........................................................................................................................ 1054
VENEZUELA - Shortages & Hyperinflation ................................................................................................................................................... 1054
MIDDLE EAST ............................................................................................................................................................................................... 1056
TURKEY ........................................................................................................................................................................................................ 1056
US ECONOMY ..................................................................................................................................... 1057

THE GLOBAL MACRO OVERLAY ........................................................................................................................................ 1059
MACRO - US Macro Data Divergence .......................................................................................................................................................... 1059
MACRO - US Macro Surprise Index .............................................................................................................................................................. 1061
MACRO - Serious Structural US Problems Impeding Global Competitive ................................................................................................... 1064
MACRO Output Gap ................................................................................................................................................................................... 1066
US INVESTMENT CYCLE ...................................................................................................................................................... 1075

GORD'S BIG PICTURE ECONOMIC CYCLE ..................................................................................................................................................... 1075
ECONOMIC INDICATORS .................................................................................................................................................................................. 1076
MONTHLY INDICATORS OF NOTE ............................................................................................................................................................. 1076
RESEARCH - The US Economy Continues to Tank under Obama.......................................................................................................... 1076
REFERENCE CHARTS ............................................................................................................................................................................. 1078
THE CURRENT BUSINESS CYCLE - SITUATIONAL ANALYSIS ..................................................................................................................... 1083
BUSINESS CYCLE - JOBS > CONFIDENCE > CONSUMPTION > GROWTH CYCLE.................................................................................... 1083
BUSINESS CYCLE - JOBS ................................................................................................................................................................................. 1085
SOME GRAPHIC HIGHLIGHTS .................................................................................................................................................................... 1085
CHARTS & TABLES OF NOTE ..................................................................................................................................................................... 1088
CHARTS - Corporate Profits versus Wages .............................................................................................................................................. 1088
CHARTS - Standard of Living Decline and Bear Market in Real Terms Reflect Labor Participation ....................................................... 1088
CHARTS - Underemployment Gap ............................................................................................................................................................ 1089
CHARTS - Participation Rate..................................................................................................................................................................... 1090
CHARTS - Part Time Employment ............................................................................................................................................................ 1090
CHARTS - U3 & U6.................................................................................................................................................................................... 1091
CHARTS - Employment Situation Summary ............................................................................................................................................. 1092
March 2014 Edition

10

RESEARCH OF NOTE .................................................................................................................................................................................. 1097

RESEARCH - Labor Force Participation Rates ......................................................................................................................................... 1097
RESEARCH - Bridging Jobs to Confidence & Sentiment.......................................................................................................................... 1100
RESEARCH - Participation Rate at 1979 Carter Levels ........................................................................................................................... 1103
SITUATIONAL SUMMARY & ANALYSIS ..................................................................................................................................................... 1104
BUSINESS CYCLE - CONSUMER & BUSINESS SENTIMENT ......................................................................................................................... 1110
A GRAPHIC HIGHLIGHT .............................................................................................................................................................................. 1110
CHARTS & TABLES ...................................................................................................................................................................................... 1111
CHARTS - NFIB Small Business Sentiment .............................................................................................................................................. 1111
CHARTS - Orange Book ............................................................................................................................................................................ 1112
RESEARCH OF NOTE .................................................................................................................................................................................. 1112
RESEARCH - Consumer Confidence & Investor Sentiment ..................................................................................................................... 1112
RESEARCH - Financial Stress Index Sends Market Clue ........................................................................................................................ 1117
RESEARCH - Consumer Confidence and the Mortgage Spike "Peak Signal" ......................................................................................... 1118
RESEARCH - Contrarian Breadth Rule ..................................................................................................................................................... 1119
SENTIMENT: Consumer, Investor & Trader ................................................................................................................................................ 1122
Consumer Confidence - Conference Board ........................................................................................................................................... 1122
Consumer Sentiment - Michigan ............................................................................................................................................................ 1126
Consumer Comfort ................................................................................................................................................................................. 1127
Investors Intelligence.............................................................................................................................................................................. 1129
American Association of Independent Investors .................................................................................................................................... 1129
National Association of Active Investment Managers (NAAIM) ............................................................................................................. 1130
Small Business Optimism ...................................................................................................................................................................... 1131
Percentage Stocks above 50 & 200 DMA ............................................................................................................................................. 1132
Margin Levels ......................................................................................................................................................................................... 1133
Mutual Fund Cash Levels v S&P 500 .............................................................................................................................................. 1137
BUSINESS CYCLE CONSUMPTION ............................................................................................................................................................... 1144
RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1144
CHARTS - Real Disposable Personal Income .......................................................................................................................................... 1147
CHARTS - Real Consumption Expenditure ............................................................................................................................................... 1149
CHARTS - Consumer Credit Deleveraging ............................................................................................................................................... 1150
CHARTS - Core Retail Growth .................................................................................................................................................................. 1151
RESEARCH OF NOTE .................................................................................................................................................................................. 1152
RESEARCH - 95% of Consumer Credit Lending Going towards Student & Car Loans ........................................................................... 1152
RESEARCH - Gallup Survey Shows -10% Reduction in Christmas Buying Plans ................................................................................... 1154
RESEARCH - The Wal-Mart Measure or How the US Consumer Is the Global Engine .......................................................................... 1155
RESEARCH - A Sequential Decline in Wages .......................................................................................................................................... 1156
RESEARCH - Final Sales Signals Pending Potential Recession on the Horizon ..................................................................................... 1157
RESEARCH - Consumers Using Savings to Maintain Life Style .............................................................................................................. 1157
RESEARCH - The Destruction of America's Middle Class ....................................................................................................................... 1160
RESEARCH - Dramatic Slowing in Restaurant Business ......................................................................................................................... 1160
RESEARCH - Signs of Serious Troubles .................................................................................................................................................. 1161
RESEARCH - Falling Real Disposable Income means Falling Consumption ........................................................................................... 1164
BUSINESS CYCLE - GROWTH .......................................................................................................................................................................... 1169
CHARTS - Manufacturing .......................................................................................................................................................................... 1171
CHARTS - Exports ..................................................................................................................................................................................... 1171
CHARTS - Durable Goods ......................................................................................................................................................................... 1172
CHARTS - NFIB Small Business CAPEX .................................................................................................................................................. 1172
CHARTS - US Manufacturing Conditions Deteriorating ............................................................................................................................ 1173
RESEARCH OF NOTE .................................................................................................................................................................................. 1174
RESEARCH - US GDP Growth Forecasts ................................................................................................................................................ 1174
RESEARCH - Economic Recoveries Don't Look Like This! ...................................................................................................................... 1174
RESEARCH - 2nd Worst Decade in Over 220 Years (And Getting Worse) ............................................................................................. 1175
RESEARCH - US Economy is being fundamentally transformed ............................................................................................................. 1177
RESEARCH - Shrinking CAPEX, Expanding Buybacks and Dividends ................................................................................................... 1180
REFERENCE - Prior Posts ............................................................................................................................................................................ 1184
RESEARCH - US Economic Recovery Has Peaked ................................................................................................................................ 1184
ECONOMIC CYCLE, INVESTMENT CYCLE, SECTOR ROTATION ................................................................................................................. 1193
US PUBLIC POLICY GROWING LIST OF POLICY PROBLEMS ........................................................................................ 1200

NSA-SECURITY-SURVEILLANCE COMPLEX......................................................................................................................................... 1200
OBAMACARE ............................................................................................................................................................................................ 1201
GENERAL PUBLIC POLICY...................................................................................................................................................................... 1203
CHARTS - US Incarceration Rate Out of Control ...................................................................................................................................... 1205
RESEARCH OF NOTE .................................................................................................................................................................................. 1207
POLICY - A self-destructive path toward oblivion...................................................................................................................................... 1207
POLICY - Indictment of US Public, Fiscal & Monetary Policy ................................................................................................................... 1212
March 2014 Edition

11

POLICY - The Crisis of Trust Continues to Worsen .................................................................................................................................. 1225

POLICY - The Stunning Truth about Inequality In America....................................................................................................................... 1226
POLICY - Pointing US towards Government Dependence ....................................................................................................................... 1227
POLICY - Yet another Game of Deception ................................................................................................................................................ 1231
POLICY - Obamacare A Flawed Public Policy Implementation ................................................................................................................ 1235
POLICY - Financial Repression and Manipulated Illusions ....................................................................................................................... 1238
Manipulating Bad Financial Data ........................................................................................................................................................... 1238
Manipulating Bad Nuclear Facts ............................................................................................................................................................ 1239
Manipulating Oil Spill Info ....................................................................................................................................................................... 1240
Manipulating Data on Other Environmental Issues ............................................................................................................................... 1240
Manipulating Food Safety Data .............................................................................................................................................................. 1241
Manipulating Health Safety Data ........................................................................................................................................................... 1241
Manipulating Metrics for War ................................................................................................................................................................. 1241
The Core Problem .................................................................................................................................................................................. 1241
POLICY - US Economic Decline is Obvious to Anyone Caring to Look ................................................................................................... 1242
POLICY - Policy Uncertainty and Confidence in Monetary Policy Direction is exposed........................................................................... 1245
POLICY - "What is good for GM is good for America" is no longer correct .............................................................................................. 1247
POLICY - Where is the Logic In US Public Policy ..................................................................................................................................... 1248
POLICY - What is the Real Driving Force Behind the New Immigration Law? ......................................................................................... 1251
POLICY - Crony Capitalism and How America Lost its Way! ................................................................................................................... 1254
MONETARY POLICY THE TAPER RATE & THE NEW FED CHAIR ............................................................................................ 1260
TAPER ....................................................................................................................................................................................................... 1264
TAPER - Fed December 2013 FOMC "TAPER" .................................................................................................................................... 1266
TAPER - The Last Time a Major Central Bank "Tapered" QE .............................................................................................................. 1267
TAPER - FOMC QE Meeting ................................................................................................................................................................. 1269
TAPER - The Fed Cannot Possibly "Exit" Without The Market Crumbling ........................................................................................... 1271
TAPER - It Matters and the Fed Has Few Options As Quality Collateral Disappears. ......................................................................... 1273
TAPER - Look for QE to Morph Into Quantitative Education ............................................................................................................... 1275
TAPER - Why Fed Bond Buying Can't Go on Indefinitely and Why TAPER ......................................................................................... 1279
TAPER - Political "Push-Back" by the Fed ............................................................................................................................................ 1280
TAPER - Ending QE Will Pressure Fiscal Policy ................................................................................................................................... 1282
TAPER - Delay Risks Bond Market Volatility as Private Availability Steadily Shrinks .......................................................................... 1286
TAPER - Clearly a Bluff or Muddled Policy ............................................................................................................................................ 1289
TAPER - Why is the Fed Talking TAPER? ............................................................................................................................................ 1291
TAPER - The Fed is Unlikely to Taper ................................................................................................................................................... 1294
TAPER - Fed Trapped in a Box ............................................................................................................................................................. 1296
TAPER - The Fed Taper Playbook ........................................................................................................................................................ 1298
TAPER - TAPER Put On Hold ............................................................................................................................................................... 1299
QUEEN YELLEN ........................................................................................................................................................................................... 1302
YELLEN - QEeen YELLEN TESTIMONY - Dampens Taper Bet .......................................................................................................... 1303
VOLKER RULE .............................................................................................................................................................................................. 1306
VOLKER - Dodd- Frank Never Had a Chance .......................................................................................................................................... 1307
CHARTS & TABLES OF NOTE ........................................................................................................................................................................... 1309
CHARTS: US Trade Balance Has Been Shrinking Since 2008 .................................................................................................................... 1309
CHARTS: Inflation Arrived with the Removal of a Gold Standard Discipline and Creditism ........................................................................ 1309
CHARTS: Economic Growth Based Significantly on Credit Growth ............................................................................................................. 1310
CHARTS: Fed deliberately ignoring data on both growth and inflation ........................................................................................................ 1312
CHARTS: US Economic Activity .................................................................................................................................................................... 1313
CHARTS: Effects of QE on S&P 500 ............................................................................................................................................................ 1314
CHARTS: Monetary Velocity versus Monetary Base .................................................................................................................................... 1315
CHARTS: Days Between 'Unsterilized' Actions ............................................................................................................................................ 1316
CHARTS: FOMC Economic Projections ....................................................................................................................................................... 1316
CHARTS: Taylor Rule & Evans Rule Estimates of Fed Funds Rates .......................................................................................................... 1317
CHARTS: Market Pricing In A Longer On-Hold Fed ..................................................................................................................................... 1317
CHARTS: Fed Balance Sheet Assets & Liabilities ........................................................................................................................................ 1318
CHARTS: Fed Policy Turns 180 Degrees ..................................................................................................................................................... 1318
CHARTS: US Banking Industry Concentration ............................................................................................................................................. 1319
CHARTS: Total Credit Market Debt as % GDP............................................................................................................................................. 1320
CHARTS: Debt-to-GDP Ratio Above What Caused Great Depression ........................................................................................................ 1321
CHARTS: Yield Chase Completely Distorted ................................................................................................................................................ 1321
CHARTS: Velocity of Money ......................................................................................................................................................................... 1324
CHARTS: Real Negative Rates ..................................................................................................................................................................... 1327
CHARTS: Short Interest Rates a Fed Problem ............................................................................................................................................. 1330
RESEARCH OF NOTE ........................................................................................................................................................................................ 1332
MONETARY - Dollar, Currency & Gold Outlook ........................................................................................................................................... 1332
MONETARY - Federal Reserves False Media Reporting ............................................................................................................................ 1337
MONETARY - The Unintended Consequences of it all................................................................................................................................. 1339
MONETARY - QE Proves to be the "Sham" We All Knew it was! ................................................................................................................ 1348
MONETARY - Owns 32.47% of all 10 Year equivalents and monetizing 70% of all net equivalent issuance ............................................. 1350
MONETARY - The Policy Options Available to the Fed................................................................................................................................ 1351
MONETARY - Capital Distortion & Global Acceptance of the Bernankean Theory ..................................................................................... 1352
MONETARY - The Suspension of Price Discovery (Marriage of Financial Repression & Crony Capitalism) ............................................. 1356
MONETARY - The Fed is stuck in a QE Trap ............................................................................................................................................... 1359
March 2014 Edition

12

MONETARY - Mathematically, the Fed Can Only Fail .................................................................................................................................. 1362

MONETARY - QE versus S&P 500 Movements ........................................................................................................................................... 1367
MONETARY - QE is standing Between Inflated Equity Markets and A Recession ...................................................................................... 1369
MONETARY - Mounting Policy Failures ........................................................................................................................................................ 1371
MONETARY - QE Doesn't Help the Economy .............................................................................................................................................. 1375
MONETARY - The US Reserve Currency and the steady erosion of trust ................................................................................................... 1377
MONETARY - The FAC is to the FED as the TBAC is to the TREASURY (Same Banks) .......................................................................... 1380
MONETARY - $2.3 Trillion of Leveraged Derivative Collateral ..................................................................................................................... 1381
MONETARY - Leverage, Funding and Profit Pressures as Money Is No Longer Quite as Free ................................................................. 1386
MONETARY - The Fed's Double-Bind .......................................................................................................................................................... 1392
MONETARY - The Federal Reserve is at the very heart of our economic problems ................................................................................... 1393
MONETARY - FED Inflation & Deflator ......................................................................................................................................................... 1395
REFERENCE - Prior Posts .................................................................................................................................................................................. 1397
RESEARCH - Reduction at the Core of the Growth of the Federal Reserve Balance Sheet ....................................................................... 1397
RESEARCH - Fed's Excess Reserves are 51% Foreign Banks, 49% Domestic ......................................................................................... 1400
RESEARCH - A Game of Calculated Deception is Evolving to Something Worse ...................................................................................... 1402
RESEARCH - A Loan Distribution Credit Bubble .......................................................................................................................................... 1403
RESEARCH - QE to be replaced with Guidance, Thresholds and Promises ............................................................................................... 1404
RESEARCH - Bernanke in a Box and Talking Out of Both Sides of Your Mouth ......................................................................................... 1406
RESEARCH - Duration Extraction: The Hidden Fed Game .......................................................................................................................... 1407
RESEARCH - The Fed's Stated Guidance Sign-Posts ................................................................................................................................. 1409
RESEARCH - An Artificial Market ................................................................................................................................................................. 1411
RESEARCH - Bank Reserves A Ticking Bomb, But Who Will Be Caught in the Blast? .............................................................................. 1411
RESEARCH - QE An Intentionally Broken Mechanism Due to 2008 Policy Payable Interest on Bank Reserves...................................... 1415
RESEARCH - QE Ineffective In Increasing GDP .......................................................................................................................................... 1416
MONETARY: Helicopter Money of Central Bank Bond Purchases are Forever .......................................................................................... 1417
MONETARY: Central Bank Balance Sheet Expansion and the Theoretical Path to SPX of 1950 .............................................................. 1419
MONETARY: Central Bank Balance Sheet Expansion versus CPI .............................................................................................................. 1421
MONETARY: The Fed Model No Longer Prices Risk ................................................................................................................................... 1421
SITUATIONAL SUMMARY & ANALYSIS ............................................................................................................................................................ 1429
FISCAL POLICY GOVERNMENT CAPITULATES ON SEQUESTRATION & AUSTERITY THINKING ............................... 1432
RESEARCH WE FOLLOWED ............................................................................................................................................................................. 1432
BUDGET AGREEMENT ................................................................................................................................................................................ 1433
GOVERNMENT SHUTDOWN ....................................................................................................................................................................... 1434
GOVERNMENT WASTE - CORRUPTION ................................................................................................................................................... 1434
FISCAL MATTERS ........................................................................................................................................................................................ 1435
CHARTS & TABLES OF NOTE ........................................................................................................................................................................... 1436
CHARTS - Government Receipts & Outlay Growth Improves Significantly .................................................................................................. 1437
CHARTS - Federal Budget Surplus / Deficit .................................................................................................................................................. 1437
CHARTS - Real Federal Government Purchases ......................................................................................................................................... 1438
CHARTS - US Trade Balance Improvement ................................................................................................................................................. 1438
CHARTS - Growth & Jobs ............................................................................................................................................................................. 1439
CHARTS - Taxes & Spending ....................................................................................................................................................................... 1443
CHARTS - Politics & Policy ........................................................................................................................................................................... 1446
CHARTS - The Stakes ................................................................................................................................................................................... 1447
CHARTS - Official Fiscal Deficit & Debt ........................................................................................................................................................ 1449
CHARTS - Payroll Tax Holiday ...................................................................................................................................................................... 1450
CHARTS - Tax Rate Comparisons ................................................................................................................................................................ 1451
CHARTS - Risk Perceptions .......................................................................................................................................................................... 1452
CHARTS - 2013 Quarterly Impact ................................................................................................................................................................. 1453
CHARTS - Budget Deficit .............................................................................................................................................................................. 1454
CHARTS - Sovereign Debt ............................................................................................................................................................................ 1457
CHARTS - State & Local Government Drag ................................................................................................................................................. 1458
CHARTS - Government Dependence ........................................................................................................................................................... 1461
CHARTS - Coming Demographic Shock ....................................................................................................................................................... 1462
CHARTS - Fiscal Cliff Outcome .................................................................................................................................................................... 1466
BUDGET - What You Need to Know ................................................................................................................................................................... 1468
BUDGET - Political Budget Cowardice and Capitulation .............................................................................................................................. 1469
BUDGET - Political Budget Cowardice and Capitulation - 2 ......................................................................................................................... 1471
BUDGET - The Ultimate in Political Can-Kicking! ......................................................................................................................................... 1473
BUDGET - The Next Step in the Collapse Of The Dollar .............................................................................................................................. 1476
BUDGET - As Represented and Spun for the Public .................................................................................................................................... 1479
BUDGET - Implications .................................................................................................................................................................................. 1480
BUDGET - A Budget That Institutionalizes Big Government ........................................................................................................................ 1482
BUDGET - The Secrets in The Budget ......................................................................................................................................................... 1486
RESEARCH OF NOTE ........................................................................................................................................................................................ 1489
RESEARCH - Budget Deficit Shrinking ......................................................................................................................................................... 1489
RESEARCH - Avoiding Taxes ....................................................................................................................................................................... 1491
RESEARCH - A Confluence Of Risky Economic Events .............................................................................................................................. 1492
RESEARCH - Everyone Hates Sequestration, But Few Can Agree On What to Cut .................................................................................. 1493
RESEARCH - $70T Off-Balance Sheet Federal Liabilities ........................................................................................................................... 1495
SITUATIONAL SUMMARY & ANALYSIS ............................................................................................................................................................ 1498
BUDGET SELLOUT ............................................................................................................................................................................................. 1498
March 2014 Edition

13

KEY DRIVERS - CATALYSTS OF CHANGE.......................................................................................................................... 1501

EMPLOYMENT .................................................................................................................................................................................................... 1506
CHARTS & TABLES ...................................................................................................................................................................................... 1506
CHARTS - Wages & Salary Accruals / GDP ............................................................................................................................................. 1507
CHARTS US Employment/Population Ratio Total in Labor Force ......................................................................................................... 1507
CHARTS US Industrial Production v Manufacturing Jobs...................................................................................................................... 1508
CHARTS - Part-Time Employment ............................................................................................................................................................ 1508
CHARTS - Nonfarm Payrolls Y-O-Y DECLINE ......................................................................................................................................... 1508
CHARTS - Hiring Stalled at 200K Per Month (Approximates ONLY the New People Entering Workforce)............................................ 1509
CHARTS - The Under-Employment Gap ................................................................................................................................................... 1509
CHARTS Staycations A Sign of the FEAR of Job Loss & Competition for Jobs ................................................................................... 1510
RESEARCH OF NOTE .................................................................................................................................................................................. 1511
EMPLOYMENT - With and Without Obama's Recovery Plan ................................................................................................................... 1511
EMPLOYMENT - Millennials Devastated As American Dream Becomes Nightmare for Most ................................................................ 1513
EMPLOYMENT - 30 Mind-blowing Statistics about Americans Under The Age Of 30............................................................................. 1515
EMPLOYMENT - Going Nowhere Even With All Jobs Becoming Temporary Jobs and the Participation Rate Plummeting .................. 1518
EMPLOYMENT - Low-Wage Jobs Bias Continues to Hamper U.S. Recovery......................................................................................... 1519
EMPLOYMENT - A REAL Family Wage versus Part Time & HES ........................................................................................................... 1520
EMPLOYMENT - It is as much About the Quality, as the Quantity of Jobs .............................................................................................. 1527
1- CAPITAL SPENDING ............................................................................................................................................................................ 1530
2- SMALL BUSINESS OPTIMISM ............................................................................................................................................................. 1533
3- DEMOGRAPHIC SHIFT ........................................................................................................................................................................ 1537
REAL DISPOSABLE INCOME ............................................................................................................................................................................ 1548
CHARTS & TABLES ...................................................................................................................................................................................... 1549
CHARTS This is a Structural .................................................................................................................................................................. 1549
CHARTS Real Disposable Income per Capita ....................................................................................................................................... 1549
CHARTS - Household Incomes a Sign of a Collapsing Middle Class ....................................................................................................... 1550
CHARTS - Food Stamps Now 14% of US Grocery Store Sales ............................................................................................................... 1550
RESEARCH OF NOTE .................................................................................................................................................................................. 1552
RESEARCH How Can a 70% Consumption Have a Recovery When Real DI/Capital Falls ................................................................. 1552
RESEARCH - The Facts are clear. The US Standard of Living is Falling ................................................................................................ 1553
RESEARCH - The Facts are clear. The US Standard of Living is falling .................................................................................................. 1554
RESEARCH - Standards of Living and Artificial Expectations .................................................................................................................. 1557
RESEARCH - A Lack of Demand in US Economy .................................................................................................................................... 1559
RESEARCH - Full Time Jobs or Food Stamps & Disability? .................................................................................................................... 1560
STANDARD OF LIVING - Salary Compression ........................................................................................................................................ 1562
DISPOSABLE INCOME - 66M (20%) Below $28.8/Year Subsistence Level ........................................................................................... 1563
FOOD STAMPS - 46,405,204 Individuals, 22,257,647 Households below Poverty Line ......................................................................... 1564
DISPOSABLE INCOME - Bad Even in Nominal Terms ............................................................................................................................ 1566
INFLATION - It's There but the Government Doesn't Account for it. ........................................................................................................ 1566
US RESIDENTIAL REAL ESTATE ...................................................................................................................................................................... 1568
CHARTS & TABLES ...................................................................................................................................................................................... 1570
CHARTS - The Real Cost of Buying a Home 6.7 X Average Salary......................................................................................................... 1570
CHARTS - Household Formations ............................................................................................................................................................. 1570
CHARTS - Housing Starts ......................................................................................................................................................................... 1571
CHARTS - Composition of Housing Sales ................................................................................................................................................ 1571
CHARTS - New Home Sales ..................................................................................................................................................................... 1572
CHARTS - Existing Residential Supply ..................................................................................................................................................... 1572
CHARTS - Housing Starts ......................................................................................................................................................................... 1573
RESEARCH OF NOTE .................................................................................................................................................................................. 1575
RESEARCH - Insight: A new wave of U.S. mortgage trouble threatens ................................................................................................... 1575
RESEARCH - Household Formation Drives Residential Real Estate ....................................................................................................... 1577
OVERVIEW ................................................................................................................................................................................................ 1580
CURRENT HOME OWNERSHIP TRENDS .............................................................................................................................................. 1585
$6.5 TRILLION IN MIDDLE CLASS NET WORTH EVAPORATES .......................................................................................................... 1588
NATIONAL STATISTICS: PRICE .............................................................................................................................................................. 1589
NATIONAL STATISTICS: EXISITNG HOME SALES ............................................................................................................................... 1591
NATIONAL STATISTICS: NEW HOME SALES ........................................................................................................................................ 1593
HOUSING: Even a Never Seen Before 30 Year Mortgage Rate can't Help Housing ............................................................................... 1594
HOUSING: Soaring FHA Delinquencies .................................................................................................................................................... 1596
US COMMERCIAL REAL ESTATE ..................................................................................................................................................................... 1601
OVERVIEW ................................................................................................................................................................................................ 1603
NATIONAL STATISTICS: COMMERCIAL REAL ESTATE ....................................................................................................................... 1604
FOCUS GROUPS .................................................................................................................................................................. 1610

US COMMERCIAL RETAIL REAL ESTATE ....................................................................................................................................................... 1610
March 2014 Edition

14


RESEARCH OF NOTE .................................................................................................................................................................................. 1612
COMMERCIAL REAL ESTATE - Indoor Mall Retail in Trouble ................................................................................................................ 1612
COMMERCIAL REAL ESTATE - Mortgage bonds reflect diverging fortunes of US malls ....................................................................... 1615
COMMERCIAL REAL ESTATE - Dead Mall Syndrome: The Self-Reinforcing Death Spiral of Retail ..................................................... 1617
COMMERCIAL REAL ESTATE - The First Domino to fall: Retail-CRE (Commercial Real Estate) ......................................................... 1619
COMMERCIAL REAL ESTATE - After Seven Lean Years: US Commercial Real Estate: The Present Position and Future Prospects 1623
COMMERCIAL REAL ESTATE - Retail Sales Cannibalization ................................................................................................................ 1629
COMMERCIAL REAL ESTATE - Tsunami of Retail Store Closings and Downsizings Coming ............................................................... 1630
US RECESSION A Looming US Recession .................................................................................................................................................... 1633
RESEARCH OF NOTE .................................................................................................................................................................................. 1633
RECESSION - Sequential Decline in Wages ............................................................................................................................................ 1633
RECESSION - Final Sales Signals Pending Recession ........................................................................................................................... 1634
RECESSION - Consumers Using Savings to Maintain Life Style ............................................................................................................. 1634
RECESSION - 1987 Yields ........................................................................................................................................................................ 1638
RECESSION - Why a Looming Recession May Be Near ......................................................................................................................... 1639
RECESSION - Minimally in the Back Stretch of the Recovery ................................................................................................................. 1644
RECESSION - Reduced Household Income at the Core of the Growth of the Federal Reserve Balance Sheet ................................... 1650
RECESSION - Household Income and Signs of A Collapsing Middle Class ............................................................................................ 1652
RECESSION - More Cyclical Signs of a US Recession ............................................................................................................................ 1652
RECESSION - A Lack of Demand ............................................................................................................................................................. 1653
RECESSION - Money Going to Cash But Equity Inflows Still Suggest Corrective Correlation ................................................................ 1655
RECESSION - More and More Signals Flashing ...................................................................................................................................... 1658
RECESSION - Term Structures Suggest Signs of a US Recession Ahead ............................................................................................. 1660
THE MUNI MONSTER- A Failure of Public Policy to Respond to Structural Change ........................................................................................ 1662
PEURTO RICO .......................................................................................................................................................................................... 1663
US MUNI LAND ......................................................................................................................................................................................... 1663
DETROIT - Simply the Canary................................................................................................................................................................... 1663
DETROIT - By the Numbers ................................................................................................................................................................. 1665
DETROIT - The News Reporting ........................................................................................................................................................... 1666
DETROIT - A Structural Problem that Failed to be politically addressed .............................................................................................. 1668
RETIREMENT CRISIS Now Beginning to Take Hold....................................................................................................................................... 1669
RESEARCH OF NOTE .................................................................................................................................................................................. 1670
RETIREMENT - Underfunded and Unsustainable .................................................................................................................................... 1670
RETIREMENT - 35 Facts to Scare a Baby Boomer .................................................................................................................................. 1673
RETIREMENT - $205K Account Limits ..................................................................................................................................................... 1675
RETIREMENT - $3M Retirement Cap Unanswered ................................................................................................................................. 1677
RETIREMENT - What Does Heart Surgery Really Cost, And Why Is It 70 Times More Expensive In The US? ..................................... 1678
RETIREMENT - UPS Drops 15,000 Spouses From Health Plan, Blames Obamacare ........................................................................... 1680
CAPITAL & INTEREST RATES ........................................................................................................................................................................... 1682
SOCIAL CHANGE - What America Will Look like When The Next Great Economic Crisis Strikes ................................................................... 1684
SPECIAL SUPPLEMENT....................................................................................................................................................... 1689

US SHADOW BANKING ...................................................................................................................................................................................... 1689
COLLATERAL TRANSFORMATIONS ...................................................................................................................................................... 1689
COV-LITE--PIK .......................................................................................................................................................................................... 1689
TruPS CDOs .............................................................................................................................................................................................. 1689
SHADOW BANKING DOCUMENTATION ................................................................................................................................................ 1689
STEALTH SHADOW BANKING FLOWS ............................................................................................................................................................ 1691
FLOWS: LIQUIDITY, CREDIT & DEBT ......................................................................................................................................................... 1691
SHADOW BANKING CREDIT INTERMEDIATION PROCESS .................................................................................................................... 1692
THE FEDS $2.3 TRILLION EXCESS RESERVES .................................................................................................................................... 1694
SAME GAME, NEW ACRONYMS The Acronyms in the Next Crisis ........................................................................................................ 1694
HOW IT NOW WORKS ................................................................................................................................................................................. 1695
ARCHILLES HEEL: DURATION & COLLATERAL RISK .................................................................................................................................... 1713
DURATION .................................................................................................................................................................................................... 1713
INSTRUMENTS OF TRANSFORMATION .................................................................................................................................................... 1715
SELF SECURITIZATION ........................................................................................................................................................................... 1715
COLLATERAL ................................................................................................................................................................................................ 1718
REHYPOTHECATION ............................................................................................................................................................................... 1718
REPOS & REVERSE REPOS ................................................................................................................................................................... 1720
HQC - HIGH QUALITY COLLATERAL ..................................................................................................................................................... 1722
COLLATERAL TRANSFORMATIONS ...................................................................................................................................................... 1739
LEVERAGED LOANS ............................................................................................................................................................................ 1744
SECURED & UNSECURED ...................................................................................................................................................................... 1758
CONTINGENT LIABILITIES .......................................................................................................................................................................... 1759
March 2014 Edition

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The Taper Tantrum Ten

New Acronym & Vehicles, Same Game

GLOBAL RISK - Risk & Tipping Points

GLOBAL MACRO TIPPING POINTS - MARCH 2014

1 March 2014 Edition

Restricted & Confidential

The Taper Tantrum Ten

TIPPING POINTS .................................................................................................................................... 17

RISK SIGNALS .......................................................................................................................................................................... 81

March 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved

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UKRAINE - Pulled by Global Financial Markets ...................................................................................................................................... 131

GLOBAL MACRO: RISK LEVELS ........................................................................................................................................... 174

TIPPING POINTS: TOP 5 FOCUS - MARCH 2014 ................................................................................................................... 194

GLOBAL MACRO ................................................................................................................................. 206

March 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved

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Japanese & Spanish Debt Unsustainable ................................................................................................................................................... 256

GLOBAL MACRO: INDICATORS (CHARTS) .......................................................................................................................... 271

GLOBAL MACRO: MONETARY POLICY & CENTRAL BANKING .......................................................................................... 339

March 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved

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GEO-ECONOMIC CONCERNS & TENSIONS ......................................................................................................................... 441

March 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved

Restricted & Confidential

REGIONAL ............................................................................................................................................. 550

March 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved

Restricted & Confidential

SITUATIONAL ASSESSEMENT ..................................................................................................................................................................... 621

March 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved

Restricted & Confidential

CHARTS - UK - GDP ....................................................................................................................................................................................... 722

ASIA - SERIOUS CRACKS BELOW THE SURFACE ......................................................................................................................... 761

March 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved

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EMERGING MARKETS ECHO BOOM AHEAD.......................................................................................................................... 959

March 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved

Restricted & Confidential

CHARTS - Current Account Balances versus GDP ........................................................................................................................................ 992

US ECONOMY ..................................................................................................................................... 1057

US INVESTMENT CYCLE ...................................................................................................................................................... 1075

March 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved

Restricted & Confidential

RESEARCH OF NOTE .................................................................................................................................................................................. 1097

US PUBLIC POLICY GROWING LIST OF POLICY PROBLEMS ........................................................................................ 1200

March 2014 Edition

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Restricted & Confidential

POLICY - The Crisis of Trust Continues to Worsen .................................................................................................................................. 1225

March 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved

Restricted & Confidential

MONETARY - Mathematically, the Fed Can Only Fail .................................................................................................................................. 1362

March 2014 Edition