THINGS THAT MAKE YOU GO

Hmmm
A walk around Lhe frlnges of nance
06 February 2012
1
Acta est fabula, plaudite!
(The play is over. applaud!)
- AuCuS1uS CALSA8
Get gold, humanely if you can, but at all hazards get
gold
King Ferdinand V of Spain
They say were young and we dont know
We won'L nd ouL unul we grow...
They say our love wont pay the rent
before its earned, our moneys all been spent
I Got You Babe, Sonny & Cher
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2. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
2
T
his week houses one of Lhe greaLesL days of any calendar year. lL ls
a day eagerly-awaited by many around the world and provides just
abouL Lhe only employmenL for such characLers as SLaLen lsland Chuck,
SmlLh Lake !ake, 8alzac 8llly and Slr WalLer Wally. Ceneral 8eauregard Lee
makes hls annual appearance as does Spanlsh !oe and even uunklrk
uave, buL each year, Lhese would-be conLenders have Lo bow down Lo
Lhe daddy of Lhem all, Lhe champlon of champlons, Lhe one, Lhe only,
Punxsutawney Phil.
?es, on 1hursday, lebruary 2nd, lL was Croundhog uay agaln, when
groundhogs and woodchuck, land-beavers and whlsLle-plgs are
dragged from Lhelr burrows and ca[oled lnLo Lrylng Lo see Lhelr shad-
ow. Legend has lL LhaL, should Lhe groundhog be able Lo see sald
shadow, lL wlll reLreaL back lnLo lLs burrow and prolong wlnLer by a
furLher slx weeks whereas, lf no shadow ls Lo be found, Sprlng wlll
come early.
1he rsL Croundhog uay was celebraLed ln 1887 aL Cobbler's knob (L8)
ln unxsuLawney, ennsylvanla and had lLs orlglns ln Lhe anclenL Lradluon
of Candlemass. 1haL year, ln a sLroke of sheer genlus LhaL would besLow
enormous nanclal beneL upon hls Lown for Lhe nexL hundred years and
counung, a newspaper edlLor belonglng Lo a group of groundhog hunLers
from unxsuLawney called Lhe unxsuLawney Croundhog Club declared LhaL hll,
Lhe unxsuLawney groundhog, was Amerlca's only Lrue weaLher-forecasung groundhog. lL really WAS
LhaL slmple and Lhls year, llke many before lL, llLerally Lens of Lhousands of people wlll descend upon
Cobbler's knob (L8) Lo wlLness Lhe 'predlcuon' of a 13lb ball of fur who has absoluLely no clue whaL
all the fuss is about:
(wlklpeJlo). MoJeto costoms of tbe bollJoy lovolve celebtouoos wbete eotly motoloq fesuvols ote
belJ to wotcb tbe qtoooJboq emetqloq ftom lts bottow. lo sootbeosteto leoosylvoolo, CtoooJboq
loJqes (CtooJsow loJqes) celebtote tbe bollJoy wltb fetsommlloqe, soclol eveots lo wblcb fooJ
ls setveJ, speecbes ote moJe, ooJ ooe ot mote qsplel (ploys ot sklts) ote petfotmeJ fot eotettolo-
meot. 1be leoosylvoolo Cetmoo Jlolect ls tbe ooly looqooqe spokeo ot tbe eveot, ooJ tbose wbo
speok oqllsb poy o peoolty, osoolly lo tbe fotm of o olckel, Jlme ot poottet, pet wotJ spokeo, pot
loto o bowl lo tbe ceotet of tbe toble.
8uL wlder famlllarlLy wlLh Lhe evenL across Lhe globe ls due, ln large parL, Lo Lhe eponymous 1993
movle, 'Croundhog uay', whlch sLarred 8lll Murray as egocenLrlc lusburgh weaLherman hll Connors
who nds hlmself Lrapped ln a umeloop on lebruary 4Lh and proceeds Lo spend Lhe bulk of Lhe movle
dreamlng up all klnds of fanclful schemes only Lo end up wlLh Lhe same resulL, waklng up aL 6am Lo
Sonny & Cher's l CoL ?ou 8abe".
F
ebruary 2012 nds Lhe world ln lLs own umeloop as we remaln Lrapped ln our very own
Croundhog uay waLchlng polluclans Lry endless new and lnvenuve ways Lo 'x' a slmple prob-
lem of way, WA? Loo much debL. lL lsn'L compllcaLed. 1he world grew faL and happy on Lhe sugar rush
provlded by a decades-long ln[ecuon of cheap and easy credlL and now lL's ume for Lhe crash dleL.
1rylng Lo avold Lhe 'crash' seems Lo be uppermosL ln everybody's mlnd.
lnLeresungly enough, Lhe led's very own Croundhog 8allabankouL 8en Lesued before Lhe Pouse
3. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
3
Commluee on Lhe 8udgeL on lebruary 2nd and, havlng been dragged from hls burrow lnLo Lhe day-
light, ben saw all kinds of shadows:
wblle cooJluoos bove cettololy lmptoveJ ovet jtbe lost two ooJ o bolf yeots], tbe poce of tbe te-
covety bos beeo ftosttouoqly slow, potucolotly ftom tbe petspecuve of tbe mlllloos of wotkets wbo
temolo ooemployeJ ot ooJetemployeJ. Moteovet, tbe sloqqlsb expoosloo bos lef tbe ecooomy
voloetoble to sbocks...
1be ootlook temolos oocettolo, bowevet, ooJ close mooltotloq of ecooomlc Jevelopmeots wlll
temolo oecessoty...
Altbooqb teol coosomet speoJloq tose moJetotely lost poottet, boosebolJs coouooe to foce slq-
olfcoot beoJwloJs. Notobly, teol boosebolJ locome ooJ weoltb stoqooteJ lo 2011, ooJ occess to
cteJlt temoloeJ uqbt fot mooy poteouol bottowets...
...we sull bove o looq woy to qo befote tbe lobot motket coo be solJ to be opetouoq ootmolly. lot-
ucolotly ttooblloq ls tbe ooosoolly blqb level of looq-tetm ooemploymeot. Mote tboo 40 petceot
of tbe ooemployeJ bove beeo jobless fot mote tboo slx mootbs, tooqbly Jooble tbe ftocuoo Jotloq
tbe ecooomlc expoosloo of tbe ptevloos JecoJe...
Clobolly, ecooomlc ocuvlty oppeots to be slowloq, testtoloeJ lo pott by splllovets ftom fscol ooJ
foooclol Jevelopmeots lo otope. 1be combloouoo of blqb Jebt levels ooJ weok qtowtb ptospects
lo o oombet of otopeoo cooottles bos tolseJ slqolfcoot coocetos oboot tbelt fscol sltoouoos,
leoJloq to sobstoouol locteoses lo sovetelqo bottowloq costs, coocetos oboot tbe beoltb of o-
topeoo books, ooJ ossocloteJ teJocuoos lo coofJeoce ooJ tbe ovolloblllty of cteJlt lo tbe eoto
oteo... tlsks temolo tbot Jevelopmeots lo otope ot elsewbete moy oofolJ oofovotobly ooJ coolJ
wotseo ecooomlc ptospects bete ot bome...
1he led's groundhog also klndly polnLed ouL Lo Lhe Pouse Commluee Lhe Lask faclng Lhem:
uofottoootely, eveo ofet ecooomlc cooJluoos bove tetotoeJ to ootmol, tbe oouoo wlll sull foce o
slzoble sttoctotol boJqet qop lf cotteot boJqet pollcles coouooe. usloq lofotmouoo ftom tbe te-
ceot boJqet ootlook by tbe cooqtessloool 8oJqet O[ce, ooe coo coosttoct o ptojecuoo fot tbe feJ-
etol Jefclt ossomloq tbot most expltloq tox ptovlsloos ote exteoJeJ ooJ tbot MeJlcotes pbyslcloo
poymeot totes ote belJ ot tbelt cotteot level. uoJet tbese ossompuoos, tbe boJqet Jefclt woolJ
be mote tboo 4 petceot of Cul lo fscol yeot 2017, ossomloq tbot tbe ecooomy ls tbeo close to foll
employmeot. Of eveo qteotet cooceto ls tbot looqet-too ptojecuoos, boseJ oo plooslble ossomp-
uoos oboot tbe evolouoo of tbe ecooomy ooJ boJqet ooJet cotteot pollcles, sbow tbe sttoctotol
boJqet qop locteosloq slqolfcootly fottbet ovet ume ooJ tbe touo of ootstooJloq feJetol Jebt to
Cul tlsloq toplJly. 1bls Jyoomlc ls cleotly oosostolooble.
1bese sttoctotol fscol lmbolooces JlJ oot emetqe ovetolqbt. 1o o slqolfcoot exteot, tbey ote tbe
tesolt of oo oqloq popolouoo ooJ, especlolly, fost-tlsloq beoltb-cote costs, botb of wblcb bove beeo
pteJlcteJ fot JecoJes...
1o ocbleve ecooomlc ooJ foooclol stoblllty, u.5. fscol pollcy most be ploceJ oo o sostolooble potb
tbot eosotes tbot Jebt telouve to oouoool locome ls ot leost stoble ot, ptefetobly, Jeclloloq ovet
ume. Auololoq tbls qool sboolJ be o top ptlotlty.
And before openlng Lhe oor Lo quesuons, 8allabankouL 8en Lhrew one more log on Lhe re:
Altbooqb we coooot expect oot ecooomy to qtow lts woy oot of oot fscol lmbolooces, o mote
ptoJocuve ecooomy wlll eose tbe ttoJeo[s tbot we foce ooJ locteose tbe llkellbooJ tbot we leove
o beoltby ecooomy to oot cbllJteo ooJ qtooJcbllJteo.
4. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
4
N
ow, havlng declded Lo expllclLly LargeL an lnauon level of 2 aL Lhelr mosL recenL meeung,
Lhe lCMC have venLured lnLo LerrlLory LhaL has been Lhe graveyard of many a CenLral 8anker -
[usL ask Lhe man wlLh Lhe uk's worsL case of wrlLer's cramp - 8ank of Lngland Covernor, Mervyn klng.
8ack ln uecember 2003, wlLh Lhe uk under Lhe sLeady hand of Chancellor Cordon 8rown and Lhe lasL
of 8rown's gold sales ln March 2002 noLhlng more Lhan a dlsLanL memory, Lhe uk adopLed Lhe Par-
monlsed lndex of Consumer rlces (PlC) as lLs benchmark lnauon raLe.
1he yardsuck (naLurally dubbed 'Plccup' by Lhe uk press) was used by Lhe LC8 Lo seL lnLeresL raLes
ln Lhe Lurozone and Lhe ldea was Lo brlng Lhe uk lnLo llne wlLh Luropean measures aer 8rown had
omclally decllned Lo [oln Lhe Lu ln !une of LhaL year.
AL Lhe ume, lL was sald LhaL, by adopung a common lnauon measure, lL would be easler Lo ascerLaln
wheLher and when Lhe uk economy had converged Lo Lhe polnL whereby adopung Lhe Luro would
be successful.
lsn'L hlndslghL wonderful?
1he largesL dlerence beLween Lhe new measure and Lhe uk's exlsung 8lx was ln how Lhey quanu-
ed Lhe eecL of houslng-relaLed cosLs.
revlously, Lhe 8lx had a far hlgher sensluvlLy Lo such cosLs buL Lhe PlC lessened Lhem ln an aL-
LempL Lo 'smooLh ouL' Lhe number...
AL Lhe ume, Lhe 8lx was runnlng aL 2.7 whlle Lhe new PlC was a far more voLe-frlendly 1.4.
So far, so good.
Cf course, Lhe adopuon of a new benchmark for lnauon meanL Lhe adopuon of a new LargeL as, had
Lhey kepL Lhe prevlous 2.3 llmlL, l dare say even Lhe mosL soporlc of [ournallsLs may have caughL
on.
and so, the bank of englands
currenL lnauon LargeL of 2
was adopted.
This had the immediate ef-
fecL of loosenlng moneLary
pollcy wlLh lnLeresL raLes fall-
lng 0.23 - a slde eecL LhaL
many 'experLs' felL would
prolong Lhe boom ln uk
properLy prlces for a llule blL
longer - and LhaL could only
be a good thing.
T
he uk has a raLher
qualnL sysLem ln place
whereby, under the bank
of Lngland AcL of 1998, Lhe
8ank's Covernor musL wrlLe
an open leuer of explanauon
1
2
3
4
5
6
%
2005 2006 2007 2008 2009 2010 2011
SOURCE: TTMYGH/BLOOMBERG
uk Cl lnauon
(Shaded ?ellow 8and = WlLhln 1argeL 8ange)
5. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
5
Lo Lhe Chancellor of Lhe Lxchequer lf lnauon exceeds Lhe LargeL by more Lhan 1 ln elLher dlrecuon,
and once every Lhree monLhs Lhereaer unul prlces are back wlLhln Lhe allowed range. 1he leuer
should also seL ouL whaL plans Lhe 8ank has for recufylng Lhe problem, and how long lL ls expecLed Lo
remaln aL Lhose levels ln Lhe meanume.
As can be clearly seen from Lhe charL (prevlous page), slnce mld-2003, Lhe uk lnauon raLe has re-
malned above Lhe 2 LargeL ln 48 ouL of 79 monLhs (a llule over 60 for Lhose of you keeplng score)
and lncludes klng's currenL 'wlnnlng sLreak' of 23 sLralghL monLhs above Lhe 2 Lhreshold (Lhe lasL 12
of whlch have been aL leasL uCu8LL Lhe LargeLed raLe)..
ln november of 2011, klng saL down aL hls desk Lo ll ln Lhe blanks ln Lhe now-sLandard communlca-
uon Lo explaln why Cl lnauon was runnlng aL (cough) 3 ln CcLober:
ueot cboocellot,
1be O[ce fot Nouoool 5tousucs wlll pobllsb Joto tomottow sbowloq tbot cll lofouoo wos 5.0X
lo Octobet. lo Aoqost l wtote oo opeo leuet to yoo becoose cll lofouoo boJ temoloeJ mote tboo
ooe petceotoqe polot obove tbe 2X totqet. As lt ls tbtee mootbs sloce l lost wtote to yoo, ooJ tbe
tote of lofouoo ls mote tboo ooe petceotoqe polot obove tbe totqet, l om wtluoq o fottbet opeo
leuet to yoo oo bebolf of tbe Mlc...
cll lofouoo fell bock to 5.0X lo Octobet. 8ot lt temolos well obove tbe 2X totqet. As JesctlbeJ lo
ptevloos leuets ooJ lofouoo kepotts, tbe cotteot blqb level of lofouoo tefects tbe locteose lo tbe
stooJotJ tote of vA1 eotllet tbls yeot, ooJ ptevloos steep locteoses lo lmpott ooJ eoetqy ptlces,
locloJloq teceot Jomesuc oullty ptlce tlses. lo tbe obseoce of tbose tempototy foctots, lt ls llkely
tbot lofouoo woolJ bove beeo below tbe 2X totqet...
Ah Lhose 'Lemporary facLors'
Cf course, ln Lhe scheme of Lhlngs, Lhe 8oman Lmplre was 'Lemporary'. 8uL l dlgress.
klng conunued:
5loce my ptevloos leuet, wotlJ qtowtb bos sloweJ ooJ oocettoloty oboot tbe ptospects fot tbe
qlobol ecooomy, ooJ lo potucolot tbe eoto oteo, bos locteoseJ. 1bose Jevelopmeots, ooJ occom-
pooyloq folls lo boosebolJ ooJ bosloess coofJeoce lo tbe uolteJ kloqJom, ote llkely to bove weok-
eoeJ tbe ootlook fot ovetoll ocuvlty lo tbe uk ecooomy ooJ so wlll ptobobly leoJ to o qteotet ooJ
mote petslsteot motqlo of spote copoclty tboo ptevloosly tbooqbt. 1bot moJe lt mote llkely tbot
lofouoo woolJ ooJetsboot tbe 2X totqet lo tbe meJlom tetm, ooJ ls wby, ot lts Octobet meeuoq,
tbe Mlc voteJ oooolmoosly to molotolo 8ook kote ot 0.5X, ooJ to locteose tbe slze of lts osset
potcbose ptoqtomme by I75 blllloo...
I
nation was llkely Lo undershooL Lhe 2 LargeL 'ln Lhe medlum Lerm' and LhaL ls why, wlLh
lnauon DOUBLE Lhe LargeL level, Lhe 8oL MoneLary ollcy Commluee declded Lo lncrease Lhe
boes CuanuLauve Laslng asseL purchase programme by 73 bllllon. Aer all, lnauon can always be
conLrolled once lL beglns Lo become a problem, rlghL?
temporary [tem-puh-rer-ee] ad[ecuve, noun, plural
-raries.
ad[ecuve
1. lasung, exlsung, servlng, or eecuve for a
ume only, noL permanenL:
6. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
6
Wrong.
ln laLe-1921, as Lhe CenLral 8ank of Welmar
Cermany boughL governmenL debL wlLh new-
ly-prlnLed currency, everyLhlng looked 'un-
der conLrol'. l feel cerLaln LhaL, had he been
requlred Lo wrlLe a slmllar leuer Lo Lhen-
Chancellor Wllhelm Cuno aL Lhe ume, 8udolf
von PaversLeln, governor of Lhe 8elchsbank's
wording would have been eerily similar.
ln a mauer of no more Lhan a few weeks, Lhe
conLrollable became anyLhlng buL and, as you
can see from Lhe charL, le, prlces exploded
(along wlLh money supply and Lhe exchange
rate).
(AL Lhls polnL, l wlll lnclude my now-cusLomary
link to a free downloadable pdf of the wonderful book by adam Fergusson When Money ules" whlch
ls absoluLely requlred readlng.)
1he wonderful uylan Crlce of Soc Cen falrly brldled when commenung on Lhe lCMC's move Lhls week
ln hls 'opular ueluslons' plece:
lloweJ tblokloq qot os loto tbls mess. 8ot totbet tboo cbooqe tbot foweJ tblokloq, oot pollcy
mokets ote opplyloq lt wltb eveo mote tlqoot. we bove mote Jebt fot losolveot bottowets, mote
foooclol eoqloeetloq, mote compllcoteJ bookloq teqolouoos, mote blomloq specolotots fot ev-
etytbloq, mote mooetoty expetlmeotouoo by ceottol books. Oot pollcy mokets bove obsolotely oo
lJeo wbot tbeyte Joloq, bot tbeyte qlvloq lt o qo!
1be lotest ftom tbe leJ ptovlJes o wooJetfol exomple. uoJetetteJ by tbe lotest colomltoos follote
of cll totqeuoq teqlmes (o btlef blstoty of wblcb wlll be pteseoteJ below), lt bos ooooooceJ oo
expllclt 2X lofouoo totqet. 8ot wby? woolJ oo expllclt totqet bove moJe ooy Jl[eteoce to tbe lost
ctlsls? wlll lt pteveot tbe oext ooe? AoJ wbete JlJ tbls 2X come ftom? we Joot koow. 8ot we
sospect tbot post oolofotmeJ copltol motket uoketloq bos folleJ to coottol tbe oocoottolloble, ooJ
wete pteuy sote tbese ooes wlll too.
lo foct, lf socb uoketloq bos lo tbe post beeo tbe ptlmoty cooses of ctlses, tbeo wby woot tbls lot-
est ouempt - tbe 2X lofouoo totqet - be tbe
coose of tbe oext ooe? 1bete ote cettololy
pteceJeots. 1otqeuoq stoble ptlces lsot o
oew lJeo. 1be ftst expetlmeot wos octoolly
cooJocteJ lo tbe u5 lo tbe 1920s, oppoteot-
ly soccessfolly. loJeeJ, so stoble wete coo-
somet ptlces tbot tbe ootbotlues ossomeJ
tbete wos oo lofouoooty tbteot. AoJ, tbls
btlllloot oew lJeo, tbot stoble coosomet
ptlces wete botb o oecessoty ooJ so[cleot
cooJluoo fot ecooomlc stoblllty, ptoveJ so
oppeolloq tbot tbe N leJ oJopteJ lt os o
pollcy objecuve.
CLICK TO ENLARGE SOURCE: COYOTEBLOG
SOURCE: BLOOMBERG/SOC GEN
7. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
7
uylan demonsLraLes how, durlng boLh !apan's nlkkel bubble of Lhe 1980s and Lhe nASuAC bubble of
Lhe 1990s, Lhe relauve Cl remalned benlgn LhroughouL and concludes LhaL Lhe problem ls one of be-
lng able Lo measure WPL8L lnauon ls appearlng raLher Lhan ll lL ls appearlng aL all:
lofouoo totqeuoq, lt seems, bos o blstoty of fostetloq osset bobbles becoose tbe oouoo tbot o
stoble cll epootes to o tobost ecooomy cootolos oometoos folse ptemlses.
1be ftst ls tbot lofouoo ls meosotoble. lostelo ooce boJ tbe wotJs oot evetytbloq wblcb coo be
meosoteJ cooots, ooJ oot evetytbloq wblcb cooots coo be meosoteJ oo tbe Jesk lo bls o[ce ot
ltlocetoo. AoJ oltbooqb tbe wotlJ mlqbt be slmplet lf lt wosot so, l belleve lofouoo boppeos to
be ooe of tbe tbloqs wblcb cooots bot coot be meosoteJ. 1be foct ls tbot ooce mooey ls cteoteJ
yoo Joot koow wbete lt eoJs op. Moybe lt wlll eoJ op lo tbe coosomet qooJs motket, moybe lt
woot. Ot moybe lt wlll be moluplleJ vlo tbe foooclol system loto oew cteJlt wblcb wlll lofote os-
set ptlces losteoJ. veo tbeo, we Joot koow wblcb ossets.
And, ln my mlnd, 1PlS ls preclsely Lhe problem we face Loday.
S
ince 2008 and Lhe
bursung of Lhe greaL
credlL bubble, cenLral banks
have been prlnung money
hand over sL ln a desperaLe
auempL Lo generaLe Lhe lna-
uon Lhey feel ls necessary Lo
drag the world out of a per-
celved deauonary splral. 1he
charL (le) shows Lhe growLh
ln 'asseLs' of C-3 CenLral 8anks
over Lhe lasL 17 monLhs alone,
durlng whlch ume, Lhey have
lncreased by 32.
To date, the level of the vari-
ous benchmark Cl lndlca-
tors would suggest there have
been no deleLerlous eecLs,
buL [usL because Lhe resulLs
aren'L showlng up where Lhose ln charge of measurlng Lhem are LCCklnC, doesn'L mean Lhey aren'L
showing up at all.
Look aL food prlces across Asla. Look aL houslng prlces ln Pong kong. Look aL fuel prlces ln nlgerla.
Look aL heaung cosLs ln Lhe uk.
Look aL gold.
1argeung lnauon ls a dangerous game Lo play because - well, because lL ls lmposslble. ?ou cannoL
LargeL 'lnauon' per se, only a speclc measure of a speclc collecuon of lLems, and Lhe wlder LhaL
collecuon of lLems ls, Lhe harder you make lL for yourself.
8uL desplLe whaL seems falrly obvlous Lo many - namely LhaL 'lnauon' cannoL be nely conLrolled by
semng lnLeresL raLes (Lhough, lf caughL ln ume and Lackled aggresslvely enough lL can someumes be
2010 2011
Aug Jul Jun May Apr Mar Feb Dec Jan Sep Oct Nov Dec
6,000
6,200
6,400
6,600
6,800
7,000
7,200
7,400
7,600
7,800
8,000
8,200
8,400
Jan Sep Oct Nov
US$
(bln)
G-3 Balance Sheet Total Assets
SOURCE: BLOOMBERG/KEN LANDON/TTMYGH
8. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
8
Lamed as aul volcker demonsLraLed), Lhe mlnds ln charge of semng pollcy have a pecullar amLude
Lowards someLhlng LhaL ls so lmpreclse and so mulu-faceLed. 1he general level of cerLalnLy surround-
lng lnLeresL raLe pollcy, quanuLauve easlng and lnauon amongsL CenLral 8ankers ls a consLanL source
of amazemenL Lo me.
1he playbook for Lhe game we are playlng now was drawn up a long ume ago and we can'L say we
weren'L shown whaL lay beLween Lhe covers.
As far back as november 2002, when 8allabankouL 8en made hls semlnal speech Lo Lhe nauonal
LconomlsLs' Club, we were Lold how Lhls was golng Lo play ouL.
llrsLly, Lhe uLle:
Defation: Making Sure "It" Doesn`t Happen Here
'Sure'? Pard Lo see how you can be 'sure' 8en, buL Ck.
Secondly, Lhls famous nuggeL wlLh whlch mosL of you are no doubL famlllar:
1be cooclosloo tbot Jefouoo ls olwoys tevetslble ooJet o fot mooey system follows ftom boslc
ecooomlc teosooloq.
'Always'. '8aslc economlc reasonlng'.
Thirdly, the big one:
...tbe u.5. qovetomeot bos o tecbooloqy, colleJ o ptlouoq ptess (ot, toJoy, lts electtoolc epolvoleot),
tbot ollows lt to ptoJoce os mooy u.5. Jollots os lt wlsbes ot esseouolly oo cost. 8y locteosloq tbe
oombet of u.5. Jollots lo cltcolouoo, ot eveo by cteJlbly tbteoteoloq to Jo so, tbe u.5. qovetomeot
coo olso teJoce tbe voloe of o Jollot lo tetms of qooJs ooJ setvlces, wblcb ls epolvoleot to tolsloq
tbe ptlces lo Jollots of tbose qooJs ooJ setvlces. we coocloJe tbot, ooJet o popet-mooey system,
o JetetmloeJ qovetomeot coo olwoys qeoetote blqbet speoJloq ooJ beoce posluve lofouoo...
And nally, Lhls llule nuggeL
lf we Jo foll loto Jefouoo, bowevet, we coo toke comfott tbot tbe loqlc of tbe ptlouoq ptess exom-
ple most ossett ltself, ooJ so[cleot lojecuoos of mooey wlll olumotely olwoys tevetse o Jefouoo.
1hree quoLes. 1hree uses of Lhe word 'always'.
lf someLhlng ls 'always' guaranLeed Lo work, you [usL keep dolng lL unul you geL Lhe resulL you ex-
pecLed, rlghL.
8lghL?
1he lnauon warnlng llghL LhaL ls bullL lnLo Lhe gold prlce has been ashlng non-sLop for eleven sLralghL
years and, aer Lhe shorL-llved and, yes l'll say lL, somewhaL susplclous-looklng correcuon ln uecem-
ber, gold has resumed lLs lnexorable march hlgher Lhls year amldsL a wave of predlcuons for boLh
hlgh and hlgher prlces and furLher lnauonary acuon by Lhe LC8 ln Lhe form of Lhe L18C along wlLh
conslsLenL and concerLed Lalk of Lhe need Lo generaLe lnauon by Lhe world's oLher CenLral 8anks.
(lncldenLally, Lhe recenL announcemenL by Lhe lCMC LhaL Lhey would keep Lhelr low raLe pollcy for
AnC1PL8 year - ouL Lo 2014 - sLruck me as lncredlbly sLrange. 1he only posslble reason for dolng
LhaL, ln my mlnd aL leasL, would be Lo re a shoL across Lhe bow of oLher CenLral 8anks hell-benL on
debaslng Lhelr currencles ln Lhe face of a sLrengLhenlng dollar. 1haL ls nC1 someLhlng 8allabankouL
9. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
9
8en ls abouL Lo slL quleLly and leL happen. ln facL, a case could be qulLe easlly made for CL3 belng
noL necessarlly Lrlggered by poor economlc numbers, buL by a sLrengLhenlng dollar - buL more of LhaL
anoLher ume).
Cold ls mosL cerLalnly nC1 slgnalllng a nlce 2 rlse ln lnauon as lLs galns slnce 2000 demonsLraLe:
WhllsL comparlng gold's rlse Lo LhaL of Lhe Cl ls far Loo
slmpllsuc, Lhe dlsparlLy beLween Lhe Lwo should cerLalnly
ralse quesuons. Cne of Lhem ls a (reasonably) freely-Lrad-
ed commodlLy, and Lhe oLher a governmenL-produced sLa-
usucal measure LhaL ls frequenLly sub[ecL Lo alLerauons ln
its methodology.
and yet...
CenLral 8ankers Lhe world over conunue Lo belleve Lhey
can repeaLedly apply more moneLary '[ulce', safe ln Lhe
knowledge LhaL Lhe ouLcome ls 'always' assured based on
'baslc economlc Lheory'.
l beg Lo dler.
l shall leave lL Lo uylan Lo sum Lhls up far more eloquenLly
Lhan l ever could, wlLh Lhe closlng quoLe from Lhe laLesL
'opular ueluslons':
...wbot lf, llke fotce-feeJloq stetolJs to o botse becoose yoo
ossome lt sboolJ be toooloq fostet, lo Joloq so yoo klll lt,
Jlstotuoq tbe cteJlt system so qtotespoely os to ctosb tbe
test of tbe ecooomy?
1beyve ossomeJ tbot woolJot be o ptoblem, ooJ tbey os-
someJ tbot lf tbete wos ooe tbeyJ be oble to fx lt (8eo 8etoooke sopposeJly ptomlseJ Mlltoo
ltleJmoo tbot tbete woolJ oevet be oootbet qteot Jeptessloo becoose tbe lessoos boJ beeo
leotoeJ ftom tbe 19J0s). 8ot, ossomloq yoo koow bow tbe oolmol beboves lsot tbe cottect woy
to qo oboot ouololoq koowleJqe oboot bow tbe oolmol octoolly beboves. 5o tbey Joot ouolo
koowleJqe oboot bow tbe oolmol beboves. 5o tbe oolmol keeps moolloq tbem.
8ot tbey keep Joloq lt. Now o 2X cll lofouoo totqet ls qoloq to moke oll tbe Jl[eteoce. AoJ l foJ
lt o vety sttooqe tbloq. l jost Joot ooJetstooJ wby tbeyte so sote tbey koow oll tbls sto[ Jesplte
oll tbe evlJeoce to tbe coottoty. l feel llke Mccottby lo Ooe llew Ovet tbe cockoos Nest. 1bots
tlqbt Mt. Motuol, tbete ls oo ostet 8oooy.
jklcbotJ] leyomoo solJ sometbloq else wblcb l llke. ne solJ
OtJlooty fools ote oll tlqbt, yoo coo tolk to tbem, ooJ tty to belp tbem oot. 8ot pompoos fools -
qoys wbo ote fools ooJ ote covetloq lt oll ovet ooJ lmptessloq people os to bow wooJetfol tbey
ote wltb oll tbls bocos pocos - tbot l coooot stooJ! Ao otJlooty fool lsot o foket, oo booest fool ls
oll tlqbt. 8ot o Jlsbooest fool ls tettlble!
l tblok bes tlqbt. ulsbooest fools ote tettlble. lts o sbome tbeyte lo cbotqe.

Year Gold Price
($/oz)
%
Change
2000 272.25
2001 278.95 +2.46
2002 348.05 +24.77
2003 415.45 +19.36
2004 438.45 +5.53
2005 517.00 +17.91
2006 636.70 +23.15
2007 833.92 +30.97
2008 882.05 +5.77
2009 1096.95 +24.36
2010 1420.78 +29.52
2011 1563.70 +10.05
Average Yearly Gain
+17.62%
10. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
10
T
his week l have been swamped Lrylng Lo geL ready for Lhe Cambrldge Pouse Callfornla lnvesL-
menL Conference nexL weekend ln lndlan Wells and, my appearance aL LhaL evenL wlll, l am
afrald, mean LhaL you won'L be hearlng from me nexL week (unless you are ln Lhe Callfornla deserL),
buL l leave you Lhls week wlLh plenLy of readlng maLerlal wlLh whlch Lo enLerLaln yourselves ln Lhe
meanume.
l began Lhls edluon of 1hlngs 1haL Make ?ou Co Pmmm..... Lalklng abouL Croundhog uay and no-
where ls LhaL phenomenon more evldenL Lhan ln Lhe negouauons over Lhe Creek Sl deal whlch,
every day, seems Lo be hours away before relapslng Lo 'a mauer of days' or 'nexL week'. We've heard
lL all before, buL, as l have suggesLed many umes ln Lhese pages, LhaL really lS Lhe end of Lhe road
you can see ln Lhe near dlsLance. Creece has buL weeks le before defaulL and exlL from Lhe Luro
and Loday we hear how Lhe Lurozone has losL pauence (agaln) wlLh Creece and LhaL Lhey only have
(anoLher) 24 hours ln whlch Lo x Lhe problem.
Llsewhere, a [udge's rullng on sunken Lreasure looks llke provldlng a welcome boosL Lo Lhe Spanlsh
1reasury's coers, Lhe 8undesbank ls slnklng lnLo debL Lrylng Lo prop up Lhe Lurozone (LhaL won'L lasL
long), Chlna's properLy markeL cools Lo arcuc exLremes and !apan's decllne lnLo relauve obscurlLy ls
belng hasLened by Lhe former laughlng sLock of Aslan 'conLenders' - korea (SouLh, noL norLh, l hasLen
to add).
We Lake a look aL lacebook's glanL llsung, 1yler and Lhe gang aL Zerohedge dlg lnLo Lhe remarkable
nl number from lrlday, Ambrose Lvans-rlLchard plcks aparL Lhe growlng rl beLween lrance and
Cermany and Crls Sherldan ls on alllLerauve ll8L as he ponders MarkeLs, Murmurauons & Machlnes.
Cur charLs look aL CenLral 8anks' explodlng balance sheeLs, Lurope's devasLaung debL mounLaln, and
Lhe Chlnese work force as well as Lechnology llsungs Lhrough Lhe years and a very useful Lechnlcal
lndlcaLor.
Charles 8lderman of 1rlm1abs has hls own Lake on Lhe nl number, Chrls MarLenson posLs a Lerrlc
lnLervlew wlLh !ames ulnes, and we head back Lo 1999 and a speech glven by Sen. 8yron uorgan LhaL
wlll uLllnl1LL? make you go Pmmm....."
1haL's all from me for anoLher week, l'll leave you ln Lhe company of some of Lhe besL mlnds ln Lhe
business.
U
ntil nexL ume...
As a resulL of my role aL vulpes lnvesLmenL ManagemenL, lL falls upon me Lo dlsclose LhaL, from ume-Lo-ume,
Lhe vlews l express and/or Lhe commenLary l wrlLe ln Lhe pages of 1bloqs 1bot Moke oo Co nmmm..... may
reecL Lhe posluonlng of one or all of Lhe vulpes funds - Lhough l wlll noL be maklng any speclc recommenda-
uons ln Lhls publlcauon.
Grant
www.vulpeslnvesL.com
11. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
11
cooteots 06 February 2012
1reasure lrom Sunken Calleon MusL 8e 8eLurned 1o Spaln, !udge Says
8undesbank Slnks ueeper lnLo uebL Savlng Lurope
Luro Zone Loses auence WlLh Creece
Lxplalnlng ?esLerday's Seasonally Ad[usLed nonfarm ayroll 8eaL"
Creece Says laces 24-Pour ueadllne 1o Cllnch 8escue
Chlna's Cnce-PoL roperLy MarkeL 1urns olar
The Value Of Friendship
!apan's 1echnology ClanLs laced uown ulsasLer - 8uL 1he new Lnemy ls uoubL
MarkeLs, Murmurauons, And Machlnes
Pungary Seeks 13-20 8llllon Luro lMl/Lu CredlL Llne: Cmclal
lrench SoclallsLs' Laun 8evolL AgalnsL Cermany
LmploymenL: Abbou & CosLello
CharLs 1haL Make ?ou Co Pmmm.....
Words 1haL Make ?ou Co Pmmm.....
and Finally.....
12. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
12
I
t ls one of Lhe greaLesL underwaLer Lreasure Lroves of all ume, a glluerlng haul of gold and sllver
recovered from a mysLerlous sunken Spanlsh galleon and secreLly own across Lhe ALlanuc Lo Lhe
uS.
8uL now an eplc baule over ownershlp of 394,000 gold and sllver colns scauered on Lhe ocean oor
has ended wlLh vlcLory for Lhe Spanlsh governmenL, wlLh Lhe Amerlcan Lreasure-hunLer Cdyssey Ma-
rlne Lxplorauon ordered Lo send Lhe valuable haul back home.
A [ubllanL Spanlsh governmenL announced on Wednesday LhaL Lhe $300m-worLh (308m) of gold and
sllver colns found aL a slLe LhaL Cdyssey called 8lack Swan" would be back on Spanlsh soll wlLhln 10
days.
1hls senLence glves Spanlards back whaL was already Lhelrs," sald Lhe culLure mlnlsLer, !ose lgnaclo
WerL. 1here ls a space of 10 days ln whlch Lhe colns musL be reLurned."
1he courL declslon puLs an end Lo nearly ve years of lnLrlgue on
Lhe hlgh seas slnce Cdyssey scooped Lhe preclous haul from Lhe
ALlanuc seabed ln May 2007. 1o Lhe fury of Spanlsh auLhorlues lL
secreLly landed Lhe Lrove ln ClbralLar and ew lL ouL ln charLered
alrcra Lo lLs base ln llorlda.
A Amerlcan clrculL courL [udge has upheld a declslon by ALlanLa
[udge Mark lzzo, who had declared Lhe Lrove came from Lhe
nuesLra Senora de las Mercedes, a Spanlsh frlgaLe sunk by a 8rlL-
lsh squadron o Cape SL Mary, orLugal, ln CcLober 1804.
1he [udge re[ecLed Cdyssey's argumenL LhaL Lhere was no clear wreck slLe, wlLh Lhe colns scauered so
wldely lL was lmposslble Lo say exacLly whlch vessel Lhey came from.
1he Lreasure-hunung company, he sald, had seL ouL Lo nd Lhe Mercedes and had clearly done so.
lzzo argued LhaL Lhe colns, all daLed prlor Lo 1804, maLched Lhe Mercedes' cargo of colns mlnLed ln
Llma, eru - parL of a haul belng broughL back Lo nance Spaln's Luropean wars. Pe also sald cannon
found Lhere maLched Lhose on Lhe Mercedes.
8lghuul ownershlp of Lhe colns, whlch ll 600 barrels, now belongs Lo Spaln and Lo descendanLs of Lhe
230 Spanlsh sallors who were losL when Lhe vessel blew up.
Powever, Lhe whereabouLs of a furLher 400,000 colns from Lhe Mercedes remalns a mysLery.
1he Lreasure was found by one of Cdyssey's remoLe-conLrolled, deep sea roboLs as lL scoured Lhe
seabed 1,100 metres down.
Cdyssey's declslon Lo use ClbralLar led Lo a Lense sLand-o ln dlspuLed waLers o Lhe rock. ShorLly
aer Lhe colns had been splrlLed o Lo llorlda, a Spanlsh warshlp forced Lhe company's 230 Cdyssey
Lxplorer salvage vessel lnLo Lhe nearby Spanlsh porL of Algeclras, whlle lL was searched. lLs capLaln,
SLerllng vorus, was arresLed, buL laLer freed.
UK GUARDIAN / LINK
G
ermanys 8undesbank has enurely exhausLed lLs sLock of prlvaLe asseLs and run up a quar-
Ler of a Lrllllon euros ln llablllues propplng up Lhe eurozone sysLem, Lesung Lhe pollucal llmlLs
of LMu solldarlLy ln Cermany.
... Rightful ownership of the coins,
which ll 600 barrels, now belongs to
Spain and to descendants of the 250
Spanish sailors who were lost when the
vessel blew up.
13. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
13
1he operauons are parL of Lhe Luropean CenLral 8ank's '1A8CL12' neLwork of auLomauc paymenLs be-
Lween Lhe nauonal cenLral banks of Lhe Luroland club. 1he 8undesbank has already provlded t496bn
(413bn) Lo counLrles ln Lrouble, chley Creece, lreland, lLaly and Spaln.
1hls ls reachlng Lhe danger polnL. lL ls already one and a half umes Lhe LoLal budgeL of Lhe Cerman
governmenL," sald rofessor lrank WesLermann of Csnabruck unlverslLy. lf any of Lhe crlsls counLrles
exlLs Lhe euro or lf Lhere ls an LMu break-up, Lhe 8undesbank bears exLreme rlsks."
1he 8undesbank - Lhe domlnanL body ln Lhe euro sysLem - used Lo keep a sLock of t270bn of prlvaLe
securlues (renance credlL) before Lhe sLarL of Lhe nanclal crlsls. 1hls was depleLed lasL year as lL sold
asseLs Lo meeL growlng demands on Lhe 1A8CL12 scheme.
Cnce Lhe debL drama began Lo engulf Lhe blgger economles, Lhe
8undesbank was forced Lo borrow money Lo meeL lLs obllgauons Lo
oseL caplLal lghL, slnce lL refused Lo sell lLs sLash of gold. lL now owes
t228bn Lo Cerman banks.
8undesbank's omclal posluon ls LhaL 1A8CL12 does noL lncrease rlsk
for Cermany, buL Lhere has been mounung alarm from Cermany's llC lnsuLuLe and prlvaLe econo-
mists.
1here are pollucal llmlLs Lo 1A8CL12 supporL. 1he reason why Lhe LC8 sLarLed prlnung money ln
uecember was Lo avold pushlng Lhe 8undesbank deeper lnLo debL," sald rof WesLermann, referrlng
Lo Lhe LC8's provlslon of t489bn ln cheap loans Lo banks for Lhree years.
uavld Marsh, auLhor of books on boLh Lhe 8undesbank and Lhe euro, sald Lhe 1A8CL12 sysLem has Lhe
eecL of locklng Cermany ever deeper lnLo moneLary unlon.
1he longer lL goes on, Lhe larger Lhe cosL of a eurozone break-up slnce Lhese credlLs could be wlped
ouL wlLh horrendous losses. lL ls abouL ume Lhls was Lhe focus of proper debaLe ln Lhe 8undesLag,
slnce Lhe Cerman Laxpayers may have Lo pay for lL," he sald.
AMBROSE EVANS-PRITCHARD / LINK
E
uro zone nance mlnlsLers Lold Creece on SaLurday lL could noL go ahead wlLh an agreed deal
Lo resLrucLure prlvaLely-held debL unul lL guaranLeed lL would lmplemenL reforms needed Lo
secure a second nanclng package from Lhe euro zone and Lhe lMl.
Luro zone mlnlsLers had hoped Lo meeL on Monday Lo nallze Lhe second Creek ballouL, whlch has
Lo be ln place by mld-March lf ALhens ls Lo avold a chaouc defaulL. 8uL Lhe meeung was posLponed
because of Creek relucLance Lo commlL Lo reforms.
lnsLead, Lhe mlnlsLers held a conference call on SaLurday Lo Lake sLock of progress on Lhe second -
nanclng package, whlch euro zone leaders seL aL 130 bllllon euros back ln CcLober.
1here was a very clear message LhaL was conveyed from all paruclpanLs of Lhe Leleconference ... Lo
Lhe Creeks LhaL enough ls enough," one euro zone omclal sald. 1here ls a greaL sense of frusLrauon
that they are dragging their feet.
1hey should geL Lhelr acL LogeLher and sLarL Lalklng honesLly, declslvely and speedlly wlLh Lhe 1rolka
on Lhe aspecLs of Lhe programme LhaL remaln Lo be nallzed - on scal and labor markeL reforms,"
Lhe omclal sald.
... e longer it goes on, the larger
the cost of a eurozone break-up
since these credits could be wiped
out with horrendous losses.
14. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
14
1he 1rolka are Lhe represenLauves of Lhe Luropean Commlsslon, Lhe Luropean CenLral 8ank and Lhe
lnLernauonal MoneLary lund, who have prepared a Creek debL susLalnablllLy analysls on whlch Lhe
second nanclng programme wlll be based.
1he maln lssue ls Lhe lack of reform, or prlor acuon, ln Creece," a second euro zone omclal sald.
Luro zone mlnlsLers were also dlssaused wlLh Creek llnance MlnlsLer Lvangelos venlzelos because
Lhey belleved Lhe mlnlsLer was paylng more auenuon Lo hls posluon wlLhln hls parLy ahead of Lhe
Aprll elecuons, Lhan Lo Lalks abouL reforms.
1here ls a greaL sense of frusLrauon wlLh MlnlsLer venlzelos,
who ls very hard Lo geL hold of because he ls very busy cam-
palgnlng for Lhe leadershlp of (Lhe Creek parLy) ASCk, so
he ls noL avallable Lo meeL wlLh 1rolka members," Lhe rsL
omclal sald.
Pe ls preparlng hls own pollucal fuLure, raLher Lhan Lhe fu-
Lure of hls counLry. eople are serlously dlsgrunLled abouL
LhaL and have conveyed Lhls very clearly Lo hlm Lhls aernoon," Lhe omclal sald.
1here ls an lncreaslng sense of frusLrauon LhaL why should we honour our parL of Lhe bargaln, whlch
we have ln Lhe pasL, whlle Creece does noL seem Lo care LhaL much, and has noL dellvered Lhelr parL
of Lhe bargaln," Lhe omclal sald.
ln ALhens, venlzelos admlued Lo a growlng sense of lmpauence wlLh Lhe Creeks.
1here ls greaL lmpauence and greaL pressure noL only from Lhe Lhree lnsuLuuons LhaL make up Lhe
Lrolka buL also from euro zone member sLaLes," venlzelos sald aer whaL he called a very dlmculL"
conference call wlLh euro zone counLerparLs.
1he momenL ls very cruclal. LveryLhlng should be concluded by Lomorrow nlghL."
!ean-Claude !uncker, who chalrs Lhe Lurogroup of euro zone nance mlnlsLers, volced Lhe posslblllLy
of default.
lf we were Lo esLabllsh LhaL everyLhlng has gone wrong ln Creece, Lhere would be no new pro-
gramme, and LhaL would mean LhaL ln March Lhey have Lo declare bankrupLcy," he sald ln advance
copy of commenLs Lo news weekly uer Splegel.
REUTERS / LINK
S
ince Lhere sull ls confuslon regardlng yesLerday's whopplng surge" ln non-farm payrolls, whlch
represenLed a 243k [ump ln Lhe LsLabllshmenL survey (of whlch 490k was Lemp [obs, same as ln
Lhe Pousehold Survey where Lemp [obs soared by a record 699k), yeL only Lo arrlve aL an employmenL
number lasL seen Len years ago, when Lhe uS populauon was abouL 30 mllllon lower (Lhlnk abouL LhaL:
30 mllllon lncrease ln populauon and no change ln Lhe LoLal employed), here ls Lhe nal explanauon
of what happened yesterday.
As everyone knows by now, !anuary ls when Lhe 8LS lmposes lLs annual seasonal ad[usLmenL revlslon
(more on LhaL ln a second) for Lhe prevlous !anuary-uecember perlod. WhaL Lhls manlfesLs lLself mosL
dlrecLly ln, ls Lhe dlvergence beLween Lhe nonad[usLed !anuary number of Lhe esLabllshmenL survey
of any glven year and Lhe unad[usLed number. And whlle Lhe !anuary ad[usLmenL ls always subsLan-
ual, lL ls Lhe facL LhaL Lhe so-called beaL was enurely based on assumpuons LhaL makes yesLerday's nl
... ere is an increasing sense of frustration
that why should we honour our part of the
bargain, which we have in the past, while
Greece does not seem to care that much,
and has not delivered their part of the bar-
gain,
15. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
15
number so meanlngless, and hardly Lhe basls Lo assume LhaL Lhe uS economy has Laken o.
1he charL below [le] shows Lhe ad[usLed and unad[usLed employmenL survey daLa for LoLal nonfarm
Lmployees. 1he annual !anuary overad[usLmenL ls more Lhan evldenL. !usL as evldenL are Lhe subse-
quenL under-ad[usLmenLs as seasonal daLa ls lowered Lo accounL for volaullLy ln Lhe nSA daLa. WhaL
ls very noLable ls LhaL ln !anuary, absenL 8LS smooLhlng calculauon, whlch are nowhere ln Lhe labor
force, buL solely ln Lhe mlnd of a few 8LS employees, Lhe real economy losL 2,689,000 [obs, whlle neL
of Lhe ad[usLmenL, lL acLually galned 243,000 [obs: a delLa of 2,932,000 [obs based solely on sLausucal
assumpuons ln an excel spreadsheeL!
So how does Lhls daLa L ln speclcally ln Lhe conLexL of Lhe [usL passed nl whopper of a number?
Slmple. 1he charL [above, rlghL] shows Lhe !anuary seasonal ad[usLmenL for Lhe pasL 4 years, slnce
2009. 1he number of [obs added for seasonal" purposes Lo Lhe nl number were as follows: 2009
- 2,006,000, 2010 - 1,970,000, 2011 - 2,129,000, and Lhe all lmporLanL 2012: 2,146,000. Cnce agaln,
Lhls ls Lhe number added Lo Lhe nl unrevlsed basellne Lo geL a nal" number whlch ls Lhen blasLed
Lo Lhe medla. 1he charL below shows Lhe hlsLorlcal !anuary ad[usLmenL, Lo Lhe nl daLa, as well as Lhe
2012 reporLed ad[usLmenL, and also whaL Lhe sLausucal ad[usLmenL would be for Lhe nl number Lo
have Lhe nl number come ln llne wlLh expecLauons of a 140,000 beaL.
ZEROHEDGE / LINK
G
reece has [usL one day le Lo sLrlke a deal wlLh lmpauenL lenders and relucLanL pollucal parLy
leaders on a 130 bllllon rescue plan before Lhe counLry ls pushed Lowards a chaouc defaulL, lLs
nance mlnlsLer warned on SaLurday.
ALhens has wrangled wlLhouL success for weeks wlLh lenders and prlvaLe bondholders on Lhe ballouL
package and a bond swap plan, pumng lLself dangerously close Lo bankrupLcy as 14.3 bllllon euros of
debL falls due ln mld-March.
1he Lalks have been held up largely on concern LhaL Lhe rescue plan may noL be enough Lo brlng
Creece's debL back Lo a susLalnable level, and fears LhaL ALhens lacks Lhe wlll or ablllLy Lo ram Lhrough
reforms demanded ln exchange for ald.
ln an apparenL warnlng Lo Creek pollucal leaders opposlng key reforms, llnance MlnlsLer Lvangelos
venlzelos sald Lhe pauence of Luropean parLners and Lhe lnLernauonal MoneLary lund fooung Lhe blll
for Creece's ballouL was wearlng Lhln.
CLICK TO ENLARGE SOURCE: ZEROHEDGE
16. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
16
1here ls greaL lmpauence and greaL pressure noL only from Lhe Lhree lnsuLuuons LhaL make up Lhe
Lrolka buL also from euro zone member sLaLes," venlzelos sald aer whaL he called a very dlmculL"
conference call wlLh euro zone counLerparLs.
1he momenL ls very cruclal. LveryLhlng should be concluded by Lomorrow nlghL. We are on a knlfe-
edge, he told reporters.
ALhens had made progress by agreelng a plan Lo recaplLallze Creek banks and deLalls on prlvauzauon,
he sald. A senlor banker Lold 8euLers Lhe recaplLallzauon would occur malnly vla common shares wlLh
resLrlcLed voung rlghLs.
8uL far blgger sucklng polnLs on wages and spendlng cuLs remaln unresolved, and venlzelos warned
LhaL Lhe sLakes were rlslng as ume ran ouL. 1he dlsLance beLween Lhe successful compleuon of Lhe
procedures and an lmpasse whlch could happen by accldenL or because
of a misunderstanding is very small.
1echnocraL rlme MlnlsLer Lucas apademos was due Lo conunue Lalks
wlLh lenders on SaLurday ln a bld Lo cllnch agreemenL before calllng ln
Lhe soclallsL, conservauve and far-rlghL parLy leaders ln hls coalluon Lo
seek their blessing.
1haL meeung of parLy chlefs, lnlually scheduled for SaLurday, has now been puL o unul early Sunday
aernoon, a governmenL source sald...
Creek omclals have descrlbed Lhe negouauons as Lough, wlLh Lhe Lrolka of Luropean CenLral 8ank,
Luropean unlon and lMl lenders unwllllng Lo yleld an lnch from Lhelr demands. MaraLhon negoua-
uons ended wlLhouL a deal on lrlday.
1he Lrolka ls noL backlng down on wages, hollday bonuses and supplemenLary penslons," a Creek
governmenL omclal sald.
none of Lhese lssues have been resolved. 1hey are all open and Lhe onus ls on pollucal leaders."
1he Lalks have moved slowly also because Lhe Lrolka wanLs agreemenL on all parLs of Lhe complex
Creek rescue deal before slgnlng o on Lhe ballouL, a source close Lo Lhe Lalks sald.
1haL lncludes reforms and spendlng cuLs, pledges by pollucal leaders Lo back Lhe reforms, as well as
Lhe debL swap and any oLher lnluauve -- lncludlng any Laken by publlc credlLors llke Lhe LC8 -- LhaL
would brlng Creece's debL down Lo Lhe LargeLed 120 pcL of Cu level by 2020, Lhe source sald.
Luropean unlon sources say euro zone governmenLs may now have Lo cough up an exLra 13 bllllon
euros on Lop of Lhe 130 bllllon already agreed.
REUTERS / LINK
F
lexible markeung sLraLegles LhaL helped some resldenual real esLaLe developers beaL 2011
sales LargeLs may prove no maLch for governmenL pollcymakers who've Laken a rlgld sLance on
houslng markeL conLrols for 2012.
1hus, Lhe credlL and home buylng conLrols phased ln by Lhe governmenL slnce 2010 are llkely Lo have
more of Lhelr deslred eecLs by coollng home prlces and dlscouraglng aL-lpplng ln comlng monLhs.
lor developers, LhaL means a more challenglng buslness cllmaLe.
... e moment is very crucial.
Everything should be concluded
by tomorrow night. We are on a
knife-edge,
17. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
17
lndeed, execuuves from several ma[or developers who spoke wlLh Calxln recenLly sald Lhey sense a
long, gurauve wlnLer seullng ln as revenues decllne and credlL remalns ughL.
Mergers and Lakeovers are llkely Lo whlule developer ranks, whlle slackenlng demand wlll slow con-
sLrucuon and plnch proL marglns for developers LhaL survlve. Some developers have Lrlmmed con-
sLrucuon plans for 2012, or shled Lhelr focus Lo aordable houslng.
MosL execuuves sald Lhey're looklng ahead wlLh a mlx of pesslmlsm and cauuon: So far, Lhey see llule
Lo cheer ln Lhe new year.
1hlngs wlll be very dlmculL ln 2012," sald Mao uaqlng, vlce presldenL of Chlna vanke Co., LLd., one
of Chlna's blggesL developers, aL a 8el[lng press conference ln ue-
cember. lL wlll be a wlnLer and a LesL for Lhe enure lndusLry."
Cold wlnds sLarLed blowlng ln Lhe fourLh quarLer 2011, as a poll-
cy-encouraged credlL crunch prompLed some banks Lo sLop lssu-
lng morLgages Lo rsL-ume home buyers. Pome shoppers ln clues
such as nan[lng, Chongqlng and Wuhan were aecLed by freezes
on morLgage loans announced by lndusLrlal 8ank Co. LLd. and Chlna Cl1lC 8ank.
ln an lnLervlew wlLh Calxln, Moody's lnvesLors Servlce lnc. vlce resldenL Zhong Wenquan warned
LhaL malnland developers wlLh Pong kong-llsLed sLock may nd nanclng especlally dlmculL ln 2012.
AlLhough some governmenL pollcymakers have referred Lo ne-Lunlng" real esLaLe markeL conLrols
ln 2012, hlnung LhaL regulaLors may allow looser credlL, lndusLry lnslders remaln skepucal abouL Lhe
overall nanclal envlronmenL.
An execuuve aL one cenLral governmenL-conLrolled real esLaLe developer who asked noL Lo be named
Lold Calxln he Lhlnks lendlng wlll sull be ughL ln 2012" across Lhe board, even Lhough sLaLe-owned
enterprises may have some advantages and may get a few more loans than others.
CAIXIN / LINK
M
ark zuckerberg, lacebook's founder and chlef execuuve, has Lalked for years abouL Lhe
nouon of a soclal graph" whlch connecLs people Lo Lhelr frlends and all of Lhe Lhlngs Lhey
are lnLeresLed ln. 8y encouraglng hundreds of mllllons of people Lo share Lhelr deeds and reveal Lhelr
lnnermosL LhoughLs, profane or profound, onllne, hls company has ln eecL mapped a poruon of Lhls
graph on lLs compuLers. Accordlng Lo Lhe Cnlon, a saurlcal publlcauon, Lhe whole Lhlng was Lhe ClA's
ldea, dlgglng up Lhls amounL of lnformauon Lhe old-fashloned way would have cosL Lhe spooks a for-
tune.
1hese bllllons of elecLronlc nodes and llnks wlll soon make a forLune for Mr Zuckerberg, sull only 27,
who owns 28.4 of lacebook and wlll conunue Lo conLrol mosL of Lhe voung rlghLs. lL wlll also enrlch
oLher shareholders, many of Lhem employees. Cn lebruary 1sL Lhe company announced plans for an
lnlual publlc oerlng (lC) LhaL wlll ralse $3 bllllon, maybe more, ln Lhe largesL oLauon ever of an ln-
LerneL company. noL slnce Coogle's lC ln 2004-Lhe year LhaL lacebook was founded-have Lechles
and venLure caplLallsLs been so auuer. lacebook's oLauon, whlch ls llkely Lo Lake place ln Lhe sprlng,
wlll creaLe a publlcly quoLed Lech glanL LhaL wlll sLand alongslde Amerlcan Lechnology uLans such as
Amazon, Apple and Coogle lLself.
1he documenL lacebook led wlLh Lhe Securlues and Lxchange Commlsslon (SLC) revealed deLalls of
lLs nances for Lhe rsL ume (see charL 1). LasL year Lhe company had sales of $3.7 bllllon, a llule below
... ings will be very dicult in 2012,
said Mao Daqing... It will be a winter
and a test for the entire industry.
18. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
18
recenL esumaLes, and made a neL proL of $1 bllllon. 1he neLwork
boasLs 843m users, whlch, were lacebook a counLry, would make lL
Lhe world's Lhlrd mosL populous, behlnd Chlna and lndla. Some of
Lhe oLher sLausucs assoclaLed wlLh lL are also mlnd-boggllng. Lvery
day 230m phoLos are uploaded Lo Lhe slLe. Cne ouL of every seven
mlnuLes spenL onllne ls on lacebook, accordlng Lo comScore, a re-
search rm.
lacebook's sLunnlng progress has earned Lhe company esumaLed
valuauons of beLween $73 bllllon and $100 bllllon. rlvaLe Lrad-
lng ln lLs shares on secondary markeLs has lmplled a value of more
Lhan $80 bllllon. 1haL would be more Lhan 20 umes lasL year's rev-
enues-and more Lhan 80 umes lasL year's neL lncome. 1hese are
eye-waLerlngly hlgh muluples.
1he case for Lhlnklng such a valuauon ls [usued resLs ln parL on a
couple of broad Lechnologlcal Lrends LhaL show no slgns of golng
lnLo reverse. 1he rsL ls Lhe rapld spread of lnLerneL connecuvlLy,
whlch ls maklng lacebook accesslble Lo ever more people. (1he 8osLon Consulung Croup reckons LhaL
around 3 bllllon people wlll be onllne by 2016, up from 1.6 bllllon ln 2010.) 1he second ls Lhe rlse of
Lhe moblle phone. Already more Lhan 423m people are Lapplng lnLo lacebook on Lhese devlces and
ln fuLure mosL of Lhe soclal neLwork's growLh wlll come from Lhe moblle web. 1ogeLher, Lhese Lrends
could propel Lhe number of users beyond 1 bllllon.
THE ECONOMIST / LINK
T
he clrculL board of skyscrapers ln 1okyo's Lech dlsLrlcL gllnLs ln Lhe wlnLer sunshlne, wlLh Lhe
Sony 1echnology CenLre seemlngly reachlng up Lo Lhe sky. lL sLands proudly alongslde Lhe oLher
uLans of !apan lnc such as anasonlc ln Lhe Shlnagawa dlsLrlcL - buL ln reallLy Lhese are crumbllng
emplres, Lhelr very foundauons chlpped away by Lhe aggresslon of Samsung and Lhe deslgn brllllance
of apple.
LasL week, Sony's Welsh-born boss, Slr Poward SLrlnger, Lhe rsL forelgner Lo hold Lhe Lop [ob, pald
Lhe prlce for hls fallure Lo Lurn Lhe company around. Company veLeran kazuo Plral, who has a record
as a hard-nosed cosL-cuuer, wlll Lake over from hlm ln Aprll - buL wlLh a near 2bn annual loss on Lhe
horlzon Lhere wlll be no cheerleadlng from Lhe new leader: he sald he felL an acuLe sense of crlsls"
and ldenued a need Lo push Lhrough urgenL change.
1he heavy losses aL Sony were mlrrored aL anasonlc and Sharp, and Lhe bleak scene was compleLed
when !apan lLself reporLed lLs rsL annual Lrade declL slnce 1980, blamed on Lhe lmpacL of Lhe Lsu-
nami and the strong yen.
WlLhln Lhe buslness communlLy Lhere are whlspers of a sense of paralysls or hopelessness", and Lhe
fear LhaL lf declslve acuon ls noL Laken, some of Lhe companles LhaL were Lhe englne for !apan's posL-
war growLh could fall lnLo lrreverslble decllne.
!apanese companles cannoL keep dolng whaL Lhey have been dolng," says Plroshl MlklLanl, Lhe
founder of e-commerce glanL 8akuLen. Pls company, whlch ls worLh more Lhan 7.6bn, ls noL a house-
hold name ln Lhe uk yeL, alLhough many 8rlLons are now lndlrecL cusLomers of MlklLanl's followlng
8akuLen's acqulsluon of uk e-reLaller lay.com for 23m lasL year and kobo, Lhe Canadlan ebook
maker, for 200m.
SOURCE: ECONOMIST
19. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
19
AL home lL ls besL known for 8akuLen lchlba, Lhe counLry's blggesL onllne markeLplace - ahead of
Amazon - wlLh more Lhan 37,000 merchanLs selllng almosL everyLhlng from noodles and sushl Lo
!apanese ceremonlal armour. WlLh annual sales of 2.6bn ln 2010, lLs operauons also span banklng,
Lravel uckeung and even a medlocre professlonal baseball Leam - Lhe 1ohoku 8akuLen Colden Lagles,
whlch nlshed h ln a league of slx Leams lasL season.
MlklLanl ls condenL 8akuLen can Lake on Amazon around Lhe world. lLs lchlba webslLe has been
llkened Lo a blog wlLh a shopplng carL auached": merchanLs are en-
couraged Lo Lalk Lo cusLomers and glve lnLerneL shopplng a human
face" - unllke Amazon, whlch, he says, ls [usL a glganuc vendlng
machlne". 8akuLen's sLraLegy ls Lo bulld alllances and lL hopes Lhe
kobo wlll be a more open source" opuon Lhan Amazon's klndle for
reLallers and publlshers. 1here are loLs of companles LhaL don'L llke
Amazon because Lhey wanL Lo conLrol and domlnaLe everyLhlng,"
says MlklLanl. We are more alllance-orlenLed . We wanL Lo esLab-
llsh relauonshlps wlLh reLallers."
1he self-made bllllonalre, whose early career was ln banklng, clalms
!apanese execuuves lack a global perspecuve - a syndrome LhaL has been called Calapagos-lsauon",
referrlng Lo Lhe Lendency among !apanese companles Lo focus on Lhe LasLes and demands of an lso-
lated and shrinking home market rather than take risks abroad.
1he counLry's elecLronlcs secLor has been hlL by Lhe success of SouLh korea's Samsung and LC, whlch
assemble producLs ln lower-cosL counLrles such as Chlna, lndonesla and 1halland. 1here have also
been specLacular own goals: !apan had web-surng handseLs nearly a decade before Lhe lhone, yeL
local producers falled Lo Lap overseas markeLs.
UK GUARDIAN / LINK
I
m noL sure lf you've nouced or noL, buL over Lhe pasL year or so Lhere's been a surglng lnLeresL
ln Lhe ocklng behavlor of sLarllngs. Why? Well, oLher Lhan Lhe awe-lnsplrlng beauLy of one of
naLure's mosL beauuful and mysLerlous phenomena (see vldeo), lL represenLs a sLeadlly growlng dy-
namlc aL work wlLhln our own socleLy and nanclal markeLs-namely, Lhe collecuve behavlor of any
hlghly lnLerconnecLed sysLem.
1o be qulLe honesL, Lhere may be no beuer way of capLurlng Lhe mysLerlous behavlor of complex
sysLems Lhan Lhe unpredlcLable and yeL hlghly coordlnaLed movemenLs of a Lhousand or so sLarllngs
ylng ln mld-alr. 1hus, lL ls easy Lo undersLand why 1Lu-Lalks, mornlng shows, or long-ume markeL
commenLaLors have all been lnsplred by Lhls amazlng phenomena and, ln Lhe case of !ames ulnes, Lo
creaLe splashy headllnes llke 1he Comlng Worldwlde Murmurauons."
WheLher we refer Lo lL as herdlng, collecuve lnLelllgence, mass psychology, or complex self-organlzlng
behavlor-Lhls properLy of Lhe markeLs ls someLhlng LhaL we as humans have a hard ume percelvlng
slnce, well, we're oen parL of lL. As ulnes wenL onLo explaln ln a recenL lnLervlew:
lt ls vety botJ to see ooJ lt Joesot sbow op vety ofeo. All psycboloqy toJoy ls vetucol, so to speok.
lts o combloouoo of oot qeoes ooJ expetleoces loJlvlJoolly, wbeteos l belleve tbete ls oootbet
level of mloJ tbot ls botlzootol. AoJ lts o moss mloJ, ooJ lt qtlps os wltboot os eveo beloq owote
of lt. AoJ tbe exomples of lt lo tbe motket wete tbe teol estote ctoze of o few yeots oqo. leople
boyloq teol estote ot woy blqbet ptlces, woy too blqb ptlces, jwblcb leJ to] tbe excesslve qloom...
jtbls betJloq ot collecuve bebovlot] sbows tooqbly lo tbe motket someumes. 8ot o mote vlslble ooe
Within the business community there
are whispers of a sense of paralysis or
hopelessness, and the fear that if
decisive action is not taken, some of
the companies that were the engine
for Japans postwar growth could fall
into irreversible decline.
20. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
20
someumes occots lo ootote. AoJ we colleJ oueouoo to o ftee vlJeo slte tbot sboweJ tboosooJs of
stotlloq bltJs movloq lo ftoctol exouc sbopes os lf tbey wete ooe oolt. AoJ my tbeoty ls tbot tbey
ote. 1be scleousts stoJyloq tbem coolJot posslbly bove qoueo o slqool ftom tbose oext to tbem
becoose tbey wete movloq lo tooJem wltb bltJs booJteJs of feet owoy. AoJ l feel tbot tbls ls o vls-
lble exomple of tbe moss mloJ, wblcb excltes me becoose l wotcb lt lo tbe 5tock Motket. 8ot lve
oevet octoolly seeo lt. AoJ lt seems to be sometbloq, o pte-bltJoess of some kloJ, socb tbot tbe
bltJs tbemselves ote octoolly moolfestouoos of lt. lm o ttoloeJ scleoust, so lts oot eosy fot me to
occept tbls kloJ of tbloq, bot o teol scleoust bos oo opeo mloJ to evetytbloq.
lrom a person who wroLe Lhe classlc book on Pow lnvesLors Can Make Money uslng Mass sychology,
lL ls lnLeresung LhaL ulnes slmulLaneously admlLs never acLually seelng" Lhe murmurauons of Lhe
markeL. 8uL Lhls lsn'L a crluclsm of ulnes-merely an observauon of how llmlLed we are ln recognlzlng
mlnuLe and ever-changlng pauerns as vlslbly we do wlLh a group of sLarllngs. lronlcally enough, mosL
of Lhe nanclal world ls conunually operaung aL Lhls level-[usL beyond human percepuon. Cood ln-
vesLors or analysLs Lhen, slmply deLecL pauerns drlven by Lhe lnLrlnslc value of an lnvesLmenL and/or
by lLs Lechnlcal behavlor and Lhen capLure Lhe resulLs. AL a fundamenLal level, Lhls ls all LhaL separaLes
those who make money from those who dont.
CRIS SHERIDAN / LINK
H
ungary ls seeklng an lnLernauonal credlL llne of 13 Lo 20 bllllon ($20 Lo $26.3 bllllon) eu-
ros, Lhe secreLary of sLaLe headlng Lhe prlme mlnlsLer's omce, Mlhaly varga, was quoLed on
SaLurday as saylng.
Pungary ls seeklng backup from Lhe lnLernauonal MoneLary lund and Lhe Luropean unlon Lo reas-
sure lnvesLors lL has nanclng even lf lL geLs cuL o from debL markeLs laLer Lhls year.
1he counLry's currency, Lhe forlnL, sank Lo a record low agalnsL Lhe euro a monLh ago, and lLs govern-
menL bond ylelds rose above 11 percenL on concerns LhaL amld Lhe euro zone crlsls lL may noL be able
Lo nance cenLral Lurope's hlghesL debL burden compared Lo lLs economlc ouLpuL.
varga relLeraLed LhaL Lhe governmenL expecLed Lo reach a deal soon
on a credlL llne LhaL lL could Lap lf Lhe Luropean debL crlsls deepened
further.
A qulck agreemenL ls ln Lhe lnLeresL of boLh parues, Lherefore a deal
could be ouLllned ln one or Lwo monLhs," he sald ln an lnLervlew ln Lhe
dally Magyar Plrlap.
1he amounL of Lhe safeLy neL could be somewhere beLween 13 and 20 bllllon euros," he added.
Pungary's governmenL unnerved lnvesLors repeaLedly ln 2010 and 2011 wlLh unorLhodox economlc
pollcy sLeps. lL has also upseL Lhe Luropean Commlsslon wlLh a range of leglslauon lncludlng a cenLral
bank blll LhaL Lhe Commlsslon sald curbed Lhe bank's lndependence.
1he counLry's markeLs have parually recovered due Lo pledges by Lhe governmenL Lo seule Lhese ls-
sues and seL up Lhe lnLernauonal credlL llne.
1he planned nanclal backsLop wlll allow Lhe forlnL exchange raLe Lo sLablllze and governmenL bond
ylelds Lo drop, and lL could lead Lo savlngs worLh Lens of bllllons forlnLs ln Lhe budgeL," varga sald.
1he Lu has LhreaLened Lo cuL vlLal 'coheslon funds' lL dlsburses Lo Pungary unless Lhe counLry Lakes
... Hungarys government unnerved
investors repeatedly in 2010 and
2011 with unorthodox economic
policy steps
21. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
21
measures Lo prove LhaL lL can reduce lLs declL Lo a susLalnable level.
8uL a slowdown ln Lhe economy makes furLher budgeL cuLs dlmculL. 1he governmenL expecLs 0.3 per-
cenL growLh for Lhe year and Lhe lMl 0.3 percenL, whlle Lhe Luropean 8ank for 8econsLrucuon and
uevelopmenL pro[ecLs a 1.3 percenL conLracuon.
ln a hecuc global envlronmenL lL ls more dlmculL Lo lncrease Lhe pace of growLh ln Lhe Pungarlan
economy Lo a susLalnable course," varga sald. An upswlng could sLarL when we geL Lo Lhe second half
of 2012.
YAHOO / LINK
T
he half-cenLury hablLs of lranco-Cerman condomlnlum dle hard. lL ls a palnful process for
lrench ellLes Lo admlL LhaL moneLary unlon ls asphyxlaung Lhelr economy and musL lnevlLably
Lrap lrance ln mercanullsL subordlnauon Lo Cermany.
1he Carollnglan unlon ls all LhaL anybody ln lrench publlc llfe can really remember. lL worked marvel-
lously for Lwo generauons, leverlng lrench power on Lhe global sLage, and Lhe euro was of course
Lhelr own creauon, lnLended Lo ue down a reunlLed Cermany wlLh sllken cords". Pow can Lhey now
face Lhe awful LruLh LhaL Lhls eleganL sLraLegy has blown up ln Lhelr faces, enLhronlng Cermany as
undlspuLed hegemon?
?eL Lhey can hardly lgnore Lhe evldence. Whlle Cerman unemploymenL has fallen Lo a posL-8eunlca-
uon low of 3.3pc, lrance's [obless raLe has crepL up Lo a posL-LMu hlgh of 9.9pc and ls cerLaln Lo rlse
furLher as recesslon blLes agaln.
Whlle boLh counLrles had Lhe same sorLs of exporL surplus ln Lhe early 1990s, Lhey have dlverged mas-
slvely slnce Lhe u-Mark and franc were xed ln perpeLulLy. Cermany has a currenL accounL surplus of
3pc of Cu: lrance has a declL of 2.7pc, anaLhema for ColberusLes.
?ou can see from lMl daLa LhaL Lhe sllenL coup Look place ln Lhe faL years of Lhe global boom when
Cermany forced down unlL labour cosLs, -1.7pc ln 2003, -4.0pc ln 2004, -3.3pc ln 2003, -1.8pc ln 2006.
lrance losL ground year aer year due Lo wage creep and weaker producuvlLy. Lnough ume has now
gone by Lo leave lL sLuck lnslde LMu wlLh a mlsallgned exchange raLe, and Lalk of euro exlL ls aL lasL
sLarung Lo be heard.
1he slngle currency ls condemned Lo an unconLrollable exploslon sooner or laLer," wroLe 12 econo-
mlsLs ln a recenL leuer Lo Le Monde, calllng for an orderly reLurn Lo nauonal currencles. 1he obsu-
naLe deLermlnauon of governmenLs Lo Lake us by forced march deeper lnLo Lhe euro lmpasse can only
lead Lo Lhe general aggravauon of Lhe economlc slLuauon ln Lurope," Lhey sald.
resldenL nlcolas Sarkozy has no answer Lo Lhls. Pe has clung Lo Lhe g leaf of lranco-Cerman parlLy,
sLaklng all on ues Lo Chancellor Angela Merkel, raLher Lhan selzlng leadershlp of Lhe Laun bloc Lo force
a radlcal change of pollcy.
Pls gamble on Lhe sLaLus quo has falled. Mrs Merkel has noL ylelded an lnch, and has now forced hlm
Lo swallow a scal LreaLy LhaL erodes lrench soverelgnLy wlLhouL oerlng any remedy Lo Lhe crlsls aL
hand.
Per conLradlcLory medlclne for half of Lurope has lLself cosL lrance lLs AAA raung, as SLandard &
oor's made clear when lL unleashed lLs volley of downgrades lasL monLh. llscal ausLerlLy alone rlsks
becomlng self-defeaung," lL sald.
AEP / LINK
22. CHARTS THAT MAKE YOU GO Hmmm...
06 February 2012
22
A
ny Cuesuons?
T
he $CLxA2008 (Lhe percenLage
of S& 100 sLocks above Lhelr 200
uMA) ls a Lechnlcal lndlcaLor avallable
on SLockCharLs.com LhaL can be used
Lo forecasL conservauve enLry and exlL
polnLs for Lhe sLock markeL.
1he CLxA ls used Lo nd Lhe sweeL spoL"
ume perlod ln Lhe markeL when you have
Lhe besL chance of maklng money 1he
markeL ls very Lradable. 8uL Lhls could
be Lhe lasL gasp before a serlous correc-
uon beglnnlng mld Lo laLe 2012. Look for
a posslble drop Lo colnclde wlLh Lhe hls-
Lorlc S& pauern LhaL has a Lendency Lo
Lall o ln Lhe 2nd and 3rd CuarLers (see
below). add to that any number of nega-
uve caLalysLs LhaL could occur around Lhe
same ume: Creece, lran, anoLher u.S.
credlL down grade - Lake your plck.
DOUG SHORT / LINK
CLICK TO ENLARGE SOURCE: D SHORT
SOURCE: CASEY RESEARCH CLICK TO ENLARGE
23. CHARTS THAT MAKE YOU GO Hmmm...
06 February 2012
23
T
he exLenL of Lurope's nanclal perll and Lhe level Lo whlch lL's banks have gouen Lhemselves
over Lhelr skls ls made crysLal clear by Lhls amazlng graphlc. noL for Lhe felnL of hearL.
I
n lLs early years, Lhe lnLerneL revoluuon spawned
companles LhaL helped people galn access Lo Lhe
nascenL Lechnology. 1hen came an e-commerce
boom ln companles selllng a wlde range of producLs.
1he laLesL sLage has been companles LhaL creaLe vlr-
Lual communlues and enLerLalnmenL. Some of Lhe
companles born of Lhe lnLerneL have become global
behemoths with a speed that would have been un-
lmaglnable decades ago. CLhers have Lraced Lhe Lra-
[ecLorles of shooung sLars - golng from concepL Lo
scrap heap ln only a few years.
NY TIMES / LINK
SOURCE: DEMONOCRACY CLICK TO ENLARGE
24. CHARTS THAT MAKE YOU GO Hmmm...
06 February 2012
24
W
hat you're looklng aL here ls LoLal Chlnese employmenL from Lhe All Chlna daLabase. rl-
mary lndusLry ls commodlues, baslcally, lncludlng agrlculLure, secondary lndusLry ls manu-
facLurlng, Leruary lndusLry ls servlces.
lL comes as llule surprlse Lo see LhaL agrlculLural employmenL has been falllng sLeadlly for 20 years.
8uL lL ls surprlslng Lo see LhaL lf you Lake ouL Lhe servlces secLor, LoLal Chlnese employmenL has been
golng nowhere, and baslcally falllng, for Lhe same amounL of ume.
Carollne 8aum, uslng a dlerenL daLa
source, says LhaL Chlna losL 13 mllllon man-
ufacLurlng [obs beLween 1993 and 2002,
accordlng Lo Lhese gures, employmenL
ln secondary lndusLry" was aL ln Lhose
years, golng from 136.6 mllllon Lo 136.8
mllllon before sLarung Lo rlse agaln and
reachlng 218.4 mllllon ln 2010. (lL's worLh
pauslng here Lo appreclaLe Lhe sheer scale
of Lhls charL: each horlzonLal llne ls anoLher
100 million workers.)
Meanwhlle, Lhe servlces lndusLry - Ler-
uary lndusLry - has been on re: lL now
employs 263 mllllon people, more Lhan are
employed ln secondary lndusLry, and has
doubled slnce 1992. All Lhls, remember, ln
a counLry wlLh more or less aL populauon
growLh, Lhanks Lo Lhe one-chlld pollcy.
Cf course lL's hard Lo nd work ln Lhe ser-
vlces lndusLry lf you're a rural peasanL: Leruary lndusLry ls a fundamenLally urban Lhlng, whlch brlngs
me Lo my second charL.
lL comes as no surprlse Lo see LhaL urban
employmenL ls growlng lncredlbly fasL -
13.7 mllllon urban [obs were creaLed ln
Chlna ln 2010 alone. WhaL does come as a
surprlse ls Lo see LhaL urban [obs are sull ln
Lhe mlnorlLy ln Chlna - whlch means LhaL
theres a lot of room for growth going for-
wards.
FELIX SALMON / LINK
SOURCE: FELIX SALMON
SOURCE: FELIX SALMON
25. THINGS THAT MAKE YOU GO Hmmm...
06 February 2012
25
CCS1LLLC: l wanL Lo Lalk abouL Lhe unemploymenL raLe ln Amerlca .
A88C11: Cood sub[ecL" ln Lhese Lerrlble umes." lL's abouL 9.
CCS1LLLC: 1haL many people are ouL of work?
A88C11: no, LhaL's 16.
CCS1LLLC: ?ou [usL sald 9.
A88C11: 9 unemployed.
CCS1LLLC: 8lghL 9 ouL of work.
A88C11: no, LhaL's 16.
CCS1LLLC: Ckay, so lL's 16 unemployed.
A88C11: no, LhaL's 9...
CCS1LLLC: WAl1 A Mlnu1L. ls lL 9 or 16?
A88C11: 9 are unemployed. 16 are ouL of work.
CCS1LLLC: lf you are ouL of work you are unemployed.
A88C11: no, you can'L counL Lhe CuL of Work" as Lhe unemployed. ?ou have Lo look for work Lo be
unemployed.
CCS1LLLC: 8uL ... Lhey are ouL of work!
A88C11: no, you mlss my polnL.
CCS1LLLC: WhaL polnL?
A88C11: Someone who doesn'L look for work, can'L be counLed wlLh Lhose who look for work. lL
wouldnt be fair.
CCS1LLLC: 1o who?
abbOTT: The unemployed.
CCS1LLLC: 8uL Lhey are ALL ouL of work.
A88C11: no, Lhe unemployed are acuvely looklng for work... 1hose who are
out of work stopped looking. They gave up. and, if you give up, you are no longer in the ranks of the
unemployed.
CCS1LLLC: So lf you're o Lhe unemploymenL roles, LhaL would counL as less unemploymenL?
abbOTT: unemployment would go down. absolutely!
CCS1LLLC: 1he unemploymenL [usL goes down because you don'L look for work?
A88C11: AbsoluLely lL goes down. 1haL's how you geL Lo 9. CLherwlse lL
would be 16. ?ou don'L wanL Lo read abouL 16 unemploymenL do ya?
CCS1LLLC: 1haL would be frlghLenlng.
abbOTT: absolutely.
CCS1LLLC: WalL, l goL a quesuon for you. 1haL means Lhey're Lwo ways Lo brlng down Lhe unemploy-
menL number?
A88C11: 1wo ways ls correcL.
CCS1LLLC: unemploymenL can go down lf someone geLs a [ob?
A88C11: CorrecL.
CCS1LLLC: And unemploymenL can also go down lf you sLop looklng for a [ob?
abbOTT: bingo.
CCS1LLLC: So Lhere are Lwo ways Lo brlng unemploymenL down, and Lhe easler of Lhe Lwo ls Lo [usL
stop looking for work.
A88C11: now you're Lhlnklng llke an economlsL.
(1hanks u8!)
26.
06 February 2012
26
WORDS THAT MAKE YOU GO Hmmm...

e prlce of gold and sllver dld noL go up. lL ls Lhe

paper money LhaL wenL down. Cold and sllver are Lhe
ulumaLe money, colns of whlch are good anywhere ln Lhe
world, no mauer whaL ls sLamped on Lhem, and LhaL ls Lhe
money. uependlng on Lhe amounL of paper each nauon
prlnLs ls Lhe prlce of gold ln LhaL parucular counLry, or ln
LhaL parucular currency."
...Cold ls Lhe only lnvesuble asseL ln Lhe world LhaL has
gone up Lhe lasL 11 years wlLhouL lnLerrupuon, and LhaL
ls because Lhey are [usL runnlng Lhe prlnung presses. 1he
more they do, the more value builds into gold and silver.
!ames ulnes Lalks Lo Chrls MarLenson on 'ownlng wealLh
ln Lhe ground'. lasclnaung.
I
n 1999, SenaLor 8yron uorgan sLepped Lo Lhe ml-
crophone Lo Lalk abouL Lhe lmpendlng Cramm-
Leach-8llley AcL and share hls vlews as Lo why lL was a
bad idea.
A llule over 12 years laLer, LhaL speech looks frlghLenlng
ln lLs presclence.
C
harles 8lderman of 1rlm 1abs commenLs on Lhe
8LS nl reporL from lrlday.
biderman knows a lot more about the inner workings of the
headline number than most, so his analysis is always worth
listening to.
unsurprisingly, his analysis of this blow-out number is a
llule causuc Lo say Lhe leasL...
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and nally
06 February 2012
27
O
n !anuary 13, 2009, CapLaln Chelsey 8urneu Sullenberger lll caLapulLed Lo worldwlde
fame aer mlraculously landlng a sLrlcken Alrbus A320 safely on new ?ork's Pudson
8lver, savlng Lhe llves of all 133 people on board.
lL was a remarkable sLory and endeared 'Sully' Lo Amerlca forever.
1hls 8lack 8ox recreauon of Lhe evenLs of LhaL day casLs some more llghL on whaL Lransplred
boLh ln Lhe cockplL and Lhe conLrol Lower aL La Cuardla, and Lells an uuerly amazlng sLory of
serenlLy under pressure, Lhe llkes of whlch l have seldom seen.
This is truly remarkable.
(Thanks ar)
Hmmm
GRANT WILLIAMS 2011