Under the Lens - 09-19-12-sub-UNLIMITED QE/OMT

Global Macro Tipping PointsSeptember 19th, 2011

UNLIMITED: QE & OMT

The content of this slide should not be considered investment advice of any sort, nor should it be used to make investment decisions. Use of this slide is considered to be your explicit acceptance of the Disclosure Statement and the Terms of Use found on the last page of this document.

Listen to the original podcast for this slide at www.GordonTLong.com/UnderTheLens

http://www.gordontlong.com/UnderTheLens.asp?sid=agr



GLOBAL CENTRAL BANK ACTIONS• ECB’S OMT / SMP-2.0• Federal Reserve’s QE-finity• BOJ Injections

MACRO HIGHLIGHTS• EU Bank Runs & Capital Flight• Rate of Global Slowdown – PMI, Exports, GDP

US ECONOMY• US Credit Downgrade• Collapsing Consumer Confidence

UNLIMITED: QE & OMT



GLOBAL CENTRAL BANK ACTIONS




US = + 85B/MO “UNLIMITED”ECB = + ??B/MO “UNCAPPED”


GLOBAL CENTRAL BANK ACTIONS





ECB’S OMT / SMP2




The European Central Bank waved the banner of “unlimited” and “without cap” subject to the CONDITION of the EU’s acceptance and audits and the approval of any nation applying for aid .

It may not have dawned upon you or most of the world but the ECB may never do anything as a result of the yoke that it placed upon itself; nothing at all may ever happen. If the Austrians and the Dutch are to be taken at their word and no more of their money is going to be used to bailout other nations then all of the fluff raised upon giant banners may be no more than flags waving in the wind. The strategy has worked to date and driven down interest rates but when people figure out that the condition is actually an impediment; the winds may begin blowing in the other direction.

If “A” depends on “B” and “B” is not forthcoming then “A” is a worthless proposition .

“Let the key guns be mounted, make a brave show of waging war, and pry off the lid of Pandora's Box once more.”

The Fed May Be Pumped Up 09-15-12 Mark Grant of "Out of the Box" via Zero Hedge

ECB - IS OMT / SMP2 Actually Real? The recent position of the Fed was spelled out and will be enacted. You may be happy, unhappy or camped in between but they will do exactly what they have said they are going to do. This is a Continent apart for the recent announcement of the ECB and should be noted.


http://www.zerohedge.com/news/fed-may-be-pumped

ECB’S OMT / SMP2





http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2012/09/20120906_EUTaylor.png

QE UNLIMITED




ONGOINGFINANCIAL REPRESSION STRATEGY





QE UNLIMITED

The Fed will monetize through QE-finity roughly half of the US budget deficit in 2013.


http://www.gordontlong.com/2012/What%20happens%20next:

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/09/Projected%20Fed%20balance%20Sheet%20GDP.jpg




QE UNLIMITED


http://dailycapitalist.com/wp-content/uploads/2012/02/TMS-Dec-2011-plus-data.png




BOJ INJECTIONS


http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2012/09/20120918_JPY.png




FLEEING EU PERIPHERALS – Was Going To Germany





SWITZERLAND





SINGAPORE





FEDEX WARNS

FedEx CEO: “I'm Amused Watching Observers 'Completely Underestimate' What The Export Slowdown Is Doing To China”





Rate of Global Slowdown – PMI, Exports, GDP


US DOWNGRADE




US DOWNGRADED - From AA to AA-Egan Jones Downgrades US From AA To AA- 09-14-12 Egan Jones

Egan Jones, who downgraded the US for the first time ever last July, two weeks ahead of S&P:

Synopsis: UNITED STATES (GOVT OF) EJR Sen Rating(Curr/Prj) AA-/ N/A Rating Analysis - 9/14/12 EJR CP Rating: A1+ Debt: $15.2B EJR's 1 yr. Default Probability: 1.2%

Up, up, and away - the FED's QE3 will stoke the stock market and commodity prices, but in our opinion will hurt the US economy and, by extension, credit quality. Issuing additional currency and depressing interest rates via the purchasing of MBS does little to raise the real GDP of the US, but does reduce the value of the dollar (because of the increase in money supply), and in turn increase the cost of commodities (see the recent rise in the prices of energy, gold, and other commodities). The increased cost of commodities will pressure profitability of businesses, and increase the costs of consumers thereby reducing consumer purchasing power. Hence, in our opinion QE3 will be detrimental to credit quality for the US.

Some market observers contend that a country issuing debt in its own currency can never default since it can simply print additional currency. However, per Reinhart & Rogoff's " This Time Is Different: Eight Centuries of Financial Folly " , p.111, 70 out of 320 defaults since 1800 have been on domestic (i.e., local currency) public debt. Note, US funding costs are likely to slowly rise as the global economy recovers or the FED scales back its Treas. purchases (75% recently).

From 2006 to present, the US's debt to GDP rose from 66% to 104% and will probably rise to 110% a year from today under current circumstances; the annual budget deficit is 8%. In comparison, Spain has a debt to GDP of 68.5% and an annual budget deficit of 8.5%. We are therefore downgrading the US country rating from "AA" to "AA-".

Ratings History:Egan-Jones rating history for United States (Govt of).9.14.12 AA to AA (-) 4.15.12 AA+ to AA (Negative outlook)

7.16.11 AAA to AA+


http://www.zerohedge.com/news/egan-jones-downgrades-us-aa-aa

COLLAPSING CONSUMER CONFIDENCE




US


DISCLOSURE STATEMENT AND TERMS OF USE

THE CONTENT OF THIS SLIDE PRESENTATION AND ITS ACCOMPANYING RECORDED AUDIO DISCUSSION ARE INTENDED FOR EDUCATIONAL PURPOSES ONLY.

This slide presentation and its accompanying recorded audio discussion are not a solicitation to trade or invest, and any analysis is the opinion of the author and is not to be used or relied upon as investment advice. Trading and investing can involve substantial risk of loss. Past performance is no guarantee of future returns/results. Commentary is only the opinions of the authors and should not to be used for investment decisions. You must carefully examine the risks associated with investing of any sort and whether investment programs are suitable for you. You should never invest or consider investments without a complete set of disclosure documents, and should consider the risks prior to investing. This slide presentation and its accompanying recorded audio discussion are not in any way a substitution for disclosure. Suitability of investing decisions rests solely with the investor. Your acknowledgement of this Disclosure and Term of Use Statement is a condition of access to it. Furthermore, any investments you may make are your sole responsibility.

THERE IS RISK OF LOSS IN TRADING AND INVESTING OF ANY KIND. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.



Under the Lens - 09-19-12-sub-UNLIMITED QE/OMT

Economy & Finance

Transcript of Under the Lens - 09-19-12-sub-UNLIMITED QE/OMT