Solar Storms

January 11, 2013
By

This post about solar storms is not a prediction, or even a long shot likelihood.  However, in keeping with my overall mission, it is a heads up to be alert.  The government has been largely silent about it, and likely will underplay a real event. You can keep this post in mind for quick reference if necessary.  If this extreme black swan were to actually occur, the world as we know will be turned upside down, as would the ability to communicate.  In 2013 two events (called solar maximum) combine that increase the risk of a large solar storm:  every 22 years the Sun’s magnetic energy cycle peaks while the number of sun spots – or flares – hits a maximum level every 11 years (History.com: Solar Storm).

Read more »

The Sorry State of the Consumer

January 7, 2013
By

Market action in the consumer sector as demonstrated by the XLY and XRT has been in a choppy, range-bound pattern since April. Note that like much else in this paper, central-planned, manipulated market, that real trading has evaporated and volume has shrunk considerably. Both the retail and consumer discretionary sectors should be shorted. These sectors have been propped up by a combination of  factors, but largely government policy.

The article is available at Seeking Alpha. 

 

 

Looking for China’s Next Bubble: Gold and Silver

December 31, 2012
By

The $4 trillion wealth management products (WMP) story in China is getting both very nasty, and is being kept under wraps. The Government there is going so far as to censure news coverage. However there is also a decent chance that investors in these products will be bailed out, setting the stage for more even moral hazard (see WMP, Too Big to Fail?).   And since moral hazard and speculation rules, one wonders what play toy the Chinese will turn to next.  They tried stocks which was largely a scam,  real estate which turned problematic, and WMPs another scam. Given that gold and precious metals are literally being promoted and encouraged within China, and the banks are being set up to use it under Basel III, logical could very well suggest that gold will be the next bubble in China.

Read more »

Basel III a Gamechanger for Both Gold and Faux AAA-AA Sovereign Debt

December 26, 2012
By

Do a Google search for Basel III, gold and tier 1 and you will see a lot of bullish chatter about banking regulations and moving gold from tier 3 to tier 1 or quasi tier 1 status. Gold is being brought back, at least in part, into the global financial system as money, ending the argument that it has no utility.

Basel III (and Basel II) divides bank assets into three risk categories (credit,  market and liquidity risk) and weights its risk depending on its attributes. Gold is “zero percent risk-weighted” in terms of credit risk. This is a huge upgrade for the metal. Delving into the nuances, gold still has “market risk” stemming from its price fluctuations. This means capital must be marked to market. Physical gold is not treated the same as cash or AAA to AA- sovereign bonds when it comes to calculating its Tier 1 ratio. The market risk will only be negative if the value of the price of gold (POG) drops.

Read more »

Risk Aversion Severely Mispriced and Zombified

December 24, 2012
By

Article at Seeking Alpha: Risk Aversion Severely Mispriced and Zombified

Mr. Predicto Nails One

December 21, 2012
By

How’ bout that,  looks like I (Mr. Predicto) nailed a political process prediction, from yesterday’s post:

Tomorrow Boehner’s Plan B ($one million threshold) goes before the House. This measure is meeting strong objections from two conservative heavy hitters the Heritage Foundation and the Club of Growth.I will confess my political instincts are not especially astute (can’t think like a politician)  but one really wonders what the masterplan is of this vote should Boehner fail to get any Democrat votes and lose 10% of his members. That would remove Boehner’s ability to compromise with Obama at all, making Obama best choice being the “cliff”.  All this for a $35 billion (the difference between 500k, and a million threshold).

Personally I think the plan all along was to “avert the cliff”, and set up a new deadline, all without doing a damn thing with the Bush tax cuts or spending.  Those will now be extended, the only questions are: until what date and the manner of the new fiscal cliff.   This will be called the Orwellian term an “agreement” or “short term resolution.” Will the same set of cliff conditions be used for a new date? I think that is likely, and now that will be the only discussion between the parties before New Years.  My SWAG is the new cliff date is set early, perhaps at the end of March.  Since the debt ceiling leverage is not the key to this, I am guessing it is increased for two quarters (about $500 billion). The TAG program is dead given that it is Reid’s baby, as is the 2% payroll cut.  Another than that it is start all over with the new Congress.

But first, Boehner will go to the Dems with a message that he will unlikely be back in January as Speaker, and that the Dems can deal with a hard (er) ass.  He will bring a pad of paper and write how many GOP House votes are likely at various income tax thresholds, one million, $800k,  600K,  500k, etc, hand it to the Dems, and wish them luck.  Of course all the numbers are conditioned upon spending cuts as outlined in the sequestration vote that passed Thursday, complications, complications. After being steam rolled, Obama has been trying to grow some testicles, which for him means “punt”.

Sometime in January the AAA credit rating of the US is cut and the permanent fiscal cliff theater starts all over again.

 

Russ Winter’s Actionable

Click here to access Russ Winter's Actionable service, for subscribers only.

To subscribe to Russ Winter's Actionable and get instant access, click here.


Monthly Archives