Daily Digest

Daily Digest 9/24 - Fed Will Shift Debt Holdings, TX Drought Slideshow, Could Social Unrest Hit America's Streets?

Saturday, September 24, 2011, 9:48 AM
  • Constraints on Central Banks Leave Markets Adrift
  • Fed Will Shift Debt Holdings to Lift Growth
  • Could World Social Unrest Hit America's Streets?
  • The Surreal Ruins of Qaddafi’s Never-Never Land
  • Needs Must 
  • Decline Watch: America's roads are so bad you need a German car to drive on them
  • New Enrollment Dips a Bit at U.S. Graduate Schools
  • Texas Drought 2011 Slideshow

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Constraints on Central Banks Leave Markets Adrift (jdargis)

This year, volatility has soared and share prices have fallen sharply, in part because few think there is a Bernanke put, or, for that matter, a Trichet put. It is far from clear that the authorities could stem a new panic, and even less clear that many would be willing to try.

In other words, the slogan for markets as the International Monetary Fund and World Bank meet this week in Washington could well be, “You’re on your own. Don’t count on anybody to bail you out.”

Fed Will Shift Debt Holdings to Lift Growth )(jdargis)

The Fed’s policy-making committee said in a statement that it was acting because it saw little prospect that the economy would expand fast enough and soon enough to help the 25 million Americans unable to find full-time work. It also said there was a significant risk that “strains in global financial markets” could further damage prospects for recovery.

Could World Social Unrest Hit America's Streets? (jdargis)

"That's what happened in Cairo. That's what happened in Madrid. You don't want those kind of riots here. The damage to a generation that can't find jobs will go on for many many years."

The Surreal Ruins of Qaddafi’s Never-Never Land (jdargis)

The end left Tripoli in a state of giddy disbelief. On the day I arrived, Bab al Aziziya, the dictator’s high-walled stronghold, lay wide open, with Libyan families strolling through and gazing wonderingly at the ruins. Outside, the vast public square was a wasteland littered with burnt-out cars, twisted metal and rags. Rebels from across Libya rode wildly through the city, firing bursts from rifles and anti-aircraft guns. Young men fanned out to trash every picture of the man known as Brother Leader and to cover the walls with triumphant, satirical graffiti. Muammar — the name is similar to a word for “builder” — was scrawled out and replaced with the rhyming Mudammer, “destroyer.”

Needs Must (jdargis)

Europe must work backwards from a vision of where its monetary system will be several years hence. We must accept that austerity measures, necessary to avoid a fiscal train wreck, have recessionary effects on output. Does [Geithner] not know that the U.S. is sinking under its own debt crisis? This man must be living on a different planet.

Decline Watch: America's roads are so bad you need a German car to drive on them (jdargis)

Good lord. Not only is a car commercial -- traditionally the domain of brash, fist-pumping Americana or at least salt-of-the-earth populism -- built around the downbeat topic of America's crumbling infrastructure, but it's a commercial for a German car! The message seems to be, America's roads are so bad, it's no longer safe to drive American cars on them. The post-apocalyptic hell-scape we call a highway system is only navigable in a high-end European luxury sedan.

New Enrollment Dips a Bit at U.S. Graduate Schools (jdargis)

"The decline in domestic students is very bad news for the nation’s economic future,” Dr. Stewart said. “Higher education and, increasingly, graduate education are what drives prosperity, and if we get to the point where only people with significant bank accounts can afford graduate education, the country is doomed.”


Texas Drought 2011 Slideshow (jdargis)

Where water should be, but isn’t.

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."


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Weekly summary of 3E Links, Cartoons and Resources

posted at http://3es.weebly.com/


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How Gold Performs During A Financial Crash

Three alternative viewpoints:

How Gold Performs During A Financial Crash (September 23, 2011)
"The first thing investors need to understand is that gold is priced in US dollars. This means that as the dollar rises the price of gold falls, all things being equal. The dollar is quickly rising because it is a safe haven (US Treasuries are a safe haven that must be purchased in US dollars) and because asset liquidations around the world are gaining speed causing a growing shortage of dollars. The second thing investors need to understand is that gold, as an asset that has performed well, is a source of funding for margin calls..."

Was That The Top For Gold Redux (September 23, 2011):
"The relationship is now breaking down, and the main thing I want to point out is that gold may have much further to decline relative to equities given the ratio weakness above. In other words, if you're bearish on stocks, you might need to be much more bearish on gold now."

Gold 'Believers' Appear Distraught Over Dollar Strength (September 23, 2011)
"...the dollar’s ascent looked to hamper gold’s continued rise, bringing into focus the historical inverse correlation between the two assets. There’s nothing wrong with gold as an investment, but market dynamics are not a one-way street, and while one may have an opinion, the market at large matters far more."


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international facility to guarantee bank debt



"International financial officials called Saturday for collective, decisive action to bring the global economy out of its current dangerous phase both in Europe and worldwide."

""Euro-area countries will do whatever is necessary to resolve the euro-area sovereign debt crisis and ensure the financial stability of the euro area as a whole and its member states," the committee said.

Such measures include implementing an agreement reached on July 21 to expand the eurozone bailout facility's mandate."

"The head of the Organization for Economic Cooperation and Development Saturday backed a proposal to create an international facility to guarantee bank debt to prevent another credit crunch.

Credit started to dry up in euro-zone banks in the summer as fears escalated over the European sovereign debt crisis. No bank has been able to issue senior debt since then. World financial leaders at the annual International Monetary Fund meetings warned there is an increased risk the euro-zone crisis may create another global financial meltdown. "

"U.S. Treasury Secretary Timothy F. Geithner demanded European policy makers intensify efforts to neuter the 18-month sovereign debt crisis or trigger the “threat of cascading default, bank runs and catastrophic risk.”

In his strongest public push yet for Europe to step up its crisis-fighting, Geithner said strains in the euro-area’s budgets and banks are the “most serious risk now confronting the world economy.” He urged governments to unite with the European Central Bank to immediately “create a firewall against further contagion.”"


Europe aims to beef up crisis fund

Minister hints at bigger cuts for Greek creditors

Portugal Downgrades 2012 Economy Outlook

Europe needs to leverage its bailout fund-EU source

Euro Debt Crisis Is Worse Than US in 2008: George Soros

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Decline Watch: America's

Decline Watch: America's roads are so bad you need a German car to drive on them

Personally......  I'd recommend a French one, preferably a Citroen!

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bipolar housing market

"Think of this housing market as bipolar. In the luxury sector, sales and prices are rising. But in the market inhabited by most Americans, prices have fallen 30% or more since the peak in 2006. That's a steeper decline than during the Depression.

Almost a quarter of American homeowners owe more on their house than it's worth. Another quarter have less than 20% equity. About half of homeowners couldn't get a mortgage if they applied today.

But then there is the other housing market, occupied by 1.5% of the U.S. population. The one with outdoor kitchens and in-home spas; with his-and-her boudoirs and closets the size of starter houses. The one that is not local but global, with international buyers bidding in all cash."


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Citroen SM
Damnthematrix wrote:

Decline Watch: America's roads are so bad you need a German car to drive on them

Personally......  I'd recommend a French one, preferably a Citroen!

Sorry, no more Citroens in the US of A.  This was the last one if I'm not mistaken.  A friend of mine had one ... quite an interesting and  technologically advanced vehcile.


It's only fault was that it would leak copious quantities of yellow fluid (?anti-freeze?) anytime a German car would come too close to it.

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Market Tsunami on Monday?

 From John Mauldin's Thoughts From The Frontline today, a tidbit from Art Cashin about the Thursday-Monday Syndrome:


"The Thursday/Monday Syndrome – We had suggested yesterday that we should probably explore the history of what old fogey traders refer to as the Thursday/Monday syndrome. While it would be pretensions to say that was prophetic, it was, to say the least, serendipitous, for yesterday's action looked like the perfect first step in a Thursday/Monday setup.

"We had intended to give you a more thorough history of the syndrome with lots of analytical examples starting with the classic one – October 1929. Unfortunately, events are moving too fast this week, so we have neither the time nor space to wax poetic on the topic. So, you will just have to rely on my recollections of 50 years of watching markets and hundreds of nights studying market history.

"The classic Thursday/Monday syndrome starts with the kind of action we saw yesterday. The markets open under pressure and selling accelerates in swelling volume. By early afternoon, there is a virtual stampede of selling. Then, later in the session, stocks stabilize a bit based on some reassurance. On Thursday, October 23, 1929, that reassurance came in the form of Richard Whitney bidding '205 for 10,000 steel' on behalf of the bankers' rescue pool. (Read a terrific account in the chapter 'The Crash' in Fredrick Lewis Allen's marvelous and essential 'Only Yesterday'.)

"The action on Friday (and Saturday in the case of 1929) is uneven, often ending choppily steady or somewhat weaker.

"Then on Monday, the trapdoor opens with liquidation and margin calls bringing tsunamis of selling.

"Is that what's going to happen? Who knows? If it were that easy, kindergarten kids could do this. But chance favors the prepared mind. Old fogeys will guard against undue risk and exposure. Some may even get out a special shopping list. They will set their basket right, put in silly bids and hope some panicky soul throws a bargain in. Recall the story of the floor messenger boy, who, in 1929, according to legend, bought White Sewing Machine with his silly bid of one dollar when all other bids canceled.

"One final note on the syndrome. Not infrequently, the Monday massacre spills over into Tuesday morning – a capitulation bottom in mid-morning resulting in a massive reversal to the upside."


I thought this was interesting. I like old fogey traders.

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Could world social unrest hit America's streets?

 Maybe I missed it, but I am sort of surprised that I have read nothing on the Daily Digest about Occupy Wall Street which is now over a week old. 


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