Daily Digest

Daily Digest - June 16

Tuesday, June 16, 2009, 11:06 AM
  • Introduction to “Broke: The New American Film" (Video)
  • Black Swan Currency Currents | The $18,100,000,000 question! (H/T Fujisan)
  • BFF and Market (Chart)
  • Setser: Who bought all the recently issued Treasuries?
  • BRICS or CRIBS? – Meeting in Moscow to coordinate policy
  • The Recession in Historical Context (PDF link on page is slow to load - but worth the wait)
  • Jim Rogers, Dow 1 million (Video)
  • Inflation, Oil is in Everything - Especially Inflation (Video)
  • Mortgage Rates Month over Month, (Chart on Page)
  • PacMan (Video)
  • The Perils of Linear Projections?
  • Treasury International Capital (TIC) Data for April (H/T Fujisan) 

Economy

Introduction to “Broke: The New American Film" (Video)

Black Swan Currency Currents | The $18,100,000,000 question! (H/T Fujisan)

BFF and Market (Chart)

Setser: Who bought all the recently issued Treasuries?

Who bought all the Treasuries the US government has issued in the last four quarters of data (q2 2008 to q1 2009)? Foreign demand for Treasuries — as we have discussed extensively — hasn’t disappeared, unlike foreign demand for other kinds of US debt. But foreign demand hasn’t increased at the same pace as the Treasury’s need to place debt. The gap was filled largely by a rise in demand for Treasuries from US households. Before the crisis, foreign purchases formerly accounted for almost all new Treasury issuance. Over the last 12 months, foreign demand accounted for more like half of total issuance even as foreigners bought a record sum of Treasuries. And from what we know about the second quarter, I don’t think the basic story has changed.

BRICS or CRIBS? – Meeting in Moscow to coordinate policy

According to Bloomberg data, at the end of last year, China was the fourth largest economy ($3.2 trillion), behind the US, Japan, and Germany. This of course takes the Chinese data at face value, and given the often large gaps between energy production and reported GDP growth, as well as the amazing consistency of the pace of growth, many often cast a suspicious eye on Chinese data.

With a GDP of $1.3 trillion in 2008, Brazil was the 10th largest economy, though it is roughly half the size of France, which is the 6th largest economy. Russia and India were neck-and-neck for 11th and 12th places with each having produced about $1.2 trillion of goods and services last year. Spain’s economy is nearly 20% bigger than Russia’s and India’s, and it is the 8th largest economy. Together the BRICs account for a little more than 12% of the world’s GDP, and China alone accounts for half of that.

The BRICs are also small in terms of the depth of the capital markets. Together, according to Bloomberg data, they account for a little more than 6% of the world equity capitalization (MSCI World Index). What equities that are truly tradable are very limited and concentrated in a few names. Often the markets lack the kind of transparency that many Western investors are familiar with, even given the financial crisis.

There are various capital controls and the BRIC’s currencies are not freely convertible or tradable. The banks have managed to partially circumvent the restrictions of the domestic (on-shore) market by creating a parallel off-shore market and non-deliverable forward contracts. Rydex’s CurrencyTrust ETF that tracks the ruble (XRU) was launched at the end of last year and has drawn little interest. It boasts a lowly $5 million market cap (assets under management).

The Recession in Historical Context (PDF link on page is slow to load - but worth the wait)

Here’s a quarterly report by Paul Swartz of the Council on Foreign Relations (CFR). It contains a lot of good charts with comparisons of today’s recession to the Great Depression and to the average Post WWII recession.

Keep in mind, however, that many of these charts are based upon data that is NOT COMPARABLE. Unemployment rate, for example, being one that is not even close to comparable. Still, overall a nice study in charts:

Jim Rogers, Dow 1 million

Inflation, Oil is in Everything - Especially Inflation (Video)

Mortgage Rates Month over Month, (Chart on Page)

PacMan (Video)

What is Different this Time?

We believe the dramatic shortening of the maturity privately held marketable federal government debt is very significant for two reasons. First, since the short end of the Treasury curve has been suppressed by the near ZIRP policy of the Fed, the net interest expense outlays on public debt have been suppressed. Since this is a line item on the expenditure side of the federal fiscal balance, Fed policy is also reducing the fiscal deficit from what it would otherwise be if the short end of the Treasury yield curve was closer to historically normal levels.

That means Chairman Bernanke may face more friction from the Administration than usual once he believes the time to lift the fed funds rate has arrived. That may be many quarters away, but questions about the Fed’s independence are already being raised, and would be inflamed by such a confrontation. It also means that if the short end of the Treasury yield curve starts to return to historical norms, interest expense will rise, and this will add to the fiscal deficit at the time. For deficit hawks, this introduces fears of compounding and a runaway public debt/income ratio.

However, it must not be forgotten that that the federal government’s interest expense must become somebody else’s income. The nuance under current conditions is with so much of the marketable federal debt held abroad, the creditors that benefit from bond coupon payments are less likely to be domestic households. With the Treasury issuing at the short end of the curve, and thereby minimizing current interest expense on the public debt, this is no big deal now, but what happens if interest rates return to historical norms?

Such a development not only suggests a larger current account deficit, as interest payments to foreign lenders reduce the trade balance, but it also takes a stream of income out of the range of federal government taxation, so a feedback loop that would otherwise reduce the budget deficit is thereby thwarted. To be clear, we are not fans of the “twin deficits” view since we find it neither holds true empirically nor theoretically, but this interest expense channel is one that could lead to spillover effects on the trade balance.

(More)

The Perils of Linear Projections?

At one point, Mr. Landry asked Stéfane of what he thought of Jeff Rubin thesis that peak oil will shrink Asian trade: A well-known economist and author says the B.C. government is looking in the “rear-view mirror” by spending vast sums of money to become a gateway for more trade with Asia.

In an interview in a downtown Vancouver food court, Jeff Rubin, a former chief economist with CIBC World Markets, told the Georgia Straight that in the coming years, “triple-digit” oil prices will make it far more expensive to ship goods here from Asia.

“Trade is going to become more and more regional than transoceanic,” he predicted.

Rubin’s new book, Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization (Random House Canada, $29.95), describes in detail the impact of oil prices on shipping costs. For example, he notes, when oil prices rose from US$30 per barrel to US$100 per barrel, the average daily fuel bill of a cargo ship went from US$9,500 to US$32,000.

“As oil climbed to [US]$100 per barrel, fuel costs became almost half the total cost of shipping something by sea,” Rubin writes.

As the Straight went to press, oil was selling at US$71 per barrel. It has swung from a high of US$147 to a low of US$33.87 over the past year.

(More)

 Treasury International Capital (TIC) Data for April (H/T Fujisan)

(Table on page) taking into account adjustments, is estimated to have been negative $8.8 billion.

 

22 Comments

JAG's picture
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Re: Daily Digest - June 16

 The latest from Nate: Bond Market Analysis Comparing Now to 1987...

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Re: Daily Digest - June 16

Black Swan Currency Currents | The $18,100,000,000 question! (H/T Fujisan)

$18,100,000,000,000
…committed by the US and Europe, one wonders about a couple of things:

  1. How in the heck can banks screw up so catastrophically? Still an open question.
  2. Why in the heck don’t we have ragging inflation by now? Still an open question.

When you consider that other governments besides the US and EU (China has been busy along with Japan, Brazil and Russia) are into the money pumping game, and we haven’t seen a whole lot in the way of global traction in demand, and even more surprisingly we haven’t seen any inflation per se from the “growing” countries, it has to make one very nervous.

Do you notice which of the charts reflects why our government is having so much trouble achieving their goal of inflationism?  (see article for chart)

If you said Velocity of Circulation, you would be correct! Congrats! For those of you not versed in such arcane jargon, and be very thankful you are not, let me put it this way: You can lead a horse to water but you can’t make him drink!

I think the collapsing velocity spells real trouble.  People are spending less, banks are lending less (other than the Fed) and the amount of debt is sucking liquidity out of circulation faster than the Fed can pump it in.

Is it time to discard expectations of inflation, hyper inflation and deflation - are we looking at stagflation?

Larry 

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Re: Daily Digest - June 16

Interesting thought Larry,

Lets make sure everybody clearly understands what "Stagflation" is:

Investopedia explains Stagflation

Stagflation occurs when the economy isn't growing but prices are, which is not a good situation for a country to be in. This happened to a great extent during the 1970s, when world oil prices rose dramatically, fueling sharp inflation in developed countries. For these countries, including the U.S., stagnation increased the inflationary effects.

So no more pay but alot more costs.  Sounds like what is happening right now.  Food has gone up 30 to 70% over the last year and my pay has not.

So we could say that our future maybe one of hyper-stagflation.

OK, if this is the true scenario we going into, OUCH!!!!!!!!!!!!

 

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Re: Daily Digest - June 16
DrKrbyLuv wrote:

I think the collapsing velocity spells real trouble.  People are spending less, banks are lending less (other than the Fed) and the amount of debt is sucking liquidity out of circulation faster than the Fed can pump it in.

Is it time to discard expectations of inflation, hyper inflation and deflation - are we looking at stagflation?

Larry 

Or maybe slumpflation ?

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Re: Daily Digest - June 16

Ok fujisan, I am going to one up you ((just joking)).

How about hyper slumpflation?

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Re: Daily Digest - June 16

 I'd still advocate we are broke... I don't think that is going to be good for the dollar.

 

U.S. likely to lose AAA rating: Prechter

NEW YORK (Reuters) - Technical analyst Robert Prechter on Monday said he sees the United States losing its top AAA credit rating by the end of 2010, as he stuck by a deeply bearish outlook on the U.S. economy and stock market.

Prechter, known for predicting the 1987 stock market crash, joins a growing coterie of market heavyweights in forecasting the United States will lose its top credit rating as the government issues trillions of dollars in debt to fund efforts to bail out the economy.

Fears about the long-term vulnerability of the prized U.S. credit rating came to the fore after Standard & Poor's in May lowered its outlook on Britain, threatening the UK's top AAA rating. That move raised fears that the United States could face a similar risk, with the hefty amounts of government debt issued in both countries to pay for financial rescues causing budget deficits to swell.

Prechter, speaking at the Reuters Investment Outlook Summit in New York, said he sees investors' confidence in an economic rebound fading, a trend that will drag the S&P 500 stock index .SPX well below the March 6 intraday low of 666.79 by the end of this year or early next.

"There will be a leg down in stock prices, and it will affect all other areas," including corporate bonds and commodities, said Prechter, who is executive officer at research company Elliott Wave International, based in Gainesville, Georgia.

Prechter, who is known for his bearish views, has repeatedly forecast a steep decline in stocks this year, even as the stock market has rebounded from 12-year lows set in March as optimism about an economic recovery has risen.

Despite the government and Federal Reserve's massive rescues for financial companies and securities markets, Prechter expects credit markets to clam up again as they did in the first phase of the global financial crisis and for the U.S. economy to sink into a depression.

Although U.S. banks' recently passed government "stress tests" that assessed the adequacy of their capital levels to absorb losses and have been able to raise some capital in debt and equity markets, "the banking sector is in severe trouble," as more loans turn bad, he said.

The economy "is obviously heading toward a depression," despite the government's efforts to dodge one, said Prechter.

Federal Reserve Chairman Ben Bernanke has not averted a re-run of the 1930s Great Depression, even though investors are becoming firmly convinced that the Fed has avoided disaster and that the economy has hit bottom.

"It's the next leg down (in stocks) that will make it clear that these things are not true," Prechter said.

 

 

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Re: Daily Digest - June 16

Rural Mich. counties turn failing roads to gravel

LANSING, Mich. (AP) - Some Michigan counties have turned a few once-paved rural roads back to gravel to save money.

More than 20 of the state's 83 counties have reverted deteriorating paved roads to gravel in the last few years, according to the County Road Association of Michigan. The counties are struggling with their budgets because tax revenues have declined in the lingering recession.

Montcalm County converted nearly 10 miles of primary road to gravel this spring.

The county estimates it takes about $10,000 to grind up a mile of pavement and put down gravel. It takes more than $100,000 to repave a mile of road.

Reverting to gravel has happened in a few other states but it is most typical in Michigan. At least 50 miles have been reverted in the state in the past three years.

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Revealed: climate change impact on US

Revealed: climate change impact on US

By Washington correspondent Kim Landers for AM


'Action needs to include measures to reduce the emissions of heat-trapping pollution' (User submitted via ABC Contribute: JodieV, file photo)

The White House has released a new report which it hopes will help to galvanise support for climate change legislation in the United States.

The report is the first issued since Barack Obama became President and it contains the strongest language on climate change to come out of the White House.

A lead author of the report, Dr Jerry Melillo, says climate change is fact, not opinion.

"It is clear that climate change is happening now. The observed climate changes we report are not opinions to be debated. They are facts to be dealt with," he said.

The nearly 200-page document is a joint venture between the White House and 13 federal agencies.

It has been released as the US Congress considers legislation that imposes the first national cap on emissions while also seeking to reduce them.

Mr Obama's chief science adviser, John Holdren, says action must be taken.

"Action needs to include both measures to reduce the emissions of heat-trapping pollution that are driving this problem and measures to adapt to the part of climate change we can't avoid," he said.

The report compiles years of scientific research and updates it with new data, painting a bleaker picture of global warming in the United States than has been done before.

It reveals that the average temperature in the US has risen 2 degrees Fahrenheit over the past 50 years, and might rise by up to 11 degrees Fahrenheit by the year 2100.

It warns the number of deaths from heat waves could double in Los Angeles and quadruple in Chicago if emissions are not reduced.

Sea levels are also expected to rise, with the area near New York City one of the worst hit.

The National Oceanic and Atmospheric Administration's Jane Lubchenco says humans are to blame.

"We're also reporting today with greater confidence than ever before that human activities are the main cause of the changes we see underway," she said.

"I really believe this report is a game changer, I think that much of the foot dragging in addressing climate change is a reflection of the perception that climate change is way down the road, it's in the future.

"And this report demonstrates, provides the concrete scientific information, that says unequivocally that climate change is happening now."

Meanwhile the United Nations is warning of what it calls "megadisasters" in the world's biggest cities unless more is done to heed the threat of climate change.

It says tens of millions of people are highly exposed because they live in big cities that would be threatened by rising sea levels or earthquakes.

And a new report from the Red Cross likens forecasting the impact of global warming to rolling a dice saying: "confronted with global warming, we know the dice is loaded".

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Re: Daily Digest - June 16

It gets better Davos - Cramer calls a housing bottom!

http://www.cnbc.com/id/31388528

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FRONTLINE: Breaking the Bank

In Breaking the Bank, FRONTLINE producer Michael Kirk (Inside the Meltdown, Bush's War) draws on a rare combination of high-profile interviews with key players Ken Lewis and former Merrill Lynch CEO John Thain to reveal the story of two banks at the heart of the financial crisis, the rocky merger, and the government's new role in taking over -- some call it "nationalizing" -- the American banking system.

http://www.pbs.org/wgbh/pages/frontline/breakingthebank/view/

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Cramer For Treasury Secretary! Cramer for Fed Chairman!
joemanc wrote:

It gets better Davos - Cramer calls a housing bottom!

http://www.cnbc.com/id/31388528

What a total BAFOON !!!

Thanks for the laugh Joe.

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A different view on Iran Elections

Western Misconceptions Meet Iranian Reality
June 15, 2009 | 1745 GMT


By George Friedman

Related Link
·        The Geopolitics of Iran: Holding the Center of a Mountain Fortress <http://www.stratfor.com/analysis/geopolitics_iran_holding_center_mountain_fortress>  
Related Special Topic Page
·        The Iranian Presidential Elections <http://www.stratfor.com/theme/iranian_elections>  
In 1979, when we were still young and starry-eyed, a revolution took place in Iran. When I asked experts what would happen, they divided into two camps.

The first group of Iran experts argued that the Shah of Iran would certainly survive, that the unrest was simply a cyclical event readily manageable by his security, and that the Iranian people were united behind the Iranian monarch’s modernization program. These experts developed this view by talking to the same Iranian officials and businessmen they had been talking to for years — Iranians who had grown wealthy and powerful under the shah and who spoke English, since Iran experts frequently didn’t speak Farsi all that well.

The second group of Iran experts regarded the shah as a repressive brute, and saw the revolution as aimed at liberalizing the country. Their sources were the professionals and academics who supported the uprising — Iranians who knew what former Supreme Leader Ayatollah Ruholla Khomeini believed, but didn’t think he had much popular support. They thought the revolution would result in an increase in human rights and liberty. The experts in this group spoke even less Farsi than the those in the first group.
Misreading Sentiment in Iran
Limited to information on Iran from English-speaking opponents of the regime, both groups of Iran experts got a very misleading vision of where the revolution was heading — because the Iranian revolution was not brought about by the people who spoke English. It was made by merchants in city bazaars, by rural peasants, by the clergy — people Americans didn’t speak to because they couldn’t. This demographic was unsure of the virtues of modernization and not at all clear on the virtues of liberalism. From the time they were born, its members knew the virtue of Islam, and that the Iranian state must be an Islamic state.

Americans and Europeans have been misreading Iran for 30 years. Even after the shah fell, the myth has survived that a mass movement of people exists demanding liberalization — a movement that if encouraged by the West eventually would form a majority and rule the country. We call this outlook “iPod liberalism,” the idea that anyone who listens to rock ‘n’ roll on an iPod, writes blogs and knows what it means to Twitter must be an enthusiastic supporter of Western liberalism. Even more significantly, this outlook fails to recognize that iPod owners represent a small minority in Iran — a country that is poor, pious and content on the whole with the revolution forged 30 years ago.

There are undoubtedly people who want to liberalize the Iranian regime. They are to be found among the professional classes in Tehran, as well as among students. Many speak English, making them accessible to the touring journalists, diplomats and intelligence people who pass through. They are the ones who can speak to Westerners, and they are the ones willing to speak to Westerners. And these people give Westerners a wildly distorted view of Iran. They can create the impression that a fantastic liberalization is at hand — but not when you realize that iPod-owning Anglophones are not exactly the majority in Iran.

Last Friday, Iranian President Mahmoud Ahmadinejad was re-elected  <http://www.stratfor.com/analysis/20090613_iran_results_presidential_election> with about two-thirds of the vote. Supporters of his opponent, both inside and outside Iran, were stunned. A poll revealed that former Iranian Prime Minister Mir Hossein Mousavi was beating Ahmadinejad. It is, of course, interesting to meditate on how you could conduct a poll in a country where phones are not universal, and making a call once you have found a phone can be a trial. A poll therefore would probably reach people who had phones and lived in Tehran and other urban areas. Among those, Mousavi probably did win. But outside Tehran, and beyond persons easy to poll, the numbers turned out quite different.

Some still charge that Ahmadinejad cheated <http://www.stratfor.com/analysis/20090613_iran_election_update_3> . That is certainly a possibility, but it is difficult to see how he could have stolen the election by such a large margin. Doing so would have required the involvement of an incredible number of people, and would have risked creating numbers that quite plainly did not jibe with sentiment in each precinct. Widespread fraud would mean that Ahmadinejad manufactured numbers in Tehran without any regard for the vote. But he has many powerful enemies who would quickly have spotted this and would have called him on it. Mousavi still insists he was robbed, and we must remain open to the possibility that he was, although it is hard to see the mechanics of this.
Ahmadinejad’s Popularity
It also misses a crucial point: Ahmadinejad enjoys widespread popularity. He doesn’t speak to the issues that matter to the urban professionals, namely, the economy and liberalization. But Ahmadinejad speaks to three fundamental issues <http://www.stratfor.com/geopolitical_diary/20090607_geopolitical_diary_irans_political_system_approaching_impasse>  that accord with the rest of the country.

First, Ahmadinejad speaks of piety. Among vast swathes of Iranian society, the willingness to speak unaffectedly about religion is crucial. Though it may be difficult for Americans and Europeans to believe, there are people in the world to whom economic progress is not of the essence; people who want to maintain their communities as they are and live the way their grandparents lived. These are people who see modernization — whether from the shah or Mousavi — as unattractive. They forgive Ahmadinejad his economic failures.

Second, Ahmadinejad speaks of corruption. There is a sense in the countryside that the ayatollahs — who enjoy enormous wealth and power, and often have lifestyles that reflect this — have corrupted the Islamic Revolution. Ahmadinejad is disliked by many of the religious elite precisely because he has systematically raised the corruption issue, which resonates in the countryside.

Third, Ahmadinejad is a spokesman for Iranian national security, a tremendously popular stance. It must always be remembered that Iran fought a war with Iraq in the 1980s that lasted eight years, cost untold lives and suffering, and effectively ended in its defeat. Iranians, particularly the poor, experienced this war on an intimate level. They fought in the war, and lost husbands and sons in it. As in other countries, memories of a lost war don’t necessarily delegitimize the regime. Rather, they can generate hopes for a resurgent Iran, thus validating the sacrifices made in that war — something Ahmadinejad taps into <http://www.stratfor.com/analysis/20090520_iran_missile_test_update> . By arguing that Iran should not back down but become a major power, he speaks to the veterans and their families, who want something positive to emerge from all their sacrifices in the war.

Perhaps the greatest factor in Ahmadinejad’s favor is that Mousavi spoke for the better districts of Tehran — something akin to running a U.S. presidential election as a spokesman for Georgetown and the Upper East Side. Such a base will get you hammered, and Mousavi got hammered. Fraud or not, Ahmadinejad won and he won significantly. That he won is not the mystery; the mystery is why others thought he wouldn’t win.

For a time on Friday, it seemed that Mousavi might be able to call for an uprising in Tehran <http://www.stratfor.com/analysis/20090612_iran_security_incidents_tehran> . But the moment passed when Ahmadinejad’s security forces on motorcycles intervened. And that leaves the West with its worst-case scenario: a democratically elected anti-liberal.

Western democracies assume that publics will elect liberals who will protect their rights. In reality, it’s a more complicated world <http://www.stratfor.com/twisting_maze_iranian_politics> . Hitler is the classic example of someone who came to power constitutionally, and then proceeded to gut the constitution. Similarly, Ahmadinejad’s victory is a triumph of both democracy and repression.
The Road Ahead: More of the Same
The question now is what will happen next <http://www.stratfor.com/analysis/20090610_iran_presidential_election_and_metamorphosis> . Internally, we can expect Ahmadinejad to consolidate his position under the cover of anti-corruption. He wants to clean up the ayatollahs, many of whom are his enemies. He will need the support of Iranian Supreme Leader Ayatollah Ali Khamenei. This election has made Ahmadinejad a powerful president, perhaps the most powerful in Iran since the revolution. Ahmadinejad does not want to challenge Khamenei, and we suspect that Khamenei will not want to challenge Ahmadinejad. A forced marriage is emerging, one which may place many other religious leaders in a difficult position.

Certainly, hopes that a new political leadership would cut back on Iran’s nuclear program have been dashed. The champion of that program has won, in part because he championed the program. We still see Iran as far from developing a deliverable nuclear weapon <http://www.stratfor.com/analysis/nuclear_weapons_devices_and_deliverable_warheads> , but certainly the Obama administration’s hopes <http://www.stratfor.com/weekly/20090323_obamas_new_year_greeting_and_view_iran>  that Ahmadinejad would either be replaced — or at least weakened and forced to be more conciliatory — have been crushed. Interestingly, Ahmadinejad sent congratulations to U.S. President Barack Obama on his inauguration. We would expect Obama to reciprocate under his opening policy, which U.S. Vice President Joe Biden appears to have affirmed, assuming he was speaking for Obama. Once the vote fraud issue settles, we will have a better idea of whether Obama’s policies will continue. (We expect they will.)

What we have now are two presidents in a politically secure position, something that normally forms a basis for negotiations. The problem is that it is not clear what the Iranians are prepared to negotiate on, nor is it clear what the Americans are prepared to give the Iranians to induce them to negotiate. Iran wants greater influence in Iraq and its role as a regional leader acknowledged, something the United States doesn’t want to give them. The United States wants an end to the Iranian nuclear program <http://www.stratfor.com/analysis/20090408_iran_u_s_nuclear_talks_announced> , which Iran doesn’t want to give.

On the surface, this would seem to open the door for an attack on Iran’s nuclear facilities. Former U.S. President George W. Bush did not — and Obama does not — have any appetite for such an attack. Both presidents blocked the Israelis from attacking, assuming the Israelis ever actually wanted to attack.

For the moment, the election appears to have frozen the status quo in place. Neither the United States nor Iran seem prepared to move significantly, and there are no third parties that want to get involved in the issue beyond the occasional European diplomatic mission or Russian threat to sell something to Iran. In the end, this shows what we have long known: This game is locked in place, and goes on.

Tell STRATFOR What You Think

For Publication in Letters to STRATFOR <http://www.stratfor.com/contact?type=letters&subject=RE%3A+Western+Misconceptions+Meet+Iranian+Reality&nid=140243>

Not For Publication <http://www.stratfor.com/contact?type=responses&subject=RE%3A+Western+Misconceptions+Meet+Iranian+Reality&nid=140243>  
 
This report may be forwarded or republished on your website with attribution to www.stratfor.com <http://www.stratfor.com/>

  

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Suitcase With $134 Billion Puts Dollar on Edge

Two Japanese men are detained in Italy after allegedly attempting to take $134 billion worth of U.S. bonds over the border into Switzerland. Details are maddeningly sketchy, so naturally the global rumor mill is kicking into high gear.

http://www.bloomberg.com/apps/news?pid=20601039&sid=a62_boqkurbI

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Re: Daily Digest - June 16

Hi JoeManC:

Hysterical, super find! Take care

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Re: Daily Digest - June 16

Swan Song: Why Nassim Taleb is Still Wrong??

http://www.cnbc.com/id/31386309/

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Restless herd????

Looks like the herd may be getting restless.....

http://blogs.moneycentral.msn.com/topstocks/archive/2009/06/16/fear-rises-on-wall-street.aspx

Fear rises on Wall Street

Posted Jun 16 2009, 04:05 PM by Anthony Mirhaydari
Filed under: Anthony Mirhaydari

 

One of the most popular indicators of investor sentiment is the Chicago Board Options Exchange Volatility Index ($VIX.X) -- or VIX for short. Dubbed the "fear index" by traders, the VIX measures implied volatility based on the pricing of S&P 500 index options. Higher prices mean investors are willing to pay more to protect themselves from uncertainty.

Over the past eight months, the VIX has been steadily declining. This helped support the rally out of the March low as extreme instability waned and risk appetites returned. But over the past two days, the VIX has started to move higher in a sign investors are suddenly more worried about a prolonged slide in stock prices.

In fact, both the S&P 500 and the VIX have broken out of three-month price channels and look ready to expand on recent moves: Higher for the VIX, which has gained 15% over the last two days; Lower for the S&P 500, which has lost 3%. Last week I warned of a narrowing of market breadth and declining buying power -- as fewer buyers pushed up fewer stocks. Now, we are finally starting to see the result.

Digging beneath the surface, we can see other signs of fear. Defensive sectors like healthcare and utilities are finding buyers while former high-flyers in the consumer discretionary sector are succumbing to selling pressure. Stocks like Tiffany & Co. (TIF) and Whole Foods Market (WFMI) are down 11% and 8% respectively over the past week. On the other hand, utilities like Dynergy (DYN) are up over 6%. At the sector level, the Utilities Select Sector SDPR (XLU) continues to outpace the S&P 500 on strong volume.

My Positions

To take advantage of these trends, I am adding positions in CenturyTel (CTL), Edison International (EIX), FPL Group (FPL), and Scana Corp. (SCG) to my TopStocks portfolio on Wall Street Survivor. We'll track it there and I'll let you know here when it's time to make another move. With some near-term weakness likely, I am also adding a position in the ProShares UltraShort Consumer Services ETF (SCC), iShares Barclays Aggregate Bond ETF (AGG), and the Direxion Financial Bear 3x ETF (FAZ). And finally, let's add a position in the iPath S&P 500 VIX Short-Term Futures ETN (VXX). You can see my portfolio here.
 

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Re: Daily Digest - June 16

Davos,

If you haven't already inlcuded the following, you might be tempted. An excerpt from:

Definancialisation, deglobalisation, relocalisation

by Dmitry Orlov

This talk was presented at The New Emergency Conference in Dublin, on June 11, 2009.

"It's rather difficult for most people to take any significant steps, even individually. It is even more difficult to do so as a couple. I know a lot of cases whether one person understands the picture and is prepared to make major changes in the living arrangement, but the partner or spouse is non-receptive. If they have children, then the constraints multiply, because things that may be necessary adaptations post-collapse look like substandard living conditions to a pre-collapse mindset. For instance, in many places in the United States, bringing up a child in a place that lacks electricity, central heating, or indoor plumbing may be equated with child abuse, and authorities rush in and confiscate the children. If there are grandparents involved, then misunderstandings multiply. There may be some promise to intentional communities: groups that decide to make a go of it in rural setting."

~Dmitry Orlov (http://www.energybulletin.net/node/49243)

Lee

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Re: FRONTLINE: Breaking the Bank

 Just finished watching Breaking the Bank (Thanks Denny, Thanks TIVO).

If that documentary doesn't make you want to put every penny that you have into Gold, then I don't what will.

Poor Banksters, they are just so misunderstood.

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Re: Daily Digest - June 16

Peter SChiff 6-15-09.

 A Recent History of the US Economy

The Laugh Heard Round the World: Chinese Laugh at Geithner's Reassurances on US Dollar and Economy

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Re: Daily Digest - June 16

ClubOrlov: Definancialisation, Deglobalisation, Relocalisation

This talk was presented at The New Emergency Conference in Dublin, on June 11, 2009.

1. Good morning. The title of this talk is a bit of a mouthful, but what I want to say can be summed up in simpler words: we all have to prepare for life without much money, where imported goods are scarce, and where people have to provide for their own needs, and those of their immediate neighbours. I will take as my point of departure the unfolding collapse of the global economy, and discuss what might come next. It started with the collapse of the financial markets last year, and is now resulting in unprecedented decreases in the volumes of international trade. These developments are also starting to affect the political stability of various countries around the world. A few governments have already collapsed, others may be on their way, and before too long we may find our maps redrawn in dramatic ways.

...

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