Winter Watch

Winter Watch Russ Winter analyzes the economy and the markets http://forums.wallstreetexaminer.com/index.php Fri, 10 Feb 2012 14:14:00 +0000 10 Spinning What’s Left of the Progressives or Going After Banksters for Real? http://forums.wallstreetexaminer.com/topic/1037422-spinning-what%e2%80%99s-left-of-the-progressives-or-going-after-banksters-for-real/ “The dogs may bark but the caravan moves on” -Turkish proverb

I now refuse to listen to words out of Presidente Zero’s hole. It looks like the mute button will be busy, but I do have Twitter (russwinter1) set up from certain sources for reactions to perceived policy intitatives from the Presidente. When Matt Taibbi (who I greatly respect) sounded hopeful and seemed to buy in on Presidente Zero’s more populist rhetoric about going more aggressively after mortgage banksters I decided to check further. Then Dylan Ratigan another observer I respect picked up on crony capitalist Mitt Romney rhetoric on banks coming clean with mark-to-market losses. Suddenly I started to wonder if these political players (and I do mean players) finally realize they need to throw some bones to the anti-crony capitalists OWS and Tea Party/Ron Paul movement to win in a close election? I prefer that those two movements join together in some kumbaya moment and throw the kleptocrats out, but that is quite unlikely now.

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Obviously if anything comes from this, it will mark a major shift away from the prevailing concept of socializing bankster losses. In Presidente Zero’s case perhaps this marks an awakening from his shameful Sixty Minutes interview when he declared, “I can tell you, just from 40,000 feet, that some of the most damaging behavior on Wall Street, some of the least ethical behavior on Wall Street, wasn’t illegal.” Any time this topic come up, Jamie Dimon has a tizzie fit, so I can only imagine what the policy makers hear. I will preface it by saying all of the electorate who cares about this are going to want to see action, not tawdry political rhetoric. If Prez Zero can’t deliver this year on this, I think the rhetoric will backfire.

But Zero has a way of fooling people around false actions and then finding some slick way of blaming it on Republicans. The announcement of another HARP like program is case in point. He could turn loose his judicial branch to get the money, but instead he proposes a (reduced from prior rhetoric) bank tax he knows Republicans will oppose. In a must read Bill Black calls Zero out, accusing him of only being about politics, propaganda and sleaze. Unfortunately as Black points out when Republicans have a chance to attack serious corruption, they fail to act unless it is some industry (like green) or group (government workers) outside of their own crony network.

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What to look for. First, here is rundown of the key players pursuing mortgage banksters. With the exception of the SEC guy Khuzami, who is a sycophant, there seems to be some rare enforcement types with larger testicles there. According to the Huffington Post story, the big banks would not receive immunity in the following areas. #4 is huge and involves $200 billion in damages sought.

1. Criminal liability.
2. Tax liability
3. Fair lending, fair housing, or any other civil rights claim.
4. Federal Housing Finance Agency or the GSEs [Fannie Mae and Freddie Mac]
5. CFPB claims for the period after they came into existence in July 2011
6. SEC claims
7. National Credit Union Association Claims
8. FDIC claims
9. Federal Reserve Board claims
10. MERS claims

The criminal investigations was also talked about although before the last elections when the Justice Dept was talking about hundreds of indictments which never came. Is this the model. A Reuters story suggests this is superfluous. Beau Biden, son of Joe Biden and Delaware Attorney General here sounds skeptical, and asks what the resources are coming from the administration. If on the other hand this is all settled for $25 billion with a couple arrests down the Mafia hierarchy, the citizenry will have been had once more.One boondoggle Obama may try to employ is expanded his HARP program paid for by taxpayers rather than banksters. Bruce Krasting writes that Obama has opposition to this and as such taxpayers may survive this misguided attempt. The head of FHFA, DeMarco has political protection from key Republicans. No HARP without full and real bankster funding. Posted Image

Separately after Barney Frank leaves Congress, his place as top Democrat on the House Financial Services Committee likely will be taken by” loose cannon” Maxine Waters.  She has advocated banning all credit default swaps and taxing “gangsta banks” out of business. The powers to be may have to Spitzerize this one. Waters is under ethics investigation.

View the full article]]> Fri, 10 Feb 2012 14:14:00 +0000 http://forums.wallstreetexaminer.com/topic/1037422-spinning-what%e2%80%99s-left-of-the-progressives-or-going-after-banksters-for-real/ Germany’s Coo-Coo Times http://forums.wallstreetexaminer.com/topic/1037292-germany%e2%80%99s-coo-coo-times/ is tanking, and for good measure so is trade,  and the losses and liabilities for bailouts keeps piling up. She must feel like the Kaiser in 1918, with so many men already lost (sunken costs), and still needing more troops to fight a losing war. It is obvious that the political will for this lost cause is waning too. As a response Angela is flaying around calling for reinforcements from the bankrupt EU. She has gone begging to China who has actually lowered its European stake. She is even suggesting the UK join the EU. This is real coo-coo time. Gee I wondered if the Kaiser ever sent feeler out to the UK in ’18 to switch sides.

The market seems to think Germany is actually willing to assume the liability for its share for up to another trillion dollar LTRO bazooka (consensus if for 350 bn). Really? I wonder, but I guess it is coo-coo time. I mean seriously folks, three out of four German voters opposed this latest $125 bn euro EU deal for Greece way back in October before the wheels came off. Now its $140 bn and counting. But wait that was before Greece reported a complete collapse in tax receipts in January, even before the next round of EU imposed austerity.  So much for Greece’s higher VAT.

“Revenues posted a 7 percent decline compared with January 2011, while the target that had been set in the budget provided for an 8.9 percent annual increase. Worse still, value-added tax receipts posted an 18.7 percent decrease last month from January 2011 as the economy continues to tread the path of recession: VAT receipts only amounted to 1.85 billion euros in January compared to 2.29 billion in the same month last year.”

As far as the next round of Greek coo-coo “austerity” (another bogus word), Zero Hedge puts it best although I saw 15,000 cuts not 150,000 and 22% reduction in minimum wage not 20%. Do they actually think this will survive a Parliamentary vote on Feb 12.? This vote isn’t about the implementation, but the restructuring, but would you care? :

TROIKA DRAFT GREEK ACCORD SAYS 2012 GDP TO SHRINK AS MUCH AS 5% – so make that 15%-25% realistically
GREECE TO CUT MEDICINE SPENDING TO 1.5% OF GDP FROM 1.9% OF GDP – why not just “cull” 15-20% of the population?
GREECE PLEDGES TO MERGE ALL AUXILIARY PENSION FUNDS - one problem – following the default, there will be no pension funds left.
GREECE TO PLEDGE 20% CUT IN MINIMUM WAGE IN TROIKA DRAFT – and Greek citizens pledge to never work again.
TROIKA DRAFT GREEK ACCORD RENEWS PLEDGE TO CUT 150,000 EMPLOYEE – or the US equivalent of nearly 5 million workers…

But the winner is:

TROIKA DRAFT GREEK ACCORD SEES RETURN TO GROWTH IN 2013 – OMFG…. no, did they just… HILARIOUS

Is there no end for the Kaiser, I mean Angela? This is going to test all her political skills just to finalize the $140 bn to be thrown down the rat hole. Of course Portuga and Ireland also wants to be restructured with Troika haircuts if Greece does. Germany’s Parliament is to vote on aid next week. As far as the EU, perhaps Frau Angela hasn’t noticed that her ally Sarkowzy is getting in his ass kicked and is now down 16% in the upcoming election. His successor Hollande wants to completely revamp the EU and not in the vision of Frau Angela?

My conclusion is that the political capital for bankster bailout economics, and that would include free lending by the ECB and EFSF is exhausted. In the case of Greece , a massive amount of Greek debt would now be held by taxpayer-backed institutions – specifically the ECB, the Eurozone bailout fund (EFSF) and the IMF. Given the seniority of the IMF, most of the next round of losses would fall on the Eurozone. Incidentally now there is talk of having the EFSF participate in the Greek haircut instead of the ECB. A minor technical point, as really makes no never mind as far as who pays up, it is still going to Germany, France, Italy and Spain, only Greece gets excused.

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View the full article]]> Thu, 09 Feb 2012 05:01:50 +0000 http://forums.wallstreetexaminer.com/topic/1037292-germany%e2%80%99s-coo-coo-times/ Playing on Iran’s Home Court, the Great Strait of Hormuz Test http://forums.wallstreetexaminer.com/topic/1037249-playing-on-iran%e2%80%99s-home-court-the-great-strait-of-hormuz-test/

Iran possesses a build up of anti-ship weapons called Sunburn missiles, which it has procured from Russia and China over the last decade. These are top-notch weapons developed by the Russians as a low-cost challenge to the expensive, tech-heavy weaponry of the U.S., and specifically the aircraft carrier task force. A conflict, which I now assign a high probability to [see Scenario for an Israel Attack on Iran], is going to be a huge test of a global-naval doctrine that Russia and China will watch with tremendous interest. That’s why I think they have armed Iran to the teeth. The big question: How many of these weapons does Iran have? I would suggest thousands, and that this is the real show.

Given that U.S. crony logic seems to be about squandering money on weapons in the military-industrial complex, I fear for young sailors and marines on the 5th Fleet. Don’t get me wrong, the US Navy is professional, but the Strait doesn’t allow for the normal defense in depth available in open seas, in fact it offers the Iranians a cross fire setup or triangulation (see map of Strait below) . If you read discussions on various military sites, there is a lively debate on American ship defense system like the Aegis. However, almost nobody claims this to be fully protective against ship strikes. And an oil tanker, no way. It is important that the US is working on new generation lasar defense to counter these missiles, however they are still in development. This puts added pressure for Iran to have this fight now, not later. The following is from ”Russian Military Equality Network. (I have cleaned up the English a bit]

U.S. Navy Pacific Commander Admiral Timothy Keating said that due to lack of sufficient funds for the procurement of simulated target missile defense system, the U.S. Navy can not now afford to fight “the club” category of supersonic anti-ship missiles. It is reported that the U.S. military that is used to simulate the “club” missile target missile is still being developed, and is expected to be put into use in 2014.

The Sunburn is perhaps the most lethal anti-ship missile in the world, designed to fly as low as 9 feet above ground/water at more than 1,500 miles per hour (mach 2+). The missile uses a violent pop-up maneuver for its terminal approach to throw off Phalanx and other U.S. anti-missile defense systems. Given their low cost, they’re perfectly suited for close quarter naval conflict in the bathtub-like Persian Gulf.

The Sunburn is versatile, and can be fired from practically any platform, including just a flat bed truck. It has a 90-mile range, which is all that is necessary in the small Persian Gulf and 40-mile-wide Strait of Hormuz. Fired from shore a missile could hit a ship in the Strait in less than a minute. It presents a real threat to the U.S. Navy. Tests using the Aegean and RAM ship defense technology stops the Sunburn 95% of the time, but such testing was done in open seas, not a bathtub. The payload hit with a 750-pound conventional warhead can be witnessed at 1:53-1:57 in this video. Not enough to sink a carrier, but it could take down smaller capital ships and crew.

You don’t have to be Hannibal preparing for the Battle of Cannae to see that the Strait is a potential shooting gallery. Without a doubt, Iran has plotted and mapped every firing angle and location along the Gulf, their home-court coastline. This is going to put enormous interdiction pressure on U.S. warplanes to spot and destroy platforms, which may be as simple as a flat-bed truck. In reality, Iran has dug in from Jask in the east to Bandar in the west and can easily cover any ship, commercial or military, traversing the narrow Strait.

Equally disturbing is Iran’s missile range for the entire Persian Gulf. Bahrain itself could be hit by the longer-range version of the Sunburn, the Onyx. Is the U.S. (which has three aircraft carrier groups in play currently) going to stick around or clear out to the Oman Sea, leaving control of the oil lanes to Iran? Or will they stay and slug it out with the Iranians? If so, at what cost? Iran’s strategic advantage may mean some losses for the 5th Fleet, if this gets played out on Iran’s home court.

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View the full article]]> Wed, 08 Feb 2012 07:40:29 +0000 http://forums.wallstreetexaminer.com/topic/1037249-playing-on-iran%e2%80%99s-home-court-the-great-strait-of-hormuz-test/ The US Labor Picture: Much Ado About Nothing http://forums.wallstreetexaminer.com/topic/1037194-the-us-labor-picture-much-ado-about-nothing/
I am seeing accounts that exports out of Japan and China are seriously declining so by extension it might make sense that some production is returning to the US. This blip has been called the “re-industrialization” of America, but mostly it is about a zero sum game with Japan who has an extremely overvalued currency, and labor cost and demographic issues. The US does have cheap labor now, but if any of the currency or labor costs variables change there goes the advantage. I have also reported on auto channel inventory stuffing. There has also been demand pulled forward because of the bonus depreciation on equipment. The situation is far too much in flux for firms to invest much into a US industrial revival.

There is a social/commercialized network bubble underway, and apparently hiring is going on there. Here we are asked to believe people spend most of their time online talking about what they bought and ate at the mall and thus ad spending can be cut. Meanwhile sectors like newspapers are dying on the vine and to the detriment of real information which has become Murdochized. It is a sad commentary when real critical news has to be picked up by Aljazeera and Russia Times. In this great interview with the former, Dylan Ratigan and Buddy Roemer discuss the whys as it relates to politics and governance.

But I digress, as on the other hand up to 150,000 bank layoffs are getting underway this year. Included in this are reduced bonuses and head counts on Wall Street, and those have inflated salaries. AMR is laying off 15,000. There is also a drilling downturn getting underway in the formerly hot gas patch.

But the bottom line comes from stepping back and looking through the lens of the last four months, using the government fiscal year to date (October to now) , which incorporates XMAS hiring. Lee Adler noted a surge in January which is now fading. In using this data in the past, anytime you get something spiky it will usually have to do with YoY timing or an outlier. Charles Biderman at Trim Tabs sees nothing here. The four month wages withheld data shows very little improvement either, which to me casts serious doubt at least on the quality of any job improvement.

Per the Daily Treasury Statement, so far in the current fiscal year total withholding is 618.5 bn vs 616.7 bn YoY, hardly an employment boom. Corporate taxes collected are 74.5 bn vs 68.9 bn. If you are wondering how corporations do so well, their tax level is scrapping along the lowest to GDP in forty years. It seems that an” unexpected” $100 billion hole has appeared in corporate tax revenues caused by the aforementioned bonus equipment depreciation. [NYT] If we have such a great economy wouldn’t be nice if taxes picked up a few degrees? Instead total taxes collected fiscal year to date is 726.6 bn vs 715.0 bn YoY, about a 1 1/2% increase. Still the CBO is still looking for a 14.7% increase in revenue, due any time from outer space apparently. Unless the payroll tax cut is dropped, at this run rate federal tax revenue is going to fall far short of the lofty projection for FY 2012.

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Since I wrote my piece on natural gas (the details are here) , we have received a lot more clarity about the sector. As advertised we are now seeing the effects of the CHK cutback announcement. There was a very substantial drop of 32 in one week. CHK is the big marginal player and this is very likely to continue. What it means is that as we approach the cooling season we should start to see the effects on production. Remember that shale gas well production is very front loaded, meaning a well drill this year is far more productive than one drilled in 2009-2010 or even 2011. The key will be on coal, and not surprisingly the Appalachian producers are reporting cutbacks. I’d like to see 2.80 or lower stick for a month or so on the October futures to push even more use into NG and away from coal.

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Yesterday was the lowest non-holiday trading volume in a decade.

View the full article]]> Tue, 07 Feb 2012 05:03:11 +0000 http://forums.wallstreetexaminer.com/topic/1037194-the-us-labor-picture-much-ado-about-nothing/ Scenarios for an Israeli Attack on Iran http://forums.wallstreetexaminer.com/topic/1037105-scenarios-for-an-israeli-attack-on-iran/ “Unity is the cure to lots of ailments in our country.” -Iran’s Supreme Leader Ali Khamenei

In predicting the outcome of a war or serious conflict scenario in the Middle East, unfortunately the threat of U.S. military presence and western economic sanctions in itself will do nothing to detour Iran from wrapping up its nuclear program. In fact these circumstances and the harm to Iran’s economy seem only to raise Iran’s ire even more. Therefore, I see U.S. moves as nothing more than running down the clock on non-military tactics. Meanwhile, this weekend Iran is starting new military exercises on the ground. What’s interesting about this exercise is that it involves Revolutionary Guards and not Iran’s navy. This tells us the obvious, that Iran will employ asymmetric and non-conventional tactics to close the Strait of Hormuz.

Iranian (and American) politics are also playing a role. In a stacked election coming on March 2, the new Iranian parliament (the Majles) will arrive. With its arrival, all remaining vintages of a moderate faction will be swept out. This is a power consolidation by religious Supreme Leader Ali Khamenei to eliminate all opposition from Ahmadinejad and any surviving moderates. In some respects, Khamenei makes Ahmadinejad seem a bit tame. He is convinced that the West’s political-economic system is decayed and is ripe for a fall, and he seems more than willing to put his theory to the test. He compares the West today to the crumbling Soviet Union of the late 1980s, which was “swept away” because it had “no logic.” ["Khamenei Won't Retreat"]

After the power consolidation, Khamenei will be more than willing to employ the more aggressive asymmetric tactics used by the Revolutionary Guard to try and bait Israel and the U.S. into some accident or retaliation, even before a strike against Iran’s facilities. Daring a strike would be a way of flipping a big middle finger and demonstrating to all that Iran’s nukes were buried safely underground. If that doesn’t work, he will provoke. After all, the U.S. was recently warned by Iran about its presence in its home court, the Persian Gulf. The U.S. responded by employing three aircraft carrier groups.

Post March 2, Iran will become even more hardline and will literally bunker down. At this point, Iran and its nuke capability will become a central topic of U.S. elections. Republican presidential candidates are going to play to the idea that potentially secular and democratic voices are being suppressed by a tyrannical regime in Tehran and Obama is not lifting a finger. There is going to be saber-rattling calls in the U.S. to “support the Green Movement,” and for “regime change” in Iran. Once sanctions fizzle and this heats up, Obama will be more and more on the defensive politically.

As a variable to all this, Israel could strike before these March 2 elections in a somewhat wild gamble to rattle the cage in Iran and hope for a different internal outcome other than the table that is now being set. But for real opposition to materialize within Iran — and given that the Green Movement was hung out to dry by the world in 2009 — the U.S. would also have to be heavily engaged militarily, taking out the Revolutionary Guard, the hardline cleric leadership in addition to the nuke facilities. That’s a tall order.

On the other hand, the huge dilemma for Israel is that the Iranians have enough enriched uranium in deep underground facilities to make a weapon. Israel has serious doubts about that. The immediate tactical variable driving Israel’s apparent push toward strikes is the ongoing installation of centrifuges in the new enrichment facility at Fordo near Qom [Iran nuclear work at underground bunker confirmed]. The Fordo facility is located inside a small mountain, making it very difficult to destroy from the air, at least not without using nuclear weapons. That would force Israel into using the dreaded and devastating “N” word against Iran, which would be far more disastrous in terms of worldwide opinion than a more conventional preemptive strike right now. Even if Israel used its conventional capabilities of precision bombing and Israeli commandos, this will be a difficult and possibly inadequate mission. Further, the odds of tactical success are dropping by the day.

With the rise of the Arab Spring and the threat of more unfriendly regimes in places like Egypt, Israel may be tempted to make it known that they will reestablish the credibility of what Israeli elites like to call their “deterrent edge.” If Israel gets talked out of using preemptive deterrence against a nuke facility deep inside an Iranian mountain, what credibility would they have for much of anything that involved risk or cost in that neck of the woods? Israeli journalist Rachel Wood in a New York Times interview calls the atmosphere in Israel ”afflicted with anxiety” with the perception of an “existential threat.” This is translating into unbearable political pressure to do something soon.

I think the press is now being used to leak back-channel threats and decoys. The U.S., and western mainstream media in particular, seem to be more about foreign policy propaganda than real assessment right now. Beyond that, there is a huge amount of pyschops and propaganda on the Internet on this topic — stories such as Iranian women training to be ninjas, etc. — making research very difficult. My instincts tell me something is up.

For example, the Turkish media reports that Israel denies a story out of the Herald of London that states Israel would do a flyover of Turkey and would even use the U.S. base in Turkey to hit Iran. The Herald story is nonsense and is used to put Turkey on notice. Turkey might try to engage this flight. The flyover of Saudi Arabia would be destabilizing to the House of Saud and would be a very poor choice. Yet the Times of London ran a story claiming a deal with the Saudis was made. As Max Keiser puts it, the problem is that the U.S./UK/Israel only know what Murdoch feeds them. Even Hillary Clinton admitted recently that “we are losing the information war.”

With the U.S. occupation of Iraq concluded and its air space returned, Jordan and Iraq would become the gateway for the Israeli flyover, rendering the routes on this map obsolete. Nevertheless, this route would imply a green light from the U.S. Meanwhile, Defense Secretary Panetta is using April to June as the strike period to both create a decoy and as an attempt to claim plausible deniability when the strike comes early. In conclusion, I think the strike will come in February, and before the March 02 Iranian house cleaning.

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View the full article]]> Sun, 05 Feb 2012 05:01:11 +0000 http://forums.wallstreetexaminer.com/topic/1037105-scenarios-for-an-israeli-attack-on-iran/