[Russ Winter]

The year ends up in a haze of complacency combined with “black swans” lined up the ying yang. Whatever kool aid the Ministry of Truth is dispensing seems to be working, as a Gallup poll reveals that two thirds of Americans feel 2012 will be a better year than 2011.   Meanwhile homeowners who are underwater still owe $751 billion more than their homes are worth.  Little wonder that the second largest bank( BAC) in the US is a five dollar stock, and that’s in a complacent market. I have two projections for the new years: 550 if the current policies continue, or 850 followed by years of range bound trading if there is a legitimate restructuring of debt that puts the burden on banksters not gente.



Finally there has been a editorial written by a former Fed official calling out the risk piling up on the Fed’s balance sheet especially in the area of currency swaps with the ECB.  The obvious concept of central banks taking massive losses is gaining a little traction among commentators. If this thinking becomes widespread, along with the realization that national governments will be handed the bill at precisely the wrong moment, it will be the equivalent of Toto pulling back the curtain on the Wizard of Oz.

European banks end the year with €445.683B deposited with the ECB, and indication that there is little confidence with interbank lending other than through an intermediary.  This puts the risk of bank failures squarely at the feet of the ECB.

Some odds and ends back in the real world:

The Treasury bubble goes merrily along  and against the headwind of foreign central bank selling.  The Federal Reserve reports foreign investors selling $23B in Treasurys in the week ended Dec. 28, bringing their holdings down to $2.67T.  Looking at the data series which goes back to 2002, it’s the 2nd highest total of weekly sales ever, and brings net sales over the past month to $69B.

The IMF has told Greece what anyone with a calculator has known since the news was announced - the 50% haircut to private bondholders will not be enough to reduce the nation’s debt to sustainable levels.

Spain has badly missed it’s 2011 deficit projection, coming in at 8% rather than 6%.

Hungary is sinking rapidly, with a failed bond auction and yields approaching 10%.

The volume of credit in Brazil has doubled to 50% of GDP in less than a decade, with 5.6% of the $1.1T total more than 90 days past due



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