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GMTP - February 2013

GMTP - February 2013

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Published by: lcmgroupe on Jan 27, 2013
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1
 February 2013 EditionRestricted & Confidential
Copyright 2012 © Gordon T. Long All Rights Reserved general@GordonTLong.com
 
CRISIS OF TRUST
A Growing Crisis of Trust is eroding Confidence and fostering slowing Capital Investment. 
Though on the surface, Global Risk has decreased by traditional measures such as Credit Default Swap rates, LIBOR-OIS, Ted Spread etc., there are many divergences that are historically majorindicators of serious problems ahead. The unprecedented moves by the central banks of the US, EU,Japan (and indications by the UK) to establish a policy of 'unlimited' monetary expansion havedistorted many traditional macro analytics. Markets as a consequence are mispricing risk. Earningsfor Q4 2012 are presently coming in below expectations, top line revenue growth is under pressure,and the Global Consumer Confidence indicators as reported by Nielsen are falling precipitously.There appears to be an abrupt re-alignment of risk sentiment looming before the Ides of March.
GLOBAL MACRO TIPPING POINTS - FEBRUARY 2013
1/26/2013
 
 
2
 
February 2013
EditionRestricted & Confidential
 
Copyright 2012 © Gordon T. Long All Rights Reserved general@GordonTLong.com
 
CRISIS OF TRUST
 
A Growing Crisis of Trust is Eroding Confidence and Fostering Slowing Capital Investment
GLOBAL MACRO TIPPING POINTS - FEBRUARY 2013
TIPPING POINTS
........................................................................................................................ 9
 
GLOBAL
 
MACRO:
 
RISK
 
 ASSESSMENT
...................................................................................................................................................... 9
 
SITUATIONAL ANALYSIS ...................................................................................................................................................... 9 
 
POSITIONAL FRAMEWORK: "WE ARE HERE!" 
......................................................................................................................................................... 9
 
Q1 2013 DEVELOPMENTS TO WATCH 
..................................................................................................................................................................... 10
 
GLOBAL TRENDS - NATIONAL INTELLIGENCE COUNCIL
................................................................................................................................... 19
 
A BROKEN PONZI SCHEME - BOSTON CONSULTING GROUP 
.......................................................................................................................... 21
 
RISK CONTINUUM 
......................................................................................................................................................................................................... 23
 
MACRO MONITORING INSTITUTIONS ............................................................................................................................... 24 
 
WEF (WORLD ECONOMIC FORUM)
.......................................................................................................................................................................... 24
 
IMF (INTERNATIONAL MONETARY FUND)
.............................................................................................................................................................. 39
 
OECD (ORGANIZATION FOR ECONOMIC COOPERATION & DEVELOPMENT)
.............................................................................................. 54
 
NIELSEN (GLOBAL CONSUMER CONFIDENCE, CONCERNS & SPENDING INTENTIONS)
.......................................................................... 56
 
MAPLECROFT (SCANNING THE GLOBE)
................................................................................................................................................................ 67 
 
GLOBAL RISK SIGNALS ...................................................................................................................................................... 69 
 
RISK - SIGNS APLENTY, BUT NO ONE PANICKING - YET! 
.................................................................................................................................. 71
 
RISK - CANARIES SINGING AGAIN 
........................................................................................................................................................................... 73
 
RISK - COMPLACENCY & REPRESSED FEAR 
........................................................................................................................................................ 74
 
RISK - CENTER OF GLOBAL MANUFACTURING SHIFTING AWAY FROM DEVELOPED COUNTRIES 
....................................................... 75
 
RISK - TIED TO EU IN 2012 
......................................................................................................................................................................................... 76
 
RISK - GLOBAL DERIVATIVE COLLATERAL
............................................................................................................................................................ 77 
 
RISK - GLOBAL IMBALANCES CONTINUE TO INCREASE ALONG WITH FRAGILITY 
..................................................................................... 79
 
RISK - GLOBAL RISK MATRIX 
..................................................................................................................................................................................... 81
 
RISK - GLOBAL MACRO HEADWINDS / TAILWINDS 
.............................................................................................................................................. 82
 
RISK - FOOD A GROWING GLOBAL INFLATION & SOCIAL UNREST RISK 
...................................................................................................... 83
 
RISK - SLOWING GLOBAL ECONOMIES 
.................................................................................................................................................................. 88
 
RISK - INCREASINGLY DYSFUNCTIONAL CAPITALS MARKETS 
....................................................................................................................... 90
 
RISK - RISING GEO-POLITICAL EVENT RISK 
.......................................................................................................................................................... 92
 
GLOBAL
 
MACRO:
 
RISK
 
LEVELS
................................................................................................................................................................ 96
 
AGGREGATED GLOBAL FINANCIAL RISK INDEX .............................................................................................................. 96 
 
BANKING RISK - LIBOR-OIS SPREAD (Updated)
.................................................................................................................................................... 97 
 
BANKING RISK - TED SPREAD (Updated)
................................................................................................................................................................ 97 
 
CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS (Updated)
.......................................................................................................................... 98
 
CREDIT RISK - EU CREDIT DEFAULT SWAPS (Updated)
..................................................................................................................................... 99
 
CONSUMER RISK - HOUSING - RATE OF CHANGE (Reference)
...................................................................................................................... 100
 
ECONOMIC RISK - ECRI LEADING INDEX (Updated)
........................................................................................................................................... 101
 
INFLATION RISK - MONEY SUPPLY GROWTH - M3 (Updated)
.......................................................................................................................... 102
 
INFLATION RISK - MONEY VELOCITY (Updated)
.................................................................................................................................................. 103
 
MONETARY RISK - BANK LIABILITIES (Updated)
................................................................................................................................................. 103
 
COST OF MONEY RISK - INTEREST RATES (Updated)
...................................................................................................................................... 105
 
AGGREGATED RISK LEVEL .............................................................................................................................................. 107 
 
TIPPING
 
POINTS:
 
CHANGES
.................................................................................................................................................................... 108
 
TIPPING POINT MAPPING: 2013 UPDATE ........................................................................................................................ 108 
 
TIPPING
 
POINTS:
 
TOP
 
5
 
FOCUS
 
-
 
FEBRUARY 
 
2013 
.......................................................................................................................... 117
 
I - RISK REVERSAL............................................................................................................................................................ 117 
 
II - JAPAN DEBT DEFLATION ............................................................................................................................................ 120 
 
III-BOND BUBBLE .............................................................................................................................................................. 123 
 
IV - EU BANKING CRISIS ................................................................................................................................................... 123 
 
V - SOVEREIGN DEBT ....................................................................................................................................................... 124 
 
VI - CHINA HARD LANDING ............................................................................................................................................... 126 
 
 
 
3
 
February 2013
EditionRestricted & Confidential
 
Copyright 2012 © Gordon T. Long All Rights Reserved general@GordonTLong.com
 
DRIVER$:
 
RISK-ON 
 
 
RISK-OFF 
 
ANALYTICS 
......................................................................................................................................... 130
 
1- G10 MACRO SURPRISE INDEX .................................................................................................................................... 133 
 
2- CUMULATIVE GLOBAL PMI ........................................................................................................................................... 136 
 
3- SLOWING GLOBAL EXPORTS ...................................................................................................................................... 142 
 
4- US NON-REVOLVING CONSUMER CREDIT ................................................................................................................. 145 
 
5- IBES' RELATIVE GLOBAL PE RATIOS .......................................................................................................................... 148 
 
6- CONSENSUS EARNINGS ESTIMATES - Sell Side Analysts .......................................................................................... 154 
 
7- INFLATION PRESSURES - Global Food Prices.............................................................................................................. 156 
 
GLOBAL MACRO
................................................................................................................... 160
 
GLOBAL
 
ECONOMIC
 
OUTLOOK
.............................................................................................................................................................. 162
 
IMF CUTS ECONOMIC OUTLOOK ..................................................................................................................................... 162 
 
IMF Cuts Advanced Economies Growth by 25% from 2.0% to 1.5% 
............................................................................................................... 162
 
IMF Cuts Growth from 3.9% to 3.6% and Increases Deficit Multiplier by 100 to 200% 
................................................................................ 169
 
WARNINGS ........................................................................................................................................................................ 172 
 
IMF WARNS ....................................................................................................................................................................... 172 
 
Japanese & Spanish Debt Unsustainable 
.................................................................................................................................................................. 172
 
Global Recovery Faltering, Reduces Global Growth to Just Above 3% Global Recession Level 
....................................................................... 174
 
BIS WARNS ........................................................................................................................................................................ 176 
 
Monetary Policy At Its Limits 
........................................................................................................................................................................................ 176
 
WORLD BANK WARNS ...................................................................................................................................................... 177 
 
Social Unrest Stems from Shrinking Disposable Income. Jobs are the central issue.
............................................................................... 177 
 
GLOBAL
 
CENTRAL
 
BANKING
................................................................................................................................................................... 179
 
Global Balance Sheet Expansion 
............................................................................................................................................................................ 179
 
First Remove Gold Standard, Now Remove Debt 
................................................................................................................................................ 182
 
GLOBAL
 
INDICATORS
............................................................................................................................................................................... 185
 
GROWTH............................................................................................................................................................................ 185 
 
Slowing Global Growth - Air Cargo Shipments 
......................................................................................................................................................... 185
 
Global Slwoing- 
Export / Import Confirmations 
..................................................................................................................................................... 186
 
Further Confirmations Global Growth Has Collapsed 
........................................................................................................................................ 187 
 
Europe Continues to Force Global Growth Estimate Reductions 
........................................................................................................................... 188
 
GDP Reductions - By Region 
...................................................................................................................................................................................... 189
 
Manufacturing PMI - By Country 
................................................................................................................................................................................ 196
 
SENTIMENT ....................................................................................................................................................................... 199 
 
Europe has a Growing Sentiment /Confidence Problem 
.......................................................................................................................................... 199
 
CREDIT MARKETS............................................................................................................................................................. 206 
 
Stable but Tenuous 
....................................................................................................................................................................................................... 206
 
INFLATION ......................................................................................................................................................................... 208 
 
Food Prices,
Driver of Social Unrest 
........................................................................................................................................................................ 208
 
Where Do these Deflators Come From? 
.................................................................................................................................................................... 209
 
TRENDS ............................................................................................................................................................................. 210 
 
Commodities and Brands Tell the Global Story 
......................................................................................................................................................... 210
 
GEO-POLITICAL
 
TENSIONS
..................................................................................................................................................................... 222
 
IRAN ................................................................................................................................................................................... 222 
 
Watch Out for a "False Flag" or "Covert" Activity Event 
................................................................................................................................... 222
 
Who Is Threatening Who Here? 
............................................................................................................................................................................... 222
 
CURRENCY WARS ............................................................................................................................................................ 224 
 
The Race to Debase 
.................................................................................................................................................................................................... 224
 
EUROPE
 
-
 
UDDLE 
TAGE 
NDS 
 
RISIS 
TAGE 
EGINS 
........................................................................................................................ 226
 
SUMMITS ........................................................................................................................................................................... 227 
 
The 20th Summit 
........................................................................................................................................................................................................... 227 
 
Muddle" Stage has ended. "Crisis" Stage has Begun 
........................................................................................................................................ 227 
 
A Banking Union & Central Budget 
........................................................................................................................................................................ 229
 
Government Debt Dynamics Interactive Model 
.................................................................................................................................................... 230
 
Roadmap of EU Hurdles and Surprises Ahead 
.................................................................................................................................................... 231
 
"19th Nervous Breakdown" 
.......................................................................................................................................................................................... 233
 

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