The Looming M&A Wave: Global Macro Update

THE LOOMING M&A WAVE
Resulting from Sustained Low Interest Rates, Government Tax Incentives &
Regulatory Forbearance
GLOBAL MACRO UPDATE
GLOBAL MACRO TIPPING POINTS - AUGUST 2014
7/25/2014
1 August 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved
Restricted & Confidential

general@GordonTLong.com
THE LOOMING M&A WAVE

Resulting from Sustained Low Interest Rates, Government Tax Incentives & Regulatory Forbearance
GLOBAL MACRO TIPPING POINTS - AUGUST 2014
TIPPING POINTS .................................................................................................................................... 20

GLOBAL MACRO: RISK ASSESSMENT .................................................................................................................................. 20
POSITIONAL FRAMEWORK: "WE ARE HERE!".................................................................................................................................................... 20
LIQUIDITY is Neither WEALTH nor COLLATERAL ................................................................................................................................................ 21
Our Assessment ................................................................................................................................................................................................ 21
MACRO MONITORING INSTITUTIONS ................................................................................................................................................................. 34
LATEST FROM THE MONITORS ..................................................................................................................................................................... 34
WEF (WORLD ECONOMIC FORUM) - JANUARY 2014 ................................................................................................................................. 35
WEF GLOBAL RISKS The World Economic Forum - Inequality has become a global challenge ............................................................ 35
WEF GLOBAL RISKS The World Economic Forum - 10 Global Risks of Highest Concern ..................................................................... 39
WEF GLOBAL RISKS Global Competitive Rankings Fragile 5 & Forgotten 4........................................................................................ 41
WEF GLOBAL RISKS The 17 Biggest Risks to Our Hyper-Connected World .......................................................................................... 43
WEF GLOBAL RISKS Global Economic, Geo-Political & Societal Risks .................................................................................................. 51
IMF, WORLD ECONOMIC OUTLOOK - JANUARY 2014 ................................................................................................................................ 58
IMF, FINANCIAL STABILITY REPORT OCTOBER 2013.......................................................................................................................... 64
OECD, WORLD ECONOMIC OUTLOOK NOVEMBER 2013 ....................................................................................................................... 67
SITUATIONAL ANALYSIS ....................................................................................................................................................................................... 70
RESEARCH WE FOLLOWED ........................................................................................................................................................................... 70
RESEARCH OF NOTE ...................................................................................................................................................................................... 71
FOURTH TURNING ACCELERATING ......................................................................................................................................................... 71
AMERICAS GLOBAL RETREAT .................................................................................................................................................................. 81
THE OLD WORLD ORDER IS OVER ........................................................................................................................................................... 84
THE DEMOGRAPHIC THREAT TO DEVELOPED NATIONS ..................................................................................................................... 85
THE RISK CONTINUUM ............................................................................................................................................................................... 88
GLOBAL TRENDS THE SIX FRAMING MEGATRENDS .......................................................................................................................... 89
GLOBAL THEMES TEN STRUCTURALTHEMES FOR STRATEGY ....................................................................................................... 92
DEBT SATURATION - A COLLAPSING PONZI SCHEME........................................................................................................................... 94
WINTER 2014 EVENT RISK DOMINATES ................................................................................................................................................. 96
RISK SIGNALS ........................................................................................................................................................................ 103

GEO-POLITICAL RISK Most Destabilizing Risks ............................................................................................................................................... 103
GLOBL GOVERNANCE RISK Failure of Political Leadership & Public Policies ............................................................................................... 104
EU ELECTIONS ........................................................................................................................................................................................... 104
RESEARCH WE FOLLOWED ..................................................................................................................................................................... 104
CHARTS & TABLES OF NOTE ................................................................................................................................................................... 104
RESEARCH OF NOTE ................................................................................................................................................................................ 107
EU ELECTION - Europe Voted: Anti-EU and Protest Parties Take Nearly A Third of All Euro-Parliament Seats ................................. 107
EU ELECTION - European Voters Are Revolting; France Warns "Situation Is Grave for Europe" ........................................................ 114
SITUATIONAL ANALYSIS ........................................................................................................................................................................... 117
LEADERSHIP - 'Value Transformer' Politicians are avoiding politics OR the voters are rejecting ......................................................... 121
LEADERSHIP - The Consequences Of A Dysfunctional Political System .............................................................................................. 122
LEADERSHIP - Mapping the Collapse of European Democracy ............................................................................................................ 126
GEO-POLITICAL RISK - Social, Economic & Financial ........................................................................................................................................ 127
ISIS THE SUNNI / SHIA /KURD PROBLEM ................................................................................................................................................ 127
SOUTH CHINA SEA TERRITORIAL PROBLEMS ......................................................................................................................................... 131
SYRIA .............................................................................................................................................................................................................. 135
SYRIA - This has the Earmarks of the Kennedy Ear "Cuban Missile" Crisis .......................................................................................... 136
SYRIA - Syrian War You Are Not Being Told About ................................................................................................................................ 137
SYRIA - 25 Quotes ................................................................................................................................................................................... 138
SYRIA - What Coalition? .......................................................................................................................................................................... 141
SYRIA - US Supporting Fully an "Al Qaeda Operation" .......................................................................................................................... 143
SYRIA - Decision Already Taken to Bomb Syria ..................................................................................................................................... 145
SYRIA - Market Patterns Before and Immediately After Conflict Begins ................................................................................................ 153
GEO-ECONOMIC RISK Financial ...................................................................................................................................................................... 155
RESERVE CURRENCY & GLOBAL IMBALANCE ......................................................................................................................................... 155
RESERVE CURRENCY - Japan May Eclipse China Again, as Largest Holder of US Treasuries............................................................. 155
PETRODOLLAR COLLAPSE .......................................................................................................................................................................... 157
UKRAINE ..................................................................................................................................................................................................... 158
UKRAINE - Pulled between EU v Russia ................................................................................................................................................ 158
UKRAINE - Pulled between An Ethnic Eastern and Western Ukraine .................................................................................................... 158
UKRAINE - Pulled between Economic Inequality Factors ....................................................................................................................... 159
UKRAINE - Pulled between the Global Military Balance ......................................................................................................................... 160
August 2014 Edition

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UKRAINE - Pulled by Global Financial Markets ...................................................................................................................................... 161

UKRAINE - A Deep State Analysis .......................................................................................................................................................... 163
PETRODOLLAR Collapsing PetroDollar Foundation ............................................................................................................................... 167
INTERNATIONAL BANKING & SHADOW BANKING .................................................................................................................................... 170
DEBT REITS & CMBS Growth ................................................................................................................................................................. 172
DEBT - GLOBAL DEBT 313% of GDP ........................................................................................................................................................ 173
DEBT - 202M GLOBALLY UNEMPLOYED DEBTORS .............................................................................................................................. 175
CYBER SPYING .............................................................................................................................................................................................. 176
GLOBAL MACRO: RISK LEVELS ........................................................................................................................................... 177

AGGREGATED GLOBAL FINANCIAL RISK INDEX ............................................................................................................................................. 177
BANKING RISK - LIBOR-OIS SPREAD (Updated) ........................................................................................................................................ 178
BANKING RISK - TED SPREAD (Updated).................................................................................................................................................... 178
CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS (Updated) ................................................................................................................ 179
CREDIT RISK - EU CREDIT DEFAULT SWAPS (Updated) .......................................................................................................................... 179
CONSUMER RISK - HOUSING - RATE OF CHANGE (Updated) ................................................................................................................. 179
ECONOMIC RISK - ECRI LEADING INDEX (Updated) ................................................................................................................................. 182
INFLATION RISK - MONEY SUPPLY GROWTH - M3 (Updated) .................................................................................................................. 183
INFLATION RISK - MONEY VELOCITY (Updated) ........................................................................................................................................ 183
MONETARY RISK - BANK LIABILITIES (Updated) ........................................................................................................................................ 184
COST OF MONEY RISK - INTEREST RATES (Updated) ............................................................................................................................ 184
AGGREGATED RISK LEVEL ................................................................................................................................................................................ 186
TIPPING POINT MAPPING: 2014 YEAR BEGINNING UPDATE ......................................................................................................................... 187
TIPPING POINTS: TOP 5 FOCUS - JUNE 2014 (NO CHANGE)............................................................................................... 197

I - RISK REVERSAL .............................................................................................................................................................................................. 197
II - JAPAN DEBT DEFLATION .............................................................................................................................................................................. 199
III-BOND BUBBLE ................................................................................................................................................................................................. 201
IV - EU BANKING CRISIS ..................................................................................................................................................................................... 202
V - SOVEREIGN DEBT .......................................................................................................................................................................................... 203
VI - CHINA HARD LANDING ................................................................................................................................................................................. 205
GLOBAL MACRO ................................................................................................................................. 208

GLOBAL MACRO: ECONOMIC OUTLOOK ............................................................................................................................ 211
RESEARCH WE FOLLOWED ............................................................................................................................................................................... 211
CHARTS OF NOTE ............................................................................................................................................................................................... 214
CHART: World GDP 2014 Economic Growth Estimates ................................................................................................................................ 214
CHART: World GDP versus World MSCI Stock Index .................................................................................................................................... 214
CHART: Baltic Dry Perspective Slowing Global Aggregate Demand Growth Rate ..................................................................................... 215
CHART: World Trade versus Central Bank Balance Sheet Growth ............................................................................................................... 215
CHART: Falling Global LEI (Leading Economic Indicator).............................................................................................................................. 216
CHART: World GDP Economic Forecast 2014 ............................................................................................................................................... 217
CHART: World GDP Economic Expectations versus MSCI Equity Index ...................................................................................................... 217
CHART: Fiscal Adjustments Required Deficit Reductions for Fiscal Sustainability..................................................................................... 218
CHART: Shifting Global GDP Share ............................................................................................................................................................... 219
CHART: Over $10 Trillion Pumped Into Global Economy by Developed Economies .................................................................................... 220
CHART: Eventually All this Debt Must be Rolled Over or Paid Out ................................................................................................................ 220
CHART: Future Economic Growth a Sub 2% Trend ....................................................................................................................................... 221
CHART: Debt and Fiscal Drag Are Significant Factors Affecting Global Growth ........................................................................................... 221
CHART: Slowing Global Aggregate Demand Shows in Shrinking FDI ........................................................................................................... 222
CHART: Liquidity Drain in US in 2H 2014 ....................................................................................................................................................... 223
RESEARCH OF NOTE .......................................................................................................................................................................................... 224
GLOBAL OUTLOOK - THE ECONOMIC ROADMAP AHEAD: It Isn't That Complicated! ............................................................................. 224
GLOBAL OUTLOOK - 20 Signs That the Global Economic Crisis Is Starting To Catch Fire ......................................................................... 228
GLOBAL OUTLOOK - Problems Erupting Everywhere (Signs of Implosion) ................................................................................................. 230
GLOBAL OUTLOOK - Global Debt Crosses $100 Trillion, Rises By $30 Trillion Since 2007 ........................................................................ 233
GLOBAL OUTLOOK The US as the Global Consumption Engine to See Sub 2% Trend Growth ............................................................ 236
GLOBAL OUTLOOK - Credit Fueled Globalization in Retreat ........................................................................................................................ 239
GLOBAL OUTLOOK - Rogoff's Sovereign Debt Default Levels ..................................................................................................................... 241
GLOBAL OUTLOOK - Imbalances Continue to Increase Along With Financial Fragility ............................................................................... 244
GLOBAL OUTLOOK - A 67 Million Jobs Gap ................................................................................................................................................. 246
ECONOMIC CUTS ................................................................................................................................................................................................. 250
CHARTS OF NOTE ......................................................................................................................................................................................... 250
CHART IMFs Delusional Forecasting Record 3 ................................................................................................................................... 250
CHART IMFs Delusional Forecasting Record 2 ................................................................................................................................... 253
CHART IMFs Delusional Forecasting Record - 1 .................................................................................................................................... 253
IMF To Slash Economic Growth Forecast... AGAIN - Still Full of Hockey sticks ............................................................................................ 253
IMF CUTS ECONOMIC OUTLOOK ............................................................................................................................................................ 259
OECD CUTS ECONOMIC OUTLOOK AGAIN!............................................................................................................................................ 270
OECD CUTS ECONOMIC OUTLOOK ........................................................................................................................................................ 272
August 2014 Edition

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ECONOMIC WARNINGS....................................................................................................................................................................................... 275

G20 WARNS Need to Add $2T in Economic Activity & Tens of Millions of Jobs ........................................................................................ 275
IMF WARNS - May 2013 ................................................................................................................................................................................. 276
Japanese & Spanish Debt Unsustainable ................................................................................................................................................... 278
Global Recovery Faltering, Reduces Global Growth to Just Above 3% Global Recession Level .............................................................. 280
BIS WARNS - June 2013................................................................................................................................................................................. 282
Monetary Policy At Its Limits ........................................................................................................................................................................ 288
WORLD BANK WARNS - June 2013 .............................................................................................................................................................. 289
Social Unrest Stems from Shrinking Disposable Income. Jobs are the central issue. ............................................................................... 291
GLOBAL MACRO: INDICATORS ............................................................................................................................................ 293

GLOBAL SENTIMENT ........................................................................................................................................................................................... 293
CHARTS OF NOTE ......................................................................................................................................................................................... 293
GLOBAL SENTIMENT Global Jog Prospects Reach 50% - First Time In 7 Years ................................................................................. 293
GLOBAL SENTIMENT Global Consumer Confidence by Country .......................................................................................................... 294
GLOBAL SENTIMENT Global Consumer Confidence Trends by Country .............................................................................................. 295
GLOBAL SENTIMENT Northern American Spending Intentions Rise According to Nielsen .................................................................. 296
GLOBAL SENTIMENT Northern American Spending Intentions Rise According to Nielsen .................................................................. 296
RESEARCH OF NOTE .................................................................................................................................................................................... 297
GLOBAL SENTIMENT The State Of Economic 'Misery' Around The World ........................................................................................... 297
GLOBAL SENTIMENT Highest Level Since 2007 ................................................................................................................................... 301
GLOBAL SENTIMENT - Complacent .......................................................................................................................................................... 301
GLOBAL SENTIMENT - Complacent .......................................................................................................................................................... 304
GLOBAL SENTIMENT - Nielsen's Global Consumer Confidence, Concerns & Spending Intentions ....................................................... 305
GLOBAL GROWTH ............................................................................................................................................................................................... 316
CHARTS OF NOTE ......................................................................................................................................................................................... 316
GLOBAL GROWTH World PMI Rankings ................................................................................................................................................ 316
GLOBAL GROWTH Global Leading Indicator Has Now Rolled Over ...................................................................................................... 317
GLOBAL GROWTH Global PMI Business Surveys Fall .......................................................................................................................... 317
GLOBAL GROWTH Baltic Dry Index Collapses 50% .............................................................................................................................. 318
GLOBAL GROWTH Global Slowdown on Verge of Contraction.............................................................................................................. 319
GLOBAL GROWTH - GDP Forecasts Continue to Be Taken Down........................................................................................................... 319
GLOBAL GROWTH Global Leading Indicator Goldmans Swirlogram Getting More Serious ......................................................... 319
GLOBAL GROWTH Global Industrial Production Rolling Over ............................................................................................................. 320
GLOBAL GROWTH Consensus 2014 GDP Forecast - Differential ......................................................................................................... 321
GLOBAL GROWTH G10 Macro Change ................................................................................................................................................. 321
RESEARCH OF NOTE .................................................................................................................................................................................... 322
GLOBAL GROWTH - The Wal-Mart Measure or How the US Consumer Is the Global Engine ................................................................ 322
GLOBAL GROWTH Potential of a Global Recession Mounting .............................................................................................................. 323
GLOBAL GROWTH What the hint of a Fed Taper Did to Global Growth Estimates ............................................................................. 327
GLOBAL GROWTH - Uneconomic Energy Problematic ............................................................................................................................. 329
GLOBAL GROWTH - Global Growth Cycle ................................................................................................................................................. 331
GLOBAL GROWTH - Global GDP Contribution .......................................................................................................................................... 332
GLOBAL GROWTH - Slowing Global Growth - Air Cargo Shipments ........................................................................................................ 333
GLOBAL UNEMPLOYMENT ................................................................................................................................................................................. 334
CHARTS OF NOTE ......................................................................................................................................................................................... 334
CHART Global Employment Rates ........................................................................................................................................................... 334
CHART Global Unemployment ................................................................................................................................................................. 335
CHART Global Unemployment EU Comparison ................................................................................................................................... 335
CHART Unemployment in Advanced Countries ....................................................................................................................................... 335
CHART Global Labor Participation Rates ................................................................................................................................................ 336
CHART Global Youth Unemployment By Country ................................................................................................................................ 336
CHART Global Chance of Finding a Job Within Year .............................................................................................................................. 337
RESEARCH OF NOTE .................................................................................................................................................................................... 338
GLOBAL UNEMPLOYMENT - The Beginnings of the Welfare Myth Unwind ............................................................................................. 338
GLOBAL UNEMPLOYMENT - The Unsustainable Welfare Myth ............................................................................................................... 340
GLOBAL UNEMPLOYMENT - Global Financial Sector Job Cuts ............................................................................................................... 342
GLOBAL TRENDS ................................................................................................................................................................................................. 344
GLOBAL TRENDS - The Facts are Clear - the US Standard of Living is Falling ........................................................................................... 344
GLOBAL TRENDS - Profound Changes in Global Youth As Japan Leads the Way...................................................................................... 345
GLOBAL TRENDS Brands & Commodities Tell the Global Story ............................................................................................................... 348
Cooper - Rio Tinto ........................................................................................................................................................................................ 348
Aluminum - Alcoa, Rio Tinto ........................................................................................................................................................................ 350
Iron Ore and Thermal Coal - Rio Tinto ........................................................................................................................................................ 352
Consumable Brands - P&G.......................................................................................................................................................................... 354
Parcel Volumes - FEDEX ............................................................................................................................................................................. 355
Shipping - Baltic Dry Index........................................................................................................................................................................... 356
GLOBAL CREDIT .................................................................................................................................................................................................. 361
CREDIT CYCLE - HY Leading the Way .......................................................................................................................................................... 361
CREDIT CYCLE - Reversal Ahead ................................................................................................................................................................. 364
GLOBAL MACRO: MONETARY POLICY & CENTRAL BANKING .......................................................................................... 367

GLOBAL CENTRAL BANKING .............................................................................................................................................................................. 367
RESEARCH WE FOLLOWED Global Banking Risk .................................................................................................................................... 367
CHARTS OF NOTE ......................................................................................................................................................................................... 370
August 2014 Edition

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CHARTS Days of Chinese Credit-Driven Growth are numbered ............................................................................................................. 370

CHARTS Major Central Bank Assets versus GDP Forecast ................................................................................................................... 371
CHARTS Major Central Bank Y-o-Y Balance Sheet Growth ................................................................................................................... 371
CHARTS Cumulative Change in Central Bank Balance Sheets Since 2008 ........................................................................................ 372
CHARTS Global Central Bank Assets versus World Equity Prices ......................................................................................................... 372
CHARTS Cumulative Change in Central Bank Balance Sheets Since 2000 ........................................................................................ 373
RESEARCH OF NOTE .................................................................................................................................................................................... 374
CENTRAL BANKS Axel Merks 2014 Outlook.......................................................................................................................................... 374
CENTRAL BANKS - Japan May Eclipse China Again, as Largest Holder of US Treasuries ..................................................................... 378
CENTRAL BANKS - $3 Trillion "Created" In First 9 Months of 2013 .......................................................................................................... 380
CENTRAL BANKS - Drop Tightening Talk as Easy Money Goes On......................................................................................................... 383
CENTRAL BANKS - Austerity Now Officially Dead Public Policy ............................................................................................................... 386
CENTRAL BANKS - They are the Market ................................................................................................................................................... 386
CENTRAL BANKS - The longer QE persists, the greater the magnitude of the left-tail event & a Minsky Trap ...................................... 389
CENTRAL BANKS - We May Have Reached a Risk-Off Leverage Pivot ................................................................................................... 390
CENTRAL BANKS - The Macro Landscape ................................................................................................................................................ 392
CENTRAL BANKS - A Serious Shortage of Quality Collateral - A $10T US Problem Over 10 Years ....................................................... 393
CENTRAL BANKS - Global Balance Sheet Expansion ............................................................................................................................... 395
CENTRAL BANKS - Where Do these Deflators Come From? .................................................................................................................... 399
CENTRAL BANKS - First Remove Gold Standard, Now Remove Debt ..................................................................................................... 400
TROUBLING DEVELOPMENTS ........................................................................................................................................................................... 404
TROUBLING DEVELOPMENTS Insider Says Central Banks Making it Up as They Go! ........................................................................... 404
TROUBLING DEVELOPMENTS Venezuela: Shortages & Hyperinflation .................................................................................................. 405
TROUBLING DEVELOPMENTS 2007 Redux: Total public and private debt levels are 30pc higher in the advanced economies ........... 406
TROUBLING DEVELOPMENTS Polish Pension Confiscation: Coming to a Theater near You ................................................................. 409
TROUBLING DEVELOPMENTS Global Tax Overhaul................................................................................................................................ 411
BOE - UK ................................................................................................................................................................................................................ 412
UK - BOE Faces Labor Market Conundrum as Wage Growth Stalls .............................................................................................................. 412
UK - Mark Carney and "Flexible Inflation Targeting" ....................................................................................................................................... 413
FED - US ................................................................................................................................................................................................................ 415
10-28-13-CAPITAL DISTORTION - Global Acceptance of the Bernankean Theory ...................................................................................... 415
10-28-13-FINANCIAL REPRESSION - The Suspension of Price Discovery.................................................................................................. 418
US MONETARY - The Fed is Stuck in a QE Trap .......................................................................................................................................... 421
US MONETARY - 2nd Worst Decade In US Growth in Over 220 Years (And Getting Worse) ...................................................................... 423
US MONETARY - Mathematically, The Fed Can Only Fail ............................................................................................................................ 425
US MONETARY - QE Standing Between Inflated Equity Markets and A Recession ..................................................................................... 431
US MONETARY - QE Programs versus S&P 500 Movements ...................................................................................................................... 432
US MONETARY - BAML Warns If The US Economy Does Not Significantly Accelerate Now, It Never Will ................................................ 434
US MONETARY - Debt Increases $1 Trillion in One Year ............................................................................................................................. 436
US MONETARY - Congress Asks Bernanke for Full Risk Analysis On Fed's Soaring Balance Sheet ......................................................... 438
GLOBAL ABE-NOMICS The Road Ahead ......................................................................................................................................................... 443
CHARTS OF NOTE ......................................................................................................................................................................................... 443
JAPAN The Third Arrow of ABE-Nomics -I ............................................................................................................................................... 443
JAPAN The Third Arrow of ABE-Nomics II ............................................................................................................................................. 444
JAPAN Japanese Households Remain Pessimistic ................................................................................................................................. 445
RESEARCH OF NOTE .................................................................................................................................................................................... 446
GLOBAL ABE-NOMICS Monetary Expansion Extremely Difficult to Stop Once Started ........................................................................ 446
GLOBAL ABE-NOMICS Monetary Policy Below the Event Horizon ........................................................................................................ 448
BOJ - JAPAN .......................................................................................................................................................................................................... 450
CHARTS OF NOTE ......................................................................................................................................................................................... 450
JAPAN CPI Shoots To 3.3% Y-o-Y .......................................................................................................................................................... 450
JAPAN Japan Government Investment Fund Asset Reallocation ........................................................................................................... 450
JAPAN Falling Real Rates as Financial Repression Takes Hold............................................................................................................. 451
JAPAN Real Wages Plummet as Financial Repression Takes Hold ....................................................................................................... 451
RESEARCH OF NOTE .................................................................................................................................................................................... 452
JAPAN - No Way Out But to Expand the Monetary Base ........................................................................................................................... 452
JAPAN - BOJ to "Own" 100% Of GDP In 5 Years....................................................................................................................................... 453
JAPAN - Adjusted trade deficit the worst in Bloomberg's 20 year history ................................................................................................... 456
JAPAN - Some Policies Have Clearly Hit the Limit ..................................................................................................................................... 458
JAPAN - Foreshadows Next Global Crisis .................................................................................................................................................. 459
JAPAN - Japan's Prime Minister Shinzo Abe prepares to print money for the whole world ....................................................................... 464
JAPAN - Shinzo Abes Monetary-Policy Delusions ..................................................................................................................................... 465
JAPAN - BOJ Governor Job Suddenly Available in Historical "Abenomics U-Turn" .................................................................................. 468
JAPAN - Japanese Economic Policy Goes The Full Ponzi ......................................................................................................................... 469
ECB - EU ................................................................................................................................................................................................................ 471
CHARTS OF NOTE ......................................................................................................................................................................................... 471
CHARTS Slovenia May BE the Next EU Debt Hotspot ............................................................................................................................ 471
CHARTS Spain & Portugal NPL ............................................................................................................................................................... 471
CHARTS ECBs Turn to Expand Its Balance Sheet ................................................................................................................................. 472
CHARTS ECBs Balance Sheet Contracted Y-o-Y .................................................................................................................................. 472
CHARTS Expect Major ECB Policy Announcement in Q2 2014 .............................................................................................................. 473
CHARTS ECB Set to Stay on Hold as Inflation Seen Lower ................................................................................................................... 474
RESEARCH OF NOTE .................................................................................................................................................................................... 475
EU MONETARY - Euro-Area Data Deterioration Points toward QE ........................................................................................................... 475
August 2014 Edition

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EU MONETARY - EU Version of QE Coming -> UST Purchases To Drive Euro Down ............................................................................ 477
EU MONETARY - Goodbye To Europe's Sterilized Monetization - Hello EU Version of QE ..................................................................... 479
EU MONETARY - Bond Markets Weigh Risks of Eurozone QE ................................................................................................................. 481
EU MONETARY - ECB Version of QE Likely .............................................................................................................................................. 484
EU MONETARY - There Is Just No Escape from Mario Draghi's Monetary Zombie Nightmare ................................................................ 487
EU MONETARY - ECB - Hints at QE for EU ............................................................................................................................................... 491
EU MONETARY - EU Equities Responding to Current Account Differential .............................................................................................. 493
EU MONETARY - Patterns: While Everyone Was Worrying About the US and Washington.... ................................................................ 494
EU MONETARY - ECB Monetary transmission mechanisms in Europe are completely broken ............................................................... 496
EU MONETARY - EU Lending Volumes Collapse ...................................................................................................................................... 498
EU MONETARY - Eurozone Funding Shortfall Rises To Over $4 Trillion .................................................................................................. 499
EU MONETARY - DRIVER$ ........................................................................................................................................................................ 500
EU MONETARY - Japan Will Effectively Monetize European Debt ............................................................................................................ 501
EU MONETARY - TARGET-2 Imbalances - "The Debt Crisis Is Eating Its Way Ever Further Into Europe's Core" .................................. 501
EU MONETARY - Draghi Will Soon Be Forced to Start Printing - Again! ................................................................................................... 504
MACRO MONETARY INFLATION ..................................................................................................................................................................... 508
CHARTS OF NOTE ......................................................................................................................................................................................... 508
CHARTS Global Country Inflation Rates .................................................................................................................................................. 508
CHARTS Two Worlds if Inflation EM and DM ....................................................................................................................................... 508
CHARTS Developed Country Inflation Rates ........................................................................................................................................... 509
RESEARCH OF NOTE .................................................................................................................................................................................... 510
INFLATION - Asset & Property inflation means shops have to pay higher rents with higher product prices ............................................. 510
GEO-ECONOMIC INSTABILITIES........................................................................................................................................... 511

CHINAs CREDIT GROWTH - Tightening or Expanding? ..................................................................................................................................... 512
CHARTS OF NOTE ......................................................................................................................................................................................... 512
CHINA LIQUIDITY - Third of Chinese GDP Now Goes to Repay Interest and Principle on Existing Loans .............................................. 512
CHINA LIQUIDITY Infrastructure Investment Offsets Weak Real Estate ................................................................................................ 513
CHINA LIQUIDITY Shadow Banks Step Back Into Light ......................................................................................................................... 514
CHINA LIQUIDITY Hopes that Credit Growth Will Spur Property Sales .................................................................................................. 515
CHINA LIQUIDITY Transport, Construction Data Point to Slower Growth .............................................................................................. 516
CHINA LIQUIDITY Little Impetus for Turnaround in Investor Sentiment ................................................................................................. 517
CHINA LIQUIDITY Industrial Output & Exports Continue to Trend the Wrong Way ............................................................................... 518
CHINA LIQUIDITY GDP Growth Trend .................................................................................................................................................... 518
RESEARCH OF NOTE .................................................................................................................................................................................... 519
CHINA LIQUIDITY - China Credit Risk Overshadows Outlook for Emerging Equities ............................................................................... 519
CHINA LIQUIDITY - Easy Money Wont Solve Chinas Hard Problems ..................................................................................................... 522
CHINA LIQUIDITY - Housing Bubble Restricting PBOC Actions ................................................................................................................ 524
CHINA LIQUIDITY - PBOC Squeezing Banks towards Reducing Speculative Risk .................................................................................. 527
CHINA LIQUIDITY - Overnight Repo at 25% .............................................................................................................................................. 528
CHINA LIQUIDITY - Red Flags ................................................................................................................................................................... 529
CHINA LIQUIDITY - Credit Fueled Growth ................................................................................................................................................. 531
CHINA LIQUIDITY - Shadow Banking System Showing Signs of Implosion .............................................................................................. 536
CHINA LIQUIDITY - PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze ................................... 539
CHINA LIQUIDITY - Potentially De-Stabilizing Cash Crunch ..................................................................................................................... 541
CHINA LIQUIDITY - Chinese Liquidity Pump Unplugged ........................................................................................................................... 542
US$ RESERVE STATUS & ERODING INFLUENCE............................................................................................................................................ 544
RESEARCH WE FOLLOWED ......................................................................................................................................................................... 544
RESEARCH OF NOTE .................................................................................................................................................................................... 545
RESERVE CURRENCY - The World Is Beginning To Bypass America's Financial & Legally-Leveraged Political Power ....................... 545
RESERVE CURRENCY - Putin Adviser Proposes "Anti-Dollar Alliance ................................................................................................... 546
RESERVE CURRENCY - Chinese, Swiss Central Banks Sign Bilateral Swap Agreement ....................................................................... 547
RESERVE CURRENCY - France, Brazil, India & Now South Korea Join Russia & China In Post-Dollar World Order ............................ 548
RESERVE CURRENCY - Frances Noyer Says BNP May Prompt Shift Away From Dollar ...................................................................... 550
RESERVE CURRENCY - More Russian Companies Set To Drop Dollar, Switch To Chinese Yuan ........................................................ 551
RESERVE CURRENCY - Russia, China sign deal to bypass U.S. dollar .................................................................................................. 552
RESERVE CURRENCY - Japan May Eclipse China Again, as Largest Holder of US Treasuries............................................................. 553
PRIOR REPORT Minor Updates & Editions ....................................................................................................................................................... 555
INTERNATIONAL BANKING & SHADOW BANKING ........................................................................................................................................... 555
DEBT REITS & CMBS Growth ................................................................................................................................................................. 557
DEBT - GLOBAL DEBT 313% of GDP ........................................................................................................................................................ 558
DEBT - 202M GLOBALLY UNEMPLOYED DEBTORS .............................................................................................................................. 560
GEO-ECONOMICS OF ENERGY & PETRO$ ...................................................................................................................................................... 561
UKRAINE ..................................................................................................................................................................................................... 562
UKRAINE - Pulled between EU v Russia ................................................................................................................................................ 562
UKRAINE - Pulled between An Ethnic Eastern and Western Ukraine .................................................................................................... 562
UKRAINE - Pulled between Economic Inequality Factors ....................................................................................................................... 563
UKRAINE - Pulled between the Global Military Balance ......................................................................................................................... 564
UKRAINE - Pulled by Global Financial Markets ...................................................................................................................................... 565
UKRAINE - A Deep State Analysis .......................................................................................................................................................... 567
PETRODOLLAR Collapsing PetroDollar Foundation ............................................................................................................................... 571
ENERGY PRICING PRESSURES...................................................................................................................................................................... 574
RESEARCH OF NOTE .................................................................................................................................................................................... 574
August 2014 Edition

6

ENERGY - Major Inflection Point Coming Near-Term In Energy Prices ..................................................................................................... 574
ENERGY - Russia Prepares Mega-Deal with India After Locking Up China With "Holy Grail" Gas Deal .................................................. 577
ENERGY - Putin Prepares To Announce "Holy Grail" Gas Deal With China ............................................................................................. 580
ENERGY - The Growing Rift with Saudi Arabia Threatens To Severely Damage the Petrodollar ............................................................. 583
FOOD PRICES & SHORTAGES Potential Disruption........................................................................................................................................ 587
CHARTS OF NOTE ......................................................................................................................................................................................... 587
CHARTS US CPI Turns Up on Food & Energy ........................................................................................................................................ 587
CHARTS CRB US Spot Foodstuff Index One Year .............................................................................................................................. 587
CHARTS CRB Food Index One Year .................................................................................................................................................... 589
CHARTS Global Food Price Change 2007-2013 ..................................................................................................................................... 590
CHARTS Food Prices Spiking Up ............................................................................................................................................................ 591
CHARTS Food Prices Spiking Up ............................................................................................................................................................ 592
CHARTS Retail Food Services and Drinking Place Sales ....................................................................................................................... 592
CHARTS Retail CRE Price/ Cost Pressures ............................................................................................................................................ 593
CHARTS Retail CRE Price/ Cost Pressures - 2 ....................................................................................................................................... 594
CHARTS Spiking Beef Prices ................................................................................................................................................................... 595
CHARTS Coffee Futures .......................................................................................................................................................................... 595
CHARTS Lean Hog Futures ..................................................................................................................................................................... 596
CHARTS Ukraine Corn and Wheat Prices Up 15% Since YB .............................................................................................................. 596
CHARTS Global Food Imports versus % Y-o-Y US$ Change ................................................................................................................. 597
CHARTS UK Food Retailers v Commodity Food Price Index .................................................................................................................. 597
RESEARCH OF NOTE .................................................................................................................................................................................... 598
FOOD INFLATION - Food Prices Surge as Drought Exacts a High Toll on Crops .................................................................................... 598
FOOD INFLATION - Food Prices, Driver of Social Unrest .......................................................................................................................... 601
FOOD INFLATION - Food Price Manipulation in Thailand.......................................................................................................................... 601
EMERGING & FRONTIER MARKETS - Unfolding 2014 Crisis .......................................................................................................................... 603
CHARTS OF NOTE ......................................................................................................................................................................................... 606
CHARTS BRIC Countries Responsible for 43% of Global Growth .......................................................................................................... 606
CHARTS BRIC & Emerging Market Inflation Rates ................................................................................................................................. 606
CHARTS Emerging Market Default Probability ........................................................................................................................................ 607
CHARTS Emerging Market versus Developed Market Public Debt and External Borrowing Positions .................................................. 607
CHARTS Emerging Market Outflows........................................................................................................................................................ 608
CHARTS Emerging Market Outflows -2 ................................................................................................................................................... 608
CHARTS Developed versus Emerging Equity Markets 1990-2014 ...................................................................................................... 609
CHARTS Total GEM Flows....................................................................................................................................................................... 609
CHARTS The Emerging Markets Have Been Weakening Since 2011 .................................................................................................... 610
RESEARCH OF NOTE .................................................................................................................................................................................... 611
EMERGING MARKETS - Fragile Five: The new focus of currency wars ................................................................................................... 611
EMERGING MARKETS - Crisis Redux? ..................................................................................................................................................... 612
EMERGING MARKETS - Losing Their Punch ............................................................................................................................................ 617
EMERGING MARKETS - Risk-On! .............................................................................................................................................................. 619
EMERGING MARKETS - Asia, BRIC, Emerging Markets Crater IBM Earnings ........................................................................................ 620
EMERGING MARKETS - Crisis Temporarily Halted ................................................................................................................................... 622
EMERGING MARKETS - Increasing Liquidity Problems In Selected Markets ........................................................................................... 623
EMERGING MARKETS - The plight of four Asian countries - China, India, Indonesia and Japan. ........................................................... 629
EMERGING MARKETS - The Impact of "TAPER" ...................................................................................................................................... 634
EMERGING MARKETS - EM Crisis will make the 1997 Asian Crisis Seem like an Early Warning ........................................................... 638
EMERGING MARKETS - Global Deleveraging Accelerating and Developing Nations Feeling the Pain ................................................... 640
CYBER SPYING .............................................................................................................................................................................................. 643
CURRENCY WARS BACK ON Rate Wars Reversed With Un-Taper ............................................................................................................... 644
CURRENCY WARS - A Major Shift................................................................................................................................................................. 644
BATTLEFIELD - Combatants & Belligerents ................................................................................................................................................... 648
BATTLEFIIELD - The Race to Debase ........................................................................................................................................................... 649
JAPAN - The Destabilizing Agent .................................................................................................................................................................... 652
EUROPE - Euro Exposed ................................................................................................................................................................................ 652
ARGENTINA - Here we Go Again! .................................................................................................................................................................. 654
VENEZUELLA - Bad Situation ......................................................................................................................................................................... 655
BRAZIL - No One Wants to Listen ................................................................................................................................................................... 655
SWITZERLAND - No Choice ........................................................................................................................................................................... 655
SINGAPORE - Hot Money ............................................................................................................................................................................... 656
UK- Pound Joins War ...................................................................................................................................................................................... 657
CYBER WARS Growing Threat & the Security-Surveillance Complex .............................................................................................................. 658
SECURITY-SURVEILLANCE COMPLEX - NSA Whistleblower Example: Booz Hamilton ............................................................................ 661
SECURITY SURVEILLANCE COMPLEX - Growing Without Public Control or Supervision! ........................................................................ 663
REGIONAL ............................................................................................................................................. 664

EU ECB & DRAGHI WILL SOON TAKE ACTION AGAINST CRIPPLING EURO LEVELS ........................................................................... 665
CHARTS OF NOTE ......................................................................................................................................................................................... 668
CHARTS EU Financial Conditions Deteriorating ...................................................................................................................................... 668
CHARTS EU Confidence .......................................................................................................................................................................... 669
CHARTS - Slow Money Growth May Stoke Deflation Concerns ................................................................................................................ 669
August 2014 Edition

7

CHARTS - Euro-Area Inflation at Lowest Level Since 2009 Individual Countries ................................................................................... 670
CHARTS - Euro-Area Inflation Aggregate ................................................................................................................................................ 671
CHARTS - 10M Part-Time Workers Underemployed in EU ........................................................................................................................ 673
CHARTS - Euro-Area Housing Prices Decline ............................................................................................................................................ 673
CHARTS - Euro-Area Trade Surplus ........................................................................................................................................................... 674
CHARTS - Euro-Area Composite PMI ......................................................................................................................................................... 675
CHARTS - EU Area Weakness ................................................................................................................................................................... 676
CHARTS - EU Area GDP ............................................................................................................................................................................. 677
CHARTS - EU Area PMI .............................................................................................................................................................................. 678
CHARTS - EU Area PMI .............................................................................................................................................................................. 679
CHARTS - EU Real Rates ........................................................................................................................................................................... 680
CHARTS - EU -NON Euro Members GDP RELIANCE ............................................................................................................................... 681
CHARTS - EU GLOBAL GDP GROWTH CONTRIBUTION ....................................................................................................................... 682
CHARTS - EU PMI ....................................................................................................................................................................................... 682
CHARTS - EU CPI ....................................................................................................................................................................................... 684
CHARTS - Regional Risk-Reward ............................................................................................................................................................... 685
CHARTS - Europe's "Core" Problem is France ...................................................................................................................................... 686
CHARTS - Germany's Preoccupation with Inflation is More Than It Would Seem ............................................................................. 689
CHARTS - Evidence OF Global Slowing Now Indisputable ................................................................................................................... 690
CHARTS - EU Credit Downgrades, France and UK On Tap ..................................................................................................................... 692
CHARTS - Perceived Reduction in Risk, A Temporary Aberration ............................................................................................................. 694
CHARTS - Dangerous Delusional Divergences ...................................................................................................................................... 696
CHARTS - IMF Projections for Euro Area and GIIPS ................................................................................................................................. 697
CHARTS - Air Cargo Shipments Confirm Slowing Global Growth .............................................................................................................. 698
CHARTS - Eurozone Misery Indices Never Been Higher ....................................................................................................................... 699
CHARTS - Euro Currency ............................................................................................................................................................................ 701
RESEARCH OF NOTE .................................................................................................................................................................................... 706
RESEARCH EU Version of QE Coming -> UST Purchases to Drive Euro Down ............................................................................. 706
RESEARCH Beware of EU Banks! ........................................................................................................................................................... 708
RESEARCH Emerging Markets Aggravates Festering Banking Problems ...................................................................................... 709
RESEARCH European Banks Have $3 Trillion of Exposure To Emerging Markets ........................................................................ 711
RESEARCH - EFSF Downgraded to AA+ ................................................................................................................................................. 713
RESEARCH - EU Stabilization Programs Are Presently Very Fragile ........................................................................................................ 714
RESEARCH - Spreads Widened in Peripherals and Significantly in Portugal and Greece ................................................................ 717
SITUATIONAL ASSESSMENT ....................................................................................................................................................................... 719
PROGNOSIS: Why the European Situation Will Get Worse ....................................................................................................................... 719
PROGNOSIS: Increasing Structural Imbalances ........................................................................................................................................ 722
PROGNOSIS: $22T Unaccounted - A Hidden World of Contingent Liabilities, Government Backing & Guarantees. ................... 724
PROGNOSIS: Monetary Malpractice - ECB's LTRO Not a Solution but ..................................................................................................... 729
PROGNOSIS: Monetary Malpractice - ECB's SMP Effort Futile ................................................................................................................. 733
PROGNOSIS: Monetary Malpractice - ECB Accepts BBB Collateral ......................................................................................................... 735
PROGNOSIS: EU Banking Overbanked, Undercapitalized and Now Insolvent ......................................................................................... 736
PROGNOSIS: Monetary Malpractice - TARGET2 "Contingent Liabilities" .......................................................................................... 737
PROGNOSIS: Bailouts - Unsustainable & Unfundable ............................................................................................................................... 743
ITALY BOND YIELDS FALL TO RECORD LOW ............................................................................................................................................... 745
CHARTS OF PARTICULAR IMPORTANCE ................................................................................................................................................... 746
CHARTS - ITALY 10 Year Bond Yields Fall to Record Low .................................................................................................................... 746
CHARTS - ITALY - Forced Rate Cuts ......................................................................................................................................................... 747
RESEARCH OF NOTE .................................................................................................................................................................................... 748
RESEARCH - Italys Budget Failures, Weak Growth Outlook Call Debt Sustainability Into Question ....................................................... 748
SITUATIONAL ASSESSEMENT ..................................................................................................................................................................... 752
ITALIAN ELECTION - What You Need to Know ......................................................................................................................................... 752
ITALIAN ELECTION - Europe Capitulates On Austerity- Never Had The Stomach For It ................................................................... 753
ITALIAN ELECTION - Message Given By the People .............................................................................................................................. 755
ITALIAN ELECTION - Bad Debt Continue to Soar ...................................................................................................................................... 759
ITALIAN ELECTION - Italians React Badly to Austerity, Elections Hardly a Surprise!............................................................................. 761
ITALIAN ELECTION - EUROPEAN FEEDBACK - #1 ............................................................................................................................... 762
ITALIAN ELECTION - EUROPEAN FEEDBACK - #2 ............................................................................................................................... 764
ITALIAN ELECTION - Regional Financial Cracks in Sicily .................................................................................................................... 767
FRANCE HOLLANDE IN TROUBLE .................................................................................................................................................................. 769
CHARTS OF NOTE ......................................................................................................................................................................................... 770
CHARTS - FRANCE - GDP ......................................................................................................................................................................... 770
CHARTS - FRANCE - UNEMPLOYMENT .................................................................................................................................................. 771
CHARTS - FRANCE - BUDGET DEFICIT ................................................................................................................................................... 772
CHARTS - FRANCE - TAX v GDP .............................................................................................................................................................. 773
CHARTS - FRANCE - BUSINESS CONFIDENCE...................................................................................................................................... 774
RESEARCH OF NOTE .................................................................................................................................................................................... 775
RESEARCH - Steady Breakdown Underway ........................................................................................................................................... 775
RESEARCH - France Loses its Coveted and NEEDED AAA Rating ..................................................................................................... 779
SITUATIONAL ASSESSMENT ....................................................................................................................................................................... 781
FRANCE - What You Need to Know ........................................................................................................................................................... 781
FRANCE - Key Indicators ............................................................................................................................................................................ 782
FRANCE: Sharpest Drop in Private Sector Output in Four Years .............................................................................................................. 785
FRANCE - Quits on Austerity - Never a Doubt This Would Happen........................................................................................................ 788
August 2014 Edition

8

FRANCE - Socialism is Expensive ........................................................................................................................................................... 789

FRANCE - Has Turned back to Socialism ................................................................................................................................................... 791
FRANCE - Losing Its Way through Political Illusions and Lies ................................................................................................................... 792
FRANCE - Uncompetitive ............................................................................................................................................................................ 793
FRANCE - Titan Tire Calls Out French Labor ............................................................................................................................................. 795
FRANCE - France Responds to Titan Tire .................................................................................................................................................. 797
FRANCE - What Happens In France When Companies Fire People ......................................................................................................... 799
FRANCE - Hollande's Economically Insane campaign Promise ................................................................................................................. 800
GERMANY MERKEL DANCING TO PUTINS ENERGY TUNE ........................................................................................................................ 802
CHARTS OF NOTE ......................................................................................................................................................................................... 803
CHARTS - GERMANY - Inflation ................................................................................................................................................................. 803
CHARTS - GERMANY - IFO Investor Confidence ...................................................................................................................................... 804
CHARTS - GERMANY - ZEW Expectations ................................................................................................................................................ 805
RESEARCH OF NOTE .................................................................................................................................................................................... 807
RESEARCH - Merkel's Third Chancellorship Challenges ...................................................................................................................... 807
RESEARCH - German Election - Merkel Begins Hunt for Coalition Partners............................................................................................. 810
RESEARCH - Europe's Shadow Economy: As Big As Germany................................................................................................................ 811
GERMANY - Anti Euro AfD Party May Cost Merkel in Critical September Election ........................................................................... 816
GERMANY - The Euro Crisis Escalation over Cyprus May Politically Cripple Merkel ....................................................................... 817
GERMANY - Call for End of "Coercive Euro Association" .......................................................................................................................... 819
UK MAY BE FIRST DEVELOPED ECONOMY TO RAISE RATES (AFTER ELECTION) ................................................................................ 821
CHARTS OF NOTE ......................................................................................................................................................................................... 823
CHARTS - UK CPI Too Low for BOE and Falling .................................................................................................................................... 823
CHARTS - UK GDP .................................................................................................................................................................................. 823
CHARTS - UK Population Growth ............................................................................................................................................................ 824
CHARTS - UK - Crushed Disposable Income ............................................................................................................................................. 825
CHARTS - UK - BOE Balance Sheet Growth .............................................................................................................................................. 826
CHARTS - UK - Lending .............................................................................................................................................................................. 827
CHARTS - UK - Unemployment .................................................................................................................................................................. 827
CHARTS - UK - GDP - Pre and Post Recession Levels ............................................................................................................................. 828
CHARTS - UK - GDP ................................................................................................................................................................................... 828
CHARTS - UK - BOE Rates ......................................................................................................................................................................... 829
RESEARCH OF NOTE .................................................................................................................................................................................... 830
RESEARCH - UK workers' wage squeeze is longest since the 1870s ....................................................................................................... 830
UK - What you need to Know....................................................................................................................................................................... 831
UK - Joins Currency War - Down 8% YTD ............................................................................................................................................... 832
UK - Specter of Stagflation Haunts UK ........................................................................................................................................................ 833
UK - Public Policy turns Against Austerity and PM Cameron .............................................................................................................. 834
UK - Doomsday Debt Machine .................................................................................................................................................................... 835
UK - QE Extension Coming ......................................................................................................................................................................... 838
UK - Small Business Credit Squeeze Now Acute - Loan Rejections Rising ....................................................................................... 840
UK - Technically in a Depression ............................................................................................................................................................. 841
IBERIAN PENINSULA NEW MORTGAGE LOANS DOWN 33% Y-o-Y ............................................................................................................ 844
CHARTS OF NOTE ......................................................................................................................................................................................... 846
CHARTS - PORTUGAL - Deficit Problem ................................................................................................................................................... 846
RESEARCH OF NOTE .................................................................................................................................................................................... 847
RESEARCH - Presidential Warning Spikes Yields To 8 Months Highs ................................................................................................ 847
RESEARCH - Clear Signs of Desperation In Spain from a Growing Collateral Contagion ................................................................ 849
RESEARCH - The Spanish Government's 'Bad Bank' Scam ................................................................................................................ 850
IBERIA - Credit Downgrades - At Precipice of "Non Investment Grade" .................................................................................................... 852
IBERIA - Regional Bailout Bailouts a Massive Problem ........................................................................................................................ 853
IBERIA - NPL Going Ballistic .................................................................................................................................................................... 854
IBERIA - Spanish Funding Problem ......................................................................................................................................................... 855
IBERIA - The Giant Spanish Housing Bubble, Now Beginning to Implode ................................................................................................. 860
IBERIA - Mal-Investment Coming Home to Roost....................................................................................................................................... 862
IBERIA - Bank Deposits Were Leaving, Now they Are Fleeing .................................................................................................................. 863
IBERIA - Now a Capital Investment Problem .............................................................................................................................................. 864
IBERIA - Banks on Artificial "Ponzi Bond" Life Support .............................................................................................................................. 865
ASIA CREDIT CRACKS WIDENING ............................................................................................................................................ 874

CHINA PROBLEMS IN CREDIT & SHADOW BANKING ................................................................................................................................. 874
CHARTS OF NOTE ......................................................................................................................................................................................... 887
CHARTS Chinas Gross Fixed Capital Formation Problem ..................................................................................................................... 887
CHARTS Chinese Investment Peaking .................................................................................................................................................... 887
CHARTS China Equity Flows ................................................................................................................................................................... 888
CHARTS Credit Accumulation Rate Growth Comparisons ................................................................................................................... 888
CHARTS Chinese Credit Growth .............................................................................................................................................................. 889
CHARTS 5 Year Debt Growth versus GDP .............................................................................................................................................. 889
August 2014 Edition

9

CHARTS 5 Year Credit Growth ................................................................................................................................................................ 890

CHARTS Growth Propensity of Credit Growth....................................................................................................................................... 891
CHARTS Chinas Bad Loans - NPL.......................................................................................................................................................... 892
CHARTS Slowing Steel Consumption ...................................................................................................................................................... 893
CHARTS Shadow Banking System .......................................................................................................................................................... 893
CHARTS Dramatic Chinese Housing Slowdown ..................................................................................................................................... 895
CHARTS - CHINA - A Global Slowdown on the Verge of Contraction........................................................................................................ 896
CHARTS - CHINA - Chinese Credit Market ................................................................................................................................................ 897
CHARTS - CHINA - PMI .............................................................................................................................................................................. 897
CHARTS - CHINA - PMI-2 ........................................................................................................................................................................... 899
CHARTS - CHINA - GDP ............................................................................................................................................................................. 900
CHARTS - CHINA Industrial Output ......................................................................................................................................................... 901
CHARTS - CHINA - Urban Fixed Asset Investment .................................................................................................................................... 902
CHARTS - CHINA Retail Sales ................................................................................................................................................................ 903
RESEARCH OF NOTE .................................................................................................................................................................................... 904
CHINA - What Happens After the Low-Hanging Fruit Has Been Picked? ............................................................................................ 904
CHINA SHADOW BANKING - CCFD (Chinese Commodity Funding Deals) ......................................................................................... 907
CHINA - Cracks Beginning to Show ......................................................................................................................................................... 910
CHINA - Has an Inflation Problem ............................................................................................................................................................... 911
CHINA - Chinese Coal Producer Collapse a Major Shadow Banking Problem ................................................................................... 912
CHINA - China Orders Its Smaller Banks to Load Up On Cash ............................................................................................................ 914
CHINA - How the Chinese Economic Disaster Scenario Could Unfold ............................................................................................... 918
CHINA - Skilled Labor Shortages & Losing Labor Cost Advantage ..................................................................................................... 920
CHINA - Launches Crackdown On "Off Balance Sheet" Credit ............................................................................................................ 925
CHINA - China's Stunning $15 Trillion in New Liquidity - Part II........................................................................................................... 928
CHINA - China's Stunning $15 Trillion In New Liquidity ........................................................................................................................ 930
RESEARCH OF NOTE LAST REPORT (Reference) .................................................................................................................................. 934
RESEARCH - China's Stunning $15 Trillion in New Liquidity ............................................................................................................... 934
RESEARCH - Dr. Copper Ready to Top and Head Lower ...................................................................................................................... 937
RESEARCH - China's $1 Trillion GDP Lie ................................................................................................................................................ 938
RESEARCH - What the Deceleration Could Portend .............................................................................................................................. 940
RESEARCH - Credit Bubble: 240% Of GDP And Soaring ...................................................................................................................... 943
RESEARCH - Forget Taper risk: China is a bigger threat ......................................................................................................................... 946
RESEARCH - Sustainability Requires a Slowdown in Investment .............................................................................................................. 948
RESEARCH - China Likely to Continue Interest Rate Liberalization .......................................................................................................... 950
RESEARCH - China #1 in Broad Array of Key Areas ................................................................................................................................. 953
RESEARCH - Global Business Confidence Sliding Rapidly ................................................................................................................. 954
RESEARCH - Investors Worried and Losing Confidence ...................................................................................................................... 957
RESEARCH - China Stampeding into Gold ............................................................................................................................................. 958
RESEARCH - China "Will introduce some measures to arrest the slowdown of growth in the next couple of quarters" ............. 960
RESEARCH - Slower Growth In the Cards & Endorsed by New Chinese Leadership ....................................................................... 961
RESEARCH - Is a PBOC Controlled Speculation Bust Possible or Will It Get Out of Control .......................................................... 963
RESEARCH - PBOC Liquidity Squeeze ................................................................................................................................................... 964
RESEARCH - Chinese Housing Bubble Restricting PBOC Actions ...................................................................................................... 966
RESEARCH - PBOC Squeezing Banks towards Reducing Speculative Risk ...................................................................................... 968
RESEARCH - Chinese Overnight Repo at 25% ........................................................................................................................................ 970
RESEARCH - Red Flags ............................................................................................................................................................................. 971
RESEARCH - Credit Fueled Growth in China ......................................................................................................................................... 973
RESEARCH - PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze .................................. 978
RESEARCH - A Potentially De-Stabilizing Cash Crunch ....................................................................................................................... 980
SITUATIONAL ANALYSIS & KEY NOTES ..................................................................................................................................................... 981
CHINA SHADOW BANKING - Shadow Banking System Showing Signs of Implosion ....................................................................... 983
CHINA SHADOW BANKING - Shadow Banking and Credit Growth ...................................................................................................... 986
CHINA SHADOW BANKING - The US Sub-Prime / CDO All Over Again ............................................................................................... 989
CHINA SHADOW BANKING - Report ......................................................................................................................................................... 993
CHINA SHADOW BANKING - Situation ................................................................................................................................................... 994
CHINA RESERVES - Distorted Foreign Reserve Levels ........................................................................................................................ 995
CHINA RESERVES - Declining Reserve Accumulation .............................................................................................................................. 997
CHINA RESERVES - Has Caught the Gold Bug big time! ...................................................................................................................... 999
CHINA CURRENCY WARS - Hot Money into China .............................................................................................................................. 1001
CHINA - Withdraws Liquidity .................................................................................................................................................................. 1002
CHINA - Socit General Sees a Likely Soft Landing! ......................................................................................................................... 1004
CHINA - True Debt is Orders of Magnitude More than Officially Being Reported ............................................................................ 1014
CHINA - Evidence OF Slowing Now Indisputable ................................................................................................................................ 1017
CHINA - PMI Improvement....................................................................................................................................................................... 1018
CHINA - Political Transition & Ongoing Emergence as a Super Power ............................................................................................ 1021
CHINA - An Implicit Social Contract .......................................................................................................................................................... 1023
CHINA - Manipulated Statistics due to Upcoming Decade Long Regime Change ........................................................................... 1025
CHINA - Increasing Leverage is China's Way of Monetary Easing .................................................................................................... 1026
CHINA - Possible Interest-Rate Liberalization........................................................................................................................................... 1027
CHINA - Global Impact of China's Slowdown ....................................................................................................................................... 1028
CHINA - Shanghai Composite at 2008 Low Levels .............................................................................................................................. 1031
CHINA - Shanghai Composite Warnings Signs .................................................................................................................................... 1032
CHINA - Credit to GDP ............................................................................................................................................................................. 1034
CHINA - A Slow Recovery Through 2013 ................................................................................................................................................. 1035
CHINA - Manufacturing PMI in Contraction Territory .......................................................................................................................... 1037
August 2014 Edition

10

JAPAN: FINANCIAL REPRESSION BEING DESPERATELY ADVANCED IN JAPAN ON MULTIPEL ABE-NOMIC FRONTS ...................... 1042
RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1043
CHARTS OF NOTE ....................................................................................................................................................................................... 1050
CHARTS Japan Adjusted Trade Balance ............................................................................................................................................... 1050
CHARTS Japan BoP Current Account Balance .................................................................................................................................. 1050
CHARTS 5T Yen of JGB Selling ............................................................................................................................................................. 1051
CHARTS Sovereign Debt % of Tax Revenue ........................................................................................................................................ 1051
CHARTS Public Sector Debt Issuances 2013 as % GDP ...................................................................................................................... 1052
CHARTS - GDP Trend ............................................................................................................................................................................... 1052
CHARTS - CPI Trend ................................................................................................................................................................................. 1053
CHARTS - JAPAN - GDP Resurgence ...................................................................................................................................................... 1053
CHARTS - JAPAN - BOJ Balance Sheet .................................................................................................................................................. 1054
RESEARCH OF NOTE .................................................................................................................................................................................. 1055
JAPAN - Japanese Financial Repression - Changes in Allocation of Japanese Retirement Accounts Coming ...................................... 1055
JAPAN - Japan bond market liquidity dries up as BoJ holding crosses 200tn........................................................................................ 1057
JAPAN - Abe Approval Rating Plunges ................................................................................................................................................. 1058
JAPAN - What the Japanese been Buying ............................................................................................................................................. 1060
JAPAN - Japan May Matter More Than Tapering .................................................................................................................................. 1062
JAPAN - Japan Finances Worse than at Wars End ............................................................................................................................. 1065
JAPAN - BOJ: "The days of constructive ambiguity is over! ......................................................................................................... 1066
JAPAN - Abenomics Third Arrow Growth Strategy Underwhelms .......................................................................................................... 1067
JAPAN - 2nd ABE-nomics $200B Stimulus Package Approved ......................................................................................................... 1069
JAPAN - Worlds Biggest Pension Fund Sees Japan Fail on ABE-nomics' 2% Inflation Goal ....................................................... 1070
JAPAN - The Abe-nomics Failure ........................................................................................................................................................... 1073
SITUATIONAL ASSESSEMENT & KEY NOTES .......................................................................................................................................... 1075
JAPAN - What You Need to Know............................................................................................................................................................. 1077
JAPAN - No Way Out But to Expand the Monetary Base ..................................................................................................................... 1080
JAPAN - BOJ to "Own" 100% of GDP in 5 Years .................................................................................................................................. 1080
JAPAN - Adjusted trade deficit the worst in Bloomberg's 20 year history ........................................................................................ 1084
JAPAN - How Japan's National Debt Grew ............................................................................................................................................... 1085
JAPAN - ABE-nomics About Lowering Real Interest Rates ................................................................................................................ 1086
JAPAN - Japanese Bonds Have Lost Their Ability to Price Risk ........................................................................................................ 1087
JAPAN - Japanese Structural Problems a "Canary" for Western Developed Economies ................................................................ 1091
JAPAN - Shinzo Abe Hasn't the Stomach for the Heavy Lifting Needed to Accompany ABE-nomics........................................... 1093
JAPAN - A Credit Squeeze Leads Deflationary Leg Down .................................................................................................................. 1096
JAPAN - Some Japanese Policies Have Clearly Hit the Limit ............................................................................................................. 1097
JAPAN - The ABE (Asset Bubble Evaluator) Index ............................................................................................................................... 1099
JAPAN - Regional Risk-Reward ................................................................................................................................................................ 1100
JAPAN - Now the Frontrunner of Outright Monetization. .................................................................................................................... 1101
JAPAN - Yen Devaluation ........................................................................................................................................................................ 1102
JAPAN - New Bank of Japan Policy - 2% Inflation in 2 Years ............................................................................................................. 1103
JAPAN - Appoints BOJ Governor Firmly Committed to Printing Money ........................................................................................... 1105
JAPAN - Third Straight Quarter of Recession ....................................................................................................................................... 1107
JAPAN - Full Out War on Deflation ......................................................................................................................................................... 1107
JAPAN - First Test of the new found dominance of the Central Banks .......................................................................................... 1109
JAPAN - BOJ Was Next Up. No Surprise .............................................................................................................................................. 1112
JAPAN - Negative Current Account Balance and -3.5% Recession ................................................................................................... 1114
JAPAN - A 50% Over-Valued Yen Has Undermined Self Confidence & Drive ................................................................................... 1117
JAPAN - Proves QE's Low Cost of Capital Does Structural Damage to Economy ........................................................................... 1119
JAPAN - BOJ Being Pressured to "Rip-Up Government Debt"1 ........................................................................................................ 1121
JAPAN - Easy Money Has Hurt Corporate Profitability in the Longer Term ..................................................................................... 1127
JAPAN - The Biggest Debtor with the Biggest Problem! .................................................................................................................... 1130
JAPAN - A Magnitude Larger Problem than Europe ................................................................................................................................. 1134
JAPAN - QE 9 A Complete Failure - Actually "Tightens" versus It's Intended Easing .............................................................................. 1140
JAPAN - Japanese Yen Continuously Under Attack ................................................................................................................................. 1145
JAPAN - Vast foreign US$ Coming Home for "Claim" .............................................................................................................................. 1146
JAPAN - PMI Breakdown ........................................................................................................................................................................... 1148
JAPAN - Exports Continue To Tumble .................................................................................................................................................. 1150
JAPAN - Intervention Fails Again - It's a Whole new Ball Game ........................................................................................................ 1151
JAPAN - First Signs of Massive Debt Monetization After Next Election ................................................................................................... 1154
JAPAN - Japan to the ESM's Rescue ..................................................................................................................................................... 1154
EMERGING MARKETS ECHO CRISIS STILL AHEAD .............................................................................................................. 1156

RESEARCH WE FOLLOWED....................................................................................................................................................................... 1156
CHARTS OF NOTE ....................................................................................................................................................................................... 1161
CHARTS - Reserves versus World ............................................................................................................................................................ 1161
CHARTS - Current Account Balances versus GDP .................................................................................................................................. 1162
CHARTS - Emerging Markets Index versus MSCI World Index ............................................................................................................... 1163
CHARTS - SINGAPORE - Inflation ............................................................................................................................................................ 1164
CHARTS - SINGAPORE - Exports ............................................................................................................................................................ 1165
CHARTS - SOUTH KOREA ....................................................................................................................................................................... 1166
CHARTS - TURKEY - Spreads .................................................................................................................................................................. 1167
RESEARCH OF NOTE .................................................................................................................................................................................. 1168
EMERGING MARKETS - Forced Changes & Advancements in the Normal "Plundering" Strategy ............................................... 1168
EMERGING MARKETS - Crisis Temporarily Halted .............................................................................................................................. 1169
EMERGING MARKETS - The plight of four Asian countries - China, India, Indonesia and Japan. ................................................. 1170
August 2014 Edition

11

EMERGING MARKETS - Negative Current Accounts + Weak(ening) International Investment Positioning ........................................... 1175
EMERGING MARKETS - "TAPER" Shock Waves Across Asia ........................................................................................................... 1175
EMERGING MARKETS - Global Bond Yields React Together ............................................................................................................. 1177
EMERGING MARKETS - A Bumpy Ride for Emerging Markets ............................................................................................................... 1179
EMERGING MARKETS - Stunning Withdrawals.................................................................................................................................... 1185
EMERGING MARKETS - Bond Outflows Accelerating ......................................................................................................................... 1186
EMERGING MARKETS - This will make the 1997 Asian Crisis Seem Like an Early Warning .......................................................... 1188
EMERGING MARKETS - Developing Nations Feeling the Pain of Global Deleveraging Acceleration ........................................... 1190
EMERGING MARKETS - The Impact of "TAPER" ................................................................................................................................. 1193
SITUATIONAL ASSESSEMENT ................................................................................................................................................................... 1197
EMERGING MARKETS - What you Need to Know ...................................................................................................................................... 1197
EMERGING MARKETS - Comparative Ease of Doing Business........................................................................................................... 1199
EMERGING MARKETS - Importance of Employment, Equality and Per Capital Income ................................................................. 1200
ASIA ............................................................................................................................................................................................................... 1203
ASIA: CHARTS - REVENUE ..................................................................................................................................................................... 1203
ASIA: CHARTS EXPENDITURES .......................................................................................................................................................... 1203
ASIA: CHARTS SPENDING GAPS ........................................................................................................................................................ 1205
ASIA: CHARTS DEBT SERVICE ........................................................................................................................................................... 1205
ASIA: CHARTS - SINGAPORE ................................................................................................................................................................. 1207
ASIA: CHARTS INDONESIA CPI May 2014 .................................................................................................................................... 1208
ASIA: CHARTS INDONESIA CPI Aug 2013 .................................................................................................................................... 1208
ASIA: CHARTS A Short Term Dead Cat Bounce? .......................................................................................................................... 1209
ASIA: CHARTS Inflation Problems Abound ........................................................................................................................................ 1210
ASIA: CHARTS Healthier Public Debt and Borrowing Positions than DM ...................................................................................... 1210
ASIA: CHARTS - AUSTRALIA ................................................................................................................................................................... 1211
ASIA - Regional Risk-Reward .................................................................................................................................................................... 1213
ASIA - Credit Contraction Problems ...................................................................................................................................................... 1214
ASIA - Corporate Debt Levels Reflect Unintended Consequences of Mispricing & Mal-Investment ............................................. 1216
ASIA - Synchronized Markets .................................................................................................................................................................... 1218
ASIA - Caution Advised Regarding Positive South Korea Export Turnaround ......................................................................................... 1220
ASIA - Export Growth Looks Similar to Pre-2008 ................................................................................................................................. 1221
ASIA - Global Slowing Quickly a Worsening Situation Across Asia ................................................................................................. 1225
ASIA - Risks All on the Downside for Asia ........................................................................................................................................... 1226
ASIA - Demographic Headwinds ............................................................................................................................................................ 1229
ASIA - Pronounced Flight to Singapore Safety ......................................................................................................................................... 1230
BRICS ............................................................................................................................................................................................................ 1232
BRICS Responsible for 43% of Global Growth in 2013 .................................................................................................................... 1232
BRICS A Short Term Dead Cat Bounce? ........................................................................................................................................ 1233
BRICS Inflation Problems Abound ...................................................................................................................................................... 1234
BRICS - EU Major Contributor to EM Current Account Deficit Growth .............................................................................................. 1235
BRICS - Insufficient Levels Prompt Russian-Chinese Support .......................................................................................................... 1236
BRICS - A Development Bank-Forex Reserve Pool-African Integration ............................................................................................ 1238
BRICS - 40% of World Population and 25% of World GDP .................................................................................................................. 1240
BRICS - $3 to $13B GDP in Ten Years ................................................................................................................................................... 1243
BRICS- A World Wide Distrust of Financial Markets Building ............................................................................................................ 1246
BRAZIL........................................................................................................................................................................................................... 1248
BRAZIL - Inflation will remain high thanks to a "growth mismatch". .......................................................................................................... 1248
BRAZIL - Sharpest Decline in 2013 Growth Forecast ............................................................................................................................... 1250
RUSSIA - Central bank will hike rates if inflation and oil prices continue to rise. ......................................................................................... 1253
INDIA.............................................................................................................................................................................................................. 1254
INDIA Inflation ......................................................................................................................................................................................... 1255
INDIA - Inflation .......................................................................................................................................................................................... 1256
INDIA - WPI ................................................................................................................................................................................................ 1257
INDIA - Will be fine as long as it continues to reduce its deficit. ............................................................................................................... 1258
INDIA - Panic in India ................................................................................................................................................................................. 1259
INDIA - India Rupee Collapse Showing Signs of Exhaustion ............................................................................................................. 1261
INDIA - Watch Out For RE-Emergence of Food Price Inflation ........................................................................................................... 1262
SOUTH AFRICA ............................................................................................................................................................................................ 1263
LATIN AMERICA ........................................................................................................................................................................................... 1265
VENEZUELA Signs of a Crack-up Boom and Dictatorship .............................................................................................................. 1266
VENEZUELA - Shortages & Hyperinflation ............................................................................................................................................ 1266
MIDDLE EAST ............................................................................................................................................................................................... 1268
TURKEY ..................................................................................................................................................................................................... 1268
US ECONOMY ..................................................................................................................................... 1269

THE GLOBAL MACRO OVERLAY ........................................................................................................................................ 1271
MACRO - US Macro Data Divergence .......................................................................................................................................................... 1271
MACRO - US & Global Growth Will Slow Dramatically on a Per Capita Basis ............................................................................................ 1275
MACRO - Serious Structural US Problems Impeding Global Competitiveness ........................................................................................... 1276
MACRO - Output Gap .................................................................................................................................................................................... 1283
US INVESTMENT CYCLE ...................................................................................................................................................... 1292

GORD'S BIG PICTURE ECONOMIC CYCLE ..................................................................................................................................................... 1293
ECONOMIC INDICATORS .................................................................................................................................................................................. 1294
August 2014 Edition

12

MONTHLY INDICATORS OF NOTE ............................................................................................................................................................. 1294

RESEARCH - The US Economy Continues to Tank under Obama ..................................................................................................... 1294
REFERENCE CHARTS ............................................................................................................................................................................. 1296
THE CURRENT BUSINESS CYCLE - SITUATIONAL ANALYSIS ..................................................................................................................... 1301
BUSINESS CYCLE - JOBS > CONFIDENCE > CONSUMPTION > GROWTH CYCLE.................................................................................... 1301
BUSINESS CYCLE - JOBS ................................................................................................................................................................................. 1303
SOME GRAPHIC HIGHLIGHTS .................................................................................................................................................................... 1303
CHARTS & TABLES OF NOTE ..................................................................................................................................................................... 1306
CHARTS - Corporate Profits versus Wages .............................................................................................................................................. 1306
CHARTS - Standard of Living Decline and Bear Market in Real Terms Reflect Labor Participation ....................................................... 1306
CHARTS - Underemployment Gap ............................................................................................................................................................ 1307
CHARTS - Participation Rate..................................................................................................................................................................... 1308
CHARTS - Part Time Employment ............................................................................................................................................................ 1308
CHARTS - U3 & U6.................................................................................................................................................................................... 1309
CHARTS - Employment Situation Summary ............................................................................................................................................. 1310
RESEARCH OF NOTE .................................................................................................................................................................................. 1314
RESEARCH - US Employment Trend Remains Chronic .......................................................................................................................... 1314
RESEARCH - Labor Force Participation Rates ......................................................................................................................................... 1316
RESEARCH - Bridging Jobs to Confidence & Sentiment.......................................................................................................................... 1319
RESEARCH - Participation Rate at 1979 Carter Levels ........................................................................................................................... 1322
SITUATIONAL SUMMARY & ANALYSIS ..................................................................................................................................................... 1323
BUSINESS CYCLE - CONSUMER & BUSINESS SENTIMENT ......................................................................................................................... 1327
A GRAPHIC HIGHLIGHT .............................................................................................................................................................................. 1327
CHARTS & TABLES ...................................................................................................................................................................................... 1328
CHARTS - NFIB Small Business Sentiment .............................................................................................................................................. 1328
CHARTS - Orange Book ............................................................................................................................................................................ 1329
RESEARCH OF NOTE .................................................................................................................................................................................. 1329
RESEARCH Small Business Confidence is a Major Problem in America ............................................................................................. 1329
RESEARCH Americas Crisis of Trust .................................................................................................................................................... 1331
SENTIMENT: Consumer, Investor & Trader ................................................................................................................................................ 1333
Consumer Confidence - Conference Board .............................................................................................................................................. 1333
Consumer Sentiment - Michigan ............................................................................................................................................................... 1337
Consumer Comfort ..................................................................................................................................................................................... 1338
Investors Intelligence ................................................................................................................................................................................. 1340
American Association of Independent Investors ....................................................................................................................................... 1340
National Association of Active Investment Managers (NAAIM) ................................................................................................................ 1341
Small Business Optimism .......................................................................................................................................................................... 1342
Percentage Stocks above 50 & 200 DMA ................................................................................................................................................. 1343
Margin Levels ............................................................................................................................................................................................. 1344
Mutual Fund Cash Levels v S&P 500 ........................................................................................................................................................ 1348
BUSINESS CYCLE CONSUMPTION ............................................................................................................................................................... 1356
CHARTS - Real Disposable Personal Income .......................................................................................................................................... 1360
CHARTS - Real Consumption Expenditure ............................................................................................................................................... 1362
CHARTS - Consumer Credit Deleveraging ............................................................................................................................................... 1363
CHARTS - Core Retail Growth .................................................................................................................................................................. 1364
RESEARCH OF NOTE .................................................................................................................................................................................. 1365
RESEARCH - Golden Era of the 1950s/60s Was an Anomaly, Not the Default Setting .......................................................................... 1365
RESEARCH - 95% of Consumer Credit Lending Going towards Student & Car Loans ................................................................... 1367
RESEARCH - Thanksgiving Retail Sales Results ..................................................................................................................................... 1369
RESEARCH - Gallup Survey Shows -10% Reduction in Christmas Buying Plans ........................................................................... 1372
RESEARCH - The Wal-Mart Measure or How the US Consumer Is the Global Engine .................................................................... 1373
RESEARCH - A Sequential Decline in Wages ....................................................................................................................................... 1374
RESEARCH - Final Sales Signals Pending Potential Recession on the Horizon ............................................................................. 1375
RESEARCH - Consumers Using Savings to Maintain Life Style ........................................................................................................ 1375
RESEARCH - The Destruction of America's Middle Class .................................................................................................................. 1378
RESEARCH - Dramatic Slowing in Restaurant Business .................................................................................................................... 1378
RESEARCH - Signs of Serious Troubles .................................................................................................................................................. 1379
RESEARCH - Falling Real Disposable Income means Falling Consumption ................................................................................... 1382
BUSINESS CYCLE - GROWTH .......................................................................................................................................................................... 1388
CHARTS A US Recession Likely IF Liquidity is not increased and TAPER Sustained ......................................................................... 1391
CHARTS Barrons Sees 4% Growth The Ultimate Contrarian Indicator ............................................................................................. 1391
CHARTS Firms Revising Lower Q1 Growth on Weakening Retail Sales .............................................................................................. 1392
CHARTS Negative Economic Surprises Began in November ............................................................................................................... 1392
CHARTS What Americans Experience Daily and its Isnt Growth ......................................................................................................... 1393
CHARTS - Manufacturing .......................................................................................................................................................................... 1394
CHARTS - Exports ..................................................................................................................................................................................... 1394
CHARTS - Durable Goods ......................................................................................................................................................................... 1395
CHARTS - NFIB Small Business CAPEX .................................................................................................................................................. 1395
August 2014 Edition

13

CHARTS - US Manufacturing Conditions Deteriorating ............................................................................................................................ 1396

RESEARCH OF NOTE .................................................................................................................................................................................. 1397
RESEARCH - US Q1 GDP ........................................................................................................................................................................ 1397
RESEARCH - US GDP Growth Forecasts ................................................................................................................................................ 1402
RESEARCH - Economic Recoveries Don't Look Like This! ................................................................................................................ 1402
RESEARCH - 2nd Worst Decade in Over 220 Years (And Getting Worse) ........................................................................................ 1403
RESEARCH - US Economy is being fundamentally transformed ............................................................................................................. 1405
RESEARCH - Shrinking CAPEX, Expanding Buybacks and Dividends ............................................................................................. 1408
REFERENCE - Prior Posts .......................................................................................................................................................................... 1412
RESEARCH - US Economic Recovery Has Peaked ............................................................................................................................. 1412
ECONOMIC CYCLE, INVESTMENT CYCLE, SECTOR ROTATION ................................................................................................................. 1420
US PUBLIC POLICY A GROWING LIST OF UNADDRESSED AND UNRESOLVED POLICY PROBLEMS........................ 1427
POLLS ........................................................................................................................................................................................................ 1427
INCARCERATION ..................................................................................................................................................................................... 1427
FLAWED TAX POLICY .............................................................................................................................................................................. 1428
MINIMUM WAGE ....................................................................................................................................................................................... 1428
SOCIAL CANCERS ................................................................................................................................................................................... 1428
CORRUPTION & MALFEASANTS ............................................................................................................................................................ 1428
INEQUALITY .............................................................................................................................................................................................. 1428
CREEPING SOCIALISM ............................................................................................................................................................................ 1428
POLICIAL PARALYSIS .............................................................................................................................................................................. 1429
STATE OF THE UNION ............................................................................................................................................................................. 1429
NSA-SECURITY-SURVEILLANCE COMPLEX......................................................................................................................................... 1430
OBAMACARE ............................................................................................................................................................................................ 1431
GENERAL PUBLIC POLICY...................................................................................................................................................................... 1433
CHARTS - US Incarceration Rate Out of Control ...................................................................................................................................... 1434
RESEARCH OF NOTE .................................................................................................................................................................................. 1436
POLICY - The Death Cross of American Business ............................................................................................................................... 1436
POLICY - The State of the Union I have a Dream! .......................................................................................................................... 1438
POLICY - A self-destructive path toward oblivion ................................................................................................................................ 1442
POLICY - Indictment of US Public, Fiscal & Monetary Policy ............................................................................................................... 1447
POLICY - The Crisis of Trust Continues to Worsen ............................................................................................................................. 1460
POLICY - The Stunning Truth about Inequality In America ................................................................................................................. 1461
POLICY - Pointing US towards Government Dependence .................................................................................................................. 1462
POLICY - Yet another Game of Deception ............................................................................................................................................. 1466
POLICY - Obamacare A Flawed Public Policy Implementation ........................................................................................................... 1470
POLICY - Financial Repression and Manipulated Illusions ....................................................................................................................... 1473
Manipulating Bad Financial Data ........................................................................................................................................................... 1473
Manipulating Bad Nuclear Facts ............................................................................................................................................................ 1474
Manipulating Oil Spill Info ....................................................................................................................................................................... 1475
Manipulating Data on Other Environmental Issues ............................................................................................................................... 1475
Manipulating Food Safety Data .............................................................................................................................................................. 1476
Manipulating Health Safety Data ........................................................................................................................................................... 1476
Manipulating Metrics for War ................................................................................................................................................................. 1476
The Core Problem .................................................................................................................................................................................. 1476
POLICY - US Economic Decline is Obvious to Anyone Caring to Look ............................................................................................ 1477
POLICY - Policy Uncertainty and Confidence in Monetary Policy Direction is exposed .................................................................... 1480
POLICY - "What is good for GM is good for America" is no longer correct...................................................................................... 1482
POLICY - Where is the Logic In US Public Policy ................................................................................................................................ 1483
POLICY - What is the Real Driving Force Behind the New Immigration Law? ................................................................................. 1486
POLICY - Crony Capitalism and How America Lost its Way! .............................................................................................................. 1489
MONETARY POLICY - TAPER IMPLEMENTATION & A 2ND HALF LIQUIDITY SQUEEZE ................................................................. 1497
BERNANKE YELLEN/FISHER TRANSITION ........................................................................................................................................ 1498
FED POST DECEMBER TAPER ........................................................................................................................................................... 1499
FED PRE-DECEMBER TAPER .............................................................................................................................................................. 1500
TAPER ....................................................................................................................................................................................................... 1503
TAPER - Fed December 2013 FOMC "TAPER" .................................................................................................................................. 1505
TAPER - The Last Time a Major Central Bank "Tapered" QE .......................................................................................................... 1506
TAPER - FOMC QE Meeting ................................................................................................................................................................. 1508
TAPER - The Fed Cannot Possibly "Exit" Without The Market Crumbling .................................................................................... 1510
TAPER - It Matters and the Fed Has Few Options As Quality Collateral Disappears. .................................................................. 1512
TAPER - Look for QE to Morph Into Quantitative Education ........................................................................................................ 1514
TAPER - Why Fed Bond Buying Can't Go on Indefinitely and Why TAPER .................................................................................. 1518
TAPER - Political "Push-Back" by the Fed ........................................................................................................................................ 1519
TAPER - Ending QE Will Pressure Fiscal Policy............................................................................................................................... 1521
TAPER - Delay Risks Bond Market Volatility as Private Availability Steadily Shrinks ................................................................. 1525
TAPER - Clearly a Bluff or Muddled Policy ....................................................................................................................................... 1528
TAPER - Why is the Fed Talking TAPER? ......................................................................................................................................... 1530
TAPER - The Fed is Unlikely to Taper ................................................................................................................................................ 1533
August 2014 Edition

14

TAPER - Fed Trapped in a Box ........................................................................................................................................................... 1535

TAPER - The Fed Taper Playbook ...................................................................................................................................................... 1537
TAPER - TAPER Put On Hold .............................................................................................................................................................. 1538
QUEEN YELLEN ........................................................................................................................................................................................... 1541
YELLEN - QEeen YELLEN TESTIMONY - Dampens Taper Bet ........................................................................................................ 1542
VOLKER RULE .............................................................................................................................................................................................. 1545
VOLKER - Dodd- Frank Never Had a Chance .......................................................................................................................................... 1546
CHARTS & TABLES OF NOTE ........................................................................................................................................................................... 1548
CHARTS: Dramatically Slowing US Foreign Flows ...................................................................................................................................... 1548
CHARTS: Money Velocity STILL a Major Deflationary Signal ...................................................................................................................... 1548
CHARTS: US Trade Balance Has Been Shrinking Since 2008 .................................................................................................................... 1549
CHARTS: Inflation Arrived with the Removal of a Gold Standard Discipline and Creditism ........................................................................ 1549
CHARTS: The Feds Asset Appreciation Strategy to Protect Collateral Values ........................................................................................... 1550
ASSET INFLATION TO PROTECT COLLATERAL VALUES ............................................................................................................................. 1550
CHARTS: Economic Growth Based Significantly on Credit Growth ........................................................................................................ 1552
CHARTS: Fed deliberately ignoring data on both growth and inflation ................................................................................................ 1554
CHARTS: US Economic Activity .................................................................................................................................................................... 1555
CHARTS: Effects of QE on S&P 500 ............................................................................................................................................................ 1556
CHARTS: Monetary Velocity versus Monetary Base .................................................................................................................................... 1557
CHARTS: Days Between 'Unsterilized' Actions ............................................................................................................................................ 1558
CHARTS: FOMC Economic Projections ....................................................................................................................................................... 1558
CHARTS: Taylor Rule & Evans Rule Estimates of Fed Funds Rates .......................................................................................................... 1559
CHARTS: Market Pricing In A Longer On-Hold Fed ..................................................................................................................................... 1559
CHARTS: Fed Balance Sheet Assets & Liabilities ........................................................................................................................................ 1560
CHARTS: Fed Policy Turns 180 Degrees ..................................................................................................................................................... 1560
CHARTS: US Banking Industry Concentration ............................................................................................................................................. 1561
CHARTS: Total Credit Market Debt as % GDP............................................................................................................................................. 1562
CHARTS: Debt-to-GDP Ratio Above What Caused Great Depression ........................................................................................................ 1563
CHARTS: Yield Chase Completely Distorted ................................................................................................................................................ 1563
CHARTS: Velocity of Money ......................................................................................................................................................................... 1566
CHARTS: Real Negative Rates ..................................................................................................................................................................... 1569
CHARTS: Short Interest Rates a Fed Problem ............................................................................................................................................. 1572
RESEARCH OF NOTE ........................................................................................................................................................................................ 1574
MONETARY - Why "Tapering" Is a Mirage and the Fed May Be Loosening Instead .................................................................................. 1574
MONETARY - Foreign Purchases Suggest Slowing Global Economies with less Easy Credit to Invest .................................................... 1576
MONETARY - Dollar, Currency & Gold Outlook ....................................................................................................................................... 1578
MONETARY - Federal Reserves False Media Reporting ........................................................................................................................ 1583
MONETARY - The Unintended Consequences of it all ............................................................................................................................ 1585
MONETARY - QE Proves to be the "Sham" We All Knew it was! ........................................................................................................... 1594
MONETARY - Owns 32.47% of all 10 Year equivalents and monetizing 70% of all net equivalent issuance.................................... 1596
MONETARY - The Policy Options Available to the Fed ........................................................................................................................... 1597
MONETARY - Capital Distortion & Global Acceptance of the Bernankean Theory ................................................................................ 1598
MONETARY - The Suspension of Price Discovery (Marriage of Financial Repression & Crony Capitalism) ................................... 1602
MONETARY - The Fed is stuck in a QE Trap ............................................................................................................................................ 1605
MONETARY - Mathematically, the Fed Can Only Fail .............................................................................................................................. 1608
MONETARY - QE versus S&P 500 Movements ......................................................................................................................................... 1613
MONETARY - QE is standing Between Inflated Equity Markets and A Recession............................................................................... 1615
MONETARY - Mounting Policy Failures .................................................................................................................................................... 1617
MONETARY - QE Doesn't Help the Economy ........................................................................................................................................... 1621
MONETARY - The US Reserve Currency and the steady erosion of trust ............................................................................................ 1623
MONETARY - The FAC is to the FED as the TBAC is to the TREASURY (Same Banks) ..................................................................... 1626
MONETARY - $2.3 Trillion of Leveraged Derivative Collateral ............................................................................................................... 1627
MONETARY - Leverage, Funding and Profit Pressures as Money Is No Longer Quite as Free ................................................................. 1632
MONETARY - The Fed's Double-Bind ........................................................................................................................................................ 1638
MONETARY - The Federal Reserve is at the very heart of our economic problems ............................................................................ 1639
MONETARY - FED Inflation & Deflator ......................................................................................................................................................... 1641
REFERENCE - Prior Posts .................................................................................................................................................................................. 1643
RESEARCH - Reduction at the Core of the Growth of the Federal Reserve Balance Sheet ............................................................... 1643
RESEARCH - Fed's Excess Reserves are 51% Foreign Banks, 49% Domestic ...................................................................................... 1646
RESEARCH - A Game of Calculated Deception is Evolving to Something Worse ............................................................................... 1648
RESEARCH - A Loan Distribution Credit Bubble ..................................................................................................................................... 1649
RESEARCH - QE to be replaced with Guidance, Thresholds and Promises ......................................................................................... 1650
RESEARCH - Bernanke in a Box and Talking Out of Both Sides of Your Mouth .................................................................................... 1652
RESEARCH - Duration Extraction: The Hidden Fed Game ..................................................................................................................... 1653
RESEARCH - The Fed's Stated Guidance Sign-Posts ............................................................................................................................. 1655
RESEARCH - An Artificial Market............................................................................................................................................................... 1657
RESEARCH - Bank Reserves A Ticking Bomb, But Who Will Be Caught in the Blast? ........................................................................ 1657
RESEARCH - QE An Intentionally Broken Mechanism Due to 2008 Policy Payable Interest on Bank Reserves ............................ 1661
RESEARCH - QE Ineffective In Increasing GDP ....................................................................................................................................... 1662
MONETARY: Helicopter Money of Central Bank Bond Purchases are Forever ...................................................................................... 1663
MONETARY: Central Bank Balance Sheet Expansion and the Theoretical Path to SPX of 1950 ............................................................ 1665
MONETARY: Central Bank Balance Sheet Expansion versus CPI ......................................................................................................... 1667
MONETARY: The Fed Model No Longer Prices Risk ................................................................................................................................ 1668
SITUATIONAL SUMMARY & ANALYSIS ............................................................................................................................................................ 1676
August 2014 Edition

15

FISCAL POLICY A SHRINKING BUDGET DEFICIT IS NOT ALL GOOD NEWS ................................................................. 1682
RESEARCH WE FOLLOWED ............................................................................................................................................................................. 1682
FISCAL MATTERS ........................................................................................................................................................................................ 1683
CHARTS & TABLES OF NOTE ........................................................................................................................................................................... 1685
CHARTS - US Government Budget Surplus / Deficit .................................................................................................................................... 1686
CHARTS - Government Receipts & Outlay Growth Improves Significantly .................................................................................................. 1686
CHARTS - Federal Budget Surplus / Deficit .................................................................................................................................................. 1687
CHARTS - Real Federal Government Purchases ......................................................................................................................................... 1687
CHARTS - US Trade Balance Improvement ................................................................................................................................................. 1687
CHARTS - Growth & Jobs ............................................................................................................................................................................. 1688
CHARTS - Taxes & Spending ....................................................................................................................................................................... 1692
CHARTS - Politics & Policy ........................................................................................................................................................................... 1695
CHARTS - The Stakes ................................................................................................................................................................................... 1696
CHARTS - Official Fiscal Deficit & Debt ........................................................................................................................................................ 1698
CHARTS - Payroll Tax Holiday ...................................................................................................................................................................... 1699
CHARTS - Tax Rate Comparisons ............................................................................................................................................................. 1700
CHARTS - Risk Perceptions ....................................................................................................................................................................... 1701
CHARTS - 2013 Quarterly Impact ............................................................................................................................................................... 1702
CHARTS - Budget Deficit .............................................................................................................................................................................. 1703
CHARTS - Sovereign Debt ............................................................................................................................................................................ 1706
CHARTS - State & Local Government Drag ................................................................................................................................................. 1707
CHARTS - Government Dependence ........................................................................................................................................................... 1710
CHARTS - Coming Demographic Shock ....................................................................................................................................................... 1711
CHARTS - Fiscal Cliff Outcome .................................................................................................................................................................... 1715
BUDGET - What You Need to Know ................................................................................................................................................................... 1717
BUDGET - Political Budget Cowardice and Capitulation ........................................................................................................................ 1718
BUDGET - Political Budget Cowardice and Capitulation - 2 ................................................................................................................... 1720
BUDGET - The Ultimate in Political Can-Kicking! .................................................................................................................................... 1722
BUDGET - The Next Step in the Collapse Of The Dollar .......................................................................................................................... 1725
BUDGET - As Represented and Spun for the Public ............................................................................................................................... 1728
BUDGET - Implications ................................................................................................................................................................................ 1729
BUDGET - A Budget That Institutionalizes Big Government .................................................................................................................. 1731
BUDGET - The Secrets in The Budget ......................................................................................................................................................... 1735
RESEARCH OF NOTE ........................................................................................................................................................................................ 1738
RESEARCH - Budget Deficit Shrinking ......................................................................................................................................................... 1738
RESEARCH - Avoiding Taxes ..................................................................................................................................................................... 1740
RESEARCH - A Confluence Of Risky Economic Events ......................................................................................................................... 1741
RESEARCH - Everyone Hates Sequestration, But Few Can Agree On What to Cut ............................................................................ 1742
RESEARCH - $70T Off-Balance Sheet Federal Liabilities ....................................................................................................................... 1744
BUDGET SELLOUT ............................................................................................................................................................................................. 1747
BUDGET AGREEMENT ................................................................................................................................................................................ 1750
GOVERNMENT SHUTDOWN ....................................................................................................................................................................... 1751
SITUATIONAL SUMMARY & ANALYSIS ............................................................................................................................................................ 1752
KEY DRIVERS - CATALYSTS OF CHANGE.......................................................................................................................... 1753

EMPLOYMENT .................................................................................................................................................................................................... 1758
CHARTS & TABLES ...................................................................................................................................................................................... 1760
CHARTS Total Compensation Growth Lingering at 2.9 Percent ........................................................................................................... 1760
CHARTS The Startling Long Term Unemployed Statistics .................................................................................................................... 1761
CHARTS Finding Work That Pays Enough to Support a Family Is Nearly Impossible ......................................................................... 1762
CHARTS Labor Force Participation by Age ........................................................................................................................................... 1762
CHARTS - America Becoming a Country of Part Time Workers .............................................................................................................. 1763
CHARTS - Wages & Salary Accruals / GDP ............................................................................................................................................. 1764
CHARTS US Employment/Population Ratio Total in Labor Force ......................................................................................................... 1764
CHARTS US Industrial Production v Manufacturing Jobs...................................................................................................................... 1765
CHARTS - Part-Time Employment ............................................................................................................................................................ 1765
CHARTS - Nonfarm Payrolls Y-O-Y DECLINE ......................................................................................................................................... 1765
CHARTS - Hiring Stalled at 200K Per Month (Approximates ONLY the New People Entering Workforce)............................................ 1766
CHARTS - The Under-Employment Gap ................................................................................................................................................... 1766
CHARTS Staycations A Sign of the FEAR of Job Loss & Competition for Jobs ................................................................................... 1767
RESEARCH OF NOTE .................................................................................................................................................................................. 1768
EMPLOYMENT - Working Age Americans without a Job Has Risen By 27 Million Since 2000 .............................................................. 1768
EMPLOYMENT - At the Core of the US Chronic Unemployment is a Lack of Private Investment.......................................................... 1771
EMPLOYMENT - With and Without Obama's Recovery Plan .............................................................................................................. 1772
EMPLOYMENT - Millennials Devastated As American Dream Becomes Nightmare for Most ........................................................ 1774
EMPLOYMENT - 30 Mind-blowing Statistics about Americans Under The Age Of 30 ..................................................................... 1776
EMPLOYMENT - Going Nowhere Even With All Jobs Becoming Temporary Jobs and the Participation Rate Plummeting ...... 1779
EMPLOYMENT - Low-Wage Jobs Bias Continues to Hamper U.S. Recovery......................................................................................... 1780
EMPLOYMENT - A REAL Family Wage versus Part Time & HES ....................................................................................................... 1781
EMPLOYMENT - It is as much About the Quality, as the Quantity of Jobs ....................................................................................... 1788
REFERENCE - Prior Posts ............................................................................................................................................................................ 1791
1- CAPITAL SPENDING ........................................................................................................................................................................... 1791
2- SMALL BUSINESS OPTIMISM ............................................................................................................................................................ 1794
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3- DEMOGRAPHIC SHIFT ........................................................................................................................................................................ 1798

REAL DISPOSABLE INCOME ............................................................................................................................................................................ 1809
RESEARCH WE FOLLOWED ...................................................................................................................................................................... 1809
CHARTS & TABLES ..................................................................................................................................................................................... 1811
CHARTS Real Disposable Income is Now Contracting ......................................................................................................................... 1811
CHARTS This is a Structural .................................................................................................................................................................. 1811
CHARTS Growing Temp Wages Impacting Real Disposable Income in America .............................................................................. 1812
CHARTS Real Disposable Income per Capita ....................................................................................................................................... 1813
CHARTS - Household Incomes a Sign of a Collapsing Middle Class ................................................................................................ 1813
CHARTS - Food Stamps Now 14% of US Grocery Store Sales ............................................................................................................. 1814
RESEARCH OF NOTE .................................................................................................................................................................................. 1815
RESEARCH How Can a 70% Consumption Have a Recovery When Real DI/Capital Falls ................................................................. 1815
RESEARCH - The Facts are clear. The US Standard of Living is Falling ........................................................................................... 1816
RESEARCH - The Facts are clear. The US Standard of Living is falling .................................................................................................. 1817
RESEARCH - Standards of Living and Artificial Expectations ........................................................................................................... 1820
RESEARCH - A Lack of Demand in US Economy ................................................................................................................................ 1822
RESEARCH - Full Time Jobs or Food Stamps & Disability? .............................................................................................................. 1823
REFERENCE - Prior Posts ............................................................................................................................................................................ 1825
STANDARD OF LIVING - Salary Compression ...................................................................................................................................... 1825
DISPOSABLE INCOME - 66M (20%) Below $28.8/Year Subsistence Level........................................................................................ 1826
FOOD STAMPS - 46,405,204 Individuals, 22,257,647 Households below Poverty Line ................................................................... 1827
DISPOSABLE INCOME - Bad Even in Nominal Terms ......................................................................................................................... 1829
INFLATION - It's There but the Government Doesn't Account for it. .................................................................................................. 1829
US RESIDENTIAL REAL ESTATE ...................................................................................................................................................................... 1831
CHARTS & TABLES ...................................................................................................................................................................................... 1834
CHARTS - Serious Housing & Household Spending Headwinds ............................................................................................................. 1834
CHARTS - Double Top in Construction Index ........................................................................................................................................... 1834
CHARTS - The Real Cost of Buying a Home 6.7 X Average Salary .................................................................................................... 1834
CHARTS - Household Formations ............................................................................................................................................................. 1835
CHARTS Falling Originations ................................................................................................................................................................. 1835
CHARTS Falling Credit Scores ............................................................................................................................................................... 1836
CHARTS Falling Down payments ........................................................................................................................................................... 1837
CHARTS Household Formations & First Time Buyers Collapse............................................................................................................ 1837
CHARTS Classic Technical Analysis Chart Showing Housing in an Uncompleted Corrective Wave ................................................... 1838
CHARTS - Housing Starts ......................................................................................................................................................................... 1838
CHARTS - Composition of Housing Sales ................................................................................................................................................ 1839
CHARTS - New Home Sales ..................................................................................................................................................................... 1840
CHARTS - Existing Residential Supply ..................................................................................................................................................... 1840
CHARTS - Housing Starts ......................................................................................................................................................................... 1841
RESEARCH OF NOTE .................................................................................................................................................................................. 1842
RESEARCH - BlackRock's Fink Warns Housing More "Unsound" Now Than During Last Bubble ......................................................... 1842
RESEARCH - A Single Family Income Insufficient and In Many Cases Two Is Insufficient ..................................................................... 1843
RESEARCH - Insight: A new wave of U.S. mortgage trouble threatens ................................................................................................... 1845
RESEARCH - Household Formation Drives Residential Real Estate ................................................................................................. 1847
OVERVIEW ................................................................................................................................................................................................ 1850
CURRENT HOME OWNERSHIP TRENDS .............................................................................................................................................. 1856
$6.5 TRILLION IN MIDDLE CLASS NET WORTH EVAPORATES .......................................................................................................... 1859
NATIONAL STATISTICS: PRICE .............................................................................................................................................................. 1860
NATIONAL STATISTICS: EXISITNG HOME SALES ............................................................................................................................... 1862
NATIONAL STATISTICS: NEW HOME SALES ........................................................................................................................................ 1864
HOUSING: Even a Never Seen Before 30 Year Mortgage Rate can't Help Housing ......................................................................... 1865
HOUSING: Soaring FHA Delinquencies ................................................................................................................................................. 1867
US COMMERCIAL REAL ESTATE ..................................................................................................................................................................... 1872
RESEARCH OF NOTE .................................................................................................................................................................................. 1873
CRE Commercial Mortgage-Backed Securities: Hot ... But Very Dangerous ................................................................................ 1873
OVERVIEW ................................................................................................................................................................................................ 1882
NATIONAL STATISTICS: COMMERCIAL REAL ESTATE ....................................................................................................................... 1883
FOCUS GROUPS .................................................................................................................................................................. 1889

US COMMERCIAL RETAIL REAL ESTATE ....................................................................................................................................................... 1889
RESEARCH OF NOTE .................................................................................................................................................................................. 1892
COMMERCIAL REAL ESTATE - Commercial Mortgage-Backed Securities: Hot ... But Very Dangerous ...................................... 1892
COMMERCIAL REAL ESTATE - The Dollar Tree Uptick in its earnings before following economic downturns ........................... 1899
COMMERCIAL REAL ESTATE - E-Commerce Industry Is About To Explode .................................................................................... 1901
COMMERCIAL REAL ESTATE - Retailers' Profits Miss By Most In 13 Years: "Consumer Is Not Back" ........................................ 1902
COMMERCIAL REAL ESTATE - Imploding Retail Floor Space Requirements .................................................................................. 1904
COMMERCIAL REAL ESTATE - Family Dollar to cut jobs, shut 370 stores as sales fall ................................................................. 1907
COMMERCIAL REAL ESTATE - The Death of a 71% Consumption Driven Economy ...................................................................... 1910
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COMMERCIAL REAL ESTATE

- Getting Worse Fast ............................................................................................................................ 1911

- Unfolding Implosion ........................................................................................................................... 1913
- Unfolding Implosion - II ..................................................................................................................... 1914
- Financial Crisis II Coming ................................................................................................................. 1919
- Indoor Mall Retail in Trouble ............................................................................................................. 1926
- Mortgage bonds reflect diverging fortunes of US malls ....................................................................... 1929
- Dead Mall Syndrome: The Self-Reinforcing Death Spiral of Retail ..................................................... 1931
- The First Domino to fall: Retail-CRE (Commercial Real Estate) ......................................................... 1933
- After Seven Lean Years: US Commercial Real Estate: The Present Position and Future Prospects 1937
- Retail Sales Cannibalization ................................................................................................................ 1943
- Tsunami of Retail Store Closings and Downsizings Coming ............................................................... 1944
- Thanksgiving Retail Sales Results ....................................................................................................... 1947
FINANCIAL STRESS Increasing Despite Increases in Net Worth ................................................................................................................... 1951

RESEARCH OF NOTE .................................................................................................................................................................................. 1951
FINANCIAL STRESS The Feds Financial Stress Index ........................................................................................................................ 1951
US CREDIT Cracks Showing in US Credit ....................................................................................................................................................... 1957
RESEARCH OF NOTE .................................................................................................................................................................................. 1957
CREDIT Problems Showing On Multiple Fronts ..................................................................................................................................... 1957
US RECESSION A Looming US Recession .................................................................................................................................................... 1961
RESEARCH OF NOTE .................................................................................................................................................................................. 1961
RECESSION - Sequential Decline in Wages ........................................................................................................................................... 1961
RECESSION - Final Sales Signals Pending Recession ....................................................................................................................... 1962
RECESSION - Consumers Using Savings to Maintain Life Style ....................................................................................................... 1962
RECESSION - 1987 Yields ....................................................................................................................................................................... 1966
RECESSION - Why a Looming Recession May Be Near ......................................................................................................................... 1967
RECESSION - Minimally in the Back Stretch of the Recovery ............................................................................................................ 1972
RECESSION - Reduced Household Income at the Core of the Growth of the Federal Reserve Balance Sheet .......................... 1978
RECESSION - Household Income and Signs of A Collapsing Middle Class ........................................................................................ 1980
RECESSION - More Cyclical Signs of a US Recession........................................................................................................................ 1980
RECESSION - A Lack of Demand ........................................................................................................................................................... 1981
RECESSION - Money Going to Cash But Equity Inflows Still Suggest Corrective Correlation ...................................................... 1983
RECESSION - More and More Signals Flashing ................................................................................................................................... 1986
RECESSION - Term Structures Suggest Signs of a US Recession Ahead ............................................................................................. 1988
THE MUNI MONSTER- A Failure of Public Policy to Respond to Structural Change ........................................................................................ 1990
PEURTO RICO .......................................................................................................................................................................................... 1991
US MUNI LAND ......................................................................................................................................................................................... 1991
DETROIT - Simply the Canary................................................................................................................................................................... 1992
DETROIT - By the Numbers ................................................................................................................................................................. 1994
DETROIT - The News Reporting ......................................................................................................................................................... 1995
DETROIT - A Structural Problem that Failed to be politically addressed ...................................................................................... 1997
RETIREMENT CRISIS Now Beginning to Take Hold....................................................................................................................................... 1998
RESEARCH OF NOTE .................................................................................................................................................................................. 2000
RETIREMENT - Underfunded and Unsustainable ................................................................................................................................ 2000
RETIREMENT - 35 Facts to Scare a Baby Boomer .................................................................................................................................. 2003
RETIREMENT - $205K Account Limits ..................................................................................................................................................... 2005
RETIREMENT - $3M Retirement Cap Unanswered ................................................................................................................................. 2007
RETIREMENT - What Does Heart Surgery Really Cost, And Why Is It 70 Times More Expensive In The US? ..................................... 2008
RETIREMENT - UPS Drops 15,000 Spouses From Health Plan, Blames Obamacare ........................................................................... 2010
CAPITAL & INTEREST RATES ........................................................................................................................................................................... 2012
SOCIAL CHANGE - What America Will Look like When The Next Great Economic Crisis Strikes........................................................... 2014
SPECIAL SUPPLEMENT....................................................................................................................................................... 2019

US RESERVE CURRENCY PRESSURES ......................................................................................................................................................... 2019
RESERVE CURRENCY Four Realistic Possibilities of Who the Belgium US Treasury Buyer Is ............................................................. 2019
RESERVE CURRENCY Who Is the New Secret Buyer of U.S. Debt? ..................................................................................................... 2022
RESERVE CURRENCY As Russia Dumps A Record Amount Of US Treasuries, Here Is What It Is Buying .......................................... 2025
RESERVE CURRENCY US FDI Shrinks ................................................................................................................................................... 2028
RESERVE CURRENCY Is the EU Rescuing the US Treasury Market? ................................................................................................... 2029
RESERVE CURRENCY Slowing Global Economies with less Easy Credit to Fund US FDI .................................................................... 2031
August 2014 Edition

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The Looming M&A Wave: Global Macro Update

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THE LOOMING M&A WAVE

GLOBAL MACRO UPDATE

GLOBAL MACRO TIPPING POINTS - AUGUST 2014

1 August 2014 Edition

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