rpt-GMTP-2015-05-Peek

1 May 2015 Edition Restricted & Confidential Copyright 2015 © Gordon T. Long All Rights Reserved [email protected]

WORRIED BANKERS Beginning to “Batten-down-the-Hatches”

MACRO UPDATE

GLOBAL MACRO TIPPING POINTS – MAY 2015

4/27/2015


WORRIED BANKERS

Beginning to “Batten-down-the-Hatches”

GLOBAL MACRO TIPPING POINTS - MAY 2015

TIPPING POINTS .................................................................................................................................... 30

GLOBAL MACRO: RISK ASSESSMENT .................................................................................................................................. 30 POSITIONAL FRAMEWORK: "WE ARE HERE!".................................................................................................................................................... 30 LIQUIDITY is Neither WEALTH nor COLLATERAL ................................................................................................................................................ 31

Our Assessment ................................................................................................................................................................................................ 31 James Rickard’s Global Risk Assessment ........................................................................................................................................................ 46

MACRO MONITORING INSTITUTIONS ................................................................................................................................................................. 95 LATEST FROM THE MONITORS ..................................................................................................................................................................... 95

RESEARCH OF NOTE .................................................................................................................................................................................. 99 NEW-MONITORS - Lagarde warns of ‘lopsided’ global growth ................................................................................................................ 99 NEW-MONITORS - OECD Cuts Global Growth Projections Again ........................................................................................................ 100 NEW-MONITORS – World Bank – Global Growth Outlook ..................................................................................................................... 101 MONITORS - World Bank warns – 100M Unemployed, 447M Working Poor, 600M Required for Population Growth Alone ............... 103 MONITORS - World Bank Says 300M Young People neither Working nor Studying ............................................................................. 104 MONITORS - IMF warns of new threats to global economy due to excessive risk taking ...................................................................... 105

BIS ................................................................................................................................................................................................................... 107 NEW-BIS - BIS Slams The Fed: The Solution To Bubbles Is Not More Bubbles ....................................................................................... 107 NEW-BIS - Former BIS Chief Economist: "The System Is Dangerously Unanchored................................................................................ 107 NEW-BIS - Even the BIS Is Shocked At How Broken Markets Have Become ........................................................................................... 110 NEW-BIS - Perhaps The BIS Can Share Its Next "Debt Trap" Warnings With Its Own Board Of Directors First ...................................... 113 NEW-BIS - The Next Time The BIS Wants To Warn About Monetary Kool-Aid, Bubbles, Lack Of Liquidity Or Complacency ................ 116 NEW-BIS - "Low Volatility Everywhere" - BIS Sounds Alarm Alert On Pervasive Complacency Masking Systemic Shocks .................... 117 BIS - BIS warns on 'violent' reversal of global markets ............................................................................................................................... 122

WEF – WORLD ECONOMIC FORUM ............................................................................................................................................................ 126 CHARTS OF NOTE ..................................................................................................................................................................................... 126

NEW-WEF – Global Business Risks ........................................................................................................................................................ 128 NEW-WEF – The 2015 Global Risk Landscape ...................................................................................................................................... 129 NEW-WEF – Evolving Risk Landscape (2007-2015) .............................................................................................................................. 130 NEW-WEF – Global Risk Exposures By Region ..................................................................................................................................... 131

SITUATIONAL ANALYSIS ..................................................................................................................................................................................... 132 RESEARCH WE FOLLOWED ......................................................................................................................................................................... 132 CHARTS OF NOTE ......................................................................................................................................................................................... 134

NEW The economic balance of the world is shifting ................................................................................................................................... 134 NEW Global Conflict Intensity is heating up ................................................................................................................................................ 135 NEW World Conflict Map ............................................................................................................................................................................. 136 NEW World Conflict Map – Details .............................................................................................................................................................. 137 NEW Global Conflict & Protest Intensity ...................................................................................................................................................... 138 NEW Deutsche Bank’s Key Global Risk ...................................................................................................................................................... 138 NEW Political and Financial Risk Now Outnumber Real Economy Risks .................................................................................................. 139

RESEARCH OF NOTE .................................................................................................................................................................................... 140 NEW Global Conflict Intensity Spikes To 7-Year High ................................................................................................................................ 140 NEW These Are 2015's "Black Swans" According To SocGen .................................................................................................................. 141 NEW "Globalization Is Turning In On Itself And It Is Each Man For Himself" ............................................................................................. 142 Putin Unleashes Fury at US “Follies” in Major Pivotal Speech ................................................................................................................... 145 Putin Warns Of Risk of Major Conflict, Says Dollar Losing Reserve Currency Status ............................................................................... 146 Putin Accuses U.S. of Blackmail, Weakening Global Order ....................................................................................................................... 148

REFERENCE PAPERS – “Position Reminders” Lest We Forget ................................................................................................................... 150 FOURTH TURNING ACCELERATING ....................................................................................................................................................... 150 AMERICA’S GLOBAL RETREAT ................................................................................................................................................................ 161 THE OLD WORLD ORDER IS OVER ......................................................................................................................................................... 164 THE DEMOGRAPHIC THREAT TO DEVELOPED NATIONS ................................................................................................................... 165 THE RISK CONTINUUM ............................................................................................................................................................................. 169 GLOBAL TRENDS – THE SIX FRAMING MEGATRENDS ........................................................................................................................ 172 GLOBAL THEMES – TEN STRUCTURALTHEMES FOR STRATEGY ..................................................................................................... 174 DEBT SATURATION - A COLLAPSING PONZI SCHEME......................................................................................................................... 176 WINTER 2015 – “EVENT RISK” DOMINATES ........................................................................................................................................... 178

GLOBAL MACRO: RISK SIGNALS ......................................................................................................................................... 186 GEO-POLITICAL RISK – Tensions & Conflicts ..................................................................................................................................................... 188

YEMEN ............................................................................................................................................................................................................ 188 CHARTS OF NOTE ..................................................................................................................................................................................... 188

NEW-YEMEN – Strategic Position ........................................................................................................................................................... 188


NEW-YEMEN – al-Houthis and Saleh Concentrations ............................................................................................................................ 189 NEW-YEMEN – The “Decisive Storm” Coalition ...................................................................................................................................... 189 NEW-YEMEN – Global Oil Chokepoints .................................................................................................................................................. 190 NEW-YEMEN – Middle Eastern Oil Production & Chokepoints .............................................................................................................. 190 NEW-YEMEN – Chinese Import Countries & Oil Routes ........................................................................................................................ 192 NEW-YEMEN – Major Crude Oil Trade Flows in the South China Sea .................................................................................................. 193 NEW-YEMEN – Regional Territorial Claims in the South China Sea ...................................................................................................... 194

RESEARCH OF NOTE ................................................................................................................................................................................ 195 NEW-YEMEN – Risk of ‘World War’ between NATO and Russia on Ukraine Escalation as Yemen Bombed for Third Day ................ 195 NEW-YEMEN – Yemen Ground Invasion by Saudi, Egyptian Troops Imminent .................................................................................... 197 NEW-YEMEN – Middle East Proxy War: Presenting The Massive "Decisive Storm" Coalition.............................................................. 200 NEW-YEMEN – Saudi Arabia Imposes Naval Blockade on Red Sea Strait, Deploys 150,000 Troops ................................................. 201 NEW-YEMEN – Another Middle East War Breaks Out: Saudis Begin Bombing Yemen, US Military Taking Action ............................. 203 NEW-YEMEN – Presenting The Theater Of War; Who Controls Yemen? ............................................................................................. 208 NEW-YEMEN – US-Armed Rebels Force Yemen President To Flee Country As Saudis Prepare For War .......................................... 210

UKRAINE – EAST/WEST CONFLICT – ‘The New Colder War’ ..................................................................................................................... 215 RESEARCH WE FOLLOWED ..................................................................................................................................................................... 216 RESEARCH OF NOTE ................................................................................................................................................................................ 222

NEW-UKRAINE - Putin Is Becoming A "Vulture" Bond Investor ............................................................................................................. 222 NEW-UKRAINE - West Further Infuriates & Antagonizes Russia with Debt Restructuring Pressures................................................... 223 NEW-UKRAINE - Congress Approves Funding for Ukraine Arms Shipments ........................................................................................ 227 NEW-UKRAINE - US Taxpayers to Fund Ukraine Bailout via Bond Guarantee ..................................................................................... 231 NEW-UKRAINE - Congress Approves Funding for Ukraine Arms .......................................................................................................... 232 NEW-UKRAINE - White House Explains Where Your $1.3 Billion Went In Ukraine ................................................................. 235 NEW-UKRAINE - Putin Says Attempts To Tip Nuclear Balance Don't Scare Russia, Moscow Will Uncover "Schemes" ..................... 238 NEW-UKRAINE - Putin Security Council Slams Obama Attempts at "New World Order" ...................................................................... 239 NEW-UKRAINE- A Russian Viewpoint ................................................................................................................................................ 241 NEW-UKRAINE- This Is What Is Really Taking Place Behind The Scenes Of The Second US-Russian Cold War ............. 256

ISIS .................................................................................................................................................................................................................. 257 ISIS – THE SUNNI / SHIA /KURD PROBLEM ............................................................................................................................................ 258

NEW-ISIS - Obama Says ISIS War Powers Request Not About 'Another Ground War' ........................................................................ 262 NEW-ISIS - President Obama Explains His "Boots On The Ground" ISIS-War Strategy ....................................................................... 262 ISIS- Kobani Overshadows Larger Battles .............................................................................................................................................. 263

SYRIA .............................................................................................................................................................................................................. 266 RESEARCH WE FOLLOWED ..................................................................................................................................................................... 266

NEW-SYRIA - Syria "Welcomes" Larger Russia Presence ..................................................................................................................... 267 SYRIA - This has the Earmarks of the Kennedy Ear "Cuban Missile" Crisis .......................................................................................... 268 SYRIA - Syrian War You Are Not Being Told About ................................................................................................................................ 269 SYRIA - 25 Quotes ................................................................................................................................................................................... 270 SYRIA - What Coalition? .......................................................................................................................................................................... 273 SYRIA - US Supporting Fully an "Al Qaeda Operation" .......................................................................................................................... 275 SYRIA - Decision Already Taken to Bomb Syria ..................................................................................................................................... 277 SYRIA - Market Patterns Before and Immediately After Conflict Begins ................................................................................................ 285

SOUTH CHINA SEA TERRITORIAL PROBLEMS ......................................................................................................................................... 287 GEO-POLITICAL RISK - Social, Economic & Financial ........................................................................................................................................ 291

NEW-GREECE - Greek Energy Minister Slams "Unscrupulous, Imperialist" Germany, Seeks "Bold Alternatives" In Russia ...................... 291 NEW-GREECE - Greece Prepares To Leave ................................................................................................................................................. 293 NEW-GREECE - Greek Deputy FinMin Confirms Athens Is "Prepared For Rift" With Europe ...................................................................... 295 NEW-GREECE - Will Greece Call A Referendum On Euro Membership?..................................................................................................... 296 NEW-GREECE - What Greece Owes, And More Importantly - When! .......................................................................................................... 299 NEW-GREECE - BofA's Modest Proposal For Greece: "A Negative Shock May Be Necessary" ................................................................. 302 NEW-GREECE - On Greek "Independence Day", Creditors Prepare To Seal Athens' Fate ......................................................................... 305

GEO-POLITICAL RISK – Global Governance Failure ........................................................................................................................................... 308 ASIAN INFRASTRUCTURE INVESTMETN BANK – A Threat to World Bank and US$ Reserve Status ..................................................... 308

RESEARCH WE FOLLOWED ..................................................................................................................................................................... 308 CHARTS OF NOTE ..................................................................................................................................................................................... 311

NEW-AIIB – Demanding Infrastructure .................................................................................................................................................... 311 RESEARCH OF NOTE ................................................................................................................................................................................ 312

NEW-AIIB - The Nepo-Cold War, The World Bank and the AIIB Threat .................................................................................... 312 NEW-AIIB - Washington Blinks: Will Seek Partnership With China-Led Development Bank ................................................................. 314 NEW-AIIB - China "Is Not Another US", Does Not Seek "Yuan Hegemony" .......................................................................................... 315 NEW-AIIB - Obama administration proposes co-financing projects with new Asian Infrastructure Investment Bank.... 317 NEW-AIIB - Qatar, Jordan, Oman, Kuwait AND Saudi Arabia have applied – Goodbye Petrodollar! .................................................... 320 NEW-AIIB - Obama continues to be humiliated by the rising anti-dollar alliance ................................................................... 322 NEW-AIIB - Did De-Dollarization Just Reach Escape Velocity? ............................................................................................................. 324

EMERGING BRICS ALLIANCE – NEW MULTI-POLAR WORLD .................................................................................................................. 328 MULTI-POLAR-Money Supply – The New World Economy ....................................................................................................................... 328 MULTI-POLAR-Financial Globalist Impose Monetary Hegemony .............................................................................................................. 330 MULTI-POLAR-Financial Globalists Controlling the Political Process ........................................................................................................ 332

ADVANCING GLOBAL FINANCIAL REPRESSION ....................................................................................................................................... 335 HENRY KISSINGER CALLS FOR NEW WORLD ORDER (NWO) ................................................................................................................ 337

KISSINGER- Henry Kissinger’s ‘World Order’ ............................................................................................................................................. 337

GLOBAL MACRO: RISK LEVELS ........................................................................................................................................... 340 AGGREGATED GLOBAL FINANCIAL RISK INDEX ............................................................................................................................................. 340


NEW-BANKING RISK - LIBOR-OIS SPREAD ................................................................................................................................................ 341 NEW-BANKING RISK - TED SPREAD ........................................................................................................................................................... 341 NEW-CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS ....................................................................................................................... 342 NEW-CREDIT RISK - EU CREDIT DEFAULT SWAPS .................................................................................................................................. 342 NEW-CONSUMER RISK - HOUSING - RATE OF CHANGE ......................................................................................................................... 342 NEW-ECONOMIC RISK - ECRI LEADING INDEX ......................................................................................................................................... 343 NEW-INFLATION RISK - MONEY SUPPLY GROWTH - M3 ......................................................................................................................... 344 NEW-INFLATION RISK - MONEY VELOCITY ............................................................................................................................................... 345 MONETARY RISK - BANK LIABILITIES ......................................................................................................................................................... 345 NEW-COST OF MONEY RISK - INTEREST RATES .................................................................................................................................... 346

AGGREGATED RISK LEVEL ................................................................................................................................................................................ 347

TIPPING POINTS ..................................................................................................................................................................... 349 NEW-CHANGES TO RANKINGS – Q2 2015 ........................................................................................................................................................ 349 NEW-CHANGES TO RANKINGS - Longer Term Benchmarks ............................................................................................................................ 351 NEW-CHANGES TO ROADMAPS - Longer Term Trends ................................................................................................................................... 353 NEW-CHANGES TO RANKINGS - Longer Term Benchmarks ............................................................................................................................ 355 TIPPING POINTS: TOP 5 FOCUS - APRIL 2015 ................................................................................................................................................. 358

NEW-I - RISK REVERSAL .............................................................................................................................................................................. 358 NEW-II - GEO-POLITICAL EVENT RISK ........................................................................................................................................................ 359 NEW-V - CHINA HARD LANDING .................................................................................................................................................................. 360 NEW-III - JAPAN DEBT DEFLATION ............................................................................................................................................................. 364 NEW-IV - EU BANKING CRISIS ..................................................................................................................................................................... 365

GLOBAL MACRO ................................................................................................................................. 372

GLOBAL MACRO: ECONOMIC OUTLOOK ............................................................................................................................ 374 ECONOMIC WARNINGS....................................................................................................................................................................................... 374

IMF WARNS .................................................................................................................................................................................................... 374 NEW- IMF Warns of Permanent Stagnation ................................................................................................................................................ 374 IMF sees risk of new eurozone .................................................................................................................................................................... 376 IMF Tells Central Europe to Spend More .................................................................................................................................................... 379 Japanese & Spanish Debt Unsustainable ................................................................................................................................................... 382 Global Recovery Faltering, Reduces Global Growth to Just Above 3% Global Recession Level .............................................................. 384

BIS WARNS ..................................................................................................................................................................................................... 386 NEW-BIS WARNS - Former BIS Economic Advisor Warns on European QE............................................................................................ 386 Monetary Policy At Its Limits ........................................................................................................................................................................ 398

WORLD BANK WARNS .................................................................................................................................................................................. 399 Social Unrest Stems from Shrinking Disposable Income. Jobs are the central issue. ..................................................................... 401

G20 WARNS – Need to Add $2T in Economic Activity & Tens of Millions of Jobs ........................................................................................ 404 RESEARCH WE FOLLOWED .............................................................................................................................................................................. 405 CHARTS OF NOTE ............................................................................................................................................................................................... 408

NEW-CHART: Global Stock of Debt Outstanding Grows By $57T Since Financial Crisis ............................................................................. 408 NEW-CHART: Decade-Long Central Bank FX Reserves Surge Nears End .................................................................................................. 409 NEW-CHART: Global Business Equipment Investment ................................................................................................................................. 410 NEW-CHART: EM versus DM Credit Risk ...................................................................................................................................................... 411 NEW-CHART: MSCI World P/E versus EM P/E ............................................................................................................................................. 411 NEW-CHART: Emerging Capital Flows & Currency Moves ........................................................................................................................... 412 NEW-CHART: Falling Real GDP of Emerging Versus Rising Developed Economies ................................................................................... 412 NEW-CHART: Domestic Bank Credit of EM versus DM ................................................................................................................................. 413 NEW-CHART: Regional Resilience Score Differences Since the Financial Crisis ......................................................................................... 413 NEW-CHART: US Macro index at a New 6 Year Low. ................................................................................................................................... 415 NEW-CHART: There is a Problem in Global Credit ........................................................................................................................................ 415 CHART: Serial Disappointments & Ratcheting Down of Global Growth ......................................................................................................... 416 CHART: Continuous Weakening of Global GDP Estimates ........................................................................................................................... 417 CHART: Reduced Demand Pressures on Energy Prices ............................................................................................................................... 417 CHART: Reduced Demand Pressures on Commodities................................................................................................................................. 418 CHART: Global Corporate Profit Trends ......................................................................................................................................................... 418 CHART: Stunning Growth in Debt of Developed Economies since Dotcom Bubble Burst ............................................................................ 419 CHART: World’s FDI Flooding Into Financial Products versus Productive Assets ......................................................................................... 420 CHART: Growth of Asian “Middle Class” Dominates Next 20 Years .............................................................................................................. 421 CHART: Global Domestic Demand Growth .................................................................................................................................................... 421 CHART: Global Asset Markets Reflecting a Major Demand Shock Has Hit ................................................................................................... 422 CHART: World GDP 2014 Economic Growth Estimates ................................................................................................................................ 422 CHART: World GDP versus World MSCI Stock Index .................................................................................................................................... 423 CHART: Baltic Dry Perspective – Slowing Global Aggregate Demand Growth Rate ..................................................................................... 424 CHART: World Trade versus Central Bank Balance Sheet Growth ............................................................................................................... 424 CHART: Falling Global LEI (Leading Economic Indicator).............................................................................................................................. 425 CHART: World GDP Economic Forecast 2014 ............................................................................................................................................... 426 CHART: World GDP Economic Expectations versus MSCI Equity Index ...................................................................................................... 426 CHART: Fiscal Adjustments Required – Deficit Reductions for Fiscal Sustainability..................................................................................... 427 CHART: Shifting Global GDP Share ............................................................................................................................................................... 428


CHART: Over $10 Trillion Pumped Into Global Economy by Developed Economies .................................................................................... 429 CHART: Eventually All this Debt Must be Rolled over or Paid Out................................................................................................................. 429 CHART: Future Economic Growth a Sub 2% Trend ....................................................................................................................................... 431 CHART: Debt and Fiscal Drag Are Significant Factors Affecting Global Growth ........................................................................................... 431 CHART: Slowing Global Aggregate Demand Shows in Shrinking FDI ........................................................................................................... 432 CHART: Liquidity Drain in US in 2H 2014 ....................................................................................................................................................... 433

RESEARCH OF NOTE .......................................................................................................................................................................................... 434 NEW-GLOBAL OUTLOOK – The Global Liquidity Squeeze Has Begun ....................................................................................................... 434 NEW-GLOBAL OUTLOOK – Biggest Worry" Is Dramatic Decline In Bond Market Liquidity”, Prudential Says ............................................ 437 NEW-GLOBAL OUTLOOK – 2015 Macro Outlook Proving to be Volatile ...................................................................................................... 438 NEW-GLOBAL OUTLOOK – 2015 Macro Outlook Forecasts Hinge on a Deteriorating US Economy ......................................................... 441 GLOBAL OUTLOOK – 3 of 10 Largest Economies Have Fallen into Recession ........................................................................................... 442 GLOBAL OUTLOOK – This is the Biggest Risk to the World's Economy ...................................................................................................... 445 GLOBAL OUTLOOK – What is global market turbulence telling us? ............................................................................................................. 449 GLOBAL OUTLOOK – Darker Outlook Has Bond Market Rethinking Odds of Economic Downturn ............................................................ 452 GLOBAL OUTLOOK – The Last Days Of The Growth Story? ........................................................................................................................ 454 GLOBAL OUTLOOK – The Last Days Of The Growth Story? ........................................................................................................................ 456 GLOBAL OUTLOOK - THE ECONOMIC ROADMAP AHEAD: It Isn't That Complicated! ............................................................................. 457 GLOBAL OUTLOOK - 20 Signs That the Global Economic Crisis Is Starting To Catch Fire ......................................................................... 462 GLOBAL OUTLOOK - Problems Erupting Everywhere (Signs of Implosion) ................................................................................................. 464 GLOBAL OUTLOOK - Global Debt Crosses $100 Trillion, Rises By $30 Trillion Since 2007 ........................................................................ 467 GLOBAL OUTLOOK – The US as the Global Consumption Engine to See Sub 2% Trend Growth ............................................................ 470 GLOBAL OUTLOOK - Credit Fueled Globalization in Retreat ........................................................................................................................ 473 GLOBAL OUTLOOK - Rogoff's Sovereign Debt Default Levels ..................................................................................................................... 476 GLOBAL OUTLOOK - Imbalances Continue to Increase Along With Financial Fragility ............................................................................... 479 GLOBAL OUTLOOK - A 67 Million Jobs Gap ................................................................................................................................................. 481

ECONOMIC CUTS ................................................................................................................................................................................................. 486 CHARTS OF NOTE ......................................................................................................................................................................................... 486

CHART – IMF’s Delusional Forecasting Record – 3 ................................................................................................................................... 486 CHART – IMF’s Delusional Forecasting Record – 2 ................................................................................................................................... 489 CHART – IMF’s Delusional Forecasting Record - 1 .................................................................................................................................... 489

IMF To Slash Economic Growth Forecast... AGAIN - Still Full of Hockey sticks ............................................................................................ 489 IMF CUTS ECONOMIC OUTLOOK ............................................................................................................................................................ 495

OECD CUTS ECONOMIC OUTLOOK – AGAIN!............................................................................................................................................ 505 OECD CUTS ECONOMIC OUTLOOK ........................................................................................................................................................ 507

GLOBAL MACRO: INDICATORS ............................................................................................................................................ 510 GLOBAL TRENDS ................................................................................................................................................................................................. 510

CHARTS OF NOTE ......................................................................................................................................................................................... 510 NEW-GLOBAL TRENDS – Consensus 2015 World GDP Growth Expectations ........................................................................................ 510 NEW-GLOBAL TRENDS – US Macro Continues to Plummet .................................................................................................................... 510 NEW-GLOBAL TRENDS – GLI Momentum & Global Industrial Production Both About to Go Into Contraction ....................................... 511 GLOBAL TRENDS – Changes in 2014 – 2015 Profit (EPS) Forecasts – By Country/Region ................................................................... 511 GLOBAL TRENDS – Changes in 2014 – 2015 Profit (EPS) Forecasts – By Sector .................................................................................. 512 GLOBAL TRENDS – G7 Long Run GDP Growth Rates (PPP Weighted) .................................................................................................. 512 GLOBAL TRENDS – Falling Population Growth Rate in Developed Economies ....................................................................................... 513 GLOBAL TRENDS – Falling Labor Productivity Rate in Developed Economies ........................................................................................ 514 GLOBAL TRENDS – Falling Workers Per Retiree in Developed Economies ............................................................................................. 514

RESEARCH OF NOTE .................................................................................................................................................................................... 515 GLOBAL TRENDS – The curse of weak global demand ............................................................................................................................ 515 GLOBAL TRENDS – Is economic growth permanently lower? Do We Have “Secular Stagnation” ........................................................... 519 GLOBAL TRENDS - The Facts are Clear - the US Standard of Living is Falling ....................................................................................... 523

GLOBAL EMPLOYMENT....................................................................................................................................................................................... 524 CHARTS OF NOTE ......................................................................................................................................................................................... 524

CHART – Global Employment Rates ........................................................................................................................................................... 524 CHART – Global Unemployment ................................................................................................................................................................. 525 CHART – Global Unemployment – EU Comparison ................................................................................................................................... 525 CHART – Unemployment in Advanced Countries ....................................................................................................................................... 526 CHART – Global Labor Participation Rates ................................................................................................................................................ 526 CHART – Global Youth Unemployment – By Country ................................................................................................................................ 527 CHART – Global Chance of Finding a Job Within Year .............................................................................................................................. 527

RESEARCH OF NOTE .................................................................................................................................................................................... 528 GLOBAL UNEMPLOYMENT - The Beginnings of the Welfare Myth Unwind ............................................................................................. 528 GLOBAL UNEMPLOYMENT - The Unsustainable Welfare Myth ............................................................................................................... 531 GLOBAL UNEMPLOYMENT - Global Financial Sector Job Cuts ............................................................................................................... 533

GLOBAL SENTIMENT ........................................................................................................................................................................................... 535 CHARTS OF NOTE ......................................................................................................................................................................................... 535

NEW-GLOBAL SENTIMENT – Global Consumer Confidence Down In Q4 2014 ...................................................................................... 535 NEW-GLOBAL SENTIMENT – Global Consumer Confidence by Country ................................................................................................. 537 NEW-GLOBAL SENTIMENT – Global Consumer Confidence Improves the Most In North America ........................................................ 538 NEW-GLOBAL SENTIMENT – Recessionary Sentiment Increases in Latin America ................................................................................ 539 NEW-GLOBAL SENTIMENT – North America Reports Strong Increase Y-o-Y for all Confidence Indicators ........................................... 540 NEW-GLOBAL SENTIMENT – Consumer Confidence Decreases in 63% of European Markets ............................................................. 541 NEW-GLOBAL SENTIMENT – Consumer Confidence Decreases in 71% of Asia Pacific Markets .......................................................... 542


NEW-GLOBAL SENTIMENT – Consumer Confidence Decreases in 71% of Latin America Markets ....................................................... 543 NEW-GLOBAL SENTIMENT – Consumer Confidence in Saudi Arabia, Pakistan Falls ............................................................................ 544 NEW-GLOBAL SENTIMENT – Consumer Confidence High in Sub-Saharan Africa .................................................................................. 545 GLOBAL SENTIMENT – Global Business Activity Future Expectations .................................................................................................... 546 GLOBAL SENTIMENT – Global Jog Prospects Reach 50% - First Time In 7 Years ................................................................................. 546 GLOBAL SENTIMENT – Global Consumer Confidence by Country .......................................................................................................... 548 GLOBAL SENTIMENT – Global Consumer Confidence Trends by Country .............................................................................................. 549 GLOBAL SENTIMENT – Northern American Spending Intentions Rise According to Nielsen .................................................................. 550

RESEARCH OF NOTE .................................................................................................................................................................................... 551 GLOBAL SENTIMENT – Global Business Confidence Collapses To Post-Lehman Lows ........................................................................ 551 GLOBAL SENTIMENT – The State Of Economic 'Misery' Around The World ........................................................................................... 553 GLOBAL SENTIMENT – Highest Level Since 2007 ................................................................................................................................... 558 GLOBAL SENTIMENT - Complacent .......................................................................................................................................................... 559 GLOBAL SENTIMENT - Complacent .......................................................................................................................................................... 561 GLOBAL SENTIMENT - Nielsen’s Global Consumer Confidence, Concerns & Spending Intentions ........................................................ 562

GLOBAL CONSUMPTION ..................................................................................................................................................................................... 574 CHARTS OF NOTE ......................................................................................................................................................................................... 574

GLOBAL CONSUMPTION – Rising Consumer Prices are Hurting Global Demand .................................................................................. 574 GLOBAL CONSUMPTION – Global Home Prices Are Rolling Over .......................................................................................................... 574 GLOBAL CONSUMPTION – Real Domestic Demand – US, Japan & EU ................................................................................................. 575

RESEARCH OF NOTE .................................................................................................................................................................................... 576 GLOBAL GROWTH ............................................................................................................................................................................................... 576

CHARTS OF NOTE ......................................................................................................................................................................................... 576 NEW-GLOBAL GROWTH – Global Leading Indicator Swirlogram – Gets Worse ..................................................................................... 576 GLOBAL GROWTH – Global Leading Indicator Signals Contraction ......................................................................................................... 577 GLOBAL GROWTH – Eurozone PMI and GDP .......................................................................................................................................... 578 GLOBAL GROWTH – World PMI Rankings ................................................................................................................................................ 579 GLOBAL GROWTH – Global Leading Indicator Has Now Rolled Over ...................................................................................................... 580 GLOBAL GROWTH – Global PMI Business Surveys Fall .......................................................................................................................... 580 GLOBAL GROWTH – Baltic Dry Index Collapses 50% .............................................................................................................................. 581 GLOBAL GROWTH – Global Slowdown on Verge of Contraction.............................................................................................................. 582 GLOBAL GROWTH - GDP Forecasts Continue to Be Taken Down........................................................................................................... 582 GLOBAL GROWTH – Global Leading Indicator – Goldman’s ‘Swirlogram’ Getting “More Serious” ......................................................... 582 GLOBAL GROWTH – Global Industrial Production “Rolling Over” ............................................................................................................. 583 GLOBAL GROWTH – Consensus 2014 GDP Forecast - Differential ......................................................................................................... 584 GLOBAL GROWTH – G10 Macro Change ................................................................................................................................................. 584

RESEARCH OF NOTE .................................................................................................................................................................................... 585 GLOBAL GROWTH - World's Busiest Freight Route Rates Plunge To 2014 Lows ................................................................................... 585 GLOBAL GROWTH - Goldman Global Leading Indicator Drastically Revised, Collapses into "Confirmed Slowdown" ............................ 586 GLOBAL GROWTH - The Wal-Mart Measure or How the US Consumer Is the Global Engine ................................................................ 588 GLOBAL GROWTH – Potential of a Global Recession Mounting .............................................................................................................. 589 GLOBAL GROWTH – What the ‘hint’ of a Fed Taper Did to Global Growth Estimates ............................................................................. 593 GLOBAL GROWTH - Uneconomic Energy Problematic ............................................................................................................................. 595 GLOBAL GROWTH - Global Growth Cycle ................................................................................................................................................. 597 GLOBAL GROWTH - Global GDP Contribution .......................................................................................................................................... 598 GLOBAL GROWTH - Slowing Global Growth - Air Cargo Shipments ........................................................................................................ 599

GLOBAL CREDIT .................................................................................................................................................................................................. 600 CREDIT CYCLE - HY Leading the Way .......................................................................................................................................................... 600 CREDIT CYCLE - Reversal Ahead ................................................................................................................................................................. 603

GLOBAL MACRO: MONETARY POLICY & CENTRAL BANKING .......................................................................................... 607 GLOBAL CENTRAL BANKING ............................................................................................................................................................................ 607

RESEARCH WE FOLLOWED – Global Banking Risk .................................................................................................................................... 607 CHARTS OF NOTE ......................................................................................................................................................................................... 611

NEW-CHARTS – Consensus Fed and ECB Rate Hike Projections............................................................................................................ 611 NEW-CHARTS – Global Monetary Policy Stance & Bias ........................................................................................................................... 612 NEW-CHARTS – Global Government Bonds Trading With Negative Yields .............................................................................................. 613 NEW-CHARTS – Lack of Inflation in Europe ............................................................................................................................................... 613 NEW-CHARTS – Two Sides of Inflation – Commodities, Inflation Breakevens and UST Curve (5-30s) ................................................... 614 NEW-CHARTS – Quantitative e Easing No Longer Drives Commodity Prices .......................................................................................... 615 NEW-CHARTS – De-Leveraging – Average Industrial Debt-Percentage of GDP ...................................................................................... 615 NEW-CHARTS – Sovereign Net Issuance – After Central Bank Issuances ............................................................................................... 616 NEW-CHARTS – Sovereign Net Issuance – After Central Bank Issuances ............................................................................................... 616 NEW-CHARTS – Falling Global Bond Rates Continue in Q1 2015 ............................................................................................................ 617 NEW-CHARTS – The Road to NIR (Negative Rates) ................................................................................................................................. 617 CHARTS – Central Bank Policy Rates ........................................................................................................................................................ 618 CHARTS – Days of Chinese Credit-Driven Growth are numbered ............................................................................................................. 618 CHARTS – Major Central Bank Assets versus GDP Forecast ................................................................................................................... 620 CHARTS – Major Central Bank Y-o-Y Balance Sheet Growth ................................................................................................................... 620 CHARTS – Cumulative Change in Central Bank Balance Sheets – Since 2008 ........................................................................................ 621 CHARTS – Global Central Bank Assets versus World Equity Prices ......................................................................................................... 621 CHARTS – Cumulative Change in Central Bank Balance Sheets – Since 2000 ........................................................................................ 622

RESEARCH OF NOTE .................................................................................................................................................................................... 623 NEW- CENTRAL BANKS - The $100 Trillion Global Debt Ponzi Scheme ................................................................................................. 623 NEW- CENTRAL BANKS - The Backstop of Modern Finance Is About to Implode ................................................................................... 624


NEW- CENTRAL BANKS - What does NIRP Tell US About Global Risk of Deflation? ............................................................................. 625 NEW- CENTRAL BANKS - In Denmark You Are Now Paid To Take Out A Mortgage .............................................................................. 628 NEW- CENTRAL BANKS - The Beginning of the End of the $100 TRILLION Bond Bubble ..................................................................... 629 NEW- CENTRAL BANKS - The $100 Trillion Reason Why Central Banks Are Terrified of Debt Deflation ............................................... 631 NEW- CENTRAL BANKS - The year of Dollar Danger for the world .......................................................................................................... 633 NEW- CENTRAL BANKS - Commodities, Inflation Breakevens and Yield Curve Sending Clear Warnings ............................................. 638 CENTRAL BANKS – Economic policies are diverging in the developed world as deflation looms ............................................................ 642 CENTRAL BANKS – Central banks can't raise growth potential, says ECB's Weidmann ......................................................................... 644 CENTRAL BANKS – Axel Merk’s 2014 Outlook.......................................................................................................................................... 645 CENTRAL BANKS - Japan May Eclipse China Again, as Largest Holder of US Treasuries ..................................................................... 648 CENTRAL BANKS - Austerity Now Officially Dead Public Policy ............................................................................................................... 649 CENTRAL BANKS - A Serious Shortage of Quality Collateral - A $10T US Problem Over 10 Years ....................................................... 650 CENTRAL BANKS - Global Balance Sheet Expansion ............................................................................................................................... 652

NEW-WAR ON CASH ..................................................................................................................................................................................... 657 NEW-WAR ON CASH – Elliott Wave’s Report on the “War on Cash” ........................................................................................................ 657 NEW-WAR ON CASH – The "War On Cash" Migrates To Switzerland...................................................................................................... 662 NEW-WAR ON CASH – Chase Joins the War on Cash ............................................................................................................................. 665 NEW-WAR ON CASH – Largest Bank In America Joins War On Cash ..................................................................................................... 667 NEW-WAR ON CASH – Citigroup's Gold "Expert" Demands A Cash Ban ................................................................................................. 669

NEW-SWISS PEG ........................................................................................................................................................................................... 674 NEW-SWISS PEG – Swiss Peg Failure – First Central Bank To Lose Control .......................................................................................... 674 NEW-SWISS PEG – Swiss Peg Failure – The Financial System Broke Last Week .................................................................................. 676 NEW-SWISS PEG – Swiss Peg Failure – Keynesian Contral Banking is Destroying Money & Markets ................................................... 678

TROUBLING DEVELOPMENTS ..................................................................................................................................................................... 681 TROUBLING DEVELOPMENTS – Insider Says Central Banks Making it Up as They Go! ....................................................................... 681 TROUBLING DEVELOPMENTS – 2007 Redux: Total public and private debt levels are 30pc higher in the advanced economies ........ 682 TROUBLING DEVELOPMENTS – Polish Pension Confiscation: Coming to a Theater near You .......................................................... 685 TROUBLING DEVELOPMENTS – Global Tax Overhaul ............................................................................................................................ 687

BOE - UK ................................................................................................................................................................................................................ 688 CHARTS OF NOTE ......................................................................................................................................................................................... 688

UK – Dissent within BOE Set to Continue ................................................................................................................................................... 688 RESEARCH OF NOTE .................................................................................................................................................................................... 688

UK - BOE Faces Labor Market Conundrum as Wage Growth Stalls .......................................................................................................... 688 UK - Mark Carney and "Flexible Inflation Targeting" ................................................................................................................................... 690

FED - US ................................................................................................................................................................................................................ 692 CHARTS OF NOTE ......................................................................................................................................................................................... 693

NEW-CHARTS – Fed’s QE History versus UST 10 Year Yields ................................................................................................................ 693 NEW-CHARTS – Fed Balance Sheet Growth ............................................................................................................................................. 693 CHARTS – June 2015 Fed Rates Hikes Diminish....................................................................................................................................... 694 CHARTS – Inflation Expectations – 1 Yr, 5010Yr, 5Yr/5Yr ......................................................................................................................... 694

RESEARCH OF NOTE .................................................................................................................................................................................... 695 NEW-US MONETARY - Humphrey Hawkins Testimony - Yellen Secures More Flexibility for 'Patient' Fed ............................................. 695 NEW-US MONETARY - Audit the Fed –Yellen’s Testimony....................................................................................................................... 697 NEW-US MONETARY - Criticism by Architect of Japanese Quantitative Easing of Fed Policy ................................................................ 706 US MONETARY - CAPITAL DISTORTION - Global Acceptance of the Bernankean Theory .................................................................... 709 US MONETARY - FINANCIAL REPRESSION - The Suspension of Price Discovery................................................................................ 712 US MONETARY - The Fed is stuck in a QE Trap ....................................................................................................................................... 715 US MONETARY - 2nd Worst Decade In US Growth in Over 220 Years (And Getting Worse) .................................................................. 717 US MONETARY - Mathematically, The Fed Can Only Fail......................................................................................................................... 719 US MONETARY - QE Standing Between Inflated Equity Markets and A Recession ................................................................................. 725 US MONETARY - QE Programs versus S&P 500 Movements .................................................................................................................. 726 US MONETARY - BAML Warns If The US Economy Does Not Significantly Accelerate Now, It Never Will............................................. 728 US MONETARY - Debt Increases $1 Trillion in One Year .......................................................................................................................... 730

GLOBAL ABE-NOMICS – The Road Ahead ......................................................................................................................................................... 733 CHARTS OF NOTE ......................................................................................................................................................................................... 733

NEW-JAPAN – Japan Heads Back towards Deflation ................................................................................................................................ 733 JAPAN – The Third Arrow of ABE-Nomics -I ............................................................................................................................................... 734 JAPAN – The Third Arrow of ABE-Nomics –II ............................................................................................................................................. 735 JAPAN – Japanese Households Remain Pessimistic ................................................................................................................................. 736

RESEARCH OF NOTE .................................................................................................................................................................................... 737 NEW- GLOBAL ABE-NOMICS - Japan Shocked To Find Abenomics Is Destroying Its Middle Class ...................................................... 737 NEW- GLOBAL ABE-NOMICS - "Godfather" Of Abenomics Admits Japanese Policy "Is A Ponzi Game ................................................. 740 GLOBAL ABE-NOMICS – Monetary Expansion Extremely Difficult to Stop Once Started ........................................................................ 741 GLOBAL ABE-NOMICS – Monetary Policy Below the Event Horizon ................................................................................................... 744

BOJ – JAPAN ......................................................................................................................................................................................................... 746 CHARTS OF NOTE ......................................................................................................................................................................................... 746

JAPAN – Japan’s Inflation Pressure Ebbs Away......................................................................................................................................... 746 JAPAN – BOJ QE Expansion In Context – Debt Monetization ................................................................................................................... 747 JAPAN – Japanese Trade Balance ............................................................................................................................................................. 748 JAPAN – Japanese Real & Nominal Household Income ............................................................................................................................ 748 JAPAN – CPI Shoots To 3.3% Y-o-Y .......................................................................................................................................................... 749 JAPAN – Japan Government Investment Fund Asset Reallocation ..................................................................................................... 749 JAPAN – Falling Real Rates as Financial Repression Takes Hold ....................................................................................................... 749 JAPAN – Real Wages Plummet as Financial Repression Takes Hold ....................................................................................................... 750


RESEARCH OF NOTE .................................................................................................................................................................................... 751 JAPAN - "Godfather" Of Abenomics Admits Japanese Policy "Is A Ponzi Game ...................................................................................... 752 JAPAN - How a Limo Ride With Paul Krugman Changed the Course of Abenomics ................................................................................. 754 JAPAN - Kuroda’s Former Boss Urges Ditching of BOJ 2% Inflation Target .............................................................................................. 757 JAPAN - No Way Out But to Expand the Monetary Base ........................................................................................................................... 759 JAPAN - BOJ to "Own" 100% Of GDP In 5 Years....................................................................................................................................... 760 JAPAN - Adjusted trade deficit the worst in Bloomberg's 20 year history ................................................................................................... 763 JAPAN - Some Policies Have Clearly Hit the Limit ..................................................................................................................................... 765 JAPAN - Foreshadows Next Global Crisis .................................................................................................................................................. 766 JAPAN - Japan's Prime Minister Shinzo Abe prepares to print money for the whole world ....................................................................... 771 JAPAN - Shinzo Abe’s Monetary-Policy Delusions ..................................................................................................................................... 772 JAPAN - BOJ Governor Job Suddenly Available in Historical "Abenomics U-Turn" .................................................................................. 775 JAPAN - Japanese Economic Policy Goes The Full Ponzi ......................................................................................................................... 776

PBOC - CHINA ....................................................................................................................................................................................................... 778 CHARTS OF NOTE ......................................................................................................................................................................................... 779

NEW-CHARTS – Bank Loans in China accelerating at the fastest pace since Financial Crisis. ............................................................... 779 NEW-CHARTS – China Reduces Bank Reserve Ratio .............................................................................................................................. 779 NEW-CHARTS – Speculation Takes Hold of Sky Rocketing Chinese Stock Market ................................................................................. 780 NEW-CHARTS – Falling Chinese Government Revenue Growth .............................................................................................................. 781 NEW-CHARTS – Falling National New Residential Housing Starts ........................................................................................................... 781 NEW-CHARTS – China and Asia Residential Property Tracking US Housing Bubble .............................................................................. 782 NEW-CHARTS – Real Chinese Rates versus Cuts .................................................................................................................................... 782

RESEARCH OF NOTE .................................................................................................................................................................................... 783 NEW-CHINA MONETARY - China's "Animal Spirits" May Call For "Draconian" Measures To Curb Rally, UBS Says ............................. 783 NEW-CHINA MONETARY – Is China Beginning to Panic as it Lowers Reserve Ratio ............................................................................. 785 NEW-CHINA MONETARY - Liquidity evaporates in China as 'fiscal cliff' nears......................................................................................... 787

ECB – EU ............................................................................................................................................................................................................... 793 NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................... 793 CHARTS OF NOTE ......................................................................................................................................................................................... 794

NEW-CHARTS – Welcome to the EU’s “NIRP” ........................................................................................................................................... 794 NEW-CHARTS – Negative Swiss Government Bonds ............................................................................................................................... 795 NEW-CHARTS – Negative Swiss Government Bonds ............................................................................................................................... 795 NEW-CHARTS – UK & German Total Return Indices ................................................................................................................................ 796 NEW-CHARTS – ECB’s Dilemma of Digging Up Enough Debt .................................................................................................................. 796 NEW-CHARTS – Nearly $2T European Nonds Trading With Negative Yields........................................................................................... 797 NEW-CHARTS – Total National Debt – Germany versus Industrial Country Average (ex-Germany) ....................................................... 797 NEW-CHARTS – The Fastest Growing Asset Class – NIR Products ......................................................................................................... 798 CHARTS – Euro-Area Output Still Slightly Below Pre-Crisis Levels ........................................................................................................... 799 CHARTS – 5 Year Inflation Swaps Suggests Deflation in the EU .............................................................................................................. 800 CHARTS – Euro-Area Inflation Rate on the Decline Since 2011 ................................................................................................................ 800 CHARTS – Euro-Area Inflation Expectations Decline ................................................................................................................................. 801 CHARTS – Euro-Area Private Sector Loan Creation .................................................................................................................................. 802 CHARTS – Euro-Area Money Supply, Private Sector Lending Growth ...................................................................................................... 802 CHARTS – Euro-Area 10 Yr Sovereign Bond Yields .................................................................................................................................. 803 CHARTS – Slovenia May BE the Next EU Debt Hotspot ............................................................................................................................ 803 CHARTS – Spain & Portugal NPL ............................................................................................................................................................... 804 CHARTS – ECB’s Turn to Expand Its Balance Sheet ................................................................................................................................. 805 CHARTS – ECB’s Balance Sheet Contracted Y-o-Y ............................................................................................................................... 805 CHARTS – Expect Major ECB Policy Announcement in Q2 2014 .............................................................................................................. 806 CHARTS – ECB Set to Stay on Hold as Inflation Seen Lower ................................................................................................................... 807

RESEARCH OF NOTE .................................................................................................................................................................................... 808 NEW-EU MONETARY - NIRP Is A Flawed Economic Concept ................................................................................................................. 809 NEW-EU MONETARY - NIRP ..................................................................................................................................................................... 811 NEW-EU MONETARY – NIRP - Yield scarce as the world turns negative ................................................................................................. 815 NEW-EU MONETARY - XXXX .................................................................................................................................................................... 818 NEW-EU MONETARY - XXXX .................................................................................................................................................................... 818 EU MONETARY - Draghi Key Statements .................................................................................................................................................. 819 EU MONETARY - Draghi throws ECB door open to money printing as global prospects dim ................................................................... 819 EU MONETARY - Economic Recovery Too Weak for ECB to Avoid New Action ...................................................................................... 822 EU MONETARY - Euro-Area Data Deterioration Points toward QE ........................................................................................................... 823 EU MONETARY - EU Version of QE Coming -> UST Purchases To Drive Euro Down ............................................................................ 826

MACRO MONETARY – INFLATION ..................................................................................................................................................................... 828 CHARTS OF NOTE ............................................................................................................................................................................................... 828

NEW-CHARTS – The Fall of Hyperinflation & the Rise of Deflation ............................................................................................................... 828 NEW-CHARTS – Falling US Consumer Price Index ....................................................................................................................................... 828 CHARTS – Global Consumer Prices are Rising Significantly ......................................................................................................................... 829

CHARTS – Global Country Inflation Rates .................................................................................................................................................. 829 CHARTS – Two Worlds if Inflation – EM and DM ....................................................................................................................................... 829 CHARTS – Developed Country Inflation Rates ........................................................................................................................................... 831

RESEARCH OF NOTE .................................................................................................................................................................................... 832 NEW- INFLATION – Martin Armstrong’s Explanation of Monetary Inflation ............................................................................................... 832 INFLATION - Asset & Property inflation means shops have to pay higher rents with higher product prices ............................................. 834

GEO-ECONOMIC INSTABILITIES ........................................................................................................................................... 836


GEO-ECONOMIC INDEX ...................................................................................................................................................................................... 836 US$ RESERVE STATUS & ERODING INFLUENCE............................................................................................................................................ 837

NEW-RESEARCH WE FOLLOWED – “DE=DOLLARIZATION” .................................................................................................................... 837 CHARTS OF NOTE ......................................................................................................................................................................................... 840

NEW-DE-DOLLARIZATION - Countries that have joined the China-led Asian Infrastructure Investment Bank ....................................... 840 NEW-DE-DOLLARIZATION - AIIB’s Founding Members ........................................................................................................................... 840 NEW-DE-DOLLARIZATION - Asia’s Infrastructure Legs & the AIIB’s Expected Capital Structure ............................................................ 841 NEW-DE-DOLLARIZATION - AIIB Infrastructure Investment ..................................................................................................................... 842 NEW-DE-DOLLARIZATION - The Rise & Fall of Modern Empires ............................................................................................................. 842

RESEARCH OF NOTE .................................................................................................................................................................................... 844 NEW-DE-DOLLARIZATION - U.S. Looks to Work with China-Led Infrastructure Fund ............................................................................. 844 NEW-DE-DOLLARIZATION - US Hegemony, Dollar Dominance Are Officially Dead ............................................................................... 847 NEW-DE-DOLLARIZATION - The BRICS New Development Bank (NDB) with its Own SDRs Is Coming ............................................... 849 NEW-DE-DOLLARIZATION - China Takes Aim At Dollar Reserve Status: Promotes Yuan In Investment Bank ..................................... 851 NEW-DE-DOLLARIZATION - Kazakhstan Authorities Announce Plans To De-Dollarize Economy .......................................................... 853 NEW-DE-DOLLARIZATION - China to urge firms to sell bonds overseas to fund new Silk Road to Europe ............................................ 855 NEW-DE-DOLLARIZATION - Is This The Most Important Chart For The Future Of The World's Reserve Currency? ............................. 855 NEW-DE-DOLLARIZATION - Is Russia Planning A Gold-Based Currency? .............................................................................................. 859 NEW-DE-DOLLARIZATION - De-Dollarization Accelerates: Russia Launches SWIFT-Alternative Linking 91 Entities ............................ 861 NEW-DE-DOLLARIZATION - What if China, Russia Succeed in Going off the Dollar? ............................................................................. 862 NEW-RESERVE CURRENCY - Asian Infrastructure Investment bank challenges U.S. supremacy ......................................................... 863 NEW-RESERVE CURRENCY - March “the moment the US lost its role as the underwriter of the global economic system.” ................. 865 NEW-RESERVE CURRENCY - - It just happened: “The moment the United States lost its role . . .” ....................................................... 867 RESERVE CURRENCY - The World Is Beginning To Bypass America's Financial & Legally-Leveraged Political Power ....................... 868 RESERVE CURRENCY - Putin Adviser Proposes "Anti-Dollar Alliance ................................................................................................... 869 RESERVE CURRENCY - Chinese, Swiss Central Banks Sign Bilateral Swap Agreement ....................................................................... 870 RESERVE CURRENCY - France, Brazil, India & Now South Korea Join Russia & China In Post-Dollar World Order ............................ 871 RESERVE CURRENCY - France’s Noyer Says BNP May Prompt Shift Away From Dollar ...................................................................... 874 RESERVE CURRENCY - More Russian Companies Set To Drop Dollar, Switch To Chinese Yuan ........................................................ 875 RESERVE CURRENCY - Russia, China sign deal to bypass U.S. dollar .................................................................................................. 876 RESERVE CURRENCY - Japan May Eclipse China Again, as Largest Holder of US Treasuries ...................................................... 877

EMERGING & FRONTIER MARKETS - Capital Outflows .................................................................................................................................. 879 RESEARCH WE FOLLOWED ......................................................................................................................................................................... 879 CHARTS OF NOTE ......................................................................................................................................................................................... 883

NEW-CHARTS – Emerging Markets Facing Both Capital Out Flows and Falling Currencies ................................................................... 883 NEW-CHARTS – Wide Spread Emerging Market Capital Out Flows ......................................................................................................... 884 NEW-CHARTS – Emerging Market Debt versus GDP - 2013 .................................................................................................................... 885 NEW-CHARTS – Emerging Market Resilience Indicator Changes ............................................................................................................. 885 CHARTS – BRIC Countries Responsible for 43% of Global Growth .......................................................................................................... 886 CHARTS – BRIC & Emerging Market Inflation Rates ................................................................................................................................. 886 CHARTS – Emerging Market Default Probability ........................................................................................................................................ 887 CHARTS – Emerging Market versus Developed Market Public Debt and External Borrowing Positions .................................................. 887 CHARTS – Emerging Market Outflows........................................................................................................................................................ 888 CHARTS – Emerging Market Outflows -2 ................................................................................................................................................... 888 CHARTS – Developed versus Emerging Equity Markets – 1990-2014 ...................................................................................................... 889 CHARTS – Total GEM Flows....................................................................................................................................................................... 889 CHARTS – The Emerging Markets Have Been Weakening Since 2011 .................................................................................................... 890

RESEARCH OF NOTE .................................................................................................................................................................................... 891 NEW-EMERGING MARKETS - JP Morgan Has A "Problem" With Emerging Markets ............................................................................. 891 NEW-EMERGING MARKETS - Which Emerging Markets Are Most Vulnerable To "External Shock" ...................................................... 894 NEW-EMERGING MARKETS - Emerging markets: The great unraveling ................................................................................................. 896 NEW-EMERGING MARKETS - Moody’s warns on EM dollar finance costs .............................................................................................. 901 NEW-EMERGING MARKETS - XX ............................................................................................................................................................. 902 EMERGING MARKETS - Fragile Five: The new focus of currency wars ............................................................................................... 903 EMERGING MARKETS - Crisis Redux? ..................................................................................................................................................... 904 EMERGING MARKETS - Losing Their Punch ......................................................................................................................................... 909 EMERGING MARKETS - Risk-On! ............................................................................................................................................................. 911 EMERGING MARKETS - Asia, BRIC, Emerging Markets Crater IBM Earnings .................................................................................... 912 EMERGING MARKETS - Crisis Temporarily Halted ................................................................................................................................ 914 EMERGING MARKETS - Increasing Liquidity Problems In Selected Markets .................................................................................... 915 EMERGING MARKETS - The plight of four Asian countries - China, India, Indonesia and Japan. ................................................... 921 EMERGING MARKETS - The Impact of "TAPER" ................................................................................................................................... 926 EMERGING MARKETS - EM Crisis will make the 1997 Asian Crisis Seem like an Early Warning ..................................................... 930 EMERGING MARKETS - Global Deleveraging Accelerating and Developing Nations Feeling the Pain .......................................... 932

GEO-ECONOMICS OF ENERGY & PETRO$ - Petro$$ Coming Unglued .......................................................................................................... 935 NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................... 935 CHARTS OF NOTE ......................................................................................................................................................................................... 938

NEW-ENERGY – Saudi Crude Oil Production & Brent Price ...................................................................................................................... 938 NEW-ENERGY – World Liquids Percent of Production .............................................................................................................................. 938 NEW-ENERGY – Interest Rates & Oil Prices in 2015 Dollars .................................................................................................................... 939 NEW-ENERGY – Oil Production and CAPEX by Operating Environment 2014 ........................................................................................ 939 NEW-ENERGY – Global Drilling Intensity Will Increase ............................................................................................................................. 940 ENERGY – Most US shale play costs are below $80 a barrel – ‘Challenged’ when approaching $60 ...................................................... 940 ENERGY – Breakeven for All Global Oil Projects ....................................................................................................................................... 941 ENERGY – Putin Cancels South Stream through Bulgaria – To Go Through Turkey ................................................................................ 942


ENERGY – Putin Cancels South Stream through Bulgaria – To Go Through Turkey ................................................................................ 943 ENERGY – Petro$$ Capital Exports Go Negative for First Time in 18 Years ............................................................................................ 944 ENERGY – Falling Inflation Adjusted Gasoline Prices ................................................................................................................................ 945 ENERGY – US v Saudi Oil Production now Equal at near 12B bl/Day ....................................................................................................... 946 ENERGY – US Shale Oil Breakeven Prices ................................................................................................................................................ 947 ENERGY – OPEC Announcement Crushes Ruble & WTI Crude ............................................................................................................... 947 ENERGY – USDRUB Rise Means Russian Loans in US$ In Big Trouble- Investment Collapse .............................................................. 948 ENERGY – EM Oil Producers Being Crushed ............................................................................................................................................ 948 ENERGY – Market Cap Impacts of OPEC Decision ................................................................................................................................... 949 ENERGY – Oil Supply / Demand and Price ................................................................................................................................................ 950

RESEARCH OF NOTE .................................................................................................................................................................................... 951 NEW-RUSSIA- XXXX............................................................................................................................................................................... 951 RUSSIA- Putin Kills "South Stream" Pipeline, Will Build New Massive Pipeline To Turkey Instead ...................................................... 951 RUSSIA- OPEC Presents: QE4 And Deflation ........................................................................................................................................ 954 RUSSIA – Energy War ............................................................................................................................................................................. 956 NEW-PETRODOLLAR – The Saudis And US Collusion Behind the Falling Oil Prices ................................................................ 959 NEW-PETRODOLLAR – Who Is Saudi Arabia Really Targeting In Its Price War? .................................................................... 964 PETRODOLLAR – "There Will Be Blood": Petrodollar Death Ignites Liquidity And Oil-Exporting Crisis ............................. 969 PETRODOLLAR – Collapsing PetroDollar Foundation ........................................................................................................................... 975 UKRAINE - Pulled between EU v Russia ................................................................................................................................................ 979 UKRAINE - Pulled between An Ethnic Eastern and Western Ukraine .................................................................................................... 979 UKRAINE - Pulled between Economic Inequality Factors ....................................................................................................................... 980 UKRAINE - Pulled between the Global Military Balance ......................................................................................................................... 981 UKRAINE - Pulled by Global Financial Markets ...................................................................................................................................... 982 UKRAINE - A Deep State Analysis .......................................................................................................................................................... 985 ENERGY – China Uses Crude Drop to Build Strategic Oil Reserve ....................................................................................................... 988 ENERGY - The Shale Bust Arrives: November Permits For New Shale Wells Tumble 15% ................................................................. 989 ENERGY - Crude Crash Slams Venezuelan Bonds To Close At 5-Year Lows: 21% Yield ...................................................... 990 ENERGY - The Oil Price Decline ............................................................................................................................................................. 992 ENERGY - The Oil-Drenched Black Swan, Part 2................................................................................................................................... 999 ENERGY - The Oil-Drenched Black Swan, Part 1 ......................................................................................................................... 1001 ENERGY - OPEC Presents: QE4 and Deflation .................................................................................................................................... 1004 ENERGY - The Sellside Chimes In On The Crude Crush: "This Will Reverberate For Years" ............................................. 1009 ENERGY - OPEC Decision "Major Strike Against", Russian Tycoon Says – Shale Oil Doesn’t Work < $80bl ................................... 1010 ENERGY - Energy Quakes as OPEC Stands Pat ................................................................................................................................. 1012 ENERGY - World's Largest Rig Operator, The "Recovery" Is Now Worse Than The Post-Lehman Crash ......................................... 1015 ENERGY - US "Secret" Deal with Saudis Backfires After Oil Minister Says US Should Cut First ....................................................... 1018 ENERGY - The 2014 Oil Price Crash Explained ............................................................................................................................. 1022 ENERGY - Crude and Credit Warn Of The Elongated Cycle Double Peak ............................................................................... 1027 ENERGY - Major Inflection Point Coming Near-Term In Energy Prices ............................................................................................... 1034 ENERGY - Russia Prepares Mega-Deal with India after Locking Up China With "Holy Grail" Gas Deal ............................................. 1037 ENERGY - Putin Prepares To Announce "Holy Grail" Gas Deal With China ........................................................................................ 1039 ENERGY - The Growing Rift with Saudi Arabia Threatens To Severely Damage the Petrodollar ....................................................... 1041

PRIOR REPORT UPDATES & EDITIONS .......................................................................................................................................................... 1045 CHINA’s CREDIT GROWTH – Reverses Direction ............................................................................................................................................. 1045

NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................. 1045 CHARTS OF NOTE ....................................................................................................................................................................................... 1046

CHINA LIQUIDITY – Chinese Bank Asset Growth Dwarfs Developed Economies Central Banks .......................................................... 1046 CHINA LIQUIDITY – China’s Official GDP Growth Rate Continues to Fall .............................................................................................. 1047 CHINA LIQUIDITY – China’s Deleveraging ............................................................................................................................................... 1047 CHINA LIQUIDITY – China’s Inflation Rate versus Real Interest Rate .................................................................................................... 1048 CHINA LIQUIDITY – Bank Loan Growth ................................................................................................................................................... 1048 CHINA LIQUIDITY – Policy Rate, RRR and Loan Growth ........................................................................................................................ 1049 CHINA LIQUIDITY – Declining Private Sector Fixed Asset Investment ................................................................................................... 1049 CHINA LIQUIDITY - Third of Chinese GDP Now Goes to Repay Interest and Principle on Existing Loans ............................................ 1050 CHINA LIQUIDITY – Infrastructure Investment Offsets Weak Real Estate .............................................................................................. 1051 CHINA LIQUIDITY – Shadow Banks Step Back Into Light ....................................................................................................................... 1051 CHINA LIQUIDITY – Hopes that Credit Growth Will Spur Property Sales ................................................................................................ 1052 CHINA LIQUIDITY – Transport, Construction Data Point to Slower Growth ............................................................................................ 1052 CHINA LIQUIDITY – Little Impetus for Turnaround in Investor Sentiment ............................................................................................... 1053 CHINA LIQUIDITY – Industrial Output & Exports Continue to Trend the Wrong Way ............................................................................. 1054 CHINA LIQUIDITY – GDP Growth Trend .................................................................................................................................................. 1054

RESEARCH OF NOTE .................................................................................................................................................................................. 1056 NEW-CHINA LIQUIDITY - Hugh Hendry - Why China's Biggest Bear, Became One Of Its Biggest Bulls .............................................. 1056 NEW-CHINA LIQUIDITY - Three Reasons China May Cut the Reserve Requirement Ratio .................................................................. 1061 CHINA LIQUIDITY - Reverses Direction and Begins Easing .................................................................................................................... 1062 CHINA LIQUIDITY - One Rate Cut Probably Not Sufficient to Sustain China's Growth ........................................................................... 1063 CHINA LIQUIDITY - Troubling Signs of Deflation in China ....................................................................................................................... 1064 CHINA LIQUIDITY - The Next Phase of China’s Financial Deepening .................................................................................................... 1066 CHINA LIQUIDITY - Steady decline in private sector activity ................................................................................................................... 1067 CHINA LIQUIDITY - China Credit Risk Overshadows Outlook for Emerging Equities ............................................................................. 1068 CHINA LIQUIDITY - Easy Money Won’t Solve China’s Hard Problems .............................................................................................. 1071 CHINA LIQUIDITY - Housing Bubble Restricting PBOC Actions ........................................................................................................ 1073 CHINA LIQUIDITY - PBOC Squeezing Banks towards Reducing Speculative Risk .......................................................................... 1076 CHINA LIQUIDITY - Overnight Repo at 25% .......................................................................................................................................... 1077


CHINA LIQUIDITY - Red Flags ................................................................................................................................................................. 1078 CHINA LIQUIDITY - Credit Fueled Growth ............................................................................................................................................... 1080 CHINA LIQUIDITY - Shadow Banking System Showing Signs of Implosion ..................................................................................... 1085 CHINA LIQUIDITY - PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze ...................... 1088 CHINA LIQUIDITY - Potentially De-Stabilizing Cash Crunch ............................................................................................................... 1090 CHINA LIQUIDITY - Chinese Liquidity Pump Unplugged .................................................................................................................... 1091

GOLD WARS – Failing Developed Economies versus Rising Emerging Economies......................................................................................... 1093 NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................. 1093 CHARTS OF NOTE ....................................................................................................................................................................................... 1095

GOLD WARS – Plummeting Gold Holdings at NY Fed from Foreign Repatriation .................................................................................. 1095 GOLD WARS – Gold : Debt Ratio Correlation – Something Seriously Amiss! ......................................................................................... 1095 GOLD WARS – Nominal & Real Price of Gold – 1790-2013 .................................................................................................................... 1097 GOLD WARS – Gold v S&P 500 Against True Austrian Money Supply ................................................................................................... 1097 GOLD WARS – Swiss National Bank Gold, FX & Total Assets ................................................................................................................ 1098 GOLD WARS – Sovereign Gold Holdings According to the World Gold Council ..................................................................................... 1098 GOLD WARS – European Countries Gold Reserves Repatriation ........................................................................................................... 1099

RESEARCH OF NOTE .................................................................................................................................................................................. 1101 GOLD WARS - Federal Reserve Confirms Biggest Foreign Gold Withdrawal in Over Ten Years ........................................................... 1101 GOLD WARS - European Nations Repatriate Gold Reserves from United States Vaults ....................................................................... 1102 GOLD WARS - Gold Shortage, Worst in 21st Century, And India Just Made It Worse ............................................................................ 1105 GOLD WARS - Deutsche Bank's Modest Proposal To Central Banks: "Purchase The Gold Held By Private Households" ................... 1107

INTERNATIONAL BANKING & SHADOW BANKING ......................................................................................................................................... 1109 NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................. 1111

DEBT – Growth of Financial Services ....................................................................................................................................................... 1112 DEBT – REITS & CMBS Growth ............................................................................................................................................................... 1112 DEBT - GLOBAL DEBT 313% of GDP...................................................................................................................................................... 1114 DEBT - 202M GLOBALLY UNEMPLOYED DEBTORS ............................................................................................................................ 1116

FOOD PRICES & SHORTAGES – Potential Disruption...................................................................................................................................... 1117 RESEARCH WE FOLLOWED ............................................................................................................................................................................. 1117

CHARTS OF NOTE ....................................................................................................................................................................................... 1118 CHARTS – Cost of Thanksgiving Food ..................................................................................................................................................... 1118 CHARTS – Consumer Price Increases Predominately Food in Emerging Economies ............................................................................ 1118 CHARTS – Sticker Shock in Isle 1 ............................................................................................................................................................. 1119 CHARTS – Food Importers ........................................................................................................................................................................ 1119 CHARTS – US Beef Production To Reach 5 Years of Decline ................................................................................................................. 1120 CHARTS – US CPI Turns Up on Food & Energy ...................................................................................................................................... 1121 CHARTS – CRB US Spot Foodstuff Index – One Year ............................................................................................................................ 1121 CHARTS – CRB Food Index – One Year .................................................................................................................................................. 1123 CHARTS – Global Food Price Change 2007-2013 ................................................................................................................................... 1124 CHARTS – Food Prices Spiking Up .......................................................................................................................................................... 1125 CHARTS – Food Prices Spiking Up .......................................................................................................................................................... 1126 CHARTS – Retail Food Services and Drinking Place Sales ..................................................................................................................... 1126 CHARTS – Retail CRE Price/ Cost Pressures .......................................................................................................................................... 1127 CHARTS – Retail CRE Price/ Cost Pressures - 2 ..................................................................................................................................... 1128 CHARTS – Spiking Beef Prices ................................................................................................................................................................. 1129 CHARTS – Coffee Futures ........................................................................................................................................................................ 1129 CHARTS – Lean Hog Futures ................................................................................................................................................................... 1130 CHARTS – Ukraine Corn and Wheat – Prices Up 15% Since YB ............................................................................................................ 1130 CHARTS – Global Food Imports versus % Y-o-Y US$ Change ............................................................................................................... 1131 CHARTS – UK Food Retailers v Commodity Food Price Index ................................................................................................................ 1131

RESEARCH OF NOTE .................................................................................................................................................................................. 1132 FOOD INFLATION - Food Prices Surge as Drought Exacts a High Toll on Crops .................................................................................. 1132 FOOD INFLATION - Food Prices, Driver of Social Unrest ..................................................................................................................... 1135 FOOD INFLATION - Food Price Manipulation in Thailand........................................................................................................................ 1136

CURRENCY WARS BACK ON – Rate Wars Reversed With Un-Taper ............................................................................................................. 1138 NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................. 1138 CURRENCY WARS - A Major Shift............................................................................................................................................................... 1138 BATTLEFIELD - Combatants & Belligerents ................................................................................................................................................. 1143 BATTLEFIIELD - The Race to Debase ......................................................................................................................................................... 1144 JAPAN - The Destabilizing Agent .................................................................................................................................................................. 1146 EUROPE - Euro Exposed .............................................................................................................................................................................. 1146 ARGENTINA - Here we Go Again! ................................................................................................................................................................ 1148 VENEZUELLA - Bad Situation ....................................................................................................................................................................... 1149 BRAZIL - No One Wants to Listen ................................................................................................................................................................. 1149 SWITZERLAND - No Choice ......................................................................................................................................................................... 1149 SINGAPORE - Hot Money ............................................................................................................................................................................. 1150 UK- Pound Joins War .................................................................................................................................................................................... 1151

CYBER WARS – Growing Threat & the Security-Surveillance Complex ............................................................................................................ 1152 NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................. 1152 SECURITY-SURVEILLANCE COMPLEX - NSA Whistleblower Example: Booz Hamilton ..................................................................... 1155 SECURITY SURVEILLANCE COMPLEX - Growing Without Public Control or Supervision! ............................................................... 1158 CYBER SPYING ............................................................................................................................................................................................ 1159


REGIONAL ........................................................................................................................................... 1160

EU – DEFLATION IS REAL – A Major Problem for Banks & Government Debt ................................................................................................ 1161 CHARTS OF NOTE ....................................................................................................................................................................................... 1163

NEW--CHARTS - Draghi Had To Deliver or it would have been a Collateral Massacre .......................................................................... 1163 NEW--CHARTS – EU Disconnect Between Equity Prices & Earnings and Dividends ............................................................................. 1163 NEW--CHARTS – Eurozone is the Biggest Drag on Global Profits .......................................................................................................... 1164 NEW--CHARTS – Eurozone Government & Private Debt 276% of GDP (Excluding Financials) ............................................................ 1164 NEW--CHARTS – EU PMI’S Rolling Over ................................................................................................................................................. 1165 NEW--CHARTS – Eurozone Banks Too Big To Be Bailed Out! ............................................................................................................... 1166 NEW--CHARTS – Eurozone Area Consumer Confidence May Be Misleading ........................................................................................ 1167 NEW--CHARTS – Eurozone GDP & Recession Pattern ........................................................................................................................... 1167 CHARTS – EU-Area PMI Shows Sustained Deterioration ........................................................................................................................ 1168 CHARTS – Euro Area CPI Seen Below 1% for 11

th Month ....................................................................................................................... 1168

CHARTS – Euro Area Domestic Demand has lagged US & Japan by 9% since 2010 ............................................................................ 1169 CHARTS – Euro Area Inflation Levels ....................................................................................................................................................... 1170 CHARTS – Geo-Political Tensions May Weigh on Confidence ................................................................................................................ 1171 CHARTS – Stalling Euro-Area Recovery Heightens ECB QE Pressure ................................................................................................... 1171 CHARTS – Industrial Production Slows In Line With PMIs ....................................................................................................................... 1172 CHARTS – ZEW Expectations Signals Slowdown Ahead ........................................................................................................................ 1173 CHARTS – Euro-Area July PMI ................................................................................................................................................................. 1173 CHARTS – Corporate Borrowing Spreads Remain Wide ......................................................................................................................... 1174 CHARTS – ECB Less Accommodative Than the Fed ............................................................................................................................... 1174 CHARTS – EU Financial Conditions Deteriorating .................................................................................................................................... 1175 CHARTS – EU Confidence ........................................................................................................................................................................ 1176 CHARTS - Slow Money Growth May Stoke Deflation Concerns .............................................................................................................. 1177 CHARTS - Euro-Area Inflation at Lowest Level Since 2009 – Individual Countries ................................................................................. 1177 CHARTS - Euro-Area Inflation – Aggregate .............................................................................................................................................. 1178 CHARTS - 10M Part-Time Workers Underemployed in EU ...................................................................................................................... 1179 CHARTS - Euro-Area Housing Prices Decline .......................................................................................................................................... 1180 CHARTS - Euro-Area Trade Surplus ......................................................................................................................................................... 1181 CHARTS - Euro-Area Composite PMI ....................................................................................................................................................... 1182 CHARTS - EU Area Weakness ................................................................................................................................................................. 1183 CHARTS - EU Area GDP ........................................................................................................................................................................... 1184 CHARTS - EU Area PMI ............................................................................................................................................................................ 1185 CHARTS - EU Area PMI ............................................................................................................................................................................ 1186 CHARTS - EU Real Rates ......................................................................................................................................................................... 1187 CHARTS - EU -NON Euro Members GDP RELIANCE ............................................................................................................................. 1188 CHARTS - EU GLOBAL GDP GROWTH CONTRIBUTION ..................................................................................................................... 1189 CHARTS - EU PMI ..................................................................................................................................................................................... 1189 CHARTS - EU CPI ..................................................................................................................................................................................... 1191 CHARTS - Regional Risk-Reward ............................................................................................................................................................. 1192 CHARTS - Europe's "Core" Problem is France .................................................................................................................................... 1193 CHARTS - Germany's Preoccupation with Inflation is More Than It Would Seem ........................................................................... 1196 CHARTS - Evidence OF Global Slowing Now Indisputable ................................................................................................................. 1197 CHARTS - EU Credit Downgrades, France and UK On Tap ................................................................................................................... 1199 CHARTS - Perceived Reduction in Risk, A Temporary Aberration ........................................................................................................... 1201 CHARTS - Dangerous Delusional Divergences .................................................................................................................................... 1203 CHARTS - IMF Projections for Euro Area and GIIPS ............................................................................................................................... 1204 CHARTS - Air Cargo Shipments Confirm Slowing Global Growth ............................................................................................................ 1205 CHARTS - Eurozone Misery Indices Never Been Higher ..................................................................................................................... 1206 CHARTS - Euro Currency .......................................................................................................................................................................... 1208

RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1213 RESEARCH OF NOTE .................................................................................................................................................................................. 1215

NEW--RESEARCH – The Broken Model of the Eurozone ........................................................................................................................ 1215 NEW--RESEARCH – The Japanization of Europe in 9 “This Time It Is Different” Charts ....................................................................... 1216 NEW--RESEARCH – Eurozone on cusp of triple-dip recession as German exports crumble ................................................................. 1217 RESEARCH – Euro Area’s Stalling Industry No Support for GDP............................................................................................................ 1219 RESEARCH – Early Warnings of Euro-Area Downturn Strengthen ECB’s QE Case .............................................................................. 1219 RESEARCH – ECB Rate Decision .......................................................................................................................................................... 1221 RESEARCH – Euro-Area Data Deterioration Points Toward QE ............................................................................................................. 1224 RESEARCH – ECB v FEDERAL RESERVE ............................................................................................................................................. 1225 RESEARCH – The ECB’s Negative Deposit Rate.................................................................................................................................. 1227 RESEARCH – EU Version of QE Coming -> UST Purchases to Drive Euro Down ........................................................................... 1229 RESEARCH – Beware of EU Banks! ......................................................................................................................................................... 1231 RESEARCH – Emerging Markets Aggravates Festering Banking Problems .................................................................................... 1232 RESEARCH – European Banks Have $3 Trillion of Exposure To Emerging Markets ...................................................................... 1234 RESEARCH - EFSF Downgraded to AA+ ............................................................................................................................................... 1236 RESEARCH - EU Stabilization Programs Are Presently Very Fragile ...................................................................................................... 1237 RESEARCH - Spreads Widened in Peripherals and Significantly in Portugal and Greece .............................................................. 1240

SITUATIONAL ASSESSMENT ..................................................................................................................................................................... 1242 PROGNOSIS: Why the European Situation Will Get Worse ..................................................................................................................... 1242 PROGNOSIS: Increasing Structural Imbalances ...................................................................................................................................... 1245 PROGNOSIS: $22T Unaccounted - A Hidden World of Contingent Liabilities, Government Backing & Guarantees. ................. 1247 PROGNOSIS: Monetary Malpractice - ECB's LTRO Not a Solution but ................................................................................................... 1252 PROGNOSIS: Monetary Malpractice - ECB's SMP Effort Futile ............................................................................................................... 1256


PROGNOSIS: Monetary Malpractice - ECB Accepts BBB Collateral ....................................................................................................... 1259 PROGNOSIS: EU Banking Overbanked, Undercapitalized and Now Insolvent ....................................................................................... 1260 PROGNOSIS: Monetary Malpractice - TARGET2 "Contingent Liabilities" ........................................................................................ 1261 PROGNOSIS: Bailouts - Unsustainable & Unfundable ............................................................................................................................. 1268

ITALY – FALLS BACK INTO A TRIPLE-DIP RECESSION ................................................................................................................................. 1270 CHARTS OF NOTE ....................................................................................................................................................................................... 1270

NEW--CHARTS - ITALY – 30 Year Bond Yield At 2.3% - Historic Low .................................................................................................... 1270 NEW--CHARTS - ITALY – Italian Unemployment ..................................................................................................................................... 1271 NEW--CHARTS - ITALY – Italian Core Inflation ........................................................................................................................................ 1271 NEW--CHARTS - ITALY – Italian Industrial Porduction ............................................................................................................................ 1272 CHARTS - ITALY – Meal Affordability Deteriorates .................................................................................................................................. 1273 CHARTS - ITALY – Falling Oil & Gas Consumption ................................................................................................................................. 1274 CHARTS - ITALY – Italian Bond Yields ..................................................................................................................................................... 1274 CHARTS - ITALY – Slips Back Into Recession ......................................................................................................................................... 1275 CHARTS - ITALY – 10 Year Bond Yields Fall to Record Low .................................................................................................................. 1276 CHARTS - ITALY - Forced Rate Cuts ....................................................................................................................................................... 1277


NEW--RESEARCH – Italy Falls Back Into Recession, Raising Concerns for Eurozone .......................................................................... 1278 RESEARCH - Italy’s Downward Spiral ...................................................................................................................................................... 1281 RESEARCH - Italy’s Budget Failures, Weak Growth Outlook Call Debt Sustainability Into Question ..................................................... 1283

SITUATIONAL ASSESSEMENT ................................................................................................................................................................... 1287 ITALIAN ELECTION - What You Need to Know ....................................................................................................................................... 1287 ITALIAN ELECTION - Europe Capitulates On Austerity- Never Had The Stomach For It ................................................................. 1288 ITALIAN ELECTION - Message Given By the People ............................................................................................................................ 1290 ITALIAN ELECTION - Bad Debt Continue to Soar .................................................................................................................................... 1294 ITALIAN ELECTION - Italians React Badly to Austerity, Elections Hardly a Surprise!........................................................................... 1297 ITALIAN ELECTION - EUROPEAN FEEDBACK - #1 ............................................................................................................................. 1297 ITALIAN ELECTION - EUROPEAN FEEDBACK - #2 ............................................................................................................................. 1299 ITALIAN ELECTION - Regional Financial Cracks in Sicily .................................................................................................................. 1303

FRANCE – ECONOMIC MALAISE SPARKING POTENTIAL POLITICAL CRISIS ............................................................................................ 1305 CHARTS OF NOTE ....................................................................................................................................................................................... 1305

NEW--CHARTS – FRANCE – Bankruptcies Soar as Profitability Slumps ................................................................................................ 1305 NEW--CHARTS – FRANCE – Post Hollande Election Results – Jobseekers and 10 Year Yield ............................................................ 1305 NEW--CHARTS – FRANCE – French Job Seekers .................................................................................................................................. 1306 NEW--CHARTS – FRANCE – Inflation Expectations ................................................................................................................................ 1306 CHARTS - FRANCE – Hollande Popularity Gap Heading for a Record Low ........................................................................................... 1308 CHARTS - FRANCE – Austerity Doesn’t Get You Re-Elected ................................................................................................................. 1308 CHARTS - FRANCE – World’s Worst PMI Ranking in June ..................................................................................................................... 1309 CHARTS - FRANCE – Near-record high bankruptcies and record-low profitability .................................................................................. 1310 CHARTS - FRANCE – France’s PMI Trend Weakness Beginning to Stand Out...................................................................................... 1310 CHARTS - FRANCE – Manufacturing Divergence With Germany Widens .............................................................................................. 1311 CHARTS - FRANCE - GDP ....................................................................................................................................................................... 1312 CHARTS - FRANCE - UNEMPLOYMENT ................................................................................................................................................ 1313 CHARTS - FRANCE - BUDGET DEFICIT ................................................................................................................................................. 1314 CHARTS - FRANCE - TAX v GDP ............................................................................................................................................................ 1315 CHARTS - FRANCE - BUSINESS CONFIDENCE.................................................................................................................................... 1316


NEW--RESEARCH – Economic Malaise Sparks Political Crisis in France .............................................................................................. 1317 RESEARCH - France In "Political Turmoil" After Hollande Unexpectedly Dissolves Government .......................................................... 1319 RESEARCH – Prime Minister Manuel Vall Resigns .................................................................................................................................. 1321 RESEARCH - European Voters Are Revolting; France Warns "Situation Is Grave for France, Europe" ................................................. 1321 RESEARCH - Steady Breakdown Underway ......................................................................................................................................... 1324 RESEARCH - France Loses its Coveted and NEEDED AAA Rating ................................................................................................... 1328

SITUATIONAL ASSESSMENT ..................................................................................................................................................................... 1330 FRANCE - What You Need to Know ......................................................................................................................................................... 1330 FRANCE - Key Indicators .......................................................................................................................................................................... 1331 FRANCE: Sharpest Drop in Private Sector Output in Four Years ............................................................................................................ 1334 FRANCE - Quits on Austerity - Never a Doubt This Would Happen...................................................................................................... 1337 FRANCE - Socialism is Expensive ......................................................................................................................................................... 1338 FRANCE - Has Turned back to Socialism ................................................................................................................................................. 1340 FRANCE - Losing Its Way through Political Illusions and Lies ................................................................................................................. 1341 FRANCE - Uncompetitive .......................................................................................................................................................................... 1342 FRANCE - Titan Tire Calls Out French Labor ........................................................................................................................................... 1344 FRANCE - France Responds to Titan Tire ................................................................................................................................................ 1346 FRANCE - What Happens In France When Companies Fire People ....................................................................................................... 1348 FRANCE - Hollande's Economically Insane campaign Promise ............................................................................................................... 1349

GERMANY – GERMANY IN RECESSION.......................................................................................................................................................... 1351 CHARTS OF NOTE ....................................................................................................................................................................................... 1351

NEW--CHARTS - GERMANY - 1.179% 30 Year Bond Yield ................................................................................................................... 1351 NEW--CHARTS - GERMANY – 2 Year Sovereign Yield Goes Negative ................................................................................................. 1352 NEW--CHARTS - GERMANY – 10 Year Sovereign Bund versus US10 Treasury ................................................................................... 1352 NEW--CHARTS - GERMANY – German & Japanese Yield Curves Are Remarkably Close ................................................................... 1353 NEW--CHARTS - GERMANY – 10 Y European Yields ............................................................................................................................. 1354


NEW--CHARTS - GERMANY – German Unemployment ......................................................................................................................... 1355 NEW--CHARTS - GERMANY – German Core Inflation ............................................................................................................................ 1355 NEW--CHARTS - GERMANY – 10 Year Sovereign Bund versus US10 Treasury ................................................................................... 1355 CHARTS - GERMANY – Expectations Component Peaked In January ................................................................................................... 1356 CHARTS - GERMANY – Ifo Rolls-Over..................................................................................................................................................... 1356 CHARTS - GERMANY – 10 Year Bund Below 1% ................................................................................................................................... 1357 CHARTS - GERMANY - Inflation ............................................................................................................................................................... 1357 CHARTS - GERMANY - IFO Investor Confidence .................................................................................................................................... 1358 CHARTS - GERMANY - ZEW Expectations .............................................................................................................................................. 1359


NEW--RESEARCH - Five charts that show Germany is heading into recession 10-19-14 The Guardian ............................................... 1361 RESEARCH - Draghi signaled additional monetary easing is likely to materialize - Possibly by September .......................................... 1364 RESEARCH - Germany close to recession as ECB admits recovery is weak.......................................................................................... 1366 RESEARCH - Merkel's Third Chancellorship Challenges .................................................................................................................... 1367 RESEARCH - German Election - Merkel Begins Hunt for Coalition Partners........................................................................................... 1371 RESEARCH - Europe's Shadow Economy: As Big As Germany.............................................................................................................. 1372

SITUATIONAL ASSESSEMENT ................................................................................................................................................................... 1376 GERMANY - Anti Euro AfD Party May Cost Merkel in Critical September Election ......................................................................... 1377 GERMANY - The Euro Crisis Escalation over Cyprus May Politically Cripple Merkel ..................................................................... 1378 GERMANY - Call for End of "Coercive Euro Association" ........................................................................................................................ 1380

UK – EXPECT RATE INCREASE BY SPRING 2015.......................................................................................................................................... 1382 CHARTS OF NOTE ....................................................................................................................................................................................... 1382

NEW--CHARTS - UK - Deficit One of Worst of Developed Economies .................................................................................................... 1382 NEW--CHARTS - UK – Private Sector Surplus Eliminated ....................................................................................................................... 1382 CHARTS - UK Self-Employment At Record High ...................................................................................................................................... 1383 CHARTS - UK Rate Voting Shows Preference for Inflation Report Months ............................................................................................. 1384 CHARTS - UK – Below 2% Target But 2

nd Highest in EU ......................................................................................................................... 1384

CHARTS - UK – CPI Below Target for 7th Month ...................................................................................................................................... 1385

CHARTS - UK – Real-Wage Decline Longest Since At Least 1964 ......................................................................................................... 1386 CHARTS - UK – Wage-Neutral Unemployment Rate Falling .................................................................................................................... 1386 CHARTS - UK – CPI Too Low for BOE and Falling .................................................................................................................................. 1387 CHARTS - UK – GDP ................................................................................................................................................................................ 1388 CHARTS - UK – Population Growth .......................................................................................................................................................... 1388 CHARTS - UK - Crushed Disposable Income ........................................................................................................................................... 1389 CHARTS - UK - BOE Balance Sheet Growth ............................................................................................................................................ 1390 CHARTS - UK - Lending ............................................................................................................................................................................ 1391 CHARTS - UK - Unemployment ................................................................................................................................................................ 1391 CHARTS - UK - GDP - Pre and Post Recession Levels ........................................................................................................................... 1392 CHARTS - UK - GDP ................................................................................................................................................................................. 1392 CHARTS - UK - BOE Rates ....................................................................................................................................................................... 1393


NEW--RESEARCH – Consensus See UK Rate Increase in February 2015 – Possibility of November .................................................. 1394 RESEARCH – BOE Faces Labor Market Conundrum as Wage Growth Stalls ........................................................................................ 1396 RESEARCH - UK workers' wage squeeze is longest since the 1870s ..................................................................................................... 1399

SITUATIONAL ASSESSEMENT ................................................................................................................................................................... 1400 UK - What you need to Know..................................................................................................................................................................... 1400 UK - Joins Currency War - £ Down 8% YTD ............................................................................................................................................. 1401 UK - Specter of Stagflation Haunts UK ...................................................................................................................................................... 1402 UK - Public Policy turns Against Austerity and PM Cameron ............................................................................................................ 1403 UK - Doomsday Debt Machine .................................................................................................................................................................. 1404 UK - QE Extension Coming ....................................................................................................................................................................... 1407 UK - Small Business Credit Squeeze Now Acute - Loan Rejections Rising ..................................................................................... 1409 UK - Technically in a Depression ........................................................................................................................................................... 1410

IBERIAN PENINSULA – LOW RATES MASK SERIOUS PERCULATING PROBLEMS ................................................................................... 1413 CHARTS OF NOTE ............................................................................................................................................................................................. 1413

NEW--CHARTS - SPAIN– 30 Year Bond Yield At 2.5% - Historic Low ........................................................................................................ 1413 NEW--CHARTS - SPAIN– 10 Year Bond Yield At 2.37% - Historic Low .................................................................................................. 1413 CHARTS - PORTUGAL – Yields Hit Low After BES Bailout ..................................................................................................................... 1414 CHARTS - PORTUGAL - Deficit Problem ................................................................................................................................................. 1415


RESEARCH - Presidential Warning Spikes Yields To 8 Months Highs .............................................................................................. 1416 RESEARCH - Clear Signs of Desperation In Spain from a Growing Collateral Contagion .............................................................. 1418 RESEARCH - The Spanish Government's 'Bad Bank' Scam .............................................................................................................. 1419

SITUATIONAL ASSESSEMENT ................................................................................................................................................................... 1421 IBERIA - Credit Downgrades - At Precipice of "Non Investment Grade" .................................................................................................. 1421 IBERIA - Regional Bailout Bailouts a Massive Problem ...................................................................................................................... 1422 IBERIA - NPL Going Ballistic .................................................................................................................................................................. 1423 IBERIA - Spanish Funding Problem ....................................................................................................................................................... 1424 IBERIA - The Giant Spanish Housing Bubble, Now Beginning to Implode ............................................................................................... 1429 IBERIA - Mal-Investment Coming Home to Roost..................................................................................................................................... 1431 IBERIA - Bank Deposits Were Leaving, Now they Are Fleeing ................................................................................................................ 1432 IBERIA - Now a Capital Investment Problem ............................................................................................................................................ 1433


IBERIA - Banks on Artificial "Ponzi Bond" Life Support ............................................................................................................................ 1434

ASIA – FALLING CURRENCIES, RISING DEBT & SLOWING GROWTH .............................................................................. 1443 CHINA – THE NEXT “PEG” TO FALL ............................................................................................................................................................... 1443

RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1443 CHARTS OF NOTE ....................................................................................................................................................................................... 1456

NEW--CHARTS - CHINA– Falling Chinese Industrial Profits .................................................................................................................... 1456 NEW--CHARTS - CHINA– Something Up (or rather down) with Chinese Currency? .............................................................................. 1456 NEW--CHARTS - CHINA– Rising Margin Debt/Market Cap Ratio Suggests Liquidity m& Credit Risks .................................................. 1457 NEW--CHARTS - CHINA– Corporate Bond Yields ................................................................................................................................... 1457 NEW--CHARTS - CHINA– New Retail Stock Trading Accounts ............................................................................................................... 1458 NEW--CHARTS - CHINA– Credit Growth 30% Above Trend for Private Sector Debt to GDP ................................................................ 1458 NEW--CHARTS - CHINA– Falling Foreign Currency Reserves ................................................................................................................ 1459 NEW--CHARTS - CHINA – 2 Year Yield Goes Negative .......................................................................................................................... 1460 NEW--CHARTS - CHINA – China Used More Cement in Last 3 Years than US in Entire 20

th Century .................................................. 1461

NEW--CHARTS - CHINA – China Real Activity Indicators – Steel, Cement & Electricity ........................................................................ 1461 NEW--CHARTS - CHINA – Chinese Coal Consumption Falls .................................................................................................................. 1462 NEW--CHARTS - CHINA – Chinese Y-o-Y Outstanding Credit & M2 ...................................................................................................... 1462 NEW--CHARTS - CHINA – China’s Bank Reserve Requirement Ratio ................................................................................................... 1463 NEW--CHARTS - CHINA – New Stock Market Trading Accounts ............................................................................................................ 1464 CHARTS – Yuan Falls as Economy Weakens .......................................................................................................................................... 1465 CHARTS – Yuan’s Currency Basket Composition .................................................................................................................................... 1465 CHARTS – Yuan Diverges From Currency Basket ................................................................................................................................... 1466 CHARTS – Industrial Output A Concern.................................................................................................................................................... 1466 CHARTS – China On A Path Since 2008 That Historically Leads to A Currency Crisis........................................................................... 1467 CHARTS – Borrowing Costs for Firms Remain High ................................................................................................................................ 1468 CHARTS – China’s Q1 GDP Deflator Falls to Zero .................................................................................................................................. 1468 CHARTS - Credit is Running Well Ahead of Economic Growth ................................................................................................................ 1470 CHARTS – Productivity is Slumping As Debt Levels Soar........................................................................................................................ 1470 CHARTS – China’s Gross Fixed Capital Formation Problem ................................................................................................................... 1470 CHARTS – Chinese Investment Peaking .................................................................................................................................................. 1471 CHARTS – China Equity Flows ................................................................................................................................................................. 1472 CHARTS – Credit Accumulation Rate – Growth Comparisons ................................................................................................................. 1472 CHARTS – Chinese Credit Growth ............................................................................................................................................................ 1473 CHARTS – 5 Year Debt Growth versus GDP ............................................................................................................................................ 1473 CHARTS – 5 Year Credit Growth .............................................................................................................................................................. 1474 CHARTS – Growth “Propensity” of Credit Growth..................................................................................................................................... 1475 CHARTS – China’s Bad Loans - NPL........................................................................................................................................................ 1476 CHARTS – Slowing Steel Consumption .................................................................................................................................................... 1477 CHARTS – Shadow Banking System ........................................................................................................................................................ 1477 CHARTS – Dramatic Chinese Housing Slowdown ................................................................................................................................... 1479 CHARTS - CHINA - A Global Slowdown on the Verge of Contraction...................................................................................................... 1480 CHARTS - CHINA - Chinese Credit Market .............................................................................................................................................. 1481 CHARTS - CHINA - PMI ............................................................................................................................................................................ 1481 CHARTS - CHINA - PMI-2 ......................................................................................................................................................................... 1483 CHARTS - CHINA - GDP ........................................................................................................................................................................... 1484 CHARTS - CHINA – Industrial Output ....................................................................................................................................................... 1485 CHARTS - CHINA - Urban Fixed Asset Investment .................................................................................................................................. 1486 CHARTS - CHINA – Retail Sales .............................................................................................................................................................. 1487

RESEARCH WE FOLLOWED THIS TRI-SEMSTER .................................................................................................................................... 1488 RESEARCH OF NOTE .................................................................................................................................................................................. 1489

NEW--CHINA – The Next “Peg” To Fall – The Yuan or Hong Kong Dollar? ...................................................................................... 1489 NEW--CHINA – Yuan Diverging From Its Trading Basket .................................................................................................................... 1495 NEW--CHINA – Signs of Madness in the Global Financial System .................................................................................................... 1497 NEW--CHINA – Reverses Direction and Begins Easing....................................................................................................................... 1498 NEW--CHINA – China's Economic Reporting Possibly a Deception .................................................................................................. 1499 CHINA – Yuan Diverging From Its Trading Basket ............................................................................................................................... 1501 CHINA - China Credit Risk Overshadows Outlook for Emerging Equities ................................................................................................ 1504 CHINA - Easy Money Won’t Solve China’s Hard Problems ...................................................................................................................... 1506 CHINA - China's Rehypothecation............................................................................................................................................................. 1509 CHINA - Asian Marginal Utility ................................................................................................................................................................... 1511 CHINA - Is China is Exporting Deflation Worldwide by Driving Down Yuan? ........................................................................................... 1513 CHINA - Someone Is Betting That The Chinese Currency Collapses By The End Of 2014Low-Hanging Fruit ............................. 1516 CHINA - Problems in the Target Redemption Forwards Derivatives market & Dim-Sum Bonds ................................................... 1517 CHINA - Absence Of A Letter Of Credit!.................................................................................................................................................... 1518 CHINA - China Cracks down on Commodity Credit .................................................................................................................................. 1521 CHINA - Falling Yuan ................................................................................................................................................................................. 1523 CHINA - What Happens After the Low-Hanging Fruit Has Been Picked? .......................................................................................... 1525 CHINA SHADOW BANKING - CCFD (Chinese Commodity Funding Deals) ....................................................................................... 1528 CHINA - Cracks Beginning to Show ....................................................................................................................................................... 1530 CHINA - Has an Inflation Problem ............................................................................................................................................................. 1531 CHINA - Chinese Coal Producer Collapse a Major Shadow Banking Problem ................................................................................. 1532 CHINA - China Orders Its Smaller Banks to Load Up On Cash .......................................................................................................... 1535 CHINA - How the Chinese Economic Disaster Scenario Could Unfold ............................................................................................. 1540 CHINA - Skilled Labor Shortages & Losing Labor Cost Advantage ................................................................................................... 1542 CHINA - Launches Crackdown On "Off Balance Sheet" Credit .......................................................................................................... 1547


CHINA - China's Stunning $15 Trillion in New Liquidity - Part II......................................................................................................... 1550 CHINA - China's Stunning $15 Trillion In New Liquidity ...................................................................................................................... 1553

RESEARCH OF NOTE – PREVIOUS REPORT (Reference) ...................................................................................................................... 1557 RESEARCH - China's Stunning $15 Trillion in New Liquidity ............................................................................................................. 1557 RESEARCH - Dr. Copper Ready to Top and Head Lower .................................................................................................................... 1560 RESEARCH - China's $1 Trillion GDP Lie .............................................................................................................................................. 1561 RESEARCH - What the Deceleration Could Portend ............................................................................................................................ 1563 RESEARCH - Credit Bubble: 240% Of GDP And Soaring .................................................................................................................... 1566 RESEARCH - Forget ‘Taper’ risk: China is a bigger threat ....................................................................................................................... 1570 RESEARCH - Sustainability Requires a Slowdown in Investment ............................................................................................................ 1572 RESEARCH - China Likely to Continue Interest Rate Liberalization ........................................................................................................ 1574 RESEARCH - China #1 in Broad Array of Key Areas ............................................................................................................................... 1577 RESEARCH - Global Business Confidence Sliding Rapidly ............................................................................................................... 1578 RESEARCH - Investors Worried and Losing Confidence .................................................................................................................... 1581 RESEARCH - China Stampeding into Gold ........................................................................................................................................... 1582 RESEARCH - China "Will introduce some measures to arrest the slowdown of growth in the next couple of quarters" ........... 1584 RESEARCH - Slower Growth In the Cards & Endorsed by New Chinese Leadership ..................................................................... 1585 RESEARCH - Is a PBOC Controlled Speculation Bust Possible or Will It Get Out of Control ........................................................ 1587 RESEARCH - PBOC Liquidity Squeeze ................................................................................................................................................. 1588 RESEARCH - Chinese Housing Bubble Restricting PBOC Actions .................................................................................................... 1590 RESEARCH - PBOC Squeezing Banks towards Reducing Speculative Risk .................................................................................... 1592 RESEARCH - Chinese Overnight Repo at 25% ...................................................................................................................................... 1594 RESEARCH - Red Flags ........................................................................................................................................................................... 1595 RESEARCH - Credit Fueled Growth in China ....................................................................................................................................... 1597 RESEARCH - PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze ................................ 1602 RESEARCH - A Potentially De-Stabilizing Cash Crunch ..................................................................................................................... 1604

SITUATIONAL ANALYSIS & KEY NOTES ................................................................................................................................................... 1605 CHINA SHADOW BANKING - Shadow Banking System Showing Signs of Implosion ..................................................................... 1607 CHINA SHADOW BANKING - Shadow Banking and Credit Growth .................................................................................................... 1610 CHINA SHADOW BANKING - The US Sub-Prime / CDO All Over Again ............................................................................................. 1613 CHINA SHADOW BANKING - Report ....................................................................................................................................................... 1617 CHINA SHADOW BANKING - Situation ................................................................................................................................................. 1618 CHINA RESERVES - Distorted Foreign Reserve Levels ...................................................................................................................... 1619 CHINA RESERVES - Declining Reserve Accumulation ............................................................................................................................ 1621 CHINA RESERVES - Has Caught the Gold Bug big time! .................................................................................................................... 1623 CHINA CURRENCY WARS - Hot Money into China .............................................................................................................................. 1625 CHINA - Withdraws Liquidity .................................................................................................................................................................. 1626 CHINA - Société General Sees a Likely Soft Landing! ......................................................................................................................... 1628 CHINA - True Debt is Orders of Magnitude More than Officially Being Reported ............................................................................ 1638 CHINA - Evidence OF Slowing Now Indisputable ................................................................................................................................ 1641 CHINA - PMI Improvement....................................................................................................................................................................... 1642 CHINA - Political Transition & Ongoing Emergence as a Super Power ............................................................................................ 1645 CHINA - An Implicit Social Contract .......................................................................................................................................................... 1647 CHINA - Manipulated Statistics due to Upcoming Decade Long Regime Change ........................................................................... 1649 CHINA - Increasing Leverage is China's Way of Monetary Easing .................................................................................................... 1650 CHINA - Possible Interest-Rate Liberalization........................................................................................................................................... 1651 CHINA - Global Impact of China's Slowdown ....................................................................................................................................... 1652 CHINA - Shanghai Composite at 2008 Low Levels .............................................................................................................................. 1654 CHINA - Shanghai Composite Warnings Signs .................................................................................................................................... 1655 CHINA - Credit to GDP ............................................................................................................................................................................. 1657 CHINA - A Slow Recovery Through 2013 ................................................................................................................................................. 1658 CHINA - Manufacturing PMI in Contraction Territory .......................................................................................................................... 1660

JAPAN: JAPAN GOES ALL IN ............................................................................................................................................................................ 1665 RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1666 CHARTS OF NOTE ....................................................................................................................................................................................... 1672

NEW--CHARTS - JAPAN – 1.174% 30 Year Bond Yield ......................................................................................................................... 1672 NEW--CHARTS - JAPAN – 2 Year Yield Goes Negative.......................................................................................................................... 1672 NEW--CHARTS - JAPAN – Savings Rate Goes Negative ........................................................................................................................ 1673 NEW--CHARTS - JAPAN – Stagnate Housing Starts with Historic Low 35 Year Mortgages ................................................................... 1673 NEW--CHARTS - JAPAN – Non-Resident Net Investment in Japanese Stocks ...................................................................................... 1674 NEW--CHARTS - JAPAN – Shifting Demographics - Birth versus Deaths ............................................................................................... 1674 NEW--CHARTS – JAPAN – Nikkei Strength is all “Relative” .................................................................................................................... 1675 NEW--CHARTS - JAPAN – Trade Balance ............................................................................................................................................... 1675 NEW--CHARTS - JAPAN – 10 Year Treasury Approaching Zero (12-27-14) .......................................................................................... 1676 NEW--CHARTS - JAPAN – BOJ Reserve Balances ................................................................................................................................. 1677 NEW--CHARTS - JAPAN – Macro Crisis Zones ....................................................................................................................................... 1678 NEW--CHARTS - JAPAN – Demographics ............................................................................................................................................... 1678 NEW--CHARTS - JAPAN – Fiscal Deficit versus BOJ Balance Sheet ..................................................................................................... 1679 NEW--CHARTS - JAPAN – Japan’s Economy versus the Rest of the World ........................................................................................... 1679 NEW--CHARTS - JAPAN – Japan’s Decline in Real Interest Rates ......................................................................................................... 1680 NEW--CHARTS - JAPAN – Japanese GDP Annualized Q-o-Q ................................................................................................................ 1681 NEW--CHARTS - JAPAN – Bankruptcies Due to Depreciating Yen ......................................................................................................... 1682 NEW--CHARTS - JAPAN –Japanese & German Yield Curves Are Remarkably Close ........................................................................... 1682 CHARTS – Q2 GDP Downturn Even Worse Than Though or Looks........................................................................................................ 1684 CHARTS – Real Incomes Falling at Fastest Rate in a Decade ................................................................................................................ 1684 CHARTS – Japan Exports Remained Subdued ........................................................................................................................................ 1685


CHARTS – Past Yen Strength Pushed Production Off-Shore .................................................................................................................. 1685 CHARTS – Japan’s Export Majors Lost Tech Battle ................................................................................................................................. 1686 CHARTS – Japan’s Stalled Inflation Adds Pressure for Second Round of Stimulus ................................................................................ 1687 CHARTS – Japan Adjusted Trade Balance ............................................................................................................................................... 1687 CHARTS – Japan BoP – Current Account Balance .................................................................................................................................. 1688 CHARTS – 5T Yen of JGB Selling ............................................................................................................................................................. 1688 CHARTS – Sovereign Debt % of Tax Revenue ........................................................................................................................................ 1689 CHARTS – Public Sector Debt Issuances 2013 as % GDP ...................................................................................................................... 1690 CHARTS - GDP Trend ............................................................................................................................................................................... 1690 CHARTS - CPI Trend ................................................................................................................................................................................. 1691 CHARTS - JAPAN - GDP Resurgence ...................................................................................................................................................... 1691 CHARTS - JAPAN - BOJ Balance Sheet .................................................................................................................................................. 1692

RESEARCH WE FOLLOWED THIS TRI-SEMESTER ................................................................................................................................. 1693 RESEARCH OF NOTE .................................................................................................................................................................................. 1694

NEW--JAPAN – The BOJ Ups The Ante ................................................................................................................................................. 1694 NEW--JAPAN – Is Japan Kaput? ............................................................................................................................................................. 1695 JAPAN - Pace of 60 to 70 trillion yen a year May Become "Open Ended" ............................................................................................... 1698 JAPAN - Japanese Financial Repression - Changes in Allocation of Japanese Retirement Accounts Coming ...................................... 1700 JAPAN - 3 Arrows of ABE-nomics Not Working ........................................................................................................................................ 1703 JAPAN - Stalled Inflation Adds Pressure for Second Round of Stimulus ................................................................................................. 1705 JAPAN - Japanese Financial Repression - Changes in Allocation of Japanese Retirement Accounts Coming ...................................... 1706 JAPAN - Japan bond market liquidity dries up as BoJ holding crosses ¥200tn........................................................................................ 1708 JAPAN - Abe Approval Rating Plunges ................................................................................................................................................. 1710 JAPAN - What the Japanese been Buying ............................................................................................................................................. 1711 JAPAN - Japan May Matter More Than Tapering .................................................................................................................................. 1713 JAPAN - Japan Finances Worse than at War’s End ............................................................................................................................. 1716 JAPAN - BOJ: "The days of ‘constructive ambiguity’ is over!” ......................................................................................................... 1717 JAPAN - Abenomics ‘Third Arrow’ Growth Strategy Underwhelms .......................................................................................................... 1718 JAPAN - 2nd ABE-nomics $200B Stimulus Package Approved ......................................................................................................... 1720 JAPAN - World’s Biggest Pension Fund Sees Japan Fail on ABE-nomics' 2% Inflation Goal ....................................................... 1721 JAPAN - The Abe-nomics Failure ........................................................................................................................................................... 1724

SITUATIONAL ASSESSEMENT & KEY NOTES .......................................................................................................................................... 1726 JAPAN - What You Need to Know ............................................................................................................................................................. 1728 JAPAN - No Way Out But to Expand the Monetary Base ..................................................................................................................... 1731 JAPAN - BOJ to "Own" 100% of GDP in 5 Years .................................................................................................................................. 1731 JAPAN - Adjusted trade deficit the worst in Bloomberg's 20 year history ........................................................................................ 1735 JAPAN - How Japan's National Debt Grew ............................................................................................................................................... 1736 JAPAN - ABE-nomics About Lowering Real Interest Rates ................................................................................................................ 1737 JAPAN - Japanese Bonds Have Lost Their Ability to Price Risk ........................................................................................................ 1738 JAPAN - Japanese Structural Problems a "Canary" for Western Developed Economies ................................................................ 1742 JAPAN - Shinzo Abe Hasn't the Stomach for the Heavy Lifting Needed to Accompany ABE-nomics........................................... 1744 JAPAN - A Credit Squeeze Leads Deflationary Leg Down .................................................................................................................. 1747 JAPAN - Some Japanese Policies Have Clearly Hit the Limit ............................................................................................................. 1748 JAPAN - The ABE (Asset Bubble Evaluator) Index ............................................................................................................................... 1750 JAPAN - Regional Risk-Reward ................................................................................................................................................................ 1751 JAPAN - Now the Frontrunner of Outright Monetization. .................................................................................................................... 1752 JAPAN - Yen Devaluation ........................................................................................................................................................................ 1753 JAPAN - New Bank of Japan Policy - 2% Inflation in 2 Years ............................................................................................................. 1754 JAPAN - Appoints BOJ Governor Firmly Committed to Printing Money ........................................................................................... 1756 JAPAN - Third Straight Quarter of Recession ....................................................................................................................................... 1758 JAPAN - Full Out War on Deflation ......................................................................................................................................................... 1758 JAPAN - First Test of the new found “dominance” of the Central Banks .......................................................................................... 1760 JAPAN - BOJ Was Next Up. No Surprise .............................................................................................................................................. 1763 JAPAN - Negative Current Account Balance and -3.5% Recession ................................................................................................... 1765 JAPAN - A 50% Over-Valued Yen Has Undermined Self Confidence & Drive ................................................................................... 1768 JAPAN - Proves QE's Low Cost of Capital Does Structural Damage to Economy ........................................................................... 1770 JAPAN - BOJ Being Pressured to "Rip-Up Government Debt"1 ........................................................................................................ 1772 JAPAN - Easy Money Has Hurt Corporate Profitability in the Longer Term ..................................................................................... 1778 JAPAN - The Biggest Debtor with the Biggest Problem! .................................................................................................................... 1781 JAPAN - A Magnitude Larger Problem than Europe ................................................................................................................................. 1785 JAPAN - QE 9 A Complete Failure - Actually "Tightens" versus It's Intended Easing .............................................................................. 1791 JAPAN - Japanese Yen Continuously Under Attack ................................................................................................................................. 1795 JAPAN - Vast foreign US$ Coming Home for "Claim" .............................................................................................................................. 1796 JAPAN - PMI Breakdown ........................................................................................................................................................................... 1798 JAPAN - Exports Continue To Tumble .................................................................................................................................................. 1800 JAPAN - Intervention Fails Again - It's a Whole new Ball Game ........................................................................................................ 1801 JAPAN - First Signs of Massive Debt Monetization After Next Election ................................................................................................... 1804 JAPAN - Japan to the ESM's Rescue ..................................................................................................................................................... 1804

EMERGING MARKETS – RUSSIA UNDER FINANCIAL SIEGE ..................................................................................................... 1806 RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1806 BRICS ............................................................................................................................................................................................................ 1812

NEW--BRICS – Population, GDP,GDP per Capita ................................................................................................................................. 1812 BRICS – Responsible for 43% of Global Growth in 2013 .................................................................................................................... 1813 BRICS – A Short Term “Dead Cat” Bounce? ........................................................................................................................................ 1813 BRICS – Inflation Problems Abound ...................................................................................................................................................... 1815


BRICS - EU Major Contributor to EM Current Account Deficit Growth .............................................................................................. 1816 BRICS - Insufficient Levels Prompt Russian-Chinese Support .......................................................................................................... 1817 BRICS - A Development Bank-Forex Reserve Pool-African Integration ............................................................................................ 1819 BRICS - 40% of World Population and 25% of World GDP .................................................................................................................. 1820 BRICS - $3 to $13B GDP in Ten Years ................................................................................................................................................... 1823 BRICS- A World Wide Distrust of Financial Markets Building ............................................................................................................ 1825

BRAZIL........................................................................................................................................................................................................... 1827 NEW-BRAZIL - Brazil’s Economy Just Imploded! ..................................................................................................................................... 1827 NEW-BRAZIL - Brazil’s economy slips into recession .............................................................................................................................. 1829 BRAZIL - Inflation will remain high thanks to a "growth mismatch". .......................................................................................................... 1832 BRAZIL - Sharpest Decline in 2013 Growth Forecast ............................................................................................................................... 1833

RUSSIA - Russia Has Stopped Trying to Protect Ruble Has FX Reserves Depleted. ................................................................................. 1836 NEW - RUSSIA – 2015 Russia Consensus GDP Forecast ...................................................................................................................... 1837 NEW - RUSSIA – Foreign Exchange Reserves ........................................................................................................................................ 1837 NEW - RUSSIA – Exchange and Interest Rate ......................................................................................................................................... 1838 NEW - RUSSIA - Real GDP and Car Sales .............................................................................................................................................. 1838 NEW - RUSSIA – Inflation Rate ................................................................................................................................................................. 1839 NEW - RUSSIA – GDP Forecast versus USDRUB ................................................................................................................................... 1839 NEW - RUSSIA – WTI Crude versus Ruble .............................................................................................................................................. 1840 NEW - RUSSIA – Russian Stocks versus Ruble, Russian 10 Y Yield versus 5Y CDS ............................................................................ 1840 NEW - RUSSIA – Russian CDS Spreads .................................................................................................................................................. 1841 NEW - RUSSIA – Winners and Losers of Oil Price Plunge....................................................................................................................... 1842 NEW - RUSSIA – CDS Spreads Has Widened 250bp Since Mid-June .................................................................................................... 1843 NEW - RUSSIA – Russian 5Y CDS versus USDRUB versus Russian Stocks ......................................................................................... 1844 NEW - RUSSIA – Crude Oil in Rubles....................................................................................................................................................... 1845 NEW - RUSSIA – Russian Reserves versus USDRUB ............................................................................................................................ 1845 NEW - RUSSIA – Falling Oil Price Weighs on Economy and the Ruble .................................................................................................. 1846 NEW - RUSSIA – Russian Ruble versus Reserves .................................................................................................................................. 1847 NEW - RUSSIA – Russian Breakeven Oil Prices versus Liquids Production ........................................................................................... 1848 NEW - RUSSIA – Russian Refining & Upstream Economics-1 ................................................................................................................ 1849 NEW - RUSSIA – Russian Refining & Upstream Economics-2 ................................................................................................................ 1849 NEW - RUSSIA – Russian Holdings of US Treasuries ............................................................................................................................. 1850 NEW - RUSSIA – Russian 9 Year Gold Buying Spree .............................................................................................................................. 1851 NEW - RUSSIA – Net YTD Gold Purchases by the Central Bank of Russia ............................................................................................ 1851 RUSSIAN RESEARCH WE FOLLOWED THIS TRI-SEMESTER ............................................................................................................ 1852

INDIA.............................................................................................................................................................................................................. 1852 NEW-INDIA – CAPEX Bottom Out? .......................................................................................................................................................... 1852 INDIA – Real GDP and Car Sales ............................................................................................................................................................. 1853 INDIA – Inflation ......................................................................................................................................................................................... 1854 INDIA - Inflation .......................................................................................................................................................................................... 1855 INDIA - WPI ................................................................................................................................................................................................ 1856 INDIA - Will be fine as long as it continues to reduce its deficit. ............................................................................................................... 1857 INDIA - Panic in India ................................................................................................................................................................................. 1858 INDIA - India Rupee Collapse Showing Signs of Exhaustion ............................................................................................................. 1860 INDIA - Watch Out For RE-Emergence of Food Price Inflation ........................................................................................................... 1861

SOUTH AFRICA ............................................................................................................................................................................................ 1863 EMERGING MARKETS ....................................................................................................................................................................................... 1865

CHARTS OF NOTE ....................................................................................................................................................................................... 1865 NEW--CHARTS – Falling EM Currencies .................................................................................................................................................. 1865 CHARTS – Post-China 16 ......................................................................................................................................................................... 1866 CHARTS – Economies Now Need More Debt to Generate Growth ......................................................................................................... 1867 CHARTS – Emerging Markets Benchmark Underperforms US Index ...................................................................................................... 1867 CHARTS - Reserves versus World ............................................................................................................................................................ 1867 CHARTS - Current Account Balances versus GDP .................................................................................................................................. 1869 CHARTS - Emerging Markets Index versus MSCI World Index ............................................................................................................... 1870 CHARTS - SINGAPORE - Inflation ............................................................................................................................................................ 1871 CHARTS - SINGAPORE - Exports ............................................................................................................................................................ 1872 CHARTS - SOUTH KOREA ....................................................................................................................................................................... 1873 CHARTS - TURKEY - Spreads .................................................................................................................................................................. 1874

RESEARCH OF NOTE .................................................................................................................................................................................. 1875 EMERGING MARKETS - Forced Changes & Advancements in the Normal "Plundering" Strategy ............................................... 1875 EMERGING MARKETS - Crisis Temporarily Halted .............................................................................................................................. 1876 EMERGING MARKETS - The plight of four Asian countries - China, India, Indonesia and Japan. ................................................. 1877 EMERGING MARKETS - Negative Current Accounts + Weak(ening) International Investment Positioning ........................................... 1882 EMERGING MARKETS - "TAPER" Shock Waves Across Asia ........................................................................................................... 1882 EMERGING MARKETS - Global Bond Yields React Together ............................................................................................................. 1884 EMERGING MARKETS - A Bumpy Ride for Emerging Markets ............................................................................................................... 1886 EMERGING MARKETS - Stunning Withdrawals.................................................................................................................................... 1892 EMERGING MARKETS - Bond Outflows Accelerating ......................................................................................................................... 1893 EMERGING MARKETS - This will make the 1997 Asian Crisis Seem Like an Early Warning .......................................................... 1895 EMERGING MARKETS - Developing Nations Feeling the Pain of Global Deleveraging Acceleration ........................................... 1897 EMERGING MARKETS - The Impact of "TAPER" ................................................................................................................................. 1899

SITUATIONAL ASSESSEMENT ................................................................................................................................................................... 1904 EMERGING MARKETS - What you Need to Know ...................................................................................................................................... 1904

EMERGING MARKETS - Comparative Ease of Doing Business........................................................................................................... 1906 EMERGING MARKETS - Importance of Employment, Equality and Per Capital Income ................................................................. 1907


ASEAN ........................................................................................................................................................................................................... 1910 NEW--ASEAN: A New Common Market.................................................................................................................................................... 1910

ASIA ............................................................................................................................................................................................................... 1914 ASIA: CHARTS - REVENUE ..................................................................................................................................................................... 1914 ASIA: CHARTS – EXPENDITURES .......................................................................................................................................................... 1914 ASIA: CHARTS – SPENDING GAPS ........................................................................................................................................................ 1916 ASIA: CHARTS – DEBT SERVICE ........................................................................................................................................................... 1916 ASIA: CHARTS - SINGAPORE ................................................................................................................................................................. 1918 ASIA: CHARTS – INDONESIA – CPI – May 2014 .................................................................................................................................... 1919 ASIA: CHARTS – INDONESIA – CPI – Aug 2013 .................................................................................................................................... 1919 ASIA: CHARTS – A Short Term “Dead Cat” Bounce? .......................................................................................................................... 1920 ASIA: CHARTS – Inflation Problems Abound ........................................................................................................................................ 1921 ASIA: CHARTS – Healthier Public Debt and Borrowing Positions than DM ...................................................................................... 1921 ASIA: CHARTS - AUSTRALIA ................................................................................................................................................................... 1922 ASIA - Regional Risk-Reward .................................................................................................................................................................... 1924 ASIA - Credit Contraction Problems ...................................................................................................................................................... 1925 ASIA - Corporate Debt Levels Reflect Unintended Consequences of Mispricing & Mal-Investment ............................................. 1927 ASIA - Synchronized Markets .................................................................................................................................................................... 1929 ASIA - Caution Advised Regarding Positive South Korea Export Turnaround ......................................................................................... 1931 ASIA - Export Growth Looks Similar to Pre-2008 ................................................................................................................................. 1932 ASIA - Global Slowing Quickly a Worsening Situation Across Asia ................................................................................................. 1936 ASIA - Risks All on the Downside for Asia ........................................................................................................................................... 1937 ASIA - Demographic Headwinds ............................................................................................................................................................ 1940 ASIA - Pronounced Flight to Singapore Safety ......................................................................................................................................... 1941

LATIN AMERICA ........................................................................................................................................................................................... 1943 VENEZUELA – Signs of a Crack-up Boom and Dictatorship .............................................................................................................. 1943 VENEZUELA - Shortages & Hyperinflation ............................................................................................................................................ 1943

MIDDLE EAST ............................................................................................................................................................................................... 1945 TURKEY ..................................................................................................................................................................................................... 1945

US ECONOMY ..................................................................................................................................... 1946

THE GLOBAL MACRO OVERLAY ........................................................................................................................................ 1948 MACRO - US Macro Data .................................................................................................................................................................................... 1948

CHARTS OF NOTE ....................................................................................................................................................................................... 1948 NEW-MACRO – Commodity Index’s Nosedive Points to Clear Global Slowdown ................................................................................... 1948 NEW-MACRO – Goldman Sachs Global Leading Indicator Has Plummeted ........................................................................................... 1949 NEW-MACRO – Goldman’s GLI Momentum versus Global Industrial Production Goes Into Contraction ............................................... 1949 NEW-MACRO – 2015 World GDP Growth versus World Stocks .............................................................................................................. 1950 NEW-MACRO – World GDP Annual Estimates versus World Stocks ...................................................................................................... 1950 NEW-MACRO – World Economies Cutting Rates to Avoid Economic Contraction .................................................................................. 1951 NEW-MACRO – World Economies Cutting Rates to Avoid Economic Contraction – By Country ............................................................ 1951 NEW-MACRO – US Macro in Q1 2015 versus Prior First Quarters – Says Something is Wrong ........................................................... 1952 NEW-MACRO – US Q4 GDP versus S&P 500 Suggests a Major Divergence Must Be Corrected ......................................................... 1952 MACRO – Divergence between Income/Job Growth and Fed Balance Sheet & Financial Markets ........................................................ 1953 MACRO – US Economic Surprises Rising While EMU Declines .............................................................................................................. 1953 MACRO – US Macro Surprise Index ......................................................................................................................................................... 1953 MACRO – Growing “Unallocated Global Currency Reserves”? ................................................................................................................ 1954 MACRO – World Trade Volumes ............................................................................................................................................................... 1956 MACRO – Marginal Utility .......................................................................................................................................................................... 1956 MACRO – Global Manufacturing PMI ........................................................................................................................................................ 1957 MACRO – Credit Markets Diverging .......................................................................................................................................................... 1957 MACRO – US Macro Complacency ........................................................................................................................................................... 1958 MACRO – Macro Implied Vols ................................................................................................................................................................... 1958 MACRO – Markets Stretched .................................................................................................................................................................... 1959

RESEARCH OF NOTE ........................................................................................................................................................................................ 1960 NEW-MACRO – Recovery? Central Banks Are Easing Policy For 50% of The World's Population............................................................ 1960 MACRO – A World Recession? ..................................................................................................................................................................... 1962 MACRO - US the Safehaven in a “Best of a Bad Lot” Choice ...................................................................................................................... 1963 MACRO – “The Ambivalent Superpower” ..................................................................................................................................................... 1965 MACRO – Things Worse than Slow Growth ................................................................................................................................................. 1967 MACRO - US & Global Growth Will Slow Dramatically on a Per Capita Basis ............................................................................................ 1970 MACRO - Serious Structural US Problems Impeding Global Competitiveness ........................................................................................... 1972 MACRO - Output Gap .................................................................................................................................................................................... 1979

US INVESTMENT CYCLE ...................................................................................................................................................... 1988 CHARTS OF NOTE ............................................................................................................................................................................................. 1988

NEW-CHART – Current Economic Cycle Is Getting “Old In The Tooth” ...................................................................................................... 1988 NEW-CHART –US Recession Cycle Suggests Cycle May Be Close To Ending ......................................................................................... 1989 CHART –US Recession Cycle Suggests Cycle May Be Close To Ending ................................................................................................... 1989 CHART –$77T in Household Net Worth Growth Keeps an Illusion Going ................................................................................................... 1990 CHART - Economy in Decline from Consuming More than it Produces ....................................................................................................... 1991

GORD'S BIG PICTURE ECONOMIC CYCLE ..................................................................................................................................................... 1991 ECONOMIC INDICATORS .................................................................................................................................................................................. 1993


MONTHLY INDICATORS OF NOTE ............................................................................................................................................................. 1993 RESEARCH - The US Economy Continues to Tank under Obama.......................................................................................................... 1993 REFERENCE CHARTS ............................................................................................................................................................................. 1995

THE CURRENT BUSINESS CYCLE - SITUATIONAL ANALYSIS ..................................................................................................................... 2000 BUSINESS CYCLE - JOBS > CONFIDENCE > CONSUMPTION > GROWTH CYCLE.................................................................................... 2000 BUSINESS CYCLE - JOBS ................................................................................................................................................................................. 2002

NEW-SOME HIGHLIGHTS............................................................................................................................................................................ 2002 CHARTS & TABLES OF NOTE ..................................................................................................................................................................... 2005

NEW-CHARTS – Big January Jump In Number of People Who Went from “Not in the Labor Force” to Employed ................................ 2005 NEW-CHARTS – Non-Farm Payrolls – Monthly and Yearly Change ....................................................................................................... 2005 NEW-CHARTS – Civilian Unemployment Rate ......................................................................................................................................... 2005 NEW-CHARTS – JOLTS-Total Job Openings ........................................................................................................................................... 2006 NEW-CHARTS – New Jobless Claims w/ 4 Week Moving Average......................................................................................................... 2006 NEW-CHARTS – Non-Farm Payrolls ........................................................................................................................................................ 2007 CHARTS – US Monthly Job Growth .......................................................................................................................................................... 2008 CHARTS – Labor Market Improving with Troublesome Signs .................................................................................................................. 2008 CHARTS – Non-Farm Payrolls & Unemployment Rate ............................................................................................................................ 2009 CHARTS - Corporate Profits versus Wages .............................................................................................................................................. 2009 CHARTS - Standard of Living Decline and Bear Market in Real Terms Reflect Labor Participation ....................................................... 2009 CHARTS - Underemployment Gap ............................................................................................................................................................ 2011 CHARTS - Participation Rate..................................................................................................................................................................... 2012 CHARTS - Part Time Employment ............................................................................................................................................................ 2012 NEW-CHARTS - U3 & U6 .......................................................................................................................................................................... 2013 NEW-CHARTS - Employment Situation Summary ................................................................................................................................... 2014

RESEARCH OF NOTE .................................................................................................................................................................................. 2019 NEW-RESEARCH - Gallup CEO: "America's 5.6% Unemployment Is One Big Lie"................................................................................ 2019 NEW-RESEARCH - This Is Why Hewlett-Packard Is Firing 58,000 ......................................................................................................... 2020 NEW-RESEARCH - American Express to cut more than 4,000 jobs........................................................................................................ 2021 RESEARCH - US Employment Trend Remains Chronic .......................................................................................................................... 2022 RESEARCH - Labor Force Participation Rates ......................................................................................................................................... 2025 RESEARCH - Bridging Jobs to Confidence & Sentiment.......................................................................................................................... 2028 RESEARCH - Participation Rate at 1979 Carter Levels ........................................................................................................................... 2031

SITUATIONAL SUMMARY & ANALYSIS ..................................................................................................................................................... 2032 BUSINESS CYCLE - CONSUMER & BUSINESS SENTIMENT ......................................................................................................................... 2038

A GRAPHIC HIGHLIGHT .............................................................................................................................................................................. 2038 CHARTS & TABLES ...................................................................................................................................................................................... 2039

NEW-CHARTS – UMich Consumer Sentiment Tumbles Most In 16 Months ........................................................................................... 2039 NEW-CHARTS – Consumer Comfort Plunges Most In 10 Months ........................................................................................................... 2040 CHARTS – Only 16% Think Future Employment Opportunities Will Be Better ........................................................................................ 2041 CHARTS – Inequality Eventually Leads to Economic Adjustments – Often Precipitously ....................................................................... 2041 CHARTS - NFIB Small Business Sentiment .............................................................................................................................................. 2042 CHARTS - Orange Book ............................................................................................................................................................................ 2042

RESEARCH OF NOTE .................................................................................................................................................................................. 2043 RESEARCH – Small Business Confidence is a Major Problem in America ............................................................................................. 2043 RESEARCH – America’s Crisis of Trust .................................................................................................................................................... 2044

NEW-SENTIMENT - Consumer, Investor & Trader ............................................................................................................................................. 2046 NEW-Consumer Confidence - Conference Board ........................................................................................................................................ 2046 NEW-Consumer Sentiment - Michigan ......................................................................................................................................................... 2051 NEW-Consumer Comfort - Bloomberg .......................................................................................................................................................... 2051 NEW-American Association of Independent Investors ................................................................................................................................. 2052 NEW-Investors Intelligence ........................................................................................................................................................................... 2052 NEW-National Association of Active Investment Managers (NAAIM) .......................................................................................................... 2053 NEW-Small Business Optimism .................................................................................................................................................................... 2055 NEW-Percentage Stocks above 50 & 200 DMA ........................................................................................................................................... 2057 NEW-Margin Levels ....................................................................................................................................................................................... 2058 NEW-Real Margin Debt as % of GDP ........................................................................................................................................................... 2064 NEW-Margin Debt versus S&P 500............................................................................................................................................................... 2064 NEW-Mutual Fund Cash Levels v S&P 500 .................................................................................................................................................. 2065

NEW-OSCILLATORS & BREADTH: Indicators of Importance .......................................................................................................................... 2067 NEW-NYSE Overbought / Oversold .............................................................................................................................................................. 2067 NEW-OEX Open Interest (Puts/Calls) ........................................................................................................................................................... 2068 NEW-TRIN ..................................................................................................................................................................................................... 2069 NEW-McClellan Oscillator ............................................................................................................................................................................. 2070

CHARTS OF NOTE ............................................................................................................................................................................................. 2071 NEW-CHARTS – Asset Allocation – Global Equities .................................................................................................................................... 2071 NEW-CHARTS – Asset Allocation – Global Bonds ....................................................................................................................................... 2071 NEW-CHARTS – Active versus Passive Funds Allocation ........................................................................................................................... 2072 NEW-CHARTS – Investors Intelligence Survey of % Bears ......................................................................................................................... 2072 NEW-CHARTS – Sentiment at Post 2008 Crisis Highs ................................................................................................................................ 2074 NEW-CHARTS – CNBC Viewership Steadily Falling .................................................................................................................................... 2075 NEW-CHARTS – Investor Allocation Trends for Stocks, Bonds and Cash .................................................................................................. 2076 NEW-CHARTS – Uptick in Fed’s Financial Stress Index Composite ........................................................................................................... 2077

CHARTS – Fear Barometer Diverges with VIX, CDS IG Index ................................................................................................................. 2078


CHARTS – Extreme Complacency Seen Near End of Cycles .................................................................................................................. 2078 CHARTS –Complacency Seen In PE/VIX ................................................................................................................................................. 2079 CHARTS –Post Crisis Sentiment Profile Shows a Clear Ending Pattern ................................................................................................. 2079 CHARTS – Smart Money Flows ................................................................................................................................................................ 2081 CHARTS – Fed Assets versus Bullish Sentiment ..................................................................................................................................... 2081 CHARTS – Macro Support Has Technically Broken Down ....................................................................................................................... 2082 CHARTS – US Surprise Index Setting Up for Downturn ........................................................................................................................... 2082 CHARTS – The Public No Longer “Trusts” the Market – Feel it is Manipulated and Ineffectively Regulated ......................................... 2083

RESEARCH OF NOTE ........................................................................................................................................................................................ 2084 NEW-SENTIMENT: "Everything Is Awesome" American Consumers Are The Happiest In 11 Years ......................................................... 2084 NEW-SENTIMENT: For CNBC, 2014 Was The Worst Year. Ever. .............................................................................................................. 2085 NEW-SENTIMENT: An Astounding Number Of Americans Aren't Investing A Cent.................................................................................... 2086 SENTIMENT: US Households to Withdraw $430 Billion From Stocks In 2014 ............................................................................................ 2091 SENTIMENT: Elliott Wave's View from the Top ............................................................................................................................................ 2094

SITUATIONAL SUMMARY & ANALYSIS .................................................................................................................................................. 2098 BUSINESS CYCLE – CONSUMPTION ............................................................................................................................................................... 2102

RESEARCH WE FOLLOWED ....................................................................................................................................................................... 2102 LATEST ..................................................................................................................................................................................................... 2102

CHARTS & TABLES OF NOTE ..................................................................................................................................................................... 2106 NEW-CHARTS – Retail Sales Have 2 Mo Change Drop Dating Back to 2009 ........................................................................................ 2106 NEW-CHARTS – Retails Sales Mo-o-Mo Drops ....................................................................................................................................... 2106 NEW-CHARTS – Estimated Change in Monthly Sales for Retail & Food Services by Kind .................................................................... 2107 NEW-CHARTS – What Americans Spent Their "Gas Savings" On .......................................................................................................... 2107 NEW-CHARTS –Retail Sales-Previous Month Comparisons ................................................................................................................... 2109 NEW-CHARTS – No Offset to Plunging Gas Sales in Ex-Auto, Ex Gas .................................................................................................. 2110 NEW-CHARTS – Deflated Retail (ex Auto) Christmas and Aftermath ...................................................................................................... 2110 NEW-CHARTS – Retail Sales Control Group Y-o-Y and Sequential Change .......................................................................................... 2111 NEW-CHARTS – Total Household Debt Added Since the Great Financial Crisis .................................................................................... 2111 NEW-CHARTS – Total Household Debt Added in Q4 2014 ..................................................................................................................... 2112 NEW-CHARTS – Real Personal Consumption ......................................................................................................................................... 2112 CHARTS – Discretionary Retail Sales ....................................................................................................................................................... 2113 CHARTS – False Signal of Consumer Re-Leveraging .............................................................................................................................. 2114 CHARTS – Sub-Prime Lending Drives Spending ..................................................................................................................................... 2115 CHARTS – Retail Sales ............................................................................................................................................................................. 2115 CHARTS – Retail Sales - Details ............................................................................................................................................................... 2117 CHARTS – Consumer Credit Growth Since Cycle Peak ........................................................................................................................... 2118 CHARTS – Real Income is The Key Driver of Consumption Spending .................................................................................................... 2118 CHARTS – Consumer Credit Drove Household Debt in Q2 – Mortgage Debt Lagged ............................................................................ 2119 CHARTS – Discretionary Spending Showing Signs of Cracking .............................................................................................................. 2119 CHARTS - Real Disposable Personal Income .......................................................................................................................................... 2120 CHARTS - Real Consumption Expenditure ............................................................................................................................................... 2122 CHARTS - Consumer Credit Deleveraging ............................................................................................................................................... 2123 CHARTS - Core Retail Growth .................................................................................................................................................................. 2124

RESEARCH OF NOTE .................................................................................................................................................................................. 2125 NEW-RESEARCH - Headwinds for US Consumers & Home Buyers ....................................................................................................... 2125 NEW-RESEARCH - Golden Era of the 1950s/60s Was an Anomaly, Not the Default Setting ................................................................. 2126 RESEARCH - Golden Era of the 1950s/60s Was an Anomaly, Not the Default Setting .......................................................................... 2127 RESEARCH - 95% of Consumer Credit Lending Going towards Student & Car Loans ........................................................................... 2129 RESEARCH - Thanksgiving Retail Sales Results ..................................................................................................................................... 2131 RESEARCH - Gallup Survey Shows -10% Reduction in Christmas Buying Plans ................................................................................... 2134 RESEARCH - The Wal-Mart Measure or How the US Consumer Is the Global Engine .......................................................................... 2135 RESEARCH - A Sequential Decline in Wages .......................................................................................................................................... 2136 RESEARCH - Final Sales Signals Pending Potential Recession on the Horizon ..................................................................................... 2137 RESEARCH - Consumers Using Savings to Maintain Life Style .............................................................................................................. 2137 RESEARCH - The Destruction of America's Middle Class ....................................................................................................................... 2140 RESEARCH - Dramatic Slowing in Restaurant Business ......................................................................................................................... 2140 RESEARCH - Signs of Serious Troubles .................................................................................................................................................. 2141 RESEARCH - Falling Real Disposable Income means Falling Consumption ........................................................................................... 2144

SITUATIONAL SUMMARY & ANALYSIS ..................................................................................................................................................... 2146 BUSINESS CYCLE - GROWTH .......................................................................................................................................................................... 2151


CHARTS & TABLES OF NOTE ..................................................................................................................................................................... 2155 xNEW-CHARTS – Ratio of Coincident-to-Lagging Conference Board Indices ........................................................................................ 2155 NEW-CHARTS – GDP Q4 2014 Revised Components Table .................................................................................................................. 2156 NEW-CHARTS – Quarterly Change in % Contributions to GDP .............................................................................................................. 2156 NEW-CHARTS – Three Reasons CAPEX is Faltering .............................................................................................................................. 2156 NEW-CHARTS – ISM Rally Has Petered Out & Expected Inflation Has Fallen ....................................................................................... 2157 NEW-CHARTS – Philly Fed Rolling Over .................................................................................................................................................. 2158 NEW-CHARTS – US Profits & Sales Have Stalled ................................................................................................................................... 2158 NEW-CHARTS – Real GDP versus CAPEX ............................................................................................................................................. 2159 NEW-CHARTS – Change In Inventories – Inflated from Lack of Demand ............................................................................................... 2160 NEW-CHARTS – US GDP Revision for Q4-2014 ..................................................................................................................................... 2160 NEW-CHARTS – Quarterly GDP by Component Breakdown ................................................................................................................... 2161 CHARTS – Long Term US GDP Growth Estimates – FOMC versus CBO ............................................................................................... 2162


CHARTS – US Real Domestic Product – Running Out of Runway .......................................................................................................... 2162 CHARTS – Steadily Falling Real US Growth Estimates ........................................................................................................................... 2164 CHARTS – US Power Consumption Tells the Real Story of US Growth & De-Industrialization .............................................................. 2165 CHARTS – US Real Trade Gap (Ex-Petroleum) ....................................................................................................................................... 2165 CHARTS – Consecutive Quarters of Contracting Growth Looming .......................................................................................................... 2166 CHARTS – Bloomberg’s Consensus GDP Forecasts – 2011-2014.......................................................................................................... 2167 CHARTS – GDP Growth During Current Recovery Lags Past Expectations ........................................................................................... 2167 CHARTS – Trends of Output, Hours and Productivity .............................................................................................................................. 2168 CHARTS – Weak US Capacity Utilization ................................................................................................................................................. 2169 CHARTS – A US Recession Likely IF Liquidity is not increased and TAPER Sustained ......................................................................... 2169 CHARTS – Barron’s Sees 4% Growth – The Ultimate Contrarian Indicator ............................................................................................. 2170 CHARTS – Firms Revising Lower Q1 Growth on Weakening Retail Sales .............................................................................................. 2171 CHARTS – Negative Economic Surprises Began in November ............................................................................................................... 2171 CHARTS – What Americans Experience Daily and its Isn’t Growth ......................................................................................................... 2172 CHARTS - Manufacturing .......................................................................................................................................................................... 2173 CHARTS - Exports ..................................................................................................................................................................................... 2173 CHARTS - Durable Goods ......................................................................................................................................................................... 2174 CHARTS - NFIB Small Business CAPEX .................................................................................................................................................. 2174 CHARTS - US Manufacturing Conditions Deteriorating ............................................................................................................................ 2175

RESEARCH OF NOTE .................................................................................................................................................................................. 2176 NEW-RESEARCH - BEA Revises 4th Quarter 2014 GDP Growth Downward to 2.18% ......................................................................... 2176 NEW-RESEARCH - The U.S. Economy is Dead ...................................................................................................................................... 2177 NEW-RESEARCH - Q4 GDP Revised Down To 2.2% From 5.0%: Full Breakdown ............................................................................... 2180 RESEARCH - US Q1 GDP ........................................................................................................................................................................ 2182 RESEARCH - US GDP Growth Forecasts ................................................................................................................................................ 2187 RESEARCH - Economic Recoveries Don't Look Like This! ...................................................................................................................... 2187 RESEARCH - 2nd Worst Decade in Over 220 Years (And Getting Worse) ............................................................................................. 2188 RESEARCH - US Economy is being fundamentally transformed ............................................................................................................. 2190 RESEARCH - Shrinking CAPEX, Expanding Buybacks and Dividends ................................................................................................... 2193

REFERENCE - Prior Posts ............................................................................................................................................................................ 2197 RESEARCH - US Economic Recovery Has Peaked ................................................................................................................................. 2197

SITUATIONAL SUMMARY & ANALYSIS ..................................................................................................................................................... 2202 ECONOMIC CYCLE, INVESTMENT CYCLE, SECTOR ROTATION ................................................................................................................. 2206

US PUBLIC POLICY – STATE OF THE UNION DIRECTION & PRIORITES .......................................................................... 2213 RESEARCH WE FOLLOWED ....................................................................................................................................................................... 2214

NEW-LATEST ............................................................................................................................................................................................ 2214 BEGINNINGS OF SOCIAL UNREST & THE MILITARIZATION OF POLICE .......................................................................................... 2214 CORPORATE INVERSIONS ..................................................................................................................................................................... 2215 FERGUSON ............................................................................................................................................................................................... 2215 MILITARIZATION OF POLICE .................................................................................................................................................................. 2216 POLLS ........................................................................................................................................................................................................ 2217 INCARCERATION ..................................................................................................................................................................................... 2217 FLAWED TAX POLICY .............................................................................................................................................................................. 2218 MINIMUM WAGE ....................................................................................................................................................................................... 2218 SOCIAL CANCERS ................................................................................................................................................................................... 2218 CORRUPTION & MALFEASANTS ............................................................................................................................................................ 2218 INEQUALITY .............................................................................................................................................................................................. 2218 CREEPING SOCIALISM ............................................................................................................................................................................ 2218 POLICIAL PARALYSIS .............................................................................................................................................................................. 2219 STATE OF THE UNION ............................................................................................................................................................................. 2219 NSA-SECURITY-SURVEILLANCE COMPLEX......................................................................................................................................... 2219 OBAMACARE ............................................................................................................................................................................................ 2220 GENERAL PUBLIC POLICY...................................................................................................................................................................... 2222

STATE OF THE UNION - Direction & Priorities ............................................................................................................................................ 2223 NEW-STATE OF THE UNION – Remarks by the President in State of the Union Address – January 20

th, 2015 .................................. 2223

NEW-STATE OF THE UNION – Free College Wasn't Just a Give Away – It Was A Trial Balloon .......................................................... 2233 CHARTS & TABLES OF NOTE ..................................................................................................................................................................... 2236

NEW-CHARTS – The Cost of Healthcare By Country – Spending Per Person........................................................................................ 2236 NEW-CHARTS – The Bankrupt US “Healthcare” System......................................................................................................................... 2236 NEW-CHARTS – Rise in Number of Homeless Children .......................................................................................................................... 2237 NEW-CHARTS – One-Third of All Homeless Live in These 10 Cities ...................................................................................................... 2238 NEW-CHARTS – Trends in American Public Schooling Since 1970 ........................................................................................................ 2239 NEW-CHARTS – Size of US Army Since 1946 ......................................................................................................................................... 2239 CHARTS – Lack of Trust in Government to Handle International & Domestic Problems ......................................................................... 2240 CHARTS – Changing Presidential Stance ................................................................................................................................................ 2241 CHARTS – Public Support to Withdraw from Union .................................................................................................................................. 2241 CHARTS - US Incarceration Rate Out of Control ...................................................................................................................................... 2242

RESEARCH OF NOTE .................................................................................................................................................................................. 2243 NEW-POLICY - A 'Shadow" State of the Union ........................................................................................................................................ 2243 NEW-POLICY - Banks Remove the "Heart" of Dodd-Frank ...................................................................................................................... 2246 NEW-POLICY - Wall Street Moves to Put Taxpayers on the Hook for Derivatives Trades ...................................................................... 2250 NEW-POLICY - The Death Cross of American Business ......................................................................................................................... 2253 POLICY - The Death Cross of American Business ................................................................................................................................... 2253 POLICY - The State of the Union – “I have a Dream!” .............................................................................................................................. 2256


POLICY - A self-destructive path toward oblivion...................................................................................................................................... 2260 POLICY - Indictment of US Public, Fiscal & Monetary Policy ................................................................................................................... 2265 POLICY - The Crisis of Trust Continues to Worsen .................................................................................................................................. 2278 POLICY - The Stunning Truth about Inequality In America....................................................................................................................... 2279 POLICY - Pointing US towards Government Dependence ....................................................................................................................... 2280 POLICY - Yet another Game of Deception ................................................................................................................................................ 2284 POLICY - Obamacare A Flawed Public Policy Implementation ................................................................................................................ 2287 POLICY - Financial Repression and Manipulated Illusions ....................................................................................................................... 2290

Manipulating Bad Financial Data ........................................................................................................................................................... 2290 Manipulating Bad Nuclear Facts ............................................................................................................................................................ 2291 Manipulating Oil Spill Info ....................................................................................................................................................................... 2292 Manipulating Data on Other Environmental Issues ............................................................................................................................... 2292 Manipulating Food Safety Data .............................................................................................................................................................. 2293 Manipulating Health Safety Data ........................................................................................................................................................... 2293 Manipulating Metrics for War ................................................................................................................................................................. 2293 The Core Problem .................................................................................................................................................................................. 2293

POLICY - US Economic Decline is Obvious to Anyone Caring to Look ................................................................................................... 2294 POLICY - Policy Uncertainty and Confidence in Monetary Policy Direction is exposed........................................................................... 2297 POLICY - "What is good for GM is good for America" is no longer correct .............................................................................................. 2299 POLICY - Where is the Logic In US Public Policy ..................................................................................................................................... 2300 POLICY - What is the Real Driving Force Behind the New Immigration Law? ......................................................................................... 2303 POLICY - Crony Capitalism and How America Lost its Way! ................................................................................................................... 2306

SITUATIONAL SUMMARY & ANALYSIS ..................................................................................................................................................... 2310

MONETARY POLICY – TAPER IGNITES GLOBAL DOLLAR STRENGTH ........................................................................... 2315 RESEARCH WE FOLLOWED ............................................................................................................................................................................. 2315

NEW-LATEST ................................................................................................................................................................................................ 2315 TAPER IMPLEMENTATION & 2

ND HALF LIQUDITY SQUEEZE ................................................................................................................. 2316

THE BERNANKE – YELLEN/FISHER TRANSITION ................................................................................................................................... 2318 FED – POST DECEMBER TAPER ............................................................................................................................................................... 2320 FED – PRE-DECEMBER TAPER ................................................................................................................................................................. 2321 TAPER ........................................................................................................................................................................................................... 2324

CHARTS & TABLES OF NOTE ........................................................................................................................................................................... 2327 NEW-CHARTS: Fed is Allowing Adjusted Monetary Base to Fall ................................................................................................................ 2327 NEW-CHARTS: Federal Reserve Monetary Base Since 1918 ..................................................................................................................... 2328 NEW-CHARTS: US Nominal GDP & Credit Market Debt Owed Since 1952 ............................................................................................... 2328 NEW-CHARTS: Fed Balance Sheet & Policy Rate Target ........................................................................................................................... 2329 NEW-CHARTS: Cash Balances versus Total Reserve Balances................................................................................................................. 2329 NEW-CHARTS: Fed Balance Sheet and QE Versions ................................................................................................................................. 2330 NEW-CHARTS: Major US Financial Institutional Leverage Ratios ............................................................................................................... 2331 NEW-CHARTS: Fed Balance Sheet Composition ........................................................................................................................................ 2332 NEW-CHARTS: Cash Bank Holdings............................................................................................................................................................ 2333 CHARTS: Debt Needed to Create $1 GDP ................................................................................................................................................... 2334 CHARTS: Markets May be Ahead of Slowing Liquidity Flow Rates ............................................................................................................. 2334 CHARTS: Primary Dealer Repo Fails............................................................................................................................................................ 2335 CHARTS: Repo Volumes .............................................................................................................................................................................. 2335 CHARTS: Repo volumes – Agency + MBS ................................................................................................................................................... 2336 CHARTS: Repo volumes – Agency + MBS ................................................................................................................................................... 2336 CHARTS: Fed’s Reverse Repo Agreements ................................................................................................................................................ 2337 CHARTS: Why Does the Fed Need Such a Large Options Trading Contract with ALL Exchanges? .......................................................... 2338 CHARTS: 10 Year Yield Suggests End to Yellen Honeymoon ..................................................................................................................... 2339 CHARTS: Capitalism Doesn’t Work Without Savings for Investment – Where is the Savings?” ................................................................. 2339 CHARTS: Net National Savings Rate............................................................................................................................................................ 2340 CHARTS: Mispricing of Risk Reaching Extremes ......................................................................................................................................... 2340 CHARTS: Unless you were a Banker, ZIRP Has Accomplished Zilch! ........................................................................................................ 2341 CHARTS: Ratio of Capital v Consumer Goods Production .......................................................................................................................... 2342 CHARTS: Fed’s Targeted Credit Growth Opportunities................................................................................................................................ 2343 CHARTS: 90 Day Delinquent Loans by Type – Student Loans a Growing Problem .................................................................................... 2343 CHARTS: A Third of US GDP is Now Going to Repay Interest & Principle on Loans ................................................................................. 2344 CHARTS: M2 Money Velocity ....................................................................................................................................................................... 2346 CHARTS: Net Foreign Purchases of US Treasuries ..................................................................................................................................... 2346 CHARTS: US Increase in Money Printing versus GDP ................................................................................................................................ 2347 CHARTS: US Consumer’s Failed Attempt at Deleveraging .......................................................................................................................... 2348 CHARTS: Traditional Bank Liabilities v GDP ................................................................................................................................................ 2349 NEW- RATES: Is There a Zero Bound for US Rates? .................................................................................................................................. 2350 RATES: Historical Policy Rates ..................................................................................................................................................................... 2351 RATES: Debt ................................................................................................................................................................................................. 2352 RATES: Stages of Fed Forward Guidance ................................................................................................................................................... 2352 RATES: Real Interest Rates .......................................................................................................................................................................... 2353 RATES: Eight Rate Issues for the Fed – Up or Down................................................................................................................................... 2354 NEW-INFLATION: Market-Based Inflation Expectations on the Rebound ................................................................................................... 2355 NEW-INFLATION: US Inflation – Education-Medical-Food-Housing versus CPI ......................................................................................... 2355 INFLATION: Price Inflation through Decline in Purchasing Power of the Dollar .......................................................................................... 2357 INFLATION: Official Inflation Picture Remains Subdued .............................................................................................................................. 2357 INFLATION: Cost of Eating ........................................................................................................................................................................... 2358


INFLATION: The Cost of Breakfast ............................................................................................................................................................... 2359 INFLATION: July 4

th Cost of Beef Burger ...................................................................................................................................................... 2360

INFLATION: Bloomberg’s July 4th Barbecue Index ....................................................................................................................................... 2360

INFLATION: Butter on a Roll ......................................................................................................................................................................... 2361 INFLATION: Back to School Shocker............................................................................................................................................................ 2362 INFLATION: Where Inflation Isn’t (Yet) - Energy .......................................................................................................................................... 2363 INFLATION: Most Commonly Used Items are rising faster than CPI ........................................................................................................... 2364 INFLATION: Back to School Shocker............................................................................................................................................................ 2364

RESEARCH OF NOTE ........................................................................................................................................................................................ 2365 NEW-RESEARCH – Global Currency Wars & Deflationary Pressures ........................................................................................................ 2365 NEW-RESEARCH – Debt is a promise of something of value in the future ................................................................................................. 2370 NEW-RESEARCH – Is NIRP Coming To America? ..................................................................................................................................... 2378 NEW-RESEARCH – Deflation is a Problem for the Fed With Shrinking Growth Rates ............................................................................... 2381

SITUATIONAL SUMMARY & ANALYSIS ............................................................................................................................................................ 2388 REPO FAILS .................................................................................................................................................................................................. 2389 REVERSE REPO – Fed’s Stealth Program to Protect Markets .................................................................................................................... 2390

FISCAL POLICY – A SHRINKING BUDGET DEFICIT IS NOT ALL GOOD NEWS ................................................................. 2392 RESEARCH WE FOLLOWED ............................................................................................................................................................................. 2392

A SHRINKING BUDGET DEFICIT IS NOT ALL GOOD NEWS ................................................................................................................... 2392 20 U.S. companies that paid 0% in taxes ............................................................................................................................................................ 2392

FISCAL MATTERS ........................................................................................................................................................................................ 2394 CHARTS & TABLES OF NOTE ........................................................................................................................................................................... 2396

NEW-CHARTS – US Federal Government Debt to GDP ............................................................................................................................. 2396 NEW-CHARTS – Mandatory versus Discretionary Spending ....................................................................................................................... 2396 NEW-CHARTS – Drivers of US Debt ............................................................................................................................................................ 2397 NEW-CHARTS – State & Local Tax Revenues ............................................................................................................................................ 2398 NEW-CHARTS – Total Government Expenditures versus Real GDP .......................................................................................................... 2398 NEW-CHARTS – How Banks Use “Dividend Arbitrage” to Reduce Client Tax ............................................................................................ 2399 NEW-CHARTS – US Debt About to Pass $18T and 102% of GDP ............................................................................................................. 2399 NEW-CHARTS – 7 Corporate CEOs Paid More Than Corporation Paid Tax .............................................................................................. 2400 NEW-CHARTS • America’s 100 highest-paid CEOs, 29 received more in pay than company federal income taxes ............................ 2401 CHARTS – Employed Population of America – Tax Exposure ..................................................................................................................... 2404 CHARTS – Interest Costs to Dwarf Virtually Every Federal Expense .......................................................................................................... 2404 CHARTS – Looming Increases in Baby-Boomer Driven Deficits .................................................................................................................. 2404 CHARTS – Federal GAAP Based Deficit Growth & Federal Obligations Growth ......................................................................................... 2405 CHARTS – US Has the Highest “Nominal” Corporate Tax Rate in the Industrialized World ....................................................................... 2406 CHARTS – US Non-Financial Debt-to-GDP Since 1952 .............................................................................................................................. 2406 CHARTS - US Government Budget Surplus / Deficit .................................................................................................................................... 2407 CHARTS - Government Receipts & Outlay Growth Improves Significantly .................................................................................................. 2407 CHARTS - Federal Budget Surplus / Deficit .................................................................................................................................................. 2407 CHARTS - Real Federal Government Purchases ......................................................................................................................................... 2408 CHARTS - US Trade Balance Improvement ................................................................................................................................................. 2408 CHARTS - Growth & Jobs ............................................................................................................................................................................. 2409 CHARTS - Taxes & Spending ....................................................................................................................................................................... 2413 CHARTS - Politics & Policy ........................................................................................................................................................................... 2416 CHARTS - The Stakes ................................................................................................................................................................................... 2417 CHARTS - Official Fiscal Deficit & Debt ........................................................................................................................................................ 2419 CHARTS - Payroll Tax Holiday ...................................................................................................................................................................... 2420 CHARTS - Tax Rate Comparisons ................................................................................................................................................................ 2421 CHARTS - Risk Perceptions .......................................................................................................................................................................... 2422 CHARTS - 2013 Quarterly Impact ................................................................................................................................................................. 2423 CHARTS - Budget Deficit .............................................................................................................................................................................. 2424 CHARTS - Sovereign Debt ............................................................................................................................................................................ 2426 CHARTS - State & Local Government Drag ................................................................................................................................................. 2427 CHARTS - Government Dependence ........................................................................................................................................................... 2430 CHARTS - Coming Demographic Shock ....................................................................................................................................................... 2430 CHARTS - Fiscal Cliff Outcome .................................................................................................................................................................... 2434

BUDGET - What You Need to Know ................................................................................................................................................................... 2436 BUDGET - Political Budget Cowardice and Capitulation .............................................................................................................................. 2437 BUDGET - Political Budget Cowardice and Capitulation - 2 ......................................................................................................................... 2439 BUDGET - The Ultimate in Political Can-Kicking! ......................................................................................................................................... 2441 BUDGET - The Next Step in the Collapse Of The Dollar .............................................................................................................................. 2444 BUDGET - As Represented and Spun for the Public .................................................................................................................................... 2447 BUDGET - Implications .................................................................................................................................................................................. 2448 BUDGET - A Budget That Institutionalizes Big Government ........................................................................................................................ 2451 BUDGET - The Secrets in The Budget ......................................................................................................................................................... 2455

RESEARCH OF NOTE ........................................................................................................................................................................................ 2458 NEW-RESEARCH – Private Pension Fund Levels Fall Behind .................................................................................................................... 2458 NEW-RESEARCH - State & Local Government Crisis ................................................................................................................................. 2462 NEW-RESEARCH - CROMNIBUS - The Real Reason Why It Needed to be Passed ................................................................................. 2468 NEW-RESEARCH - $89.5 trillion in liabilities ................................................................................................................................................ 2470 NEW-RESEARCH - The Federal Government is "cooking the books"! ........................................................................................................ 2474


NEW-RESEARCH – Professor Laurence Kotlikoff on the $210T “Fiscal Gap” ............................................................................................ 2478 NEW-RESEARCH – NIA 2015 U.S. Debt Crisis Report ............................................................................................................................... 2481 RESEARCH - Budget Deficit Shrinking ......................................................................................................................................................... 2490 RESEARCH - Avoiding Taxes ....................................................................................................................................................................... 2492 RESEARCH - A Confluence Of Risky Economic Events .............................................................................................................................. 2493 RESEARCH - Everyone Hates Sequestration, But Few Can Agree On What to Cut .................................................................................. 2494 RESEARCH - $70T Off-Balance Sheet Federal Liabilities ........................................................................................................................... 2496

BUDGET SELLOUT ............................................................................................................................................................................................. 2499 BUDGET AGREEMENT ................................................................................................................................................................................ 2502 GOVERNMENT SHUTDOWN ....................................................................................................................................................................... 2503

SITUATIONAL SUMMARY & ANALYSIS ............................................................................................................................................................ 2504

KEY DRIVERS – MUST HAVE CATALYSTS OF CHANGE ................................................................................................... 2506 EMPLOYMENT .................................................................................................................................................................................................... 2510


CHARTS & TABLES ...................................................................................................................................................................................... 2514 NEW-CHARTS – Industries That Have Been Hiring ................................................................................................................................. 2514 NEW-CHARTS – Top 5 Industry Cuts ....................................................................................................................................................... 2514 NEW-CHARTS – Employees in the US by Industry .................................................................................................................................. 2514 NEW-CHARTS – Workers Aged 55 and Over ........................................................................................................................................... 2515 NEW-CHARTS – Percentage of Over 65 in Labor Force.......................................................................................................................... 2516 NEW-CHARTS – Non Participation Has Stabilized? ................................................................................................................................. 2516 NEW-CHARTS – Share of Population Retired .......................................................................................................................................... 2516 NEW-CHARTS – Goods –Producing Workers versus Government Payroll ............................................................................................. 2517 NEW-CHARTS – Not in the Labor Force................................................................................................................................................... 2517 NEW-CHARTS – Labor Force Participation versus Not in the Labor Force ............................................................................................. 2518 CHARTS – Small Business Not the Focus of A Consolidating Banking Industry ..................................................................................... 2520 CHARTS – Those Leaving Work Force Likely Not to Return .................................................................................................................... 2520 CHARTS – Workers Not In the Labor Force Soars ................................................................................................................................... 2521 CHARTS – The Trend of a “Breadwinner Economy” ................................................................................................................................ 2521 CHARTS – Trend of a Goods Producing Economy .................................................................................................................................. 2522 CHARTS – Trend of a “Part Time” Working Economy .............................................................................................................................. 2522 CHARTS – Jobs in HES = Health, Education and Social Services .......................................................................................................... 2523 CHARTS – NFP Jobs Less HES ............................................................................................................................................................... 2523 CHARTS – 1,446,000 Fewer People Working Full Time Aug ’14 the Aug ‘08.......................................................................................... 2524 CHARTS – Employment is Part Time in Food Services and Drinking Places .......................................................................................... 2524 CHARTS – QE Has A Diminishing Effect on US Job Creation ................................................................................................................. 2525 CHARTS – Labor Participation Rate ......................................................................................................................................................... 2525 CHARTS – US Industrial Production versus Manufacturing Jobs............................................................................................................. 2526 CHARTS – Total Compensation Growth Lingering at 2.9 Percent ........................................................................................................... 2526 CHARTS – The Startling Long Term Unemployed Statistics .................................................................................................................... 2527 CHARTS – Finding Work That Pays Enough to Support a Family Is Nearly Impossible ......................................................................... 2528 CHARTS – Labor Force Participation by Age ........................................................................................................................................... 2529 CHARTS - America Becoming a Country of Part Time Workers .............................................................................................................. 2530 CHARTS - Wages & Salary Accruals / GDP ............................................................................................................................................. 2531 CHARTS – US Employment/Population Ratio Total in Labor Force ......................................................................................................... 2531 CHARTS – US Industrial Production v Manufacturing Jobs...................................................................................................................... 2531 CHARTS - Part-Time Employment ............................................................................................................................................................ 2532 CHARTS - Nonfarm Payrolls Y-O-Y DECLINE ......................................................................................................................................... 2532 CHARTS - Hiring Stalled at 200K Per Month (Approximates ONLY the New People Entering Workforce)............................................ 2533 CHARTS - The Under-Employment Gap ................................................................................................................................................... 2533 CHARTS – Staycations A Sign of the FEAR of Job Loss & Competition for Jobs ................................................................................... 2534

RESEARCH OF NOTE .................................................................................................................................................................................. 2535 EMPLOYMENT - Job = Just Over Broke ................................................................................................................................................... 2535 EMPLOYMENT - Working Age Americans without a Job Has Risen By 27 Million Since 2000 .............................................................. 2538 EMPLOYMENT - At the Core of the US’ Chronic Unemployment is a Lack of Private Investment.......................................................... 2540 EMPLOYMENT - With and Without Obama's Recovery Plan ................................................................................................................... 2542 EMPLOYMENT - Millennials Devastated As American Dream Becomes Nightmare for Most ................................................................ 2543 EMPLOYMENT - 30 Mind-blowing Statistics about Americans Under The Age Of 30............................................................................. 2545 EMPLOYMENT - Going Nowhere Even With All Jobs Becoming Temporary Jobs and the Participation Rate Plummeting .................. 2548 EMPLOYMENT - Low-Wage Jobs Bias Continues to Hamper U.S. Recovery......................................................................................... 2549 EMPLOYMENT - A REAL Family Wage versus Part Time & HES ........................................................................................................... 2550 EMPLOYMENT - It is as much About the Quality, as the Quantity of Jobs .............................................................................................. 2557

REFERENCE - Prior Posts ............................................................................................................................................................................ 2560 1- CAPITAL SPENDING ............................................................................................................................................................................ 2560 2- SMALL BUSINESS OPTIMISM ............................................................................................................................................................. 2563 3- DEMOGRAPHIC SHIFT ........................................................................................................................................................................ 2567

REAL DISPOSABLE INCOME ............................................................................................................................................................................ 2578 RESEARCH WE FOLLOWED ....................................................................................................................................................................... 2578

LATEST ..................................................................................................................................................................................................... 2578 STUDENT LOANS ..................................................................................................................................................................................... 2578

CHARTS & TABLES ...................................................................................................................................................................................... 2581 NEW-CHARTS – Real Median Household Income in the United States .................................................................................................. 2581 NEW-CHARTS – Food Stamps – Number of Participants ........................................................................................................................ 2581


NEW-CHARTS – Food Stamps – Number of Participants per Employed ................................................................................................ 2582 NEW-CHARTS – Food Stamps – Cost Per Participant per Month ........................................................................................................... 2582 NEW-CHARTS – Food Stamps – Annual Program Cost .......................................................................................................................... 2583 NEW-CHARTS – Education, Medical, Food, Housing Costs versus CPI ................................................................................................. 2583 NEW-CHARTS – Rising Sub-Prime .......................................................................................................................................................... 2584 NEW-CHARTS – Early Delinquencies on US Car Loans Has Been Rising ............................................................................................. 2585 NEW-CHARTS – Student Loan Default Rates By Graduating Year ......................................................................................................... 2586 NEW-CHARTS – Student Loan Graduating Debt Levels – Class 2009 ................................................................................................... 2586 NEW-CHARTS – Student Loan Borrowing Trends ................................................................................................................................... 2588 NEW-CHARTS – Increasing Government Entitlement Dependency ........................................................................................................ 2588 CHARTS – Increasing Government Entitlement Dependency .................................................................................................................. 2589 CHARTS – US Household Balance Sheet ................................................................................................................................................ 2589 CHARTS – Middle Class Not Sharing In Per Capita GDP ........................................................................................................................ 2590 CHARTS – Real Personal Consumption Expenditures ............................................................................................................................. 2591 CHARTS – Inflation Adjusted Net Worth for Typical Family Falls 36% in 10 Years ................................................................................. 2592 CHARTS – Even Wal-Mart Discounting Can’t Keep Up With Government Inflation ................................................................................ 2592 CHARTS – Food Stamps Now Part of the American Way of Life ............................................................................................................. 2593 CHARTS – Inflation Adjusted Hourly Earnings Remain Weak .................................................................................................................. 2594 CHARTS – the Country’s Central Economic Challenge according to EPI ................................................................................................ 2595 CHARTS – The New Sub-Prime Boom – Auto Loans ............................................................................................................................... 2595 CHARTS – Real Median Income Falls as Real Rates Turn Negative....................................................................................................... 2596 CHARTS – Disposable Personal Income Per Capita ................................................................................................................................ 2596 CHARTS – Real Disposable Income is Now Contracting ......................................................................................................................... 2597 CHARTS – This is a Structural .................................................................................................................................................................. 2597 CHARTS – Growing “Temp Wages” Impacting Real Disposable Income in America .............................................................................. 2598 CHARTS – Real Disposable Income per Capita ....................................................................................................................................... 2599 CHARTS - Household Incomes a Sign of a Collapsing Middle Class ....................................................................................................... 2599 CHARTS - Food Stamps Now 14% of US Grocery Store Sales ............................................................................................................... 2600

RESEARCH OF NOTE .................................................................................................................................................................................. 2601 NEW-RESEARCH – Fed's Household Credit Report Confirms It Is A Student And Car Loan "Recovery".............................................. 2601 RESEARCH – How Can a 70% Consumption Have a Recovery When Real DI/Capital Falls ................................................................. 2603 RESEARCH - The Facts are clear. The US Standard of Living is Falling ................................................................................................ 2604 RESEARCH - The Facts are clear. The US Standard of Living is falling .................................................................................................. 2605 RESEARCH - Standards of Living and Artificial Expectations .................................................................................................................. 2607 RESEARCH - A Lack of Demand in US Economy .................................................................................................................................... 2609 RESEARCH - Full Time Jobs or Food Stamps & Disability? .................................................................................................................... 2610

REFERENCE - Prior Posts ............................................................................................................................................................................ 2612 STANDARD OF LIVING - Salary Compression ........................................................................................................................................ 2612 DISPOSABLE INCOME - 66M (20%) Below $28.8/Year Subsistence Level ........................................................................................... 2613 FOOD STAMPS - 46,405,204 Individuals, 22,257,647 Households below Poverty Line ......................................................................... 2614 DISPOSABLE INCOME - Bad Even in Nominal Terms ............................................................................................................................ 2616 INFLATION - It's There but the Government Doesn't Account for it. ........................................................................................................ 2616

US RESIDENTIAL REAL ESTATE ...................................................................................................................................................................... 2618 RESEARCH WE FOLLOWED ....................................................................................................................................................................... 2618

LATEST ..................................................................................................................................................................................................... 2618 CHARTS & TABLES ...................................................................................................................................................................................... 2622

NEW-POLICY – San Francisco Y/Y Price Increase Indicator ................................................................................................................... 2622 NEW-POLICY – Meaningful Housing Recovery On Hold Until Spring...................................................................................................... 2623 NEW-POLICY – Housing Starts ................................................................................................................................................................ 2623 NEW-POLICY – Existing & New Home Sales ........................................................................................................................................... 2624 NEW-POLICY – Home Ownership Rate versus Rental Rate ................................................................................................................... 2624 NEW-POLICY – Mortgages – Past Due and Foreclosure Starts .............................................................................................................. 2625 NEW-POLICY – Mortgage Spreads .......................................................................................................................................................... 2625 NEW-POLICY – Lumber Sales .................................................................................................................................................................. 2626 CHARTS – Total Real Estate Sales Activity vs. Mortgage Rates ............................................................................................................. 2628 CHARTS – Home Price Slowdown Underlines Weak Demand ................................................................................................................ 2629 CHARTS – National Home Price Medians & Indexes ............................................................................................................................... 2630 CHARTS – Multi-Family Shift Underway In America ................................................................................................................................. 2630 CHARTS – Housing Completions Show Shift to Multi-Family Units ......................................................................................................... 2630 CHARTS – New Home Prices ................................................................................................................................................................... 2631 CHARTS – Housing Starts and Completions ............................................................................................................................................ 2632 CHARTS – DJ Home Construction Index .................................................................................................................................................. 2632 CHARTS – Consumer Attitudes About Home Ownership ......................................................................................................................... 2633 CHARTS – Trailing 12 Month Average Median US New Home Sale Prices ............................................................................................ 2634 CHARTS – US New Home Demand Still Flagging .................................................................................................................................... 2634 CHARTS – Housing Completions – Single Family Versus Multifamily ..................................................................................................... 2635 CHARTS – Troubling Technicals in Housing Starts .................................................................................................................................. 2635 CHARTS – NAHB Sentiment versus Mortgage Applications .................................................................................................................... 2636 CHARTS - Serious Housing & Household Spending Headwinds ............................................................................................................. 2636 CHARTS - Double Top in Construction Index ........................................................................................................................................... 2636 CHARTS - The Real Cost of Buying a Home 6.7 X Average Salary......................................................................................................... 2637 CHARTS - Household Formations ............................................................................................................................................................. 2637 CHARTS – Falling Originations ................................................................................................................................................................. 2638 CHARTS – Falling Credit Scores ............................................................................................................................................................... 2639 CHARTS – Falling Down payments ........................................................................................................................................................... 2639 CHARTS – Household Formations & First Time Buyers Collapse............................................................................................................ 2640


CHARTS – Classic Technical Analysis Chart Showing Housing in an Uncompleted Corrective Wave ................................................... 2640 CHARTS - Housing Starts ......................................................................................................................................................................... 2641 CHARTS - Composition of Housing Sales ................................................................................................................................................ 2641 CHARTS - New Home Sales ..................................................................................................................................................................... 2642 CHARTS - Existing Residential Supply ..................................................................................................................................................... 2642 CHARTS - Housing Starts ......................................................................................................................................................................... 2643

RESEARCH OF NOTE .................................................................................................................................................................................. 2645 RESEARCH - BlackRock's Fink Warns Housing More "Unsound" Now Than During Last Bubble ......................................................... 2645 RESEARCH - A Single Family Income Insufficient and In Many Cases Two Is Insufficient ..................................................................... 2646 RESEARCH - Insight: A new wave of U.S. mortgage trouble threatens ................................................................................................... 2648 RESEARCH - Household Formation Drives Residential Real Estate ....................................................................................................... 2650

SITUATIONAL SUMMARY & ANALYSIS ..................................................................................................................................................... 2653 OVERVIEW ................................................................................................................................................................................................ 2653 CURRENT HOME OWNERSHIP TRENDS .............................................................................................................................................. 2658 $6.5 TRILLION IN MIDDLE CLASS NET WORTH EVAPORATES .......................................................................................................... 2661 NATIONAL STATISTICS: PRICE .............................................................................................................................................................. 2662 NATIONAL STATISTICS: EXISITNG HOME SALES ............................................................................................................................... 2664 NATIONAL STATISTICS: NEW HOME SALES ........................................................................................................................................ 2666 HOUSING: Even a Never Seen Before 30 Year Mortgage Rate can't Help Housing ............................................................................... 2667 HOUSING: Soaring FHA Delinquencies .................................................................................................................................................... 2668

US COMMERCIAL RETAIL REAL ESTATE ....................................................................................................................................................... 2673 RESEARCH WE FOLLOWED ....................................................................................................................................................................... 2673

LATEST ..................................................................................................................................................................................................... 2673 CHARTS & TABLES OF NOTE ..................................................................................................................................................................... 2677

NEW-CHARTS – Vacancy Rate - Indoor Malls versus Strip Malls ........................................................................................................... 2677 CHARTS – McDonald’s Global Sales Fall 2.5% - 35,000 Franchise Operators In Trouble...................................................................... 2677 CHARTS – McDonald’s US Same Store Sales Down ~4% Y-o-Y ............................................................................................................ 2678 CHARTS – Top US Franchise Defaulters ................................................................................................................................................. 2678 CHARTS – Online Retailers Beginning to Dominate World’s Largest Retailers by Market Cap .............................................................. 2679 CHARTS – Shippers Being Squeezed By Online Retailers ...................................................................................................................... 2680 CHARTS – Consumer Discretionary Underperforming Consumer Staples – Signs of Increasing Squeeze ............................................ 2680 CHARTS – Discretionary Retail Sales Trend ............................................................................................................................................ 2680 CHARTS – US Retail Sales Ex-Auto & Parts ............................................................................................................................................ 2681 CHARTS – Retail Sales Ex-Auto Adjusted for Inflation & Population Growth .......................................................................................... 2683 CHARTS – Retail Space Opened Pre-2008 versus Current Rate ............................................................................................................ 2684 CHARTS – CMBS Recovered Somewhat but Malls In Trouble ................................................................................................................ 2684 CHARTS – Department Store Sales Continue to Erode ........................................................................................................................... 2685

RESEARCH OF NOTE .................................................................................................................................................................................. 2687 COMMERCIAL REAL ESTATE - Capture market share and get the most out of the consumers that are in our stores ......................... 2687 COMMERCIAL REAL ESTATE - McDonalds Has Worst Month In A Decade ......................................................................................... 2688 COMMERCIAL REAL ESTATE - August Retail Sales: Post-Winter Bounce Fading Fast ....................................................................... 2688 COMMERCIAL REAL ESTATE - Weakness reported in restaurants, food service and processors and some retailers ........................ 2693 COMMERCIAL REAL ESTATE - Why Aren't "Confident" Consumers Spending? ................................................................................... 2694 COMMERCIAL REAL ESTATE - Retail Sales Have not Recovered to the 2007 Pre-Recession Level .................................................. 2696 COMMERCIAL REAL ESTATE - Why Retail Sales Are Faltering - 60% of Households Have No Real Income Gains .......................... 2699 COMMERCIAL REAL ESTATE - Wal-Mart Reduces Guidance - Again! ................................................................................................. 2702 COMMERCIAL REAL ESTATE - 35,000 Franchise Operators in Trouble ............................................................................................... 2703 COMMERCIAL REAL ESTATE - Retail Furniture Sales Collapse ............................................................................................................ 2704 COMMERCIAL REAL ESTATE - Lower Prices & Discounting Taking a Toll ........................................................................................... 2705 COMMERCIAL REAL ESTATE - Retail Sales Weaken on Price Discounting.......................................................................................... 2706 COMMERCIAL REAL ESTATE - Wal-Mart Looks to Grow by Embracing Smaller Stores ...................................................................... 2707 COMMERCIAL REAL ESTATE - INEQUALITY leads to Economic Adjustments .................................................................................... 2713 COMMERCIAL REAL ESTATE - A Bad Start to the Q Earnings Season ................................................................................................ 2714 COMMERCIAL REAL ESTATE - Gallup Highlights Consumers are “straining against rising prices" ..................................................... 2715 COMMERCIAL REAL ESTATE - Markets Being "Duped" by Misinterpreting Misleading Data ............................................................... 2718 COMMERCIAL REAL ESTATE - Rising Beef Costs ................................................................................................................................. 2719 COMMERCIAL REAL ESTATE - - Rising "Prime" Retail Rents ............................................................................................................... 2723 COMMERCIAL REAL ESTATE - Tablets Are Making Waiters Obsolete ................................................................................................. 2725 COMMERCIAL REAL ESTATE - Weakness in RETAIL Broadens ........................................................................................................... 2727 COMMERCIAL REAL ESTATE - Credit Spending Marginally Increasing - But Now on More Expensive Non-Discretionary ................. 2728 COMMERCIAL REAL ESTATE - Darden Results Disappoint as Olive Garden Sales Keep Declining & Sells Red Lobster .................. 2729 COMMERCIAL REAL ESTATE - Commercial Mortgage-Backed Securities: Hot ... But Very Dangerous .............................................. 2731 COMMERCIAL REAL ESTATE - The Dollar Tree Uptick in its earnings before following economic downturns ..................................... 2738 COMMERCIAL REAL ESTATE - E-Commerce Industry Is About To Explode......................................................................................... 2740 COMMERCIAL REAL ESTATE - Retailers' Profits Miss By Most In 13 Years: "Consumer Is Not Back" ................................................ 2741 COMMERCIAL REAL ESTATE - Imploding Retail Floor Space Requirements ....................................................................................... 2743 COMMERCIAL REAL ESTATE - Family Dollar to cut jobs, shut 370 stores as sales fall ........................................................................ 2746 COMMERCIAL REAL ESTATE - The Death of a 71% Consumption Driven Economy ........................................................................... 2748 COMMERCIAL REAL ESTATE - Getting Worse Fast .............................................................................................................................. 2750 COMMERCIAL REAL ESTATE - Unfolding Implosion .............................................................................................................................. 2752 COMMERCIAL REAL ESTATE - Unfolding Implosion - II ......................................................................................................................... 2753 COMMERCIAL REAL ESTATE - Financial Crisis II Coming..................................................................................................................... 2758 COMMERCIAL REAL ESTATE - Indoor Mall Retail in Trouble ................................................................................................................ 2765 COMMERCIAL REAL ESTATE - Mortgage bonds reflect diverging fortunes of US malls ....................................................................... 2768 COMMERCIAL REAL ESTATE - Dead Mall Syndrome: The Self-Reinforcing Death Spiral of Retail ..................................................... 2770 COMMERCIAL REAL ESTATE - The First Domino to fall: Retail-CRE (Commercial Real Estate) ......................................................... 2772


COMMERCIAL REAL ESTATE - After Seven Lean Years: US Commercial Real Estate: The Present Position and Future Prospects 2777 COMMERCIAL REAL ESTATE - Retail Sales Cannibalization ................................................................................................................ 2784 COMMERCIAL REAL ESTATE - Tsunami of Retail Store Closings and Downsizings Coming ............................................................... 2785 COMMERCIAL REAL ESTATE - Thanksgiving Retail Sales Results ....................................................................................................... 2788

SITUATIONAL SUMMARY & ANALYSIS ..................................................................................................................................................... 2792 OVERVIEW ................................................................................................................................................................................................ 2792 NATIONAL STATISTICS: COMMERCIAL REAL ESTATE ....................................................................................................................... 2793

SPECIAL FOCUS .................................................................................................................................................................. 2799 NEW-YELLEN’S HUMPHREY HAWKINS TESTIMONY .................................................................................................................................... 2799

NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................. 2799 The Testimony was More about Whether to Audit the Fed or Not? .......................................................................................................... 2799

AUDIT THE FED .................................................................................................................................................................................................. 2799 CHARTS OF NOTE ....................................................................................................................................................................................... 2801

NEW-HUMPHREY-HAWKINS – 5-to-10 Year Forward Inflation .............................................................................................................. 2801 NEW-HUMPHREY-HAWKINS – Wealth to Income Ratio ......................................................................................................................... 2801 NEW-HUMPHREY-HAWKINS – Consumer Sentiment and Income Expectations .................................................................................. 2802 NEW-HUMPHREY-HAWKINS – Private Housing Starts and Permits ...................................................................................................... 2803 NEW-HUMPHREY-HAWKINS – New and Existing Home Sales .............................................................................................................. 2803 NEW-HUMPHREY-HAWKINS – Mortgage Interest Rates and Refinance Activity .................................................................................. 2804 NEW-HUMPHREY-HAWKINS – US Trade and Current Account ............................................................................................................. 2805 NEW-HUMPHREY-HAWKINS – US Net Financial Flows ......................................................................................................................... 2805 NEW-HUMPHREY-HAWKINS – Change is Real Government Expenditures On Consumption and Investment .................................... 2806 NEW-HUMPHREY-HAWKINS – Yield On Nominal US Treasury Securities ............................................................................................ 2806 NEW-HUMPHREY-HAWKINS – Bank Holding Company Profitability...................................................................................................... 2807

RESEARCH OF NOTE .................................................................................................................................................................................. 2808 NEW-HUMPHREY-HAWKINS – Prepared Testimony - Transcript .......................................................................................................... 2808 NEW-HUMPHREY-HAWKINS – Congressional Monetary Report ........................................................................................................... 2811 NEW-HUMPHREY-HAWKINS – Yellen Secures More Flexibility for 'Patient' Fed .................................................................................. 2812 NEW-HUMPHREY-HAWKINS – Should the Fed be Independent? 100 Points In Examining the Fed’s Track Record .......................... 2814 NEW-HUMPHREY-HAWKINS – Yellen Encourages More Levered Risk Taking in Markets ................................................................... 2823

SPECIAL SUPPLEMENT ....................................................................................................................................................... 2830 FLOWS ................................................................................................................................................................................................................. 2830

NEW-LIQUIDITY FLOWS – QE Is Debt Cancellation ................................................................................................................................... 2830 NEW-LIQUIDITY FLOWS – The Most Profitable Organization In History .................................................................................................... 2831 NEW-LIQUIDITY FLOWS – Now On The Endangered Species List: Bond Traders .................................................................................... 2832 NEW-LIQUIDITY FLOWS – The ECB’s Bazooka Should Send European Stocks Higher ........................................................................... 2835 NEW-LIQUIDITY FLOWS – Downdraft Hits Emerging-Market Capital Flows - Bloomberg ......................................................................... 2836 NEW-LIQUIDITY FLOWS – 2015 Could Be A Tough Year For Stocks ........................................................................................................ 2837 NEW-LIQUIDITY FLOWS – EU Stocks negatively correlated to the ECB's own B/S .................................................................................. 2838 NEW-LIQUIDITY FLOWS – Positive Thoughts on 2015............................................................................................................................... 2841 NEW-LIQUIDITY FLOWS – Global Liquidity Is Drying Up ............................................................................................................................ 2844 NEW-LIQUIDITY FLOWS – This Is What 6 Years Of Central Bank Liquidity Injections Look Like ............................................................. 2846 NEW-LIQUIDITY FLOWS – Austrian Money Supply Growth Sending Early Warning ................................................................................. 2847 NEW-LIQUIDITY FLOWS – Drying Up Quickly On Multiple Front................................................................................................................ 2852 NEW-LIQUIDITY FLOWS – A Dramatic Change in the Liquidity Environment ............................................................................................ 2853 NEW-LIQUIDITY FLOWS – China Central Bank Cuts Interest Rates to Support Growth ........................................................................... 2858 LIQUIDITY FLOWS – 3 Month Advanced Fed Balance Sheet versus S&P 500 .......................................................................................... 2859 LIQUIDITY FLOWS – Lurking Problems in Repo Land – Rising Failures .................................................................................................... 2860 LIQUIDITY FLOWS – Eating the “Seed Corn” of Capitalism’s “Savings”. .................................................................................................... 2865 LIQUIDITY FLOWS – “Reverse Repos” – The Fed’s New Magic Trick ........................................................................................................ 2868 LIQUIDITY FLOWS – Fed “Magic Trick” ....................................................................................................................................................... 2870 LIQUIDITY FLOWS - Current QE Experiment is simply not working!! .......................................................................................................... 2872 LIQUIDITY FLOWS – Liquidity is Becoming a Serious Issue Due to Japanese Bond Market Problems .................................................... 2876 LIQUIDITY FLOWS - In A Sea Of Money Printing, What Happened To All The Liquidity? .......................................................................... 2879 LIQUIDITY FLOWS - Why "Tapering" Is a Mirage and the Fed May Be Loosening Instead ....................................................................... 2882 LIQUIDITY FLOWS – Half a Trillion More Demand than Supply Means Lower US Treasury Yields .......................................................... 2884

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