Salam-
The Press is really making hay with the Chinese Yuan story. Cleverly played by the Chinese ahead of the G-20 meeting. Markets in Asia rocketed yesterday, tanked today. US could not make any headway despite a very strong open.
Sobering-
…“The United States, and most of the rest of the developed world, is in need of a tectonic shift in fiscal policy,” said Greenspan, 84, who served at the Fed’s helm from 1987 to 2006. “Incremental change will not be adequate.”…“The federal government is currently saddled with commitments for the next three decades that it will be unable to meet in real terms,” Greenspan said. The “very severity of the pending crisis and growing analogies to Greece set the stage for a serious response.”…
…more than 75 million American households own the homes they live in and of those 75million nearly 12 million owe more than their homes are worth. That’s 16% of the nation’s home owning families! To put that in perspective, back in ’06 only 4% of those owning a home were “under-water” on their mortgages and as of ’09 “only” 6% were. Moody's Economy.com
…San Diego: Beautiful; healthy; vibrant San Diego has seen its average housing price fall to levels back in the summer of ’03; prices are down 32% from their peak; a stunning 51% of those with mortgages taken out in the past five years are underwater and prices have to fall another 13% before historical affordability can be re-established. We have our doubts as to whether San Diegans who’ve bought a home in the past five years and who have a mortgage on that home will ever be made whole again, or made whole in our lifetime. Gartman
…Further selling pressure likely to arrive in Q3 and Q4…“You can't solve the deficit problem with spending cuts alone. It's inevitable that we're going to have to raise taxes to do so."… the tax cuts enacted by President Bush in 2001 and 2003 will expire at year's end, and tax rates could go up significantly for almost all taxpayers. The current 10% bracket will disappear. While income cutoffs haven't been specified, couples earning up to about $70,000 would probably pay a 15% rate. The 25%, 28%, 33% and 35% brackets would most likely pop up to 28%, 31%, 36% and 39.6%. Letting the Bush cuts lapse also would push the long-term capital-gains rate from 15% to 20%. Dividends, now taxed at 15%, would become subject to rates on ordinary income… Obama outlined in his 2011 budget proposal: Extend the tax cuts for most taxpayers, but let them expire for couples earning more than $250,000 and singles making more than $200,000. This means that the top two tax rates would rise to 36% and 39.6%...If you've been considering selling any highly appreciated investments—whether a stock or a second home—consider doing so in advance of the capital-gains increases…
A little follow-on from long ago to Father’s Day in the US...
Behold, children are a heritage from the Lord, the fruit of the womb a reward.
Like arrows in the hand of a warrior are the children of one's youth.
Blessed is the man who fills his quiver with them!
He shall not be put to shame when he speaks with his enemies in the gate.
Solomon, שְׁלֹמֹה, سليمان
9th Century B.C.
Solomon, שְׁלֹמֹה, سليمان was known throughout the Region for both his wisdom and his fair judgments-Wikipedia…I have heard it said that he was the wisest man of his day, maybe ever.
Still on top baby…don’t count us out…The US remained the world’s biggest manufacturing nation by output last year, but is poised to relinquish this slot in 2011 to China – thus ending a 110-year run as the number one country in factory production…Last year, the US created 19.9 per cent of world manufacturing output, compared with 18.6 per cent for China…The US became the world’s biggest manufacturer in the late 1890s, edging the then incumbent– Britain – into the number two position…what goes around comes around…within 30 years the US would call WWI loans and the British Empire began to unravel as it could not fund the protection of its far flung empire. It may rhyme this time, but it will not likely repeat, exactly. The Chinese screwed up and the middle class myth will continue to unravel in time whether or not they keep buying US Treasuries.
One couple each working two jobs to support moms, dads and grandmas and grandpas and pouring what they have left into their child. Best of luck with that demographic. “Smart guys” decided that they would take care of a perceived food shortage by making “only children” for a generation of Chinese families. This particular group of “smart guys” really, really screwed up. 400 million children is what the Party takes pride in preventing…really...so a relative few “smart guys” at the top (for this past generation) could have a lot more? I really feel sorry for the young couples that are now bearing the weight of their entire family alone upon their shoulders. Their children will be raised without their influence (no time) without siblings (no perspective), without uncles or aunts (no confidantes) and will be without the joy of nieces and nephews for another generation. This price was too high, too arrogant and at its base very sad. In one generation they have taken the communal family structure and destroyed it in China. Tick tock goes the demographic time bomb. In 2030 1/3 of their enormous population will have reached the age of 60.
I think the easy money from the long side over the last three weeks is over.
Perceived risk has abated…VIX Index..(option volatility) fell like a stone into the latest rally. Short put strategies worked well for the bounce. Cover them.
Sentiment is no longer pessimistic…individuals are again more bullish than bearish.
Tighten stops on anything you have. It’s getting close to vacation time…
All the best,
Leon
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