We've had far too many interventions in the Western world where the share of total economy that goes to government and is government-sponsored has grown. That essentially makes it very difficult for the Western world to grow sustainably...I don't see how the Western world including the U.S., Japan and Western Europe can grow. They're going to stagnate

Despite the fact that the European Central Bank and the European governments will flood the market with liquidity to bail themselves out, global liquidity is tightening. Whenever global liquidity is tightening it is bad for asset prices but good for the U.S. dollar, as was the case in 2008

At 1900 dollars per ounce gold was extremely overbought, and a correction was necessary. However, Faber now believes that gold could undergo a significant correction similar to what happened between 1974-1976, when gold fell 40 percent. Faber notes that a large decline in gold is now a distinct possibility. The first support level for gold is at the 200-day moving average around 1500 dollars per ounce. Despite the potential for a pullback, Faber still likes gold and believes it will trade significantly higher.

I'm also bearish on American education, but I haven't figured out how to short Princeton

The U.S. dollar has started fading as the world's reserve currency. However, the dollar could get a temporary boost if the government allows U.S. companies to repatriate their overseas cash without onerous taxation.

So what will banks do instead: why proceed with all out asset liquidation, and sell anything that is not nailed down. ext step: the realization that he who sells first, sells best. The average European bank’s equity is trading at only about 60 per cent of its book value.

As was reported earlier, it was Barroso who had a massively disappointing session earlier today, in which not only did he not announce any of the specifics on the EU bank recap plan (because they do not exist!), but demanded that banks scramble to raise their capital ratio, in essence undoing everything that had been done to the moment.

In thirty short years, China was able to accelerate her GDP from $216 billion to $6 trillion. She amassed reserve capital of $3 trillion. She reversed America’s fortunes from the greatest creditor nation to the greatest debtor nation. She gutted America’s factories while creating the world’s largest manufacturing base in her own country. A measure of output that highly correlates to GDP is energy consumption. In June of this year, 2011, China surpassed the United States as the largest consumer of energy on the planet. While the US consumes 19% of the world’s energy, China consumes 20.3%.

While China was growing their economy by a phenomenal 2,800%, the US GDP grew from $2.3 trillion to $15 trillion – a mere 650% increase, of which 420% was due to inflation. There is no question that China’s progress has been remarkable. The question is whether that growth is sustainable and built upon a solid foundation.

otaled $586 billion and was to be invested in key areas such as housing, rural infrastructure, transportation, health and education, environment, industry, disaster rebuilding, income building, tax cuts, and finance. In reality, the central government pumped an additional $1.5 trillion into the economy in an effort to maintain social stability through the subsidization of its industrial base. Chinese banks funneled cheap loans to state-owned enterprises in order to manufacture artificial profit margins to keep Chinese goods competitive and employment maximized. In the short term, the stimulus produced the desired effect.
Specifically, the Shanghai Index – which had topped out at 5,913 in October of 2007 and had fallen to a low of 1,678 by November 2008 – responded to the stimulus by rebounding to 3,300 in January 2010, as the chart below shows.
As with all monetary and fiscal stimuli, however, the initial high is always followed by a hangover. Today the Shanghai Index stands at 2,350, down 29% from when I penned my article. China is also experiencing accelerating inflation, a real estate bubble of epic proportions, a looming banking crisis due to the billions in bad loans made by Chinese banks as commanded by the Chinese government, and growing social unrest due to rising food and energy prices.

Based on the facts as I understand them, the Chinese government has created a commercial and residential real estate bubble in an effort to keep peasants employed and not rioting in the streets. In the case of the US subprime mortgage bubble, critical thinkers like Steve Eisman and Michael Burry figured out it was a bubble three years before it burst. Jim Chanos and Andy Xei have been warning about this Chinese bubble for over a year. They have been scorned by the same Wall Street shills who denied the US housing bubble. As Eisman and Burry proved (reaping billions), just because you are early doesn’t mean you are wrong.

Even still, the Chinese government’s own numbers show inflation escalating as economic growth is slowing.

Even with inflation surging, the Manufacturing Output Index fell to 47.2 in July – the lowest in 28 months, and indicating contraction. China’s automobile industry, which overtook the US in 2010 with sales of 18 million autos, has experienced a dramatic slowdown, with growth of only 3% through June versus 32% growth last year. For all of 2011, the China Association of Automobile Manufacturers expects sales to decline versus 2010

Chinese authorities unleashed $2.1 trillion of stimulus, or almost 33% of GDP. This compares to the US stimulus of $800 billion, or 5.5% of GDP, spent on worthless Keynesian pork. Unlike the US, where no jobs were created, China’s command-and-control structure funneled the stimulus into building cities, malls, roads, office buildings, and residential units. Millions of Chinese were employed in creating properties for which there was no demand. Moody’s approximates that China’s banks have funded at least RMB 8.5 trillion (US$1.3 trillion) of the RMB 10.7 trillion of outstanding local government debt

China consumes more steel, iron ore and cement per capita than any industrial nation in history. It’s all going to railways that will never make money, roads that no one drives on and cities that no one lives in. It’s like walking into a forest of skyscrapers, but they’re all empty.

There are 218 million urban households in China, and the central government ordered local governments to build 36 million more units by 2015 Prices for apartments in Shanghai and other major metropolitan areas have soared by over 100% in the last five years

The average size of a “cheap” apartment in second-tier Chinese cities is 60 square meters etches an average price of $1,230 per square meter, or $73,800. Mid-tier apartments in Shanghai or Beijing sell for $3,500 per square meter, or $210,000 for an average size apartment. “When prices are over 20 times more than annual household income, it’s not affordable,” house prices per square meter generally amount to between 50% and 100% of average annual incomes. “To secure a flat of 90 square meters, an average working family in Beijing and Shanghai will have to work for more than 50 years to pay off their loans, compared to five to 10 years in the developed world

itch downgraded the country’s credit rating and warned there was a 60% chance the Chinese banking system will require a bailout in the next two years. Just like the US, China has too-big-to-fail banks, with five banks accounting for 50% of the lending in China.

d if there were a major banking crisis, you would start to see money trying to get out of China. What would the government do to maintain stability? You could have a whole host of problems. It’s almost far too complicated to contemplate.

http://www.zerohedge.com/news/guest-post-china-continued-boom-or-bursting-bubble#

o while copper is doing its high beta thing on the n^th short squeeze day in stocks, the smart money is starting to bail for very obvious reasons. And if the reasons are not obvious, this means that "The estimates, which were announced at a recent meeting of the International Copper Study Group but have not been made public, imply that real Chinese copper demand may have been lower than thought in recent years.

Non Performing Loan ratio forecast from 4.5%-5.0% to 8.0%-12.0%: a unprecedented doubling in cumulative losses Credit Suisse just singlehandedly said the equity value of the entire Chinese banking system is between 66% and 100% overvalued

a surge in underground lending, ii) a property downturn, iii) bad bank debt and iv) and "hot money" outflows, and on the other we have the vicious loop of what this means in terms of a central planning reaction. Simply said look for China to scramble to undo all the signals that it had been trying to spark while it was fighting with the Fed-inspired inflation bubble

http://www.zerohedge.com/news/credit-suisse-buries-chinas-banks

• SOME FED OFFICIALS SOUGHT TO RETAIN OPTION OF QE3, MINUTES SAY
• SOME FED OFFICIALS SAW QE3 AS 'MORE POTENT TOOL' TO SPUR GROWTH.
• TWO FOMC MEMBERS FAVORED `STRONGER POLICY ACTION' LAST MONTH

And remember Golidlocks:

• MANY FOMC MEMBERS SAID INFLATION RISKS `WERE ROUGHLY BALANCED'
• FOMC MEMBERS SAW `RELATIVELY LITTLE RISK OF DEFLATION'
• FOMC MINUTES SAY LABOUR MARKET COSTS REMAIN SUBDUED

he 30-year bull market in bonds is about to come to an end. Bond portfolio managers should start looking for a different line of work.

o “mortgage to rent” social housing schemes. These would mean approved housing agencies taking ownership of homes in specific circumstances or the leasing of houses by banks to local authorities, which would in turn rent them to former owners.
...
The report ... stressed that there would be no blanket debt or negative equity forgiveness. Defending the decision not to implement a blanket forgiveness scheme, the report states it would cost some €14 billion to clear negative equity in Irish mortgage portfolios, while tackling those home loans taken out between 2006 and 2008 would cost in the region of €10 billion.

The U.S. population is roughly 50 times the size of Ireland, so a similar plan would be for 500 thousand homeowners. A blanket forgiveness more would probably cost $1 trillion or more in the U.S.

http://www.econbrowser.com/archives/2011/10/wealth_inequali.html

the top 1-5% had about 40% wealth, as in 40', after the war it dropped to 20%

Similarly, strong brands should have high returns on equity (greater than their cost of equity) which should help them grow their book value and/or their dividends.

http://www.tradingfloor.com/blogs/equity-daily-theme/bottom-up-valuation-approach-to-top-brands-like-ge-msft-and-ko-507494121?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Trading-Floor+%28TradingFloor%29&utm_content=Google+Reader

Firstly however  it is clear that by looking at the 2011 constituents throughout the years, we should be able to easily find ‘Buffett type’ companies which use their branding power to increase profits, sales, maintain or increase margins and have a high return on equity

axo Bank se așteaptă ca “Operațiunea Twist” să fie următorul pas către noua emisiune monetară, cel mai probabil undeva în primul trimestru al lui 2012. De asemenea, Saxo Bank se așteaptă ca Banca Centrală Europeană să reintroducă, înainte de sfârșitul anului, o nouă dobândă fixă, lichidități pe termen lung pentru bănci, alimentând sistemul cu lichidătăți și forțând piețele actuale să mențină dobânzile sub dobânda de refinanțare de 1,5% - care și ea ar putea să scadă

Roubini spune că ne apropiem de o aterizare forțată a economiei chineze pentru că "ei vorbesc despre o creștere a consumului, însă ponderea consumului în PIB a scăzut de la 50% la 40% și apoi la 35%, iar acum este de 33%".

As far the dollar is concerned, the reason I’m actually quite positive is that global liquidity, despite of the fact that the ECB and the European governments will flood the market with liquidity to pay the sales out, that global liquidity is tightening. And whenever global liquidity is tightening, it’s bad for asset prices but good for the U.S. dollar as was the case in 2008.

Faced with the prospect of having to raise additional capital at a time when their shares are selling at a fraction of their book value, the eurozone’s banks have a powerful incentive to reduce their balance sheets by withdrawing credit lines and shrinking their loan portfolios. The banking and sovereign debt problems are mutually self reinforcing. The decline in government bond prices has exposed the banks’ undercapitalisation and the prospect that governments will have to finance recapitalisation has driven up risk premiums on government bonds. Greece clearly needs an orderly restructuring because a disorderly default could cause a meltdown. The next move will have fateful consequences. It will either calm the markets or drive them to new extremes. . The banking system needs to be guaranteed first and recapitalised later. National governments cannot afford to recapitalise the banks now

http://economix.blogs.nytimes.com/2011/10/13/rent-vs-buy/

For the first time in three decades, the median monthly mortgage payment is about the same as the median rental payment:

• 96 percent of veterans are proud of their military service.
• 90 percent said they gained self confidence.
• 37 percent say that, whether diagnosed or not, they have experienced post traumatic stress.
• 44 percent had problems readjusting to civilian life.
• 34 percent say that (given the costs and benefit) the wars were worth fighting.
• 11.5 percent were unemployed in 2010.
• 16 percent were seriously injured while serving.
• 84 percent think the American public has little to no understanding of the problems that the military faces.