Best of the Net - Thursday August 28, 2008

It's been a slow week leading up to Labour Day. In fact, the lowest volume trading week of the year. As such, there's relatively little to mention from the web-world that's worth reading. Here's a few from the last two days that piqued my interest:

Amid the euphoria of the "happy days are back" crowd, Paul Kasriel has some charts showing that the devil is in the details of the US GDP figures. Read Paul's daily here.

and Mike Shedlock appear to have some differing opinions on the gold market, currencies and manipulation. Click on their names to read their views. I'll have some of my own views on the gold market next week.

Chris Puplava has some good analysis and some interesting charts to mull over in his weekly wrapup on Financial Sense, The Worst Is Yet to Come.

Best of the Net - Tuesday August 26, 2008

Mike Shedlock has an interesting article in continuation with the "China Bust" theme. Read it: Is China's Growth Story Coming Unglued?

Jeff Saut has some words on the unprecedented government interventions we've been seeing lately around the globe with Don't Rally Around Fannie, Freddie

John Mauldin wrote a very long but worthwhile article on the issues facing the financial markets. John writes without fancy charts or numbers, so makes for easy reading. Read Financials in Trouble, Part 1, Part 2.

Yves Smith writes about the same topic, but gets a little more specific with the details in Banks Need Fistfulls of Dough through 2009

Best of the Net - Monday August 25, 2008

Bennet Sedacca has an article on Dead Banks Walking, where he discusses the extremely unique situation facing a growing list of struggling financial institutions. Their survival may not be a matter of "if", rather, "when".

John Hussman has his weekly on the topic of rising credit spreads in the non-financial space and the growing disconnect between the credit and equity markets we have been talking about for weeks now.

Kevin Depew continues his streak of fantastic dailies with Five Things You Need To Know: Fear Mixed With Incredulity.

Yves Smith has a long-winded and decidedly boring, yet perhaps important review of some commonly held views pertaining to the future direction of global trade. Read the article here.

Best of the Net - Weekend Edition Aug 22-24, 2008

Mike Shedlock writes about China's dismal showing at the Olympics. No, not on the podium. They did fine there. But the business output was abysmal compared to expectations. In other words, the olympics were a success for the oportunistic government bureaucrats, IOC officials and corporate sponsors. For everyone else it was a disappointment. Will this sort of sentiment carry over to Vancouver and London where hype over the Olympics has also created hugely unnecessary infrastructure projects? Mish answers that question rather convincingly in China's Olympic Sized Bust

Charles Payne wrote about the commodity and equity market corrolations and a potential change in trend with Will Crude, Equities Keep Holding Hands?

Paul Kasriel shows how things in Europe are not looking any brighter than in North America. Read: Kasriel's daily entry. How well will the dollar do with Europe slowing rapidly? Remember the dollar index is 57% composed of Euros.

Best of the Net - Thursday August 21, 2008

Mike Shedlock answers some questions and takes a closer look at monetary numbers that he addressed on Tuesday in Revisiting the M3 contraction. He also delved into new data on the rising savings rate, concluding that heavily indebted baby boomers will be paying back that debt by reducing their consumption (a double whammy for the economy - lower spending and contracting credit) in What's Behind the Soaring Savings Rate?

A little levity you ask? Well, here you go: McDonald's Unveils The Big Freddie Mac

In Five Things You Need to Know: Bernanke's Jackson Hole Gets Deeper, Kevin Depew gives a look back to some 2007 comments from Bernanke and shows clearly that the "Bernanke Put" has expired worthless.

Yves Smith had an article on statements from a Dutch Central Banker that suggested the end may be near for the easy money policies of the ECB providing liquidity to stressed financial institutions. Read the article here: ECB: Banks Need to Wean Themselves off Liquidity Support

Best of the Net - Wednesday August 20, 2008

Chris Puplava has some interesting commentary in his Market Wrap-up at Financial Sense. He talks about some of the major trends that have affected our economies over the last 4 decades. He even throws out one of my favourite Mark Twain quotes in Why So Depressed?

Kevin Depew writes about 'Stagflation.' What it is, where it comes from and whether or not its heading our way. His answer is that the perception of stagflation is simply a stopping point on the long road (we're talking decades here) from massive inflation to deflation. I couldn't agree more. Read: Five Things You Need To Know: Not Your Father's Stagflation

Paul Kasriel Steps Back and Looks at the History of Core Inflation He concludes, based on a number of factors, that core inflation will moderate over coming months.

Frank Shostak further debunks the myth that the current delevering of balance sheets of the world's banks is a negative. He notes that with an increase of savings rates among banks and individuals, the road to recovery can be properly sewn. It is a dry article (as Frank's always are), but worth reading. Is Deleveraging Bad for the Economy?

Best of the Net - Tuesday August 19, 2008

Between the mounds of sarcasm, you'll find a very good discussion of today's PPI numbers in Kevin Depew's Five Things You Need to Know: No One is Driving the Train. This is a perfect example of why headline numbers should be looked at with a grain of salt.

Mike Shedlock talks about the massive contraction in M3 money supply with M3 Contraction: The Future is Now.

William Hester gives some very good historical analysis on previous recessions and tries to draw a correlation with the current recession/bear market to others. I highly reccommend reading this one: The Beginning of the Middle

Bloomberg reports that Kenneth Rogoff, former IMF cheif economist and a specialist in alalysing financial crises over the last 800 years believes The Worst is Yet to Come

Yves Smith reports on a happiness survey conducted, that shows The Key to Happiness is Freedom, Not Income. I agree, but I think the scales are tipping in the other direction as governments become more paranoid and authoritarian around the world.

Best of the Net - Monday August 18, 2008

Caroline Baum gives an account of Greenspan's ability to create "once a century events" numerous times in his 18 year central banking career, all of which "required" stimulating of the economy. Her article is titled No limit to Greenspan's Once a Century Events

Kevin Depew addresses price fixing and asks a valid question that if there are institutions "too big to fail", there must also be those that are "too small to save" in his daily Five Things You Need to Know: Too Small to Save

Bennet Sedacca has another two part series on the credit markets with No Credit For Financials, Part 1, and Part 2

John Xenakis of Generational Dynamics writes on the soaring P/E valuations as 2Q earnings have clocked in at -22% YoY. The S&P 500 is currently trading at 26x earnings with the expectations that 3Q and 4Q will be enormously positive. John and I both think otherwise. Read his article here: Price/earnings Ratios Continue to Surge as Corporate Earnings Plummet

Best of the Net - Weekend Edition Aug 15-17

Lew Rockwell looks at the downturn in the economy from a "glass half full" perspective, arguing that recession is the medicine required to cure an unhealthy economy of its overindebtedness and low savings rates. Please read: The Downturn is a Good Thing I couldn't agree more.

Mike Shedlock writes about how gold and silver are reacting to the deflationary credit crunch with Gold, Silver and the Great Unwind and Kevin Depew chimes in on the same subject in Panic Selling in Gold: What's next?

Best of the Net - Thursday, August 15

Mike Shedlock writes about the slowing global economy, currency markets and the deflationary effects that are now coming to the forefront in Implications of the Slowing Global Economy

Paul Kasriel writes about Thursday's economic numbers (Euro Growth, US inflation, jobless claims) with his daily commentary

Tim Iacono writes about the convoluted manner in which the BLS reports the homeownership portion of its CPI calculation. He calls it A Complete and Utter Failure of Owners' Equivelant Rent

Yves Smith at Naked Capitalism writes about the continuing disconnect between credit and equity markets in Stock, Bond market disconnect on Mortgages, Financials

Best of the Net - Wednesday August 13, 2008

In an interview with Bloomberg, Dennis Gartman gives very convincing reasons for commodities to continue their decline, while the dollar is to begin a new bull market as capital flees Europe and finds a new home in the US. Watch the interview here.

Calculated Risk notes that US Miles Driven Declines 4.7% from June

This could be seen as a sign that the economy is slowing, so businesses are cutting back their shipments and the unemployed are obviously not driving to work anymore. It could also be a sign that prices were just too high, so people cut back on driving they didn't absolutely need to do. It's likely a combination of the two.

Barry Ritholz writes on the $500,000,000,000 in losses so far accrued and the capital that is still needing to be raised to offset it in Bank Losses: Half a Trillion and counting

Thomas Woods gives a historical account of the Roosevelt gold confiscation during the last depression with The Great Gold Robbery of 1933 Will they try it again?

Best of the Net - Tuesday August 12, 2008

Bennet Sedacca of Minyanville wraps up a 3 part series on the credit markets, where he describes the equity markets as irrational and the credit markets less so. The dichotomy between the two markets should be getting more attention in the media, but as usual does not. The bubbleheads on CNBC would far rather you believe some bank being up 6% on the day means the credit crisis is over. Thankfully, Bennet provides us with the real scoop A Tale of Two Markets, Part 1, Part 2, Part 3.

Frank Barbera takes a technical lense to the massive selloff in commodities and concludes that we may be at an intermediate term bottom in his Market Wrapup Commodity Correction - Coming Into an Important Bottom?

Robert Murphy at Mises.org discusses the absurdity of the recent SEC rules against naked short selling in a select grouping of 19 "VIP" financial stocks with Short-Sale Restrictions Are an Excersise in Naked Power

Tanta over at Calculated Risk is looking at the coming accelleration in Alt-A defaults in Subprime and Alt-A: The End of One Crisis, and the Beginning of Another

That's all for today...

Best of the Net - Monday August 11, 2008

Chris Puplava talks about the ongoing tightening credit markets in Fed Senior Loan Survey Confirms Credit Crisis isn't over.

Kevin Depew continues his theme of socioeconomic change with Five Things You Need to Know: Word of the Moment - Frugality

Mike Shedlock talked about credit markets in Europe and the US in Lending Standards Tighten Again in US and Eurozone

Paul Kasriel of the Northern Trust talks about the same loan officer survey, but with some different charts and interperetations in his daily analysis

John Mauldin looks ahead at what he thinks will be an emerging asset class, when the western economies are ready to recover in a two part series The Rise of a New Asset Class, Part 1 The Rise of a New Asset Class, Part 2

John Hussman gives his weekly outlook and describes market traders in the current environment aptly in Nervous Bunny

If you're wondering why I've posted 3 articles (Kasriel, Shedlock, Puplava) that essentially talk about the same thing, it's because it is extremely important. Central Banks around the world have acted in co-ordination over the last year to support asset prices by making credit cheaper and easier to access for large banks. This survey says that it hasn't been working to its intended result. Banks have not been lending the money out into the economy, and are instead using it to increase their own loan loss reserves. As they write down the value of their assets, the 'money' essentially disappears.

This is the definition of deflation. A contraction in the overall supply of money and credit. Kevin Depew's theme of "it's cool to be frugal" is a manifestation of deflation in our society. These manifestations serve to exacerbate the condition as we become a culture of savers, driving asset prices down further. A viscious cirlcle only to be resolved by time and price.

Time and price. Remember that. It is the solution to our problems.