Home > Uncategorized > 2012/03/07: Courtesy access to ‘Brief Update’ and extended discussion in new format

2012/03/07: Courtesy access to ‘Brief Update’ and extended discussion in new format

© 2012 ROHR International, Inc. All International rights reserved.

Short & Sweet on the specific market comments in this post, because yesterday’s TrendView Brief Update was also actually very brief for a change. That is because the equities key technical indications were very well crystalized for the sharp failure yesterday after such a long churn to the upside. And we are referring you back to yesterday’s analysis because the levels and psychology explored there for the March S&P 500 future remain the same for the critical late week period.

And one of the reasons we did not post to the blog during the highly active market swings yesterday was that we felt the more critical decision will be made in the late part of this week. Yet not necessarily solely upon the market response to the US Employment report. As we noted in the title of Monday’s post, “You better have ‘game’ prior to Friday…” (which was to say prior to Friday’s US Employment influence.)

And why is that? Because of all the factors we have covered previous on the more critical nature of the next phase of the attempt to address the European Sovereign Debt Crisis. That is something we have explored at length in previous analysis. Any of our regular readers should have been ready for the potential market dislocation under the influence of (finally) a more definitive deadline for at least the current attempt to defuse any immediate sharp failure of those European rescue efforts.

Which gets us to the other reason we were not available to add another post to our already extensive observations in that area yesterday morning. In addition to all of our highly active institutional analysis and sharing our background thoughts on the blog, we have resurrected a previous media role that allows for more extensive, open-ended discussion of those factors.

And I am very excited once again about

…being a regular cohost for my friend Jack Bouroudjian’s radio presence in The Jack B. Show. He is a well regarded commentator on many aspects of the politico-economic scene, and especially on fine points of the derivatives markets where he has been a trader and top executive for many years. He is a regular guest on CNBC and other prominent financial media platforms.

I’m flattered that he considers my ‘macro-technical’ analysis so useful (especially from one who was once in the anti-technical “voodoo” camp), and especially my insights on how Europe plays into the overall market influences. And over the past week or so Jack’s very energetic and highly attuned focus on the markets has rotated back around to Europe‘s critical contingencies for the global markets.

That began with our discussion last Thursday on the International Swaps and Derivatives Association (ISDA) refusal to designate the Standard & Poors lowering of Greek debt to an SD (Selective Default) rating as grounds to declare a “credit event.” In that show we reviewed the reasons why within their narrow technical definition that was at least temporarily acceptable, and the degree to which so many other contingencies were going to be determined by whether the PSI (Private Sector Involvement) Greek bondholders’ voluntary agreement to the dilution of value of their bonds was successful.

That had to do with all manner of factors, the most critical of which are the further German financial support for the Greek Debt Bailout, and how that relates to the willingness of the IMF (International Monetary Fund) to proceed with the non-European contribution to that effort.

And yesterday we followed up on further details of the exact participation percentages of existing bondholders necessary for that PSI agreement to prevent various unseemly developments by tomorrow evening. Thursday evening (European time) is the deadline for any of those bondholders to decide. And rather than go into the same extended discussion here of those various aspects and the potential positive or negative outcomes, we strongly suggest anyone who is interested in the details of the European influence listen to the podcasts of those shows.

Those are available on the podcasts page of The Jack B. Show website.  Last Thursday’s (March 1st, episode 189) show discusses the in-depth contingencies, and yesterday morning’s (March 6th, episode 192) follows up on those specific figures for the success or failure of the PSI. Along the way there is quite a bit of discussion of other factors that relate to this, such as the pluses and minuses of Credit Default Swaps (CDS), as well as some of the broader economic factors. There is also extensive discussion of the now even more critical failure of the March S&P 500 future from around last summer’s 1,367 lead contract future high. The lower support in that market as well as the key technical perspective for most of the other major asset classes is also explored.

As a final note that some of you are likely aware of because of our previous mention of it, Jack was the person who co-created the term Taxulationism1 along with me back in the summer of 2010. Rather than any overt attempt to structure some sort of new jargon, it was a natural extension of Jack’s fit of pique at the current denizens of Washington DC as members of (as he calls them) “The Don’t Have a Clue Society.” He was specifically wondering whether any of them were at all familiar with the theories of Dr. Arthur Laffer, and the eponymous Laffer Curve?

He was astounded that nobody seemed to have a clue that government spending that was supported by excessive taxation would not bring about the desired result; just as Dr. Laffer had articulated back in the 1970s during a similarly misguided attempt to tax and spend our way out of fiscal shortfalls. Jack also noted that there was a component of over regulation, to which I responded that combination sounded to me like “tax-ulation.”

By the next morning Jack predicted (rightfully) it was classically also going to foment a degree of protectionism, which is how the “-ism” was appended to the end to give us Taxulationism. All of which would be a good giggle if it were not for the fact that on current form it looks like US government spending is headed for something like 30% of Gross Domestic Product. Anyone who wanted to see us on the ‘European model’ should be pretty happy with that. Anyone who is not interested in ending up in the same sort of pickle that Europe now finds itself is more likely fairly depressed and scared about the whole matter.

Some folks would say it’s a bit too antagonistic to refer to the current administration and their policies in extreme political terms. Fair enough; and a certain amount of the commentary might be too personal or overtly political. Yet, it is not taking it too far at all in terms of the pure politico-economic dynamic to characterize any government that spends 30% of the total national output as ‘socialist’.

Actions speak louder than words, and at that level of spending the government is exerting far too much control to still allow a truly free market, capitalist society. And that doesn’t even touch on the degree to which the current steroidal regulatory regime expansion has exerted so much additional government control that depresses the animal spirits of entrepreneurs. Sad but true that pending any reversal of much of this government overreach in the wake of a regime change this November, Taxulationism rules for now.

Thanks for your interest.

1Taxulationism © 2010 Alan Rohrbach & Jack Bouroudjian. All international rights reserved unless explicitly waived

Definition: Combined impact of taxation, regulation and protectionism imposed to an oppressive degree as official policy

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