The King Report

M. Ramsey King Securities, Inc.

Friday November 4, 2011 Issue 4132 Independent View of the News

Greece may leave euro, leaders admit G20 summit on eurozone crisis is dominated by news about Greeks, while IMF is given more cash and fears grow over Italy [How can the US & UK fund IMF?] The G20 will now seek to shore up confidence both by beefing up the IMF's finances and by publishing an action plan for global growth that will include a call for Germany, China and Japan to expand their domestic economies and a commitment by Italy seen as crucial in the fight to hold the euro together to tackle its public finances http://www.guardian.co.uk/business/2011/nov/03/greece-may-leave-euro-leaders-admit?CMP=twt_fd New ECB President, Mario Draghi, cut the ECB benchmark rate to 1.25% as his opening act. This was unexpected, though several pundits opined that Draghis DNA would prompt him to cut rates ASAP. Rumors that George Papandreou would resign as Greek PM fostered a spirited rally in Europe. However, when Papandreou vowed to fight to keep his post, SPZs and European stocks didnt flinch. Was the rate cut leaked?Whats the sense of being an ex-GS if you cant act like one? The big equity rally on the ECB rate cut disintegrated quickly. Abetting the morning stock retreat was Draghis statement that the ECB would not bailout bankrupt EU countries and concern about JefferiesDraghi also said the EU would suffer a slight recession. Jefferies perceived problem is what we warned about weeks ago that an ISDA decision to not label the 50% haircut on Greek debt a default would roil the CDS market and cause problems for dealers and traders that were hedging sovereign debt risk with CDS. How can anyone believe that rate cuts will do anything constructive at this point? Rates are near or approaching absolute lows, and years of rate cuts have mostly produced more debt and further concentration of wealth. As we have maintained for years, the problem that the world faces is a solvency issue the collapse of socialism. Liquidity and rates arent an issue; so lower rates and more QE will not remedy the problems. Stocks re-rallied in late morning trade due to a report that the Greek referendum had been scrappedIs Papandreou trading his own account? Stocks got supercharged in the afternoon when for the umpteenth time, China contradicted an earlier assertion. This time a Chinese official said it would support the EU and buy more from EU nations Perhaps Chinese officials are trading their own accounts. WWGD? US retail sales miss expectations US retail sales climbed 3.8 per cent in October, but missed market expectations as retailers prepare for a holiday shopping season of fierce competition and volatile consumer sentiment. Sales rose for the 26th consecutive month in spite of the weak US economy, but the 3.8 per cent rise fell below forecasts of a 4.4 per cent rise and marked the first miss this year.
http://www.ft.com/intl/cms/s/0/8fe79bfe-062d-11e1-a079-00144feabdc0.html#axzz1ceuvMrtY

Debt Increased $203 Billion in Oct. At the end of September, the total national debt stood at $14,790,340,328,557.15..the end of October, it had risen to $14,993,709,044,140.78. The debt increased far more this October than it did last October. Between the last day of September 2010 and the last day of October, the debt rose from $13,561,623,030,891.79 to 13,668,825,497,341.36for an increase of $107,202,466, 449.57.
http://www.cnsnews.com/news/article/debt-increased-203-billion-oct-650-every-man-woman-and-child-america

Big profits, zero taxes for large U.S. companies Tax rate for 280 profitable firms ranges from 41% to negative 58%: study Is the 35% corporate income tax rate working as well as it should? This study demonstrates unequivocally it is not. For the three-year period, the average effective tax rate for all 280 companies was about 19%, but rates varied widely by company, from a low of negative 58% for Pepco Holdings to a high of 41% for Coventry Health Care Inc., the study said. GEs effective tax rate for that period was negative 45.%...
http://www.marketwatch.com/story/big-profits-zero-taxes-for-large-us-companies-2011-11-03?reflink=MW_GoogleNews&google_editors_picks=true

Charles Hugh Smith: Our Fragile "Hothouse" Economy Financialization has led to a "hothouse" global economy where the slightest disruption in central bank/Central State intervention will cause the sickly flowers to wilt and expire. Of the three great financial truths that have been left unspoken for the past four years out of sheer dread, lest their mere mention collapse our economy, let's start with the most obvious: if the Federal Reserve and Federal government ever crimped the dripline of "easing" and bailouts, America's financial sector would promptly roll over and expire. Does this strike you as a robust, flexible, transparent system? Of course not. Rather, it is a "hothouse" financial sector, one that needs constant injections and a carefully controlled environment just to keep it alive http://www.zerohedge.com/news/guestpost-our-fragile-hothouse-economy

Michael Krieger: The main point I want to make is that the collapse of this firm and its crony capitalist CEO Jon Corzine fits in perfectly to one of my overriding themes regarding the current fourth turning we find ourselves in. Namely, that the celebrated elites and financial wizards will be disrobed, disgraced and proven once and for all to be the frauds they always were. If nothing else, the story of MF Global should make it crystal clear to all observers that the biggest problem the world faces today comes back to a small cadre of financial engineering misfits that continue to be recycled all over the worlds positions of power. Most of them have Goldman on their resume or at the least JP Morgan. I just find this hilarious considering that I dont think the clowns at any of these banks could make a dime without government help http://www.zerohedge.com/news/michael-krieger-explains-why-it-takes-only-5-minutes SEC misled Archives on destroying records, inspector general finds The SEC, which is responsible for policing Wall Street, destroyed internal documents that should have been preserved as official federal records, the agencys inspector general has found. The SEC also withheld important information about the practice from the National Archives
http://www.washingtonpost.com/business/economy/sec-misled-archives-on-destroying-records-inspector-generalfinds/2011/11/01/gIQAx2tKdM_story.html?tid=sm_twitter_washingtonpost

World War II Stimulus and the Postwar Boom - Richard Rumelt WSJ op-ed (7/30-31/11) Last month, former Obama adviser Larry Summers put the case this way: "But for Hitler and the military buildup he caused, FDR would have left office in early 1941 a failure, with American unemployment above 15 percent and with the recovery promise of the New Deal shattered." And in 2008, Princeton's Paul Krugman referred to "the enormous public works project known as World War II." This is received wisdom to many economists and historians, but it skates around key facts of the World War II economy. Chief among them: Government policy didn't stimulate personal consumption, as Keynesian policy makers aim to do today, but rather enforced thrift. 2

During World War II, there was no investment in civilian infrastructure and the government placed severe restrictions on consumption. That meant significant portions of the massive government spending went toward saving and private debt repayment. Thrift restored personal balance sheets, ultimately setting the stage for the postwar boom This high saving rate was driven by fiat. Thanks to wartime rationing, Americans were only allowed to purchase small amounts of sugar, butter, meat, gasoline, tires, shoes, bicycles, processed foods and other goods. Plus, there was virtually no production of new cars, radios, home appliances or housing. In fact, when inflation and increased working hours are taken into account, consumption per hour worked actually declined for the bulk of civilians during the war If one wanted to replay the economics of World War II (without the war), it would mean high consumption taxes aimed at the middle class, and putting 30 million Americans to work at minimum wage or lessThe difficult truth is there is no easy cure for the present hangover Instead of looking for a pre-election year pop, it would be wiser to focus on transitioning from credit-driven economic growth to growth that is, once again, driven by new productive investments. The key policy aims should be removing the tangle of tax, policy, regulatory and human-capital impediments to domestic private investment. http://relooney.fatcow.com/0_New_10785.pdf Oct. small-business hiring down slightly: NFIB Small-business hiring eased slightly in October, falling by average of 0.1 employees per firm, according to a survey of 2,077 National Federation of Independent Business members. AIG reported an unexpected loss of 1.60 (-.30 exp) or $4.1B and a $1B share buyback. Only in America! Today Will a good October Employment Report be good for stocks or will a bad report be good for stocks because it will arouse QE 3.0 hope & hype? Or will the usual suspects spin whatever NFP appears as good for stocks?...Greece has become a sideshow that obfuscates Italys worsening condition. The credit and bond markets still see mucho trouble in Europe and maybe MF. Foreign reverse repos at the Fed soared $43.3B for the week ended on Wednesday. Only the Lehman panic ($44B) was larger However, stocks are in irrational exuberance mode because equities always get it last. Remember, stocks can stay irrational longer than most people can stay liquid. So be very careful out there! Expected economic data: NFP 95k, Private NFP 125k, Manuf 2k, rate 9.1%, wages 0.2%, workweek 34.3 You cant make up stuff like this: Busted nations of the IMF want to print paper to fund themselves!!! The Group of 20 is considering injecting billions of dollars into the world economy through the International Monetary Fund to increase global liquidity, G20 sources said on Thursday. The idea being discussed is to replicate a 2009 decision by G20 leaders that agreed to a special allocation of $250 billion of IMF Special Drawing Rights, the IMF's internal unit of account, to its 187 member countries. http://www.reuters.com/article/2011/11/04/us-g20-imf-idUSTRE7A25NU20111104 "Robin Hood tax" gaining support at G20 Activists are pressuring global leaders meeting for the Group of 20 summit to impose higher taxes on financial transactions in order to raise millions of dollars to fight poverty and deprivation around the worldMultibillionaire Microsoft founder Bill Gates joined the call, traveling to Cannes to urge G-20 leaders to consider the tax and other innovative ways to help poor nations.
http://www.cbsnews.com/8301-202_162-57317946/robin-hood-tax-gaining-support-at-g20/

How about a retroactive Robin Hood tax on all computer operating systems for PCs?