Answer: I wouldn’t do that, and here’s why. My target for the QQQQs this summer is 30, and time frame before the end of August. From there I expect a bounce, before falling lower into late this year. I do not believe the September 25′s will get close to the money. If you are looking to buy some inexpensive puts on the QQQQs with a strike price of 25, I would be looking at December for expiration, not September.

Question:
Hi Greg,

I was wondering if it would be possible to go back to two webinars a week? Since they are only one hour long and with the markets as they are, I think most of your subscribers would appreciate more timely updates as to what is going on.

Since you had a technical problem like last week, it will now be two weeks since I have seen an update and I think most everyone else feels the same.
Thanks!
Sincerely,
Jeff Spillman

Answer: Within several weeks I am planning to go back to two webinars per week. I am happy to hear you like my updates.

Question:
my request, if possible to (again) spell out how I (we) can emulate the success of the single mother that you were able to mentor ?
(I too am an unemployed single Father of 4, who live with me, and am praying that your service will pull me out of my quagmire; especially as we presently seem to have a golden opportunity of the century just ahead of us !!!)

Presently I have 1 XLI Aug 29 Put purchased at 1.29 and is doing excellent
I hoped to invest $1000 very shortly, on your recommendation, to take advantage of the small expected ‘recovery bump’ perhaps this week,
and with the ‘profits load the boat’ in the anticipated downhill in August,
but I’m uncertain as to which specific Puts to purchase ? VIX or QQQQ ?

Last year, I made a fatal error with your recommendations and got wiped out (due to my greed and over speculation).

I am very much enthused by your convictions and favour putting all my marbles in your corner!
So if possible I look forward to your help – which you are already providing to all of us – ‘except’ that I am unable to do covered calls and depend on straight forward Puts/Calls

I look forward to any further assistance you may be able to provide.

Answer: We are facing a long Primary Wave 3 down in the stock market. Just as Primary Wave 1 down and Primary Wave 2 up were over a year in length, I expect Primary Wave 3 down to last at least a year as well. There will be many opportunities within that year to make very large gains using options. You must be patient to wait for those opportunities, and not get greedy or try to force the profits. I know for fact, 100% certainty, that the economy is rapidly deteriorating. That does not mean with 100% certainty that the stock market will go straight down also. I’ve been forecasting an economic depression. Not because it is what I want, I actually want the exact opposite, but becuase that is what is unfolding. Things are going to get a lot worse. Collectively, the living standards of Americans are going to fall significantly. If you can adjust and get ahead of the trend, you’ll fare much better. Learn to not only live, but prosper in tough times. with every problem comes an opportunity. Business is nothing more than finding a need and filling it. There will be lots of needs in these tough times. If you can find a way to fill those needs, you’ll prosper.

Question:
Should we roll over our Aug. 40 QQQQ puts into the SEPT. 40 puts ???

Answer: I am not personally doing that. Obviously, that would double the amount of time for the market to reach our targets, but if my EW count is correct, and I am seeing no signs that it isn’t, we will have a large bout of selling dead ahead.

Question:

Greg,

In your next webinar, please talk to why you would disagree with what the author says about the BDI not being a good leading market indicator. See link below.

http://www.wikinvest.com/wikinvest/api.php?action=viewNews&aid=1512684&page=Index%3ABaltic_Dry_Index_-_BDI_%28BALDRY%29&comments=0&format=html

Answer: OK. will do that in Thursday evening webinar.

From Institutional Investor, which I used to write for in Paris, I got this:

In the article titled “Al Gore’s Fund Suffers and Green Investors are Seeing Red,” which appeared on our web site on July 13 and 14, we wrongly stated that the Generation Global Equity Fund was, according to its Securities and Exchange Commission filings, worth only $2.4 bn at the end of March 2010, having originally been worth $5.3 bn when it was closed to new investments in 2008.

We accept that these figures are wholly incorrect. The Fund’s SEC filings state the value of the Fund’s U.S. investments only (which at the end of March 2010 were approximately $2.6 bn), and not the value of the whole Fund. We understand that the value of the Fund at that date was $5.6 bn, and that the Fund has therefore grown in value since 2008. We apologize unreserverdly to Generation.

There’s more but you get the drift. II managed to set off legal pursuits by the veep’s employer without even mentioning Gore’s curious sex life, his embonpoint, or his split from Tipper.

More about writing English, correct statistcs, and other corrections follows for paid subscribers. News from Spain, Portugal, the Netherlands, Britain, South Africa, Israel, China, India and Panama.

First a message from the anti-Vivian, Leila Heckman. Vivian does bottom up and Heckman is the pioneer of top down country allocation research and an expert in quantitative analysis, macro economics, stock selection, and portfolio optimization with expertise in developed, emerging and frontier markets. She asks:

Over the past month, investments in Europe have increased 7-8%. Have investors’ worries about investing in the European market and contagion dissipated, or have they just quieted for the moment? Is Europe poised to bounce back?

According to Heckman, now Senior Director of Mesirow Financial, people are quick to forget crises, including those in the financial markets. She thinks while Europe’s bailout will likely take place over an extended period of time, there are several positive market drivers indicating that there are good investment opportunities now.

Currently, Heckman believes the most attractive European markets include: Turkey, the Netherlands, Spain, and Norway.

Heckman has over 20 years of experience specializing in country allocation modeling and international equity investing. Previously, she was the senior managing director and head of international equity for Bear Stearns; founder and CEO of Heckman Global Advisors; and head of global asset allocation for Salomon Smith Barney. Her Interactive model is built on a scoring mechanism. Each month it compares the markets under coverage on the basis of quantitative investment factors that have been shown to convey information about future equity returns in research by academics and practitioners, including ourselves. These indicators include valuations, growth indicators, macroeconomic indicators, and measures of momentum. The factors and the weights we put on each one are shown below. Each month statistical scores are computed for each factor, and a total score is computed for each country as the weighted average of the individual factor scores. The weights on each factor are determined by the strength and reliability of each factor in back tests. Each country then gets an allocation relative to the benchmark roughly in proportion to its total score, with restrictions on the maximum allocation to avoid unrealistically large exposures. Each month performance of the hypothetical portfolio is compared with the benchmark.

Here is another important note from Information Line, a hard money newsletter, of interest to all US investors, by Vernon Jacobs CPA. He writes that the Foreign Bank Account Report form used by the Dept of the Treasury for many years to collect information about American banking and investment accounts overseas, which have to be reported if they total more than $10,000, is about to be supplanted by new rules. Mr. Jacobs writes about the Housing Act to Restore Employment (HIRE):

“Questions about what must be disclosed on the FBAR form may soon become a moot issue. The recent HIRE act incluedes a new requirement to report foreign financial assets – which is much broader than foreign financial accounts. This new form is to be effective for tax years beginning after the effective date of the HIRE act which was March 18, 2010.

“For most individuals, that means it will be necessary to discolose any foreign financial assets with their 2010 income tax return – but only if the total of those assets exceeds $50,000 at any time during the year.

“Unlike the FBAR form, the new and expanded report of financial assets is to be included with the income-tax return of the ‘person’ that has foreign financial assets that must be reported. The law specifically mentions that the report should include information about foreign securities, financial instrucments or contracts and any ownership interest in a foreign entity. The law also gives very broad authority to the IRS to develop regulations to implement the law and to exclude assets that are being disclosed in other reports.

“Even so, it seems likely that there will be a duplication of reporting in the new HIRE act asset report and the FBAR form. One of them goes to a part of the Treasury Department that is separate from the IRS and is not part of an income-tax return. The new asset report will be required as part of a tax return.”

For his readership, Mr. Jacobs then worries about how holdings of gold bullion or silver will be dealt with under the new rules, which probably is irrelevent to most of us. Mr. Jackobs has written a half dozn books on international taxes and writes the twice-monthly International Wealth Protection Monitor newsletter. He is producing a new edition of his Guide to Reporting Foreign Financial Accounts. www.vernonjacobs.com Information Line is published by info@assetstrategies.com

-Barclays is skeptical that we are in for another economic decline. So, it recently advised clients to continue accumulating stocks on corrections, favoring sectors with a strong demand base across the major economies.

-Credit Suisse Securities recently told clients we are in an environment of healthy corporate balance sheets and a fair amount of excess cash, but a decidedly un-exciting medium-term growth outlook for the average US corporation. As a result, it expects U.S. corporations will increasingly focus cash flows on increasing dividend payments and share repurchases.

-Bank of America Merrill Lynch reminds clients the strong role dividends have played over the years. “If dividend tax rates stay aligned with capital gains rates, we think companies will raise dividend payout ratios significantly over time.”

Note that there are two meanings for double dip, one for the economy as a whole, and another, quite different, for the stock market. The two do not move in phase.

Here is a bullish take from Steve Chun of Miller/Howard Investment research:

“There are some interesting features in the current landscape that may auger well for equity investment–which 2009 amply demonstrated is not all that closely correlated to the larger economy in the intermediate term. Corporate cash and noncorporate funds available for investment (even excluding funds that might be switched from bond positions) have never been higher, measuring in the multitrillions. The rate of improvement in corporate operating margins has grown faster than any period for which we have data.

Astonishingly, some sectors such as Technology and Consumer Discretionary show margins that are off the charts on the upside, higher than ever! Corporations are as lean as they have ever been, and they have more cash than they’ve ever had. This is a nice prescription for an era of mergers and capital expansion if necessary (though capacity is fairly ample). The former would shrink the overall capitalization in the market, a market that is already rather small compared to the funds that could be available for equity investment, as we’ve pointed out on a number of occasions, if those funds were of a mind to get to work.

“Cash available, rapid margin improvement, moderately negative investor sentiment, and the help that might come from still-growing economies to the south and east of us could make for a potent brew boosting stock prices—a configuration that tends to get lost in the constant news flow about sovereign debt troubles, tax increases, and an overall ‘Age of Austerity.’” Miller/Howard is at (845)679-9166.

Moody’s today downrated Portugal by 2 notches to A1 while citing weak growth and mounting debt. It said the reform measures will take time to kick in.

The euro today did not collapse against the greenback on the news. It may be that panic about the single currency has played out. Or it may be that poor US May trade figures (showing a mounting $42.3 bn trade deficit, mostly with China) kept the dollar down. More about China for paid subscribers below thanks to a special survey shared with us.

Chartists are carefully watching gold. The precious metal has apparently hit its trend line 5 times according to Dutch analyst Charles Nenner, which may signal a reversal. But he is sititng on the sidelines all the same.

Your editor will be doing a tour of the River Duoro highlands east of Porto next month, her contribution to Portuguese recovery, thanks to a 30% senior price break in the government-sponsored network of Paradors, and the offer of an air-conditioned mini-car at the same price as a hot one. Paradors are hostelries built in old castles and convents to encourage tourism in remote regions. They were built under Salazar in Portugal, imitating the Pousadas built by Franco’s Spain. Even without the discount most of them are great bargains. Your credit card only gets swiped when you sign out, so I am hoping for a weaker Euro.

Switzerland struck a blow for liberty by freeing French-born film director Roman Polanski rather than shipping him off to the USA for a trial on very old statuatory rape charges. Having given way over secret Swiss bank accounts I guess they had to find another way to show their independent spirit.

More from China, Spain, Britain, Research Triangle, Germany, Australia, India, and Israel for our paid subscribers follows. Join them. Your portfolio will be grateful.

To become a paid subscriber, click here now for more details…

Today our pro-Dutch reporter is preparing an octopus stew by chopping up lots of garlic while her buddies blow vuvuzelas. A German octopus correctly forecast every single winner in the World Cup which ended yesterday. with Spain the champion. Meanwhile an economist panel, having rightly predicted Spain would win its first-ever Mundial in a first poll, then revised its figures to produce a muddled message

It reminds me of Harry Truman who said: “what I need is a one-handed economist.” But an 8-handed creature, despite another octopus’s brilliant foresight (or perhaps because of it), is being sacrificed in Amsterdam.

Your editor thinks the best team won. Dutch fouls and far kicks tried to stop the Spanish who advanced with brilliant handovers and clockwork passes. The best moment was the arrival of 91-year Nelson Mandela, dressed for the South African winter in fur coat and hat.

The French are in soccer disgrace after their team lost its only match because les bleus turned on their manager and refused to practice. French chefs still make very good octopus stew being creative and self-indulgent, insubordinate and egotistical. This works better in cooking than in football.

The low point of the World Cup was the murder of 64 Ugandans watching the final game at two different sites. They were attacked by terrorists with a grievance not related to the game, reportedly from Somalia. As heightened security makes it harder to murder Israelis, Americans or Europeans, the Al-Queda terror machine is turning on softer targets like African sports fans.

In the market today, bad news is good news, for example that BP is trying a Notre Dame pass to try to stop the oil spewing into the Gulf of Mexico, and also may cede shares to a Chinese takeover bid. It will sell its Alaska crown jewels to Apache Corp.

And good news is bad news. Banco Santander is being penalized for plans to further expand in South America and for its purchase today of the German branch network of Skandinavska Enskila Bank. These are marks of its management’s confidence in the STD balance sheet.

Your editor however is still frightened of the Spanish banking sector, however enamored of Spain’s football prowess.

So today paid subscribers are going to be told about a German specialty chemical stock to buy. It will have to be bought with a specialzed brokerage for international trading, like HSBC (my bank); Euro-Pacific Capital (Peter Schiff’s firm), or Lassalle St., a specialized brokerage whose principals are subscribers to this newsletter (tel: 407 539 1004). I could not do the trade with E-trade and my trying to do so is why this blog is late. We also have news from France, Britain, China, and Israel.

Americans may pay scant attention to the World Cup but my friends in the Netherlands are nothing short of euphoric. The Oranje team will play in the finals against Spain on Sunday and the Dutch, in keeping with their focus on economics and global trade, are counting their Guilders (ok, euros) in advance of what 77% of them are sure will be a Dutch victory.

Economics reporters in the Netherlands, having surveyed the matter, conclude that winning the World Cup will boost Dutch economic growth by 0.1 to 0.5%. This, they explain, is because a euphoric country experiences a surge of economic confidence, which in turn spurs spending, which can boost GDP.

It’s hard to imagine the cautious Dutch going on a national shopping binge. On the other hand, beer sales are already visibly – and audibly — up. (Drinking beer is a requirement under FIFA rules.)

Houseboat owners plan to build barricades to keep revellers off their boat tops during Tuesday’s victory parade, to happen whether the Dutch win or lose. When the Dutch team won the European Cup in 1988, houseboats sank in the party. Maybe that was good for the houseboat salvage industry.

Your editor last night went to a dinner hosted by Marta from Sevilha and Chris from Munich who are married to each other. Luckily Germany is out of the World Cup race, or there might have been an Andalucian-style Blood Wedding in Brooklyn. Your USA editor and her English husband observed scrupulous neutrality.

AutoNavi Holdings Ltd , a Chinese developer of photogrammetry (digital maps, and navigation and location software), last week became the 145th Chinese co. to list on Nasdaq with an ipo of 10 mn ADRs are $12.50/sh. AMAP is the 22nd new Chinese listing and the 8th on Q in 2010.

There are two drivers of gains on the stock market. One is corporate earnings and results. The other is liquidity. With newly-listed Chinese stocks, liquidity is in short supply despite the general and Asian market boomlets. Shanghai peaked on Oct. 16, 2007. While I know nothing about AMAP I am sure that the huge AgBank capital raising exercise occurred on Beijing’s orders, to forestall the need for govt. money.

With a weekend looming and stocks up sharply over the past three days, Wall Street can fall today. There will be profit-taking. Maybe it will be offset by money coming in from the sidelines helping support prices. There is a lot of liquidity in the hands of investors still shell-shocked out of stocks.

According to EPFR of Cambridge Mass, which tracks fund flows reported on last week’s moves which seem to have reversed:

Going into the second week of July global equity markets were staging a modest recovery as investors shrugged off fears of a double-dip recession and went bargain hunting. But flow data for EPFR Global-tracked funds reflected the uncertainty of the preceding weeks, with Money Market and US Bond Funds seeing big inflows as most equity fund groups struggled to attract significant amounts of fresh money.

Greece’s Socialist government voted to cut government pension rights and overall job protection to try to force down government debt despite tradition and a general strike yesterday. The strikes were moderate and peaceful after an earlier round left three bank employees dead.

The tradition means that many of the measures to be struck down (details still to come) were put in place by earlier Papandreou family governments, current Premier George P.’s grandfather with the same name, and his father Andreas P. The first time I visited Athens, as a student, I recall demonstrators against the Colonels shouting “eena, eena, tessera” after the article in the Greek Constitution violated by their coup against George I. Andreas went into exile and spent some years as an American academic. The younger George was born in the USA.

Learn from these Euro-American Greeks. A suggestion. How about US states running deficits (often illegal) doing like the Greeks. We should be prepared to cut abusively manipulted state pension rights too. US manipulation typically involves older workers piling up overtime to boost their pensions which are based on take-home pay rather than formal wages.

South Korea has raised its interest rates 25 basis points to 2.25% to control inflationary tendencies. It joins Norway, Australia, Israel, and India in this elite group of fast-growing countires.

Nudged by your editor, reader PS managed to get the interest rate on his margin account with TD Ameritrade cut to a still-high 3.5%. Bargain with your broker in the current low-interest rate environment. We can save you money with fees and commissions to help cover the cost of a fully paid subscription.

The International Monetary Fund late yesterday increased its 2010 world growth outlook to 4.6% reflecting a stronger-than-expected H1. Its earler estimate was for 4.2% growth, made in April. That would be the biggest rise in 3 years. Growth in 2011 is projected to be 4.3%, the same as the April forecast.

Then today the U.S. Dept. of Labor data showed that 21,000 fewer Americans applied for jobless benefits last week (to July 3). That is still 454,000 unemployed people.

European banks are up on an assumption they will pass their not-very-demanding “stress” tests. And perhaps because shareholders are happy that new rules will cut instant bonuses by 70-80%, alligning executives’ interests more closely with theirs. Even the embattled euro is up, to $1.27.

German figures showed that imports had risen by a whopping 14.8% sequentially in May, while exports only grew 9.2%. The German trade surpluse narrowed to a mere 10.6 bn euros for the month, well below forecasts.

And as for gold, it now turns out that rather than being a beneficiacy from the printing press at central banks, the yellow metal also was a support for their profligacy. CB swaps with the central banks’ central bank, the Basel-based Bank for International Settlements (reported in its latest annual report to end Mar.) helped them monetarise their gold hoards. The BIS acted as a pawnshop, although so far there have been no revelations that it actually sold any of the 346 metric tonnes of gold placed with it.

If there is no such thing as beta, as reported yesterday in an EDHEC study from France, then there is probably no such thing as alpha either. That’s a shame because today I got a Seeking Alpha article headlined “Lewis Turning Point in PRC.”

It was not about me. It was about William Arthur Lewis, the Nobel Prize economist who posited that at some point an emerging market will run out of cheap labor. The Seeking Alpha article was by Aoyu Bai, a Canadian. Lewis was from Saint Lucia and no relative of my husband’s family more of which is reported for paid subscribers below.

Hon Hai, the Taiwanese company first hit by a wave of suicides in Shenzhen, employs 400,000 workers in that city alone.

Here is the latest from Adam Carr of ICAP, the brokers in Australia whose overnight ponderings are often timely and precise:

The key take out of price action last night, more than anything, is that markets are confused. Following a very strong lead out of Europe (major indices up 2.2-2.9%) US equities were bid up shortly after the open. Gains were slashed in subsequent trading and the index fell 2.3%. The last hour was remarkable. The index bounced in and out of positive territory quite sharply. In the end, the S&P500 was up 0.5%, but it could just as easily have finished lower. Confusion. The bizarre thing is that analysts are apparently raising earnings forecasts at the fastest pace since 2004. A survey of 8000 analysts suggests earnings will rise 34% in 2010 compared to estimates of 27% in March.

The problem comes from the interpretation, or rather the misinterpretation of recent data. Much of this stems from the tendency bears have to use the words ‘slowing’ and ‘double dip’ interchangeably. Consequently they view the slowing in the ISM surveys as proof that the US economy is going to roll over. This is blatantly incorrect. Data is volatile, it bounces around and seeing the non-manufacturing ISM fall to 53.8 in June from 55.4 is consistent with usual patterns of volatility– especially for an economy that only recently has come out of a recession.

Note how rapidly the bearish focus is changing. Recent financial market turmoil began with concerns over sovereign debt in Europe.

The US was a safe haven. Fast forward a few weeks and that issue seems to have died down. In the end, Greece didn’t default and countries like Spain are having no trouble raising money. Indeed they tapped the market for an additional €6bn last night and received €13bn in bids (in addition to strong interest from non-residents). So now we’ve seen concerns over European debt morph into fear of a US double dip. As a result, the Dollar no longer seems to be enjoying safe-haven status and Greenbacks have been sold off. There was a time that was viewed as a bullish signal.

The economic landscape just doesn’t change that rapidly. Only sentiment does. So the trick for investors is to determine the true underlying economic trend – the trend behind these violent swings in sentiment. Unfortunately, given these extreme swings in pricing and sentiment, markets aren’t providing much of a guide now.

I was credited by John Thomas of The Mad Hedge Fund Trader with tipping Thailand and Poland on its pages. Merci. I also warned that gold was going to retreat. TMHFT is great fun and free but its portfolio advice is tough to act on. I also misspelled the name of the new Polish president yesterday. I corrected on the site but the email was wrong. Apologies to all the Polonian-Americans out there. (The term was invented by my old boss, Sen. Clifford P. Case, R.-NJ after he got into trouble for using the Shakespearean word from Hamlet, Pollacks.)

But China had the real bad news. Shanghai fell on revised numbers for GNP growth from the Conference Board . That body corrected a leading index of Chinese growth of 1.7% calculated in April right down to a mere 0.3% now.

But in fact the Chinese market had slumping before this. The bears then escaped all over Asia, and hurriedly released their fellows in Europe and later in the US, where there was nothing particularly awful happening.

But if the Red Rooster is not a strong enough locomotive to pull the world economy out of its malaise, we are in trouble. Instead of watching the stock market sink I attended an alternative energy conference.

A new fund that may be of interest came out from Bank of New York-Mellon’s Dreyfun Corp. whose chief economist I have been quoting lately. Dreyfus Global Real Return Fund will invest globally in pursuit of absolute return. It will be managed by Newton Capital Mgm Ltd, a London boutique which already manages similar multi-asset absolute return funds for non-US investors. Newton is known for its thematic investment approach seeking total return (both capital appreciation and income) using a multi-asset strategy to get real returns with less volatility. The aim is to work over a market cycle (typically 5 years.) It does not use benchmarks or indexes and the goal is to get returns that do not depend on the movement of markets (or beta.) . Jeams Harries is the primary portfolio manager at Newton.

Meanwhile investors in Invesco Powershares ETFs discovered today that its managers have shifted indexes for their funds which keep the same ticker symbols. You no longer own what you thought you bought with this ETF family.

A trio of global funds are affected. Power Shares Autonomic Growth (PTO) will track Ibbotson Alternative Completion IndexTM in place of a New Frontier index; PowerShares Autonomic Balanced Growth (PAO) will drop New Frontier for RiverFront Tactical Balanced Growth Portfolio, and PowerShares Growth and Income (PCA) will drop New Frontier for a different RiverFront Index. Also affected are two Power Shars US portfolios linked to Value Line Timeliness and Rotation which are being linked to Morningstar indexes instead.

The renewable conference lobbied for the US to extend or replace cleaner energy programs which were part of the stimulus bills. They are slated to sink into the sunset by the end of 2010 unless what one delegate called “the Pearl Harbor” impact of the BP Deepwater Horizon gets Washington to change tack.

The American Council On Renewable Energy and the US Partnership for Renewable Energy Finance worried about potential deceleration and loss of jobs as green for green runs out. To say nothing of money for their members. In a joint press conference they called for extension of 1603 Renewable Energy Treasury Grants (AKA Grants in Lieu of Investment Tax Credit) to run out at the end of this year at a time of continued financial crisis and capital scarcity. Conferees, many of them lawyers and financial pros, clamoured for the1603 cash grants program to be renewed and for other loan guarantees and manufacturing incentives. Continued uncertainty and disorder in the US tax equity and credit markets are constraining financing for solar, wind, and other renewables, they say.

If BP is the best argument for money, the worst was the presence of so many foreign investors coming to feed at the trough: engineers, banks, utes, manufcturers of solar and wind equipment, pernsion plans. Even a Spanish Caixa turned up, from Madrid, presumably not in distress and about to be merged into the super-Caixa.

Antonio Garcia Mendez, CFA, of Santander Investment Securities (a US firm), cited the zeal shown by Europe’s “government-intervened banks” for more environmental deals. I had assumed European renewables would find funding hard to get now but he claims “inactive banks are active again” in Europe, and that liquidity, down in 2009, is on the rise along with “a higher risk appetite.” Against that, he noted that despite a strong pipeline of deals, “there are regulatory uncertainties in Spain and Italy.” To say nothing of the US.

Another European, the British-educated German, Gisela Kroess (of UniCredit, an Italian bank) warned that European banks face higher funding costs because of what she called “the Greek crisis” and the resulting lower euro. She thinks the time has come for longer-tenure financing involving mixes of loans, grants and equity. She wants to see a standardized system of funding and protection (maybe called collaterized debt obligations?)

She noted that so far this year there have been 10 US deals with a total funding of $3.4 bn in the USA vs 20 deals with a total funding of only $4.3 bn last year. (Of course this may only be because the funding will soon run out.)

Your editor was interested in how other countries encourage renewables without direct grants. Canada and many Euro countries make local utilities contract long-term to buy green energy and fold it into electricity sold, at a fixed price higher than non-renewables get. Sometimes utes finance the green plant. According to Daniel Soper, CFO of Carbonfree Technology (of Toronto) such pass-through pricing has less impact for example on German retail electricity prices than the bill for upgrading transmission sytems. So it can slip into your electric bill without your noticing.

But he warned that a weak economy makes it harder to contract for passthrough rate payment for renewables because politicians fear supporting it. A tax is a tax when it is contracted for even if it later is hidden.

The industry is frustrated mainly by lack of volume. Canada for example produces zero mW of solar vs 400mW or so in the USA, said Soper. The price of clean rooms and solar panels and cells has fallen sharply as the silicon industry finally woke up to new opportunities from solar. But solar prices are still too high for unaided investment.

Another thought: Consumers could cut their household electricity use by 2-12% and save up to $35 bn over the next 20 years if U.S.utes use smart meters and a range of energy-use feedback tools to educate us to use less energy.This according the nonprofit American Council for an Energy-Efficient Economy .We need at-home or on-line displays to inform and motivate us to cut down on juice consumptiom. ACEEE likes enhanced billing daily or weekly feedback,on- or off-line. But these programs are rare with no US ute providing the full gamut. Most have barely learned about smart meters.

Matters of subsidy and taxation are complicated in the main thing to take away from the above. Simplistic rants against government programs or taxes make no sense. In a period of shrinking investment somebody has to take the initative and right now the designated driver is government.

Stay the course. This is buy time not sell time.

“The Bank of International Settlements always seems to know what’s what. While the G20 meeting may have yielded a flimsy ‘do as you wish’, there was no confusion from the BIS. The Bank is worried about a new crisis developing, but the rhetoric is far from what we’ve become used to. In contrast, the BIS are more worried about heading to the exit too late, which as regular readers know, is my concern also.

“The BIS acknowledged the difficulty policy makers had, especially as the banking system was fragile in some cases. ‘But the longer that policy rates in the major advanced economies remain low, the larger will be the distortions they create, both domestically and internationally.’ The BIS argued that extremely low real rates altered investment decisions, postponed the recognition of losses, increased risk-taking in the search for yield and encouraged high levels of borrowing. There was also the problem that central bankers would underestimate inflation risks given the crisis may have lowered potential growth rates.

“The UK illustrates this view perfectly. Rates are historically low, the economy is recovering, the land registry is reporting house price growth of 8.2%y/y to May (consistent with other house price measures) and inflation is well above target. All the while the governor of the Bank of England insists there is no problem.”
The US is not in the same situation on inflation and house prices. Challenged by a reader on what I would want to see from the Obama Administration now I made a little list, which he called “Porkulus Spending”. TM thinsk any measures would increase the size and reach of governmetn and add new bureaucrats and new regulations which would hamper future economic growth.

This is a challenge, But the US is not in the same boat over inflation and housing prices as Britain. Challenged by a reader to tell what I want the Obama Administration to do, I created a list, which TM thinks is nothing but “porkulus spending. Any measures he fears will add to the size and reach of governments and add new bureaucracy and regulations that hamper future economic growth prospects. But I do not agree.

I think our country is in a crisis because of a lack of liquidity and a lack of what Lord Keynes called “animal spirits” leading to extremely risk-averse investment in no-yielt Treasury bills and keeping corporate cash undewr the mattress rather than investing it. Because there is no way for the consumer to take up the cudgels and invest in this climate, because of American household’s probems with underwater housing mortgages and unemployment, I want the government to act, preferably in ways that stimulate employment, and require the private sector to join in.

The cheap funds are there. I did not create the lack of animal spirits in the bond market or the unwillingness of corporate America to spend the money it has rather than hiding it under a mattress. household oversaving is the likeliest to stop when my proposals are in place but they will also encourage capex by gun-shy corporate America.

Just for the heck of it, here is my list which I think will put people to work and pay them.

We can borrow to invest in the future of America. for my 5 grandkids without burdening them with debt. Here’s how:

We extend unemployment insurance payouts so people can continue to eat while they look for work.We get businesses to come on board with training programs and internships or apprenticeships.

We figure out a way to refinance home loans. I am far too stupid to know how but I do not like families living on the street.

We improve education by cutting down the vacations and extending the school day. Teachers then can continue to get the high pay they collect regardless and produce something in return.

We don’t stop healthcare reform with the first incomplete round and try to avoid taxing elderly Medicare folks at the highest incremental tax rate in the USA.

We invest the borrowed money to replace bridges which are falling down and build toll roads. These will pay for themselves with tolls but meanwhile will put unemployed Las Vegas condo construction workers to work building them. WPA for today.

We beam everyone up to the internet. We reopen closed libraries and offer web access and e-books..I hear America learning.

We build a high-speed railway running from LA to San Francisco (and maybe further north to TM’s area). Another line down the Florida coast to Key West. Maybe even one from NYC to Boston or Washington DC or both. Again we charge fares to repay. And meanwhile people get jobs doing useful things for th country.

We restore breakfasts in school for hungry children so they can learn without their grumbling stomachs getting all their attention. Corporate America can help.

We resume bus service to take people from poor neighborhoods to their jobs, get kids to school without mama-chauffeurs, and get old codgers out of the house. The auto industry can build the buses.

We build nuclear power plants and wind and solar plants. Maybe even hydroelectric dams.

We finish the job in Afghanistan.

We finance the SEC and the new bank lending overseers properly.

We start out by doing a real investigation of the Flash Crash to figure out what happened, what the role of arbitrageurs and electronic was. (That’s the one for us.)

The government is no bigger today than under Ronald Reagan as a part of GNP. US debt is falling without any need for rigorous cutbacks in spending.

The goal is not to grow the government or its reach. the goal is to gorw the economy. Rright now relying on private spending is not working. the cost of borrowing money for even sound and stable companies is way too high. firms which have cash are not spending it out of funk and fear. We have to let the government act as the counter-cyclical force because there ain’t no other. It would be better if there was capex and a functioning bond market. There isn’t one. so I am crying uncle (or Uncle Sam) .

The cheap funds are there. I did not create the lack of animal spirits in the bond market or the unwillingness of corporate America to spend the money it has rather than hiding it under a mattress. household oversaving is the likeliest to stop when my proposals are in place but they will also encourage capex by gun-shy corporate America.

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