I’m always interested in how Government ties in with the markets. It’s been a bit of a hobby of mine, along with WWII battles, over the past 2-3 years and there’s no bigger tie then Goldman and the Government then recently…and BOY is it bigger then we know! In my recent late night surfing I came across Greg Roy. Greg recently released a special report with the same title of this blog post, Goldman Sachs’ Next Slaughter of the Stock Market Lambs, and being the digger I am, I read the full report and cold called him. I asked if I could repost a part of the report for my Trader’s Blog members. After some convincing he said ok.

This guy knows what he is talking about… Here is an exclusive excerpt from his newly released report Goldman Sachs’ Next Slaughter of the Stock Market Lambs.

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Goldman Sachs

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This post provides links to a number of thought-provoking articles I have read over the past few days that you may also find of interest.

• Mike Shedlock (Mish’s Global Economic Trend Analysis): Is the stock market a leading indicator?, October 12, 2009. The stock market is at best a coincident indicator, known only well after the fact. Furthermore, even as a coincident indicator, the stock market gives many false signals, making it totally useless for all practical purposes. The theory that the stock market is a reliable leading indicator is a myth easily shattered by simple observation of the facts.

• Caroline Baum (Bloomberg): Treasury bond rally fails asset-bubble test, October 13, 2009. Bubble sightings are proliferating by the day, and with interest rates near zero, it’s not hard to understand why. Easy money leads to excess credit creation, which eventually produces

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A very interesting if not controversial article from Luke Harding makes the argument that we are seeing continuity in foreign policy toward Russia under both Gerhard Schröder and Angela Merkel.  In my experience, the change has been night and day in terms of getting high level politicians willing to talk about human rights issues (just look at Sabine Leutheusser-Schnarrenberger), though Harding does make a good point that this has not produced any concrete or measurable changes on the ground or any visible political costs of the relationship.  He has a point, but my response would be that we should wait and see.

During her first visit to Russia as chancellor, in January 2006, Merkel made a point of meeting human rights activists - an apparent break with the sleazy Schröder era. She also promised to

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TODAY: Chief of staff denies decisions on Kaliningrad plan; Churkin criticizes US 'cold war attitude'; arms reduction talks not progressing as smoothly as they may appear.  Israel maintains choice in Iran; Russia suggests onus on NATO to improve ties; ship plans for Abkhaz waters.  Moscow court rejects appeal for Vasily Aleksanyan; 'anti-Soviet' restaurant feels Mitvol's wrath.Russian Ambassador Vitaly Churkin has said that US Defense Secretary Robert Gates's insistence that the decision on missile defense was not about Russia reveals 'a rather difficult negotiating partner, a partner who is loaded in many ways by a Cold War mentality'.  The Chief of Russia's general Staff has stated that no decision has yet been made on plans to deploy ...

This post provides links to a number of thought-provoking articles I have read over the past few days that you may also find interesting.

•John Hussman (Hussman Funds): Showtime for visible roots and fruit, September 8, 2009. In my view, the next 12-16 weeks will be extremely important in shedding light on any incipient economic recovery. Investors have become so used to the idea that stocks often foreshadow economic strength that actual, convincing evidence has been dispensable - beyond the excitement over “less bad” economic news. The next 12-16 weeks will change that.

• Alan Blinder (The New York Times): The wait for financial reform, September 5, 2009. Back during the Obama transition, the newly designated chief of staff, Rahm Emanuel, enunciated what I’ll call the Emanuel Principle: “You don’t ever want a crisis to go to waste,” he said. “It’s an

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TODAY: NATO head upbeat on relations with Russia; Medvedev looks to imams for help with Caucasus Islamic insurgents; suggests a TV channel.  Russia on the defensive regarding WW2; 70th anniversary of its start to prove a diplomatic minefield?  St Petersburg heritage status in jeopardy with Gazprom tower looming.The New York Times reports on how the period of relative tranquility in Chechnya, Ingushetia and Dagestan has ended with a surge in violence.  Reuters relays Russian claims that an al-Qaeda agent has been killed in Dagestan.  The republic's recovering President Yunus-Bek Yevkurov has warned Medvedev that Islamic insurgency has 'permeated all facets of life in society'.   The Russian president has urged Muslim clerics to help ...

TODAY: Putin promises to fortify Abkhazia with new base; Ukraine still smarting from Medvedev blow.  EU urges Russian leadership to work on safety of human rights advocates.  Lawyers in Russia beware - it is not just their clients who face prison terms.On a one-day visit to Abkhazia, Vladimir Putin assured the breakaway state that Russia would provide, 'systemic economic, political and, if needed, military support', worth between $350 million and $500 million (reports vary on the exact sum) over the next two years.  A significant amount will be allotted to 'the development of our military base and strengthening of Abkhazia's state border next year', the Prime Minister told reporters.  A new naval base which will ...

Do you remember the first time you saw a rain drenched Peter Finch scream, “I’m as mad as hell, and I’m not going to take this anymore!”? We do. We were too young to see Network in the cinema (the movie came out the year we were born: 1976). Instead, we watched it late one night on TV. And we’ll never forget the moment when Finch’s character, news anchor Howard Beale, arrives in the television studio in his tan raincoat with a deranged look on his face and begins to speak to camera.

I don’t have to tell you things are bad. Everybody knows things are bad. It’s a depression. Everybody’s out of work or scared of losing their job. The dollar buys a nickel’s worth; banks are going bust; shopkeepers keep a gun under the counter; punks are running wild in the street, and there’s nobody anywhere who seems ...

June 25 (Bloomberg) – “Barack Obama may be the worst thing that ever happened to tax-exempt bonds …. “

We certainly agree and see more trouble for tax-exemption down the road.

Obama Chief of Staff, Emanuel said, “A crisis is a terrible thing to waste.”, and the administration is taking that advice by sponsoring and subsidizing the issuance of fully taxable municipal bonds — “Build America Bonds” (the camel’s nose under the tent).

Presidents since Franklin D. Roosevelt have tried to tax the interest payments from municipal bonds without success, but the debt crisis has provided Obama with a way.

Build America Bonds (we prefer “Obama Bonds”) pay 35% of the interest cost for fully taxable muni bonds.

Presumably the subsidy also improves the credit quality of the bonds by having a portion of the interest come from the US Treasury.

Example Bonds YTM Rate Comparison:

We based our credit quality argument on logic suggesting the

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TODAY: Conflicting voices on air base deal; US hits back at Shuvalov's comments on WTO accession; fears of new Russian incursion prevalent in Georgia; priests find new role in crisis; Communists present Stalin as economic inspirationThe Kremlin claims that the US deal with Kyrgyzstan to continue using the Manas air base was approved by Russia in 'support all steps aimed at stabilizing the situation in Afghanistan'.  A Russian diplomat would appear to differ; saying that the news was 'a very unpleasant surprise for us -- we did not expect such a trick'.  The US has hit back against Igor Shuvalov's claims that Washington and the EU were to blame for Russia's decision to back out of ...