Mish's Global Economic Trend Analysis

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• Sarkozy Breaks Campaign Pledge, Says Treaty Too Complicated For A Vote
• Capital Flight From Italy, Greece, Portugal Accelerates; Two Trillion Fantasy; Merkel Weaker Every Week; Crude and Geopolitical Risks
• Mathematical Case for Brokered Convention; How Ron Paul Can Throw a Big Wrench Into Romney's Campaign

Sarkozy Breaks Campaign Pledge, Says Treaty Too Complicated For A Vote Posted: 27 Feb 2012 09:53 PM PST French president Nicolas Sarkozy is campaigning on a pledge to consult people directly on "significant issues". However, despite trailing in polls, Sarkozy refuses to agree to referendum on EU fiscal treaty. Mr Sarkozy, who is trailing the socialist François Hollande in opinion polls seven weeks before the presidential election, came under pressure to promise a referendum on the pact after he pledged to consult the people directly on significant issues if re-elected. "No," he replied when asked on French radio yesterday if he would put the treaty to a public ballot. "If you're dealing with a treaty with 200 articles, 250 articles, I can't see how you'd formulate a clear question." The French electoral calendar means the treaty cannot be passed by parliament until after the election. Mr Hollande has said he will seek to renegotiate parts of the deal if he wins, a move that has been criticised by Mr Sarkozy and German Chancellor Angela Merkel. Arnaud Montebourg, a prominent party figure who came third in the presidential primary last autumn and has been campaigning for Mr Hollande, went further than the candidate by predicting the treaty "will never be ratified". Mr Montebourg said a left-wing majority in France would never vote for the pact, while there was "not a majority" in favour of it in Ireland, the UK or other European countries. "The 'Merkozy' treaty would inflict austerity on all of Europe and plunge us dangerously into recession," he said. Too Complicated To Form a Clear Question? Sarkozy says "I can't see how you'd formulate a clear question." Mish Attempt to Formulate Clear Question For Voters Punch Yes to Approve Treaty Punch No to Disapprove Treaty Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Capital Flight From Italy, Greece, Portugal Accelerates; Two Trillion Fantasy; Merkel Weaker Every Week; Crude and Geopolitical Risks Posted: 27 Feb 2012 08:49 AM PST Via Email, here is a nice summary of European events from Steen Jakobsen at Saxo Bank in Denmark. Topics include the G20 Summit, Extend-and-Pretend Dogma, Capital Flight , and Geopolitical Risks. Steen Writes ... Two Trillion Fantasy This week-end's G-20 came and went without any real new information. Yes, the policy makers wants us to believe ultimately IMF will have 2 trillion US dollars at its disposal. No, the US, UK and rest of non-Europe is not really interested before we all get more clarification on how Europe will ring fence the debt crisis. This is more and more Wall Street vs. Main Street: Underfunded banks buys underfunded government bonds and underfunded governments guarantees underfunded banks. The real loser being the unemployed - Edward Heath put it more elegantly: Unemployment is of vital importance, particularly to the unemployed. Meanwhile the real economy and unemployment is exploding higher adding further burdens to already stretched government deficits. The new EU forecast for GDP growth in 2012 of minus .3% from this past Friday down from plus .05% is great example of how EU and the debt crisis non-solutions continues to lack behind fundamentals. Soon the rising disconnect will hit the politicians games of buying time. Capital Flight Merkel Weaker Every Week Chancellor Merkel is weaker, week after week. She soon will have to rely on SPD votes if she continues down this path. 62 percent polled over weekend are against giving more money to Greece and 2/3 don't believe Greece can be saved according to German newspaper Bild. Finland will have an interesting vote this week. Follow it closely. The G20 did not give more credibility to more funds but they sure talked the talk of extend-and-pretend dogma. Geopolitical Risks Crude: We are potentially a few weeks from some sort of confrontation unfortunately. IEA report from Iran is due this week. Israel's time window is closing if you believe the media coming out of Israel. Iran's finances are running out of time as well. Iran failed to pay for Indian rice last week. High energy prices will soon spill-over into gasoline and survey data and will start to impact data and sentiment negatively. Greece Controlled Default: Greece will have a controlled default and a vacation from Europe. Portugal CDS Spreads: Portugal is the real issue and containment is almost impossible. CDS spreads suggest the probability of default within five years is about 65 percent. Nice money printing week, Steen Jakobsen Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Mathematical Case for Brokered Convention; How Ron Paul Can Throw a Big Wrench Into Romney's Campaign Posted: 27 Feb 2012 12:33 AM PST There are 2,286 republican delegates. It takes 1,144 delegates to win the Republication nomination. With four candidates remaining, many are wondering about the likelihood of a brokered convention where no candidate wins in the first round. Conventional wisdom suggests there will not be a brokered convention. From where I sit, one is increasingly likely. Following is a table of delegates won so far (totals from Real Clear Politics Delegate Count), plus my projections of all primaries and caucuses through Super-Tuesday on March 6 (based on recent polls). State Primary Count Romney Santorum Gingrich Paul Total to Date - 243 99 47 32 20 Iowa Jan 3 28 6 7 0 0 New Hampshire Jan 10 12* 7 0 0 3 South Carolina Jan 21 25 2 0 23 0 Florida Jan 31 50* 50 0 0 0 Nevada Feb 4 28 14 3 6 5 Minnesota Feb 7 40 2 17 1 4 Colorado Feb 7 36 9 17 2 1 Maine Feb 11 24 9 3 0 7 Michigan Feb 28 30* 13 11 2 4 Arizona Feb 28 29 29 0 0 0 Washington Mar 3 43 13 17 5 8 Georgia Mar 6 76 19 22 27 8 Ohio Mar 6 66 19 27 13 7 Tennessee Mar 6 58 16 25 7 10 Virginia Mar 6 49 49 0 0 0 Oklahoma Mar 6 43 11 18 9 5 Massachusetts Mar 6 41 28 8 2 3 Idaho Mar 6 32 32 0 0 0 North Dakota Mar 6 28 10 12 3 3 Alaska Mar 6 27 10 11 3 3 Vermont Mar 6 17 11 4 1 1 Super Tuesday Est Mar 6 782 359 202 104 72 If Paul Wins Idaho Mar 6 782 327 202 104 104 * States penalized half of their delegates. Thru Super-Tuesday Scenarios Romney 359 Others 423 (Romney wins Idaho) Romney 327 Others 455 (Romney loses Idaho) Notes I assigned delegates by expected percentages based on recent polls except in winner-take-all setups. All state delegates were assigned to the above four candidates. In no instance did I assume Romney would do worse than his most recent polls. In several instances I bumped up Romney's poll percentages substantially. Points one and two were not done to favor Romney per se, but rather to to give a modest boost to the prevailing idea there would not be a brokered convention. Michigan Prediction 30 Delegates Percent: Romney-40% Santorum-35% Gingrich-8% Paul-12% Delegates: Romney-13 Santorum-11 Gingrich-2 Paul-4 Real Clear Politics Michigan Primary Poll Arizona Prediction 29 Delegates Arizona is "Winner Take All" Romney wins all 29 Delegates Real Clear Politics Arizona Primary Poll Washington Prediction 43 Delegates Percent: Romney-30% Santorum-38% Gingrich-12% Paul-17% Delegates: Romney-13 Santorum-17 Gingrich-5 Paul-8 Real Clear Politics Washington Caucus Poll Georgia Prediction 76 Delegates Percent: Romney-24% Santorum-26% Gingrich-33% Paul-10% Delegates: Romney-19 Santorum-22 Gingrich-27 Paul-8 Real Clear Politics Super Tuesday Poll (Georgia, Ohio,  Oklahoma, Massachusetts, Vermont) Ohio Prediction 66 Delegates Percent: Romney-26% Santorum-38% Gingrich-19% Paul-10% Delegates: Romney-19 Santorum-27 Gingrich-13 Paul-7 Tennessee Prediction 58 Delegates Percent: Romney-26% Santorum-40% Gingrich-12% Paul-16% Delegates: Romney-16 Santorum-25 Gingrich-7 Paul-10 Vanderbilt University Tennessee Primary Survey Virginia Prediction 49 Delegates Romney wins all 49 Virginia delegates. Virginia has a proportional allocation with a twist. Should any candidate take 50% in a district, the candidate will all votes in the district. In a display of complete ineptitude, Santorum and Gingrich failed to collect and turn in enough signatures on time and are not on the ballot. Romney is currently polling about 53% and Paul 23%, but Paul can only win delegates if he outright wins a district. Oklahoma Prediction 43 Delegates Percent: Romney-23% Santorum-42% Gingrich-20% Paul-9% Delegates: Romney-11 Santorum-18 Gingrich-9 Paul-5 Massachusetts Prediction 41 Delegates Percent: Romney-64% Santorum-16% Gingrich-6% Paul-8% Delegates: Romney-28 Santorum-8 Gingrich-2 Paul-3 Idaho Prediction 32 Delegates Romney wins all 32 Idaho delegates January Straw Poll Results Romney-34% Santorum-10% Gingrich-12% Paul-43% February Straw Poll Results Romney-45.4% Paul 42.7% A third straw poll will be held March 1-3 and my answer may change based on the results of that poll. Ron Paul or Mitt Romney will likely take all of the delegates based on the explanation below. Whether or not Paul or Romney takes all the votes depends entirely on whether or not Gingrich or Santorum can win any counties which at this time looks doubtful. Idaho Caucus Explanation: Voters will go to locations for their county and use ballots or tokens to support a candidate on Tuesday, March 6th. There are five candidates for Idaho voters to choose from and they will keep voting until a winner is selected. In each round the candidate with the fewest votes or anyone with less than 15% is out of the race. The voting ends at the county level when there is a final vote for two candidates or one has more than 50% of the vote for that county. The delegates assigned for that county will then represent the winning candidate. Counties will report their winner to the state office in Boise. If one candidate has more than 50% of the vote for all of Idaho, they get all 32 delegates. Otherwise, the candidates split delegates they won in each county I cannot find any recent polls for North Dakota, Alaska, or Vermont. Romney should do extremely well in Vermont and fair at best in North Dakota and Alaska. North Dakota Prediction 28 Delegates Percent: Romney-35% Santorum-40% Gingrich-10% Paul-10% Delegates: Romney-10 Santorum-12 Gingrich-3 Paul-3 Alaska Prediction 27 Delegates Percent: Romney-35% Santorum-40% Gingrich-10% Paul-10% Delegates: Romney-10 Santorum-11 Gingrich-3 Paul-3 Vermont Prediction 17 Delegates Percent: Romney-64% Santorum-16% Gingrich-6% Paul-8% Delegates: Romney-11 Santorum-4 Gingrich-1 Paul-1 How Ron Paul Can Throw a Big Wrench Into Romney's Campaign I purposely bumped up Romney's percentages to see if a brokered convention would still be possible. I also awarded Romney all 32 delegates in Idaho even though that race is a statistical dead-heat with Ron Paul. If Ron Paul wins Idaho, and the rest of my numbers above are close, the odds of a brokered convention are well above 50 percent in my estimation. There may be a brokered convention anyway, provided Santorum, Paul, and Gingrich stay in to the end. Fuzzy Math The New York Times discusses The G.O.P.'s Fuzzy Delegate Math. There are 2,286 delegates to the Republican National Convention, of which 1,144 are required to clinch a majority. The Web site TheGreenPapers.com, which has extensive information on delegate-selection procedures in each state, divides them into two broad categories, what it calls "hard" and "soft." Hard delegates are formally bound to a candidate on at least the first ballot at the convention, while soft delegates are not. Although this is a useful conceptual framework, it probably simplifies things too much. Instead, Republican delegates exist along something of a spectrum between bound and unbound, pledged and unpledged, hard and soft. Contributing to the confusion is that there are a series of three interrelated ideas about delegates which are often treated as interchangeable, even though they are not: Bound vs. Unbound Delegates. Is the delegate officially bound to a particular candidate on at least the first ballot at the convention?   Pledged vs. Unpledged Delegates. Whether or not she is formally bound to a candidate, will the delegate's candidate preference be known in advance of the convention and reported upon by the news media?  . Elected vs. Selected Delegates. Was the delegate selected through some relatively direct means, such as based on the popular vote in the state's primary? Or through some indirect means, like through the series of conventions that often take place in caucus states, and which may not correspond to the popular vote there? Category of Delegates Legal Challenges on the Way I did not take any of the bound, unbound, super-delegate counts into consideration. However, I was rather generous to Romney in other ways. Moreover, there are legal challenges pending in Arizona and Florida. Winner-Take-All primaries are a violation of Republican National  Committee rules if held before April 1. As it stands, Romney 50 Florida delegates and 29 Arizona delegates that could dramatically change the totals. Should Romney loses those challenges and also lose Idaho, a brokered convention would be all but certain. If Wishes Were Fishes If wishes (mine) were fishes, then Ron Paul would win the nomination outright. A more realistic wish is for a brokered convention because Romney, Santorum, and Gingrich are all likely to lose to Obama. I believe Paul would defeat Obama although polls don't currently support that idea. Republicans Need to Face the Facts Of the four candidates, only Ron Paul balances the budget, only Ron Paul wants to stop the war-mongering, only Ron Paul does not alienate the majority of women, only Ron Paul can ignite a fire in independents, and independents (not the radical right), are the key to this election. Republicans are not going to vote for Obama so appealing to the far right makes little sense in terms of an overall strategy. Moreover, independents are likely horrified by the war-mongering and misguided statements on religious and social issues of all the candidates but Paul. If Republicans lose this election, it will be because they all outdid each other in foolish attempts to appeal to the far right on issues where a huge majority of the population of the US is in the middle. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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