This week, a staggering discovery was made in the small southern state of Keral on the western coast of India. Authorities found a treasure in gold, diamonds and jewelry worth about 22 Billion US Dollars hidden in the 16century Padma-Nabh-Swamy temple by the ex-King of Travancore. By the way, there are records (per BBC.com) of Travancore trading actively with Rome in the first couple of centuries CE.

The Travancore Kings were never considered to be really wealthy by Indian standards. So if they could store away $22 billion for the future, what was the wealth of the Kings of bigger & richer states?

It is generally reported that over $1.5 trillion has been taken out of India and is now held in tax haven countries. Such has been and is the level of corruption in the official circles in India. If $22 billion can be located in just one small temple in a small state, then $1.5 trillion does not seem too large. 

Finally, we are so tired of the nonsense that is written by ‘Indian’ authors about ‘Hindu gods’ in the New York Times and Washington Post.

• Quintannia – Do you worry about fiscal drag?
• Achuthan – You know, as much as we like to think that politicians or the Fed or somebody can push this one way or the other,  let’s say we cut taxes or we increase spending or the Fed does something with monetary easing and it will fix stuff, they’re not in the driver’s seat, they’re lucky if they are in the passenger seat. They’re in the back seat. The business cycle is much stronger element here. and right now, let’s go — the first key thing is this global industrial downturn, which is not over at all.
• Quintannia – You say it’s just beginning!
• Achuthan – you were in the at best to middle and in the best case scenario, it ends by the middle of the year. that’s if everything starts to lift from here, if the skies part and the sun comes out. and it is a pretty nice day this morning. maybe that’s happening. I don’t know. But then, when you look at the country specific indicators, look at the U.S., this is not simply a manufacturing slowdown any more. this is a broad economy slowdown. You’re not going to see the jobs growth that you saw earlier this year.
• Quintannia – you’re saying we’ve seen the best jobs numbers of the year already?
• Achuthan – Yeah. if you look at the 3-month moving average, it smooths out the jumps. That peaked out around a quarter million in the February to April range; we’re not going back there, we are not going back to the PMI in the 60s. (Achuthan proved to be prescient when Friday’s payroll number was released).
• Kernen – What makes you think that the policymakers don’t affect the business cycle? I mean, I think you’re giving the benefit of the doubt to our divided government here and good luck that we’re not going to do anything absolutely crazy because you can’t tell me that policymakers in Europe haven’t affected the business cycle in Europe for 30 years where GDP has consistently grown less than year, there’s labor laws — that’s structure. we can’t go there?
• Achuthan – no, no, we can go there. Let’s go on the fiscal side first which is taxing and spending. There, I think Washington has a lot of power or Brussels or Beijing, they have a lot of power in shaping the playing field. And so to your point over a span of many years, they absolutely can set the stage for what kind of economy you’re going to have. The Fed or the Central Bank or wherever, these guys are much more short-term. They’re going to raise rates, they’re going to cut rates, the ECB is going to raise rates, China just raised rates. The Fed is saying, you know, we’re holding off. They can smooth the cycle if they’re preemptive. You haven’t seen a preemptive fed since the middle of the 90s. I‘m talking Greenspan, vintage 90s. There’s a preemptive strike in ’94 and ’95. If you take a look at the current cycle, let’s not forget that six months inside of the recession, in the second quarter of ’08,  the Fed and the Bond Market were pricing in 100 basis points of rate hikes by December of ’08. So I don’t think they’re helping in that sense. And more recently, they’ve been behind the curve with a lot, like a rocket engine, and if you look at the way cycles work, that makes cycles more bouncy not smoother, which is not exactly what you want.
• Quintannia – Bottom line, Kevin, does any of this resonate with you, make you more cautious than you ordinarily would be?
• Caron – well, it does. it resonates because we’ve seen the lowdown in the data that Lakshman is talking about. and as we look at the data, we’re a little different about the role of government in all of this because what we’ve seen in the bottom of 2009 when the stimulus package came on, it did kick up GDP.  It has an impact. you’re running almost 10% budget deficit. if you were to cut that dramatically next year, back to what was normal like 2%, you would have, I think, a significant impact on the economy. so everything — it does have an impact. the question is to how it plays out in the short run. So our position is that equities move higher, we expect slow growth in the economy, and in terms of the portfolio postures, lengthened our bond duration, we focused more on consistency over growth in the portfolios that we manage. And We’ve pulled in risk.
• Achuthan – They can affect the business cycle and they do it when there’s a crisis. But here, we’re not at a crisis yet and the idea that they’re going to be able to nudge it so it lifts again, that’s not happening. 

Mr. Caron has lengthened bond duration (he has added more longer maturity bonds to his portfolio). So at least in the short term, he is somewhat in sync with Mr. Achuthan.

2. Roubini on Perfect Storm – Nouriel Roubini with CNBC’s Maria Bartiromo – Wednesday, July 6

John Taylor of FX Concepts told us on June 2 that “2012 will be a miserable year” (see clip 1 of our May 31 – June 3 Videoclips article). Then David Rosenberg told us on June 13 (see clip 1 of the June 11 – June 17 Videoclips article) that he is 99% sure that there will be a recession in 2012. You don’t expect Nouriel Roubini to not opine on a downturn, do you? Well, he does. But not in 2012. Because he sees the proverbial can being kicked down the road after until the Presidential Election in 2012.

So Dr. Roubini predicts a ‘Perfect Storm’ in 2013. Hear him explain his reasoning in the clip or read a summary at Perfect Storm Coming for the Global Economy in 2013 on CNBC.com. We include a few excerpts below:

• Weakening economic conditions will come together in 2013 and create a “perfect storm” of global weakness.
• “My prediction for the perfect storm is not this year or next year but 2013, because everybody is kicking the can down the road,…We now have a problem in the US after the election if we don’t resolve our fiscal problems. China is overheating…eventually it’s going to have a hard landing.“
• In the nearer term, Roubini sees slow but steady growth in the US, with gross domestic product likely to be a bit above 2 percent, with unemployment and housing continuing to hold back the economy. From there, recovery will be difficult as the government cuts spending and raises taxes to ease pressure from the bulging debt and deficit issues.
• At the same time, euro zone periphery nations like Greece, Portugal and Spain will continue to wrestle with their own debt problems, and China will act to prevent inflation from getting out of control.
• “I see every economy in the world trying to push their problems to the future,…We start with private debt, public debt, supra-national debt-we’re kicking the can down the road and eventually this is going to come to a head in 2013.”
• “China’s efforts to pull inflation back to the 5 or 6 percent range also will constrain growth and hit its trading partners,… That implies lower commodities, lower exports from Europe to China, weaker global economic growth and a situation in which all advanced economies have weak economic growth.”

3. Market’s Triple Play – CNBC Power Lunch – Friday, July 8

In this succinct, no-nonsense clip, three professionals give their views about markets in the aftermath of the horrible payroll number. They are Art Cashin of UBS, John Netto, President M3 capital, and Holly Liss, Director of Global Futures at Citi. The three CNBC Anchors are Michelle Caruso Cabrera, Sue Herera and Tyler Mathisen.

• Art – I think we are dodging a budget. It is not just the non-farm payrolls. Before that came out, things were beginning to flash some warning signs on Italy. That’s a big, big load of the sovereign debt worries in Europe. And then when non-farm payrolls came in as disastrous as they were, I mean long-term unemployment was up, short-term unemployment hinting that maybe we’re going to have a little bit of a rollover. So far we’ve dodged a bullet. I think it’s the calendar bias. Going into a weekend, Friday’s usually the best day of the week. I think it is a value operation salvage.

• John – One thing that’s important to look at, speaking anecdotally over th
  e last 45 minutes or so, it is amazing how much complacency is in this market. We come with a very bad jobs data, the rally leading up to this week, showing the binary nature of this market.… The fact that we had bad jobs data and we haven’t sold off more I think speaks for complacency and I think there’s more downside to come.

• Holly – It’s encouraging to me and for all the market bulls out there for interest rates. They are going lower. The market clearly had a huge move. If you look at commitment of traders data from CFTC, which granted at this point is a week old, but the market was short, the speculators were short coming into this week’s data so that probably accounts for some of the move we had here but clearly the disastrous non-farm payrolls added to that. Technicals continue to look very bullish. We are going to see continuous price action to the upside next week. If not, they may have to start looking into the benefits of outsourcing their payroll, using somewhere like Cloudpay (https://www.cloudpay.net/resources/the-benefits-of-outsourcing-payroll) or a similar system.

• Sue – Holly, would you stay with your yield projections which was down I believe at the 2.35% mark on the 10-year?

• Holly – yeah, clearly. I still am sticking with that. The Technicals continue to look positive despite last week’s sell-off. This week’s recovery is at this point technically it is called an inside higher week meaning we’re within last week’s range but we’re higher. Still looks like we have potential to take out 128-01 that is 2.38% in terms of yield. And there is something else interesting in the Interest Rate Market. In equities we tend to look at the golden cross, when moving averages cross over to the up side. We have that in 10-years. Last time we did, we had an eight-point rally. I‘m sticking with it. Market bears may want to look through options to get short rather than outright naked futures.

• Michelle – Holly, when we come in on Monday are we going to be relieved about Italy or even more worried?

• Holly – Anybody’s guess at this point. I say it’s 50%-50%.

• Michelle – How much are you guys, John, Art, how much are you looking at the sovereign worries in Europe next week as we watch all those spreads blow out or are we going to be insulated here in the United States, Art?

• Cashin – I don’t think you’re going to be insulated at all. I think what you’re going to see is the kind of thing you began to see as Bear Stearns was the first flashing warning and everybody thought they went past that. Then the vigilantes went around marauding from issue to issue, they are gonna go from country to country. CDS spreads are going to make it an infection.

• Tyler – you put it in those terms, Art, we’ve got very thin volume. this would suggest to me that your next few weeks, the next few months may be a time to really buckle your seatbelts?

• Art – It’s a time to be careful and I would bet you that given the non-farm payrolls today, not many people high up in the Federal Reserve are going to be at barbecues this weekend. I think they’ll be talking about QE 2.5 or something else to get it moving.

• Sue – John, what about that? We did have several people on CNBC today saying we’re going to get exactly what Art just mentioned. More quantitative easing. How does that impact your market and what’s your near-term projection for oil.

• John – I think if you want to look at oil, we’ve seen the pull-back today and ultimately oil moves down to $94. One market to rely focus on is what Gold is doing. Gold and Euros. Gold price in Euros is 1,084 euros per ounce. That’s an all-time high right now. if you want to understand and ultimately capsulate the sovereign debt concerns out there, look how well Gold has performed against the Euro, two aspects inversely correlated to the U.S. Dollar. Gold has significantly outperformed the Euro. They did so in 2010 and they are doing so now in 2011 as well. < /font>