Saturday, June 21, 2008

Ocean Water Acidity

6/21/08 Ocean Water Acidity

Earthfiles: "Ocean water along the Pacific Coast has increased in acidity so much after absorbing carbon dioxide from the atmosphere that scientists are surprised. None of the global warming climate models saw open oceans increasing in acidity by 30% until the end of the 21st Century. But the Earth is changing much faster than computer models can project. A new study published in the June 2008 journal, Science, shows that ocean water only four miles off the northern California shore, is already 30% more acidic than normal.

By 2008, it is estimated that oceans have absorbed 525 billion tons of greenhouse gases. All the carbon dioxide absorbed by seawater has produced increasing amounts of carbonic acid. The calcium carbonate shells of clams, oysters, corals, diatoms and some planktons weaken and disintegrate in carbonic acid. Could we be facing a time in the next few decades where shellfish, corals, diatoms and planktons won't be able to survive? Like dominoes falling, without them in the food chain, what happens to other marine life? And what happens to humans who depend on sea creatures for food?"

“The last time the oceans endured such a drastic change
in chemistry was 65 million years ago, at about the same time
the dinosaurs went extinct.” - Ken Caldeira, Ph.D., Stanford University

The US economy is likely to “stagnate” in the second half of this year, the International Monetary Fund warned, as stock markets in the US and Europe fell to their lowest levels since March and US bank shares hit a five-year low.

Gasoline near $4 a gallon helped send prices for used large pickups and SUVs tumbling at least 21 percent in May, Atlanta- based Manheim Consulting estimates. That cuts trade-in values, pushing light-truck sales down 16 percent in 2008, compared with less than 1 percent for cars.

According to Bloomberg, MBIA Inc.'s five-level downgrade by Moody's Investors Service probably will force it to make $7.4 billion of payments and collateral postings.

China's central bank Governor Zhou Xiaochuan said his bank may formulate ``stronger policies'' to tackle inflation exacerbated by the government's latest fuel- price increases.

The International Monetary Fund said the U.S. economic slump has been shallower than estimated and warned the Federal Reserve may have to raise interest rates ``quickly'' to contain inflation.

California's unemployment rate rocketed up by 0.6 percentage points in May - the largest one-month increase since the state began keeping records in 1976 - as the fallout from high energy prices and the depressed housing market rippled through the state's economy.

The state's jobless rate was a seasonally adjusted 6.8 percent, up from 6.2 percent in April, the California Employment Development Department reported Friday. That's the highest rate since November 2003, when California was recovering from recession.

Much of Texas has plunged into extreme drought conditions.

According to the study by private analysts Global Insight for the U.S. Conference of Mayors meeting in Miami. Just eight months ago, researchers predicted property values would shrink by $1.2 trillion this year, the study said. "Metro areas are expected to suffer a $1.46-trillion decline in property values in 2008," the study said. "The increased loss is a result of even greater deterioration in home markets and prices than anticipated."
The decline is the equivalent of $21,277 per home, the study said.

Chevron Corp. has suspended output of 120,000 barrels a day of oil production in Nigeria after local militants attacked a key supply pipeline, media reports said Saturday.

The oil minister, who is close to the country's powerful Shiite clerical leadership, told the British newspaper The Guardian this week that Iraq will demand the right to veto any U.S. military operation.

But American commanders believe they need such sweeping powers to protect U.S. soldiers in a combat zone.

With communities in the Midwest still under water, Democrat Barack Obama on Saturday criticized Republican John McCain for opposing federal spending on flood prevention programs and opened a new debate in the White House race.

Mike Burk: "The market is oversold and there is reason to think we are at or very near the low for this downward move. Every one of the issues in the Dow Jones Industrial Average (DJIA) is below its 50 day EMA, a relatively rare event that has occurred near bottoms...Near the low last August there were 1132 new lows on the NYSE, at the January low there were 1114 new lows and at the March low there were 759 new lows. At each of those points I pointed out there was a high likelihood of a retest because of the high number of new lows. On Friday the DJIA closed less than 1% above its March low (close enough to qualify as a retest) and there were "only" 275 new lows, not enough to imply a high likelyhood of another retest. The market could collapse in the next few days generating a lot of new lows, but that scenario seems unlikely...I expect the major indices to be higher on Friday June 27 than they were on Friday June 20."

The U.S. energy secretary said Saturday that insufficient oil production, not financial speculation, was driving soaring crude prices.

Financial And Economic Vulnerability

6/20/08 Financial And Economic Vulnerability

Doug Noland: "Grossly inappropriate short-term U.S. interest-rates are today directly stoking serious price inflation, in the process reducing consumer discretionary income and the capacity to service enormous debt loads...And because of the worsening Credit backdrop, mortgage and consumer debt borrowing costs are rising in spite of Fed rate cuts. Moreover, households are suffering further from the sharp reduction in returns on their savings, not to mention the inflation-related decline in many stock prices...Sinking home prices and surging energy and food prices are causing bloody havoc on general creditworthiness, a huge dilemma for the faltering financial sector and finance/consumption-driven Bubble economy. The bust in Wall Street finance is driving a major shift in economy-wide spending patterns, putting downward pressure on wages, incomes and profits in some sectors, while other sectors enjoy huge inflationary boosts. The breakdown in Wall Street “alchemy” has ensured that the Fed-orchestrated reflation bypasses home prices as it hastens problematic inflation elsewhere. A very strong case can be made that the nature of the Wall Street finance and asset-based lending boom nurtured a degree of financial and economic imbalance and vulnerability unlike the wage-based inflation of the seventies...I simply see no way around the necessity of sharply reducing the amount of new Credit and imports required to sustain the U.S. economy. I see no alternative than a long and wrenching adjustment period while the household balance sheet is repaired, financial sector stability is restored, and some semblance of economic balance is achieved."

Venezuelan President Hugo Chavez is vowing to help poor, landlocked Paraguay meet its petroleum needs and explore for oil and natural gas.

Chavez says Venezuela "guarantees" it will satisfy demand for oil in the South American nation.

Del Monte Foods Co. has confirmed it is in talks with South Korea's Dongwon Enterprise Co. about potentially selling its Starkist seafood business.

According to AMG Data Services, Including ETF activity, Equity funds report net cash inflows totaling $22.028 billion in the week ended 6/18/08 with Domestic funds reporting net inflows of $24.264 billion and Non-domestic funds reporting net outflows of -$2.237 billion;
Excluding ETF activity, Equity funds report net cash outflows totaling -$106 million with Domestic funds reporting net inflows of $369 million and Non-domestic funds reporting net outflows totaling -$475 million.

Have you considered the following? Bush will go down as the most popular as well as the worst president in this nation's history. He will have broken a myriad of laws; reduced our freedoms; spit on the articles in our Constitution; started a war without cause; his economic policies placed our nation's finances in harm's way; and yet, accomplished the unthinkable-- he will walk away without even a slap on his wrist and/or a scratch on his head. That is quite an accomplishment, and probably the only accomplishment of his 2-term presidency.

Anheuser-Busch Cos. Inc.said Friday that Carlos Fernandez, chairman and chief executive officer of Mexican brewer Grupo Modelo, submitted his resignation Thursday as a board member of Anheuser-Busch, effective immediately.

Lehman Brothers cut its earnings estimates on Fannie Mae and Freddie Mac, saying the housing market continues to deteriorate at an accelerating pace. It expects national house prices to drop 20% from the peak.

Goldman Sachs analysts say that the Chinese fuel price hike announced Thursday won't significantly slow demand growth and may, in fact, increase it. There will be a higher incentive for refineries to bring more products to the market, which in turn can alleviate domestic shortages of refined products.

Washington Mutual is cutting 1,200 more jobs as part of the lender's efforts to reduce costs and return to profitability.

Mexico's central bank unexpectedly increased its benchmark interest rate to fight the fastest inflation in three years amid higher food and energy prices. Mexico's five-member board voted today to raise the overnight lending rate by a quarter percentage point to 7.75 percent.

Iran would respond to an Israeli attack on nuclear facilities with a ``heavy blow,'' a senior cleric said, following a New York Times report that Israel carried out an exercise that could prepare it for such a strike.

Ayatollah Ahmad Khatami, leading Friday prayers in Tehran, said today that Iran favored dialogue and would resist ``mischievous acts,'' the state-run Islamic Republic News Agency said. Such an attack would prompt an ``uproar on the part of our nation,'' Khatami said.

MBIA Inc. and Ambac Financial Group Inc. declined after Moody's Investors Service stripped the bond insurers of their Aaa ratings.

Global oil demand is likely to contract 0.6% in 2008 for the first time in 15 years, said J.P. Morgan Chase late Friday.

The Dow Jones Industrial Average fell 220.4 points, or 1.8%, to end at 11,842.69, giving the blue chips a weekly loss of 3.8%. The S&P 500 shed 24.91 points, or 1.9%, to stand at 1,317.92, leaving it 3.1% down on the week, while the Nasdaq Composite fell 55.97 points, or 2.3%, with the technology-laden index off 2% from a week ago.

July crude closed at $134.62 a barrel in New York Friday, up $2.69, or 2%, for the session, but down 0.2% for the week. August gold closed at $903.70 an ounce Friday in New York, down 50 cents for the session, but up 3.5% for the week.

The flooding in the Midwest has brought freight traffic on the upper Mississippi to a standstill, stranding more than 100 barges loaded with grain, cement, scrap metal, fertilizer and other products while shippers wait for the water to drop on the Big Muddy.

Peter Schiff: "Throughout history, governments have always used crises to justify blatant power grabs. Often the crisis subsides, but the expanded government powers remain. In America this week, the tendency came into sharp focus. Congress signaled that it is preparing to perpetuate the Bush Administration's domestic wiretapping program, and has even abandoned the pretense that warrantless surveillance be confined to terrorism. Similarly, even though our financial crisis has yet to reach full flower, Treasury Secretary Paulson announced plans to give the Federal Reserve new and explicit powers to oversee and regulate the financial services industry. However, a sober look at his plan reveals that it is tantamount to giving the fox complete autonomy to guard the henhouse."

As for Nancy Pelosi, she stated the Bush Administration's domestic wiretapping program did not violate the Constitution. This is the same Pelosi who proclaimed impeachment was off the table. When she runs for re-election, I suggest she run as a Republican. Hopefully, the voters will deep six her the next time around.

BCE Inc. on Friday won the right to go ahead with the largest leveraged buyout in history, a US$35 billion deal that the telecommunications company's bondholders fought, saying it would reduce their holdings to junk. Canada's Supreme Court overturned a lower court ruling that the sale of BCE, the parent of telecommunications holding company Bell Canada, to the Ontario Teachers' Pension Plan and its minority U.S. partners didn't adequately consider bondholders' interests.

According to Rigzone, a consortium led by the oil-services arm of China National Offshore Oil Corp. is in advanced talks to buy Norwegian oil drilling contractor Awilco Offshore ASA in a deal that could be valued at more than $2 billion.

Iran is pressing on with uranium enrichment "non-stop," its envoy to the U.N. nuclear agency was quoted as saying on Saturday, despite a world powers' offer of economic incentives to coax Tehran into halting such activities.

Obama reported his weakest fund-raising month this year, raising $22 million in May for his presidential campaign. He ended the month with $43 million cash on hand, according to his campaign.

According to the WSJ, Ford said the plunge of U.S. truck and SUV sales due to record-high gasoline prices was forcing the new cuts, and even pushing back the launch of its redesigned F-150 pickup truck that once was expected to drive the company's recovery. The moves suggest the company is bracing for a greater loss in 2008 than its $2.7 billion loss last year, and Ford said it no longer expects to break even by 2009.

Thursday, June 19, 2008

Another Hindenburg Omen

6/19/08 Another Hindenburg Omen

Robert McHugh: "We got another confirming Hindenburg Omen observation Tuesday, June 17th, the third since June 6th, and we continue to have an official Hindenburg Omen potential stock market crash signal on the clock. Getting a third does not make the risk of a crash any greater than had we just two, however it does drive home the point this remains an unhealthy market, and it is no aberration."

Royal Dutch Shell said it shut down production from an offshore oil field that produces about 200,000 barrels per day after the most powerful militant group in Nigeria launched an attack on an installation there Thursday.

Circuit City Stores Inc's quarterly loss widened to $164.8 million, or $1 a share, from $54.6 million, or 33 cents, a year earlier. Sales dropped to $2.3 billion from $2.49 billion a year earlier. The company, which is exploring its strategic alternatives following a buyout offer from Blockbuster Inc, said it's suspended future dividend payments.

Commercial property foreclosure postings in the Dallas-Fort Worth area jumped 35 percent in the first half of 2008, although the number remains very low.

Fewer than 1,000 commercial postings were recorded through June, according to Addison-based Foreclosure Listing Service.

That compares with more than 25,000 residential foreclosure postings during the same six-month period in Dallas, Tarrant, Collin and Denton counties.

According to the NY Times, in recent years, this global shortage of drill-ships has created a critical bottleneck, frustrating energy company executives and constraining their ability to exploit known reserves or find new ones. Slow growth in oil supplies, at a time of soaring demand, has been a major factor in the spike of oil and gasoline prices.

China's monetary policy may be overwhelmed by inflows of speculative capital if it doesn't allow greater exchange-rate flexibility, the World Bank said.

``China is too large an economy not to have an independent monetary policy,'' Louis Kuijs, acting chief economist for China, said in Beijing today when the Washington-based lender released its quarterly report on the nation. ``To have that, you need more exchange-rate flexibility.''

Hundreds of sensitive nuclear missile components that were previously part of a US Air Force nuclear inventory cannot be accounted for, according to a Pentagon report.

Bob Barr, the Libertarian Party presidential nominee, offered a scathing critique of Sen. John McCain. Barr, a one-time conservative Republican House member from Georgia who broke with the Bush administration and many of his former congressional colleagues, blasted McCain for his support of the war in Iraq, his energy policies and his stand on reducing government spending.

An employer has no right to read an employee's text messages without the worker's knowledge and consent, and federal law bars service providers from turning over the contents of the messages to the employer who pays for the service, the 9th U.S. Circuit Court of Appeals ruled Wednesday.

Rob Hanna: "One statistic I look at and use in my trading is the amount of time a security trades above or below certain moving averages. One moving average I look at is the 10-day moving average. Right now there are 4 stocks in the S&P 100 that have closed below their 10-day moving average for at least 30 days in a row. They are BAC, RF, GM and WB. Using the current S&P 100, I ran some scans back over the last 10 years to find out how unusual this is. In the last 10 years there have been only 65 occurrences of an S&P 100 stock closing below its 10-day moving average for 30 days in a row. Twice there have been 4 or more on at once. The first time was in late August of 1998 when there was up to 5 and the 2nd time was early March of 2000 with 4. From a historical perspective, some of the recent selling, especially in banks and financials, has been persistent to a degree that has rarely been seen."

Forest Labs annouced positive phase-III results of its skin-infection drug Ceftaroline.

Alliance Data Signs Long-Term Agreement to Provide Private Label Credit Card Services for Fast-Growing Web and Catalog Retailer Peach Direct.

The number of Americans filing first-time claims for unemployment benefits fell last week, signaling the labor market may be stabilizing. Initial jobless claims fell 5,000 to 381,000 in the week ended June 14, more than forecast, from a revised 386,000 the prior week, the Labor Department said today in Washington. The total number of people collecting benefits dropped 76,000 to 3.06 million for the week ended June 7.

Iran is studying incentives from the world's powers for the country to drop its uranium-enrichment program and will respond ``at an appropriate time,'' Foreign Minister Manouchehr Mottaki said.

Iran is prepared to negotiate on the proposals, though it won't be intimidated by threats from the U.S., Mottaki told reporters today in Uganda's capital, Kampala. The U.S. ``has no right to interfere; the time for ordering other nations is over,'' he said.

The U.S., European governments, Russia and China are offering the incentives in exchange for a halt to Iran's production of nuclear fuel, which the U.S. and its allies suspect is disguising a program to develop an atomic bomb or gain the knowledge to make one.

The Oil Drum reported the Dutch government acknowledged in its new energy strategy that Dutch natural gas production has passed its peak. Stating that the peak occurred in 2007/2008 and the Netherlands will have become a net importer of natural gas by 2025.

Nouriel Roubini: "Is there a significant chance that Israel will attack by year end Iran’s nuclear facilities? The German magazine Spiegel argues so in a two-part article “Mission Doable“ and “‘We Will See a Middle East in Flames’“ (hat tip to Fabius Maximus):

While the Europeans continue to pin their hopes on diplomacy and are convinced that a negotiated solution that would allow Tehran to save face is still possible, the Israelis already view the UN sanctions regime as a failure. Russia and China, they say, sabotaged the boycott from the very beginning, and even the Europeans have only half-heartedly supported sanctions. More rumors about a strike by Israel at Iran."

"The standing inventory of new construction is declining rapidly, but it's being offset somewhat by existing homes and foreclosures," said Lawrence Angelilli, senior vice president of finance at Centex Corp. (CTX). Steven Hilton, chief executive at Meritage Homes Corp. (MTH), said home builders have smaller inventories than the data being reported by the government. He estimated public builders, on average, have less than a 3-month supply as they try to cut the number of "speculative" homes, or those without a buyer due to a cancellation. When builders start to have less incentive to cut prices in order to move inventory and generate cash, it could be one of the "first signals to price stability," Hilton said Thursday at an industry conference hosted by Bank of America Corp.

High-net worth individuals, those coveted financial-services customers with at least $2 million to invest, are shifting assets from brokerages and large global banks to smaller, more conservative alternatives.``For the first time in my career, I saw concern about the location of one's assets,'' said Robert Balentine, the head of Wilmington Trust Corp.'s investment management group. ``We've seen tangible evidence of very wealthy clients shifting assets out of brokerage firms in great numbers.''

July crude fell $4.75, or 3.5%, to close at $131.93 a barrel Thursday in New York, marking the contract's weakest closing price since June 10. China said it increased retail-energy prices and oil analysts said the news raised concerns over a slowdown in demand.

August gold closed at $904.20 an ounce in New York Thursday, up $10.70, or 1.2%, for the session. That was the contract's highest closing level since May 28.

Americans drove just below 935 billion vehicle miles in 2008 as of April 30, the lowest total since 2003's figure of 899 billion miles, according to the monthly Travel Trends report from the U.S. Federal Highway Administration. In April, Americans drove 246 billion miles, down 1.8% from 250 billion in the year-ago period.

Citigroup Inc's chief financial officer Gary Crittenden said Thursday that, "if current trends prevail, it is fair to conclude we will continue to have substantial additional marks on our subprime exposure this quarter."

Natural-gas inventories rose by 57 billion cubic feet for the week ended June 13, the Energy Department said Thursday. Global Insight expected the data to show an increase of 65 billion. Total stocks now stand at 1.943 trillion cubic feet, down 376 billion cubic feet from the year-ago level and 52 billion cubic feet below the five-year average, the government data said. July natural gas was last down 7 cents at $13.145 per million British thermal units in electronic trading on Globex.

The factory sector in the Philadelphia region weakened in June for the seventh straight month, the Federal Reserve Bank of Philadelphia reported Thursday. The Philly Fed index fell to negative 17.1 from negative 15.6 in May.

The Conference Board said Thursday that the index of leading economic indicators rose slightly in May for a second straight month. The index, which attempts to forecast turning points in the economy, rose 0.1% in May, matching April's gain.

Wednesday, June 18, 2008

A Warning

6/18/08 A Warning

A credit strategist from the Royal Bank of Scotland warned investors in a note that the S&P 500 may fall by more than 300 points by September and that iTraxx index of high-grade corporate bonds could soar, according to a report in the Daily Telegraph newspaper. "Cash is the key safe haven. This is about not losing your money, and not losing your job," the RBS strategist, Bob Janjuah, was quoted as saying.

Burlington Northern Santa Fe Corp warned on Wednesday that earnings would miss forecasts because of flooding in the U.S. Midwest and rising fuel prices. Not long ago, all analysts were bullish on the rails--except for me.

Coventry Healt lowered its earnings estimates because of disappointing April and May results, sending shares sliding 19% to $32.44. Coventry now sees earnings of 55 cents to 57 cents a share for the second quarter, and $3.65 to $3.75 a share for the year.

Huntsman dropped 38% to $12.87 in heavy trade after Apollo Management LP and Hexion Specialty Chemicals said it has filed a lawsuit against Huntsman, alleging the chemical company's poor financial results make a previously announced takeover bid untenable.

The Dow Jones Industrial Average fell 131.24 points, or 1.1%, to 12,029.06. The Dow at 3 month low.The S&P 500 shed 13.13 points to 1,337.8, or 1%, while the Nasdaq Composite declined 28.02 points, or 1.1%, to 2,429.71.

July crude climbed $2.67, or 2%, to close at $136.68 a barrel in New York Wednesday. Gold for August delivery gained $6.60 to finish at $893.50 an ounce on the New York Mercantile Exchange.

The American Petroleum Institute reported a fall Wednesday of 3.1 million barrels in crude supplies for the week ended June 13. The Energy Department had reported a decline of 1.2 million barrels for the latest week. Motor gasoline supplies were down 2.4 million barrels, the API said. The government had reported that supplies fell by 1.2 million barrels. Distillate supplies climbed by 1.4 million barrels, the API said. They were up 2.6 million barrels, according to the Energy Department.

FedEx Corp. reported disappointing results, with rising fuel costs denting its bottom line. FedEx also said it expects first-quarter earnings of 80 cents to $1.00 a share and fiscal 2009 earnings of $4.75 to $5.25 a share.

Pfizer Inc. has agreed to settle patent litigation with India-based generic drugmaker Ranbaxy Laboratories Ltd. Under terms of the settlement, Ranbaxy will obtain a license effective Nov. 30, 2011, to sell generic versions of Pfizer's cholesterol-lowering drug Lipitor and high blood-pressure and cholesterol treatment Caduet in the U.S.

Moving to stem rising inflation and civil discontent, President Felipe Calderon and Mexican industrialists announced an agreement Wednesday to freeze prices on more than 150 food items.

The First Trust ISE Global Wind Energy ETF (NYSE Arca: FAN) launched Wednesday.

30-year fixed mortgage rates at an eight-month high.

According to Wikipedia:

The traditional definition of a Hindenburg Omen has five criteria:


That the daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows must both be greater than 2.2 percent of total NYSE issues traded that day.

That the smaller of these numbers is greater than 75. (this is not a rule but a function of the 2.2% of the total issues)

That the NYSE 10 Week moving average is rising.

That the McClellan Oscillator is negative on that same day.

That new 52 Week Highs cannot be more than twice the new 52 Week Lows (however it is fine for new 52 Week Lows to be more than double new 52 Week Highs). This condition is absolutely mandatory.

These measures are calculated each evening using Wall Street Journal figures for consistency. The occurrence of all five criteria on one day is often referred to as an unconfirmed Hindenburg Omen. A confirmed Hindenburg Omen occurs if a second (or more) Hindenburg Omen signals occur during a 36-day period from the first signal.

Tuesday, June 17, 2008

Hindenburg Omen

6/17/08 Hindenburg Omen

Robert McHugh: "We got a confirming, second Hindenburg Omen observation Monday, June 16th, so we now have an official Hindenburg Omen potential stock market crash signal on the clock. This means, there is an approximate 25 percent probability that we will see a full blown stock market crash within the next 120 days, taking us into a risk zone through October 2008. This is significant as the odds of getting a stock market crash on any given random day is less than one-tenth of one percent. Further, we can tell you that there has not been a stock market crash over the past 25 years without a confirmed H.O."

Finished goods are up 7.2% over the past year.

Wholesale prices bolted ahead in May at the fastest pace in six months as energy and food costs marched higher.The Labor Department reported Tuesday that its Producer Price Index, which measures the costs of goods before they reach store shelves, shot up 1.4 percent in May. That was up from a modest 0.2 percent rise in April and marked the biggest increase since November.

U.S. housing starts slid 3.3 percent in May to their lowest level in more than 17 years, while permits for future construction also fell, signaling more weakness ahead for the battered U.S. housing sector.

Best Buy reported a 7 percent drop first-quarter profits Tuesday, but it still beat Wall Street's expectations because of a lower share count and increased sales.

Seneca: " It is not because things are difficult that we do not dare, it is because we do not dare that they are difficult."

Goldman Sachs Group Inc said second-quarter earnings fell about 10 percent, but still easily beat lowered Wall Street expectations on higher fees from asset management and stock underwriting.

Adobe Systems Inc.'s profit rose 41 percent in the second quarter because of strong sales and booming demand in international markets.

The output of the nation's factories, mines and utilities fell 0.2% in May, the Federal Reserve said Tuesday. This is the third drop in the past four months.

Tesoro said it's schedule to realize its goal of generating $750 million to $1 billion of operating cash flow through reduced operating and administrative costs, lower capital expenditures and reduced working capital driven mainly by inventory reductions.

The U.S. current account deficit widened to $176.4 billion in the first three months of the year from $167.2 billion in the fourth quarter, the Commerce Department reported Tuesday. The current account deficit was 5% of gross domestic product. The increase was largely due to lower income earned by Americans overseas. Net financial flows into the United States fell to $124.3 billion from $213.4 billion.

Analysts from Goldman Sachs Group Inc.estimated that U.S. banks may need as much as $65 billion in new capital and said that raising that amount will be harder and more expensive in coming months.

Consumer price inflation in the United Kingdom is set to rise sharply in the second half of the year due largely to surging energy and food prices, likely hitting an annualized pace of more than 4%, Bank of England Gov. Mervyn King told U.K. Chancellor of the Exchequer Alistair Darling in an open letter published Tuesday.

Swamped by debt and rising medical bills, elderly Americans have been seeking bankruptcy-court protection at sharply faster rates than other adults, a study to be released Tuesday indicates.

Salmon-Challis National Forest Supervisor Bill Wood has signed the Record of Decision approving a modified Plan of Operations for Formation Capital Corporation's Idaho Cobalt Project, a proposed cobalt mining project located in the Panther Creek drainage west of Salmon.

Rob Hanna: " The S&P 500 rose today for the 3rd day in a row. As I showed on May 30th, when the S&P is trading below its 200-day moving average and without the proper pattern of increasing volume, this has provided a short-run negative expectancy over the last 35 years. What was interesting about today’s rise is that it was so weak from a price perspective. This can be a sign that the bulls are losing momentum and the short-term tide is ready to turn back to the bears."

According to Reuters, Credit Derivatives Research LLC, an independent credit research company, on Tuesday launched an index to measure, or hedge against, counterparty risk in the $62 trillion credit derivatives market.

The index, dubbed the CDR Counterparty Risk Index, comprises the average spread of the largest 15 credit derivative counterparties and may be used to hedge against the risk of a counterparty failing, or to track perceptions of their credit quality.

"The biggest fear when you do a credit default swap contract is when somebody goes into default and you're expecting your $10 million back from the guy you trade with and they're not there to pay you that money," said Tim Backshall, chief strategist at Credit Derivatives Research in Walnut Creek, California.

When a company defaults on its debt the protection seller in a credit default swap contract, which is often a bank, pays the protection buyer the full amount insured.

The average credit spread of the 15 largest dealers, which represent more than 90 percent of volumes in the market, peaked at 250 basis points in March, compared to 25 basis points a year ago, though have since retreated to 100 basis points, according to CDR data.

"That risk is a low number still but it's a lot higher than it ever was before," said Backshall.

Erich Fromm: "Creativity requires the courage to let go of certainties."

August gold closed at $886.90 an ounce in New York Tuesday, up 60 cents for the session to mark a recovery from the day's low of $876.70. July crude closed at $134.01 a barrel Tuesday, down 60 cents for the New York trading session.

The fertilizer stocks shot to the moon on Tuesday and the railroad stocks took it on the chin.

Ross Perot

6/16/08 Ross Perot

Columnist Robert D. Novak said in a story published Monday that sources close to Ben Bernanke indicated the Fed chief has no current plans to raise interest rates to fight inflation. Bernanke is more worried about the jump in oil and gasoline prices causing an economic slowdown rather than an overheated economy, Novak said, citing sources.
In case Novak did not notice, the market raised rates for the Fed.

Front month July corn on the Chicago Board of Trade rose to a contract high of $7.57-3/4 a bushel, up more than 3.5 percent from Friday's close, while July 2009 soared to an all-time peak of $8.07.

Tim Wood: "Since July 2007 we have had an upside Dow theory non-confirmation, followed by a bearish primary trend change that was followed by a downside non-confirmation out of the January/March secondary lows. This was all then followed by a rally into the most recent secondary high points that carried the Transports to a new closing high on June 5, 2008 while the Industrials have lagged. As a result, another upside non-confirmation has been date nothing has occurred to negate the bearish primary trend change that occurred on November 21, 2007. So, until the bearish primary trend, that was established on November 21, 2007 is negated, there is not sufficient evidence in accordance with classical Dow theory, to determine if we are still operating within the context of a longer-term bull market or if we have indeed moved into the early stages of a long term bear market."

Brett Steenbarger: "Until we see greater evidence of demand for stocks, it will be difficult to sustain a bull move. That having been said, I'm not yet seeing the kind of selling that typified the markets in the first quarter of this year. As long as that's the case, we appear to be trading in a broad range defined by the March lows and the recent market highs."

Ross Perot launched a new Web site Sunday, scolding America about its fiscal irresponsibility and the impact bad decisions will have on the country’s future.

Perot says America is spending its way over the edge of a cliff, and has launched to shake up voters about the national debt and the federal government

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Monday, June 16, 2008

Continuing Economic Downturn

6/15/08 Continuing Economic Downturn

"Within the Constitution's separation-of-powers structure, few exercises of judicial power are as legitimate or as necessary as the responsibility to hear challenges to the authority of the Executive to imprison a person," Justice Kennedy wrote.

North Dakota has set a monthly oil production record and is on pace to set a record for the year, state and industry officials say.The state Industrial Commission reports that North Dakota oil wells pumped an average of 150,578 barrels a day in April. The previous high of 147,774 barrels a day was set in August 1984.

Luxury home developer WCI Communities Inc on Friday said it formed a special board committee to evaluate restructuring proposals from potential investors.

The Oil Drum: "Aramco’s statement that it is the world’s leading oil producer is now false as it now second after Russia since 2006. Nevertheless, Saudi Aramco’s repeated statement about remaining recoverable oil reserves being 260 billion barrels (Gb) is still generally accepted...Saudi Aramco has kept remaining recoverable crude oil reserves constant simply by artificially increasing the OIIP each year since 1982, accompanied by an unrealistically high average recovery factor of 52% since 1988. Saudi Aramco’s propaganda campaign is failing. Saudi Aramco is no longer the world’s leading crude oil producer. Saudi Aramco’s statement of 260 billion barrels of remaining recoverable reserves is almost certainly false. Instead, the remaining recoverable crude oil reserves are probably less than 100 Gb, instead of 260 Gb. It is time to call on Saudi Aramco and the other OPEC members to tell the truth about their reserves."

Capital One said in a filing to the Securities and Exchange Commission that its U.S. charge-off rate was 6.28% and that its international charge-off rate was 6.5%. In April, the U.S. charge-off rate was 6.08% and the international rate was 6.34%.

The proposal to merge XM Satellite Radio Holdings Inc.and Sirius Satellite Radio Inc. received backing from the staff of the Federal Communications Commission, with conditions to protect consumers from price increases in service and receiving equipment, The Wall Street Journal reported.

Consumer price inflation across the 15-nation euro zone rose at an upwardly revised annual pace of 3.7% in May, Eurostat reported Monday, up from a preliminary May estimate of 3.6% and an April pace of 3.3%.

John Hussman: "And the Fed is talking about raising rates to slow inflation and support the dollar? The Fed is on the fast track to destroying its own credibility. In my view, no sooner will all of this “tough love” leave the lips of Fed governors than the Fed will be forced to announce some novel emergency “liquidity facility” to address a fresh round of credit concerns. We may even observe an emergency easing on some morning in the next few months when the markets appear likely to open up particularly weak. The simple fact is that inflation outside of food and energy is not particularly high. Moreover, Fed tightening can do nothing to ease the food and energy pressures short of intentionally throwing the U.S. into a deeper recession (by making adjustable-rate mortgage resets more onerous than they already are). Mortgage failures remain the predominant risk to the economy, and that risk will not go away soon...In short, mortgage foreclosures and defaults are just now hitting their stride, and we are likely to observe a second round of credit fears as those losses mount. The U.S. dollar has enjoyed a brief rebound on tightening talk from the Fed, which is likely to quickly dissipate as soon as those credit concerns revive. Meanwhile, commodity price pressure is likely to diminish by the end of summer as the result of a continuing economic downturn coupled with a flight-to-safety which will reduce monetary velocity."