Friday, October 31, 2008

Happy Halloween

11/1/08 Happy Halloween

Marilyn Ferguson: "Fear is a question: What are you afraid of, and why? Just as the seed of health is in illness, because illness contains information, your fears are a treasure house of self-knowledge if you explore them."

The three-day rally has ended in Asia and Europe. US stock futures point to a drop at the opening bell. Google-Yahoo proposed Web advertising alliance could be over. Ford calls 1,000 workers back to work. The Dow headed for its worst month in more than two decades, as investors braced for economic data and news that the General Motors-Chrysler merger is on hold. Down 124 points ahead of the data, futures for the Dow Jones Industrial Average were off 112 points at 9,114.00. Those for the S&P 500 were off 12.1 points at 949.4, while 100 futures dropped 20 points to 1,325.

Crude for December delivery fell $2.29 to $63.67 a barrel in early electronic trading. Crude has lost 37% so far in October.

The recent financial crisis could have a negative impact on Intel Corp's business, results of operations and financial condition, the technology bellwether said in a regulatory filing.

"There could be a number of follow-on effects from the credit crisis on Intel's business, including insolvency of key suppliers resulting in product delays," the company said in a filing with the U.S. Securities and Exchange Commission.

Chevron Corp's third-quarter profit more than doubled, the oil major said on Friday, as high oil prices and healthy margins at its refineries boosted its bottom line.

Net profit was $7.9 billion, or $3.85 per share, compared with $3.7 billion, or $1.75 per share, in the same period a year before.

Consumer spending fell 0.4% in September, the Commerce Department reported Friday. This is the biggest drop since June 2004. Real consumer spending fell 0.4%. Income rose 0.2% in September after a 0.4% rise in August. Real disposable incomes rose 0.1% in September. The core personal consumption expenditure price index rose 0.2% in September compared with August and is up 2.4% in the past year. Wall Street economists had expected a 0.1% gain in incomes, a 0.3% fall in spending and a 0.2% rise in the core PCE.

Average U.S. retail gasoline prices for a gallon of unleaded fell 4 cents to $2.50 a gallon in the last day, according to the AAA Fuel Gauge Report. A month ago, gasoline sold for $3.62 a gallon and a year ago it sold for $2.91.

The Economist endorses Barack Obama.

Rob Hanna continues with his valuable work and observes "For the 2nd day in a row the S&P 500 saw a sizable move in the last 10 minutes of the day. This time, though it was to the upside as the index gained nearly 1% from 3:50 to 4pm. We saw yesterday an example of how overly strong reactions are many times overreactions. Tonight I looked at the sharp upside reaction as opposed to last night’s downside reaction.
SPX rises at least 0.75% in the last 10 minutes of the day. Buy on close. Sell at the next days close. $100k/trade. Last 25 years: Ten out of 12 finished lower the next day.

The last 5 have been especially harsh....almost every move the market has made in this highly charged environment has been an overreaction. It has in fact created vicious whipsaws in both directions for intraday and swing style traders."

The Oil Drum: "Recent stories have shown that the price of heating oil in Maine has fallen from $4.71 in July to $3.08 last week. The national average heating oil price as shown by the EIA is steadily falling."

ArvinMeritor laying off 1,250 workers.

Italian oil producer Eni said its third-quarter net income jumped 37% on high crude prices and increased production.

A group of western oil companies signed an agreement with the government of Kazakhstan Friday that resolves a long-running dispute over one of the world's largest oilfields in the Caspian Sea.

A Kazakh government spokesman said documents had been signed in the Kazakh capital Astana between the authorities and seven oil firms setting out the details of the multiphase development of the field, Kashagan. Commercial output will start in 2013, under the revised contract.

Almost half of Nevada homeowners with a mortgage owe more to the bank than their homes are worth.

Here's another: If you add in the homeowners like them in California, Arizona, Florida, Georgia and Michigan, together they account for nearly 60 percent of all homeowners who are "underwater" on their mortgages.

Nationwide, almost one out of every five homeowners with a mortgage owes more to their lender than their properties are worth. But if you subtract those states, the rate drops to about one in 10, according to a report released Friday by First American CoreLogic.

Sarah Palin is being portrayed as a Neiman Marxist. That maybe kind.

The U.S. government's borrowing needs will almost double to $2 trillion this fiscal year, prompting the Treasury to revive three-year notes and hold more frequent sales of 10- and 30-year debt, according to Goldman Sachs Group Inc. Who is going to buy this $2 trillion pile of dung?

David Morgan: "Fully 70% of silver is produced as a result of mining other metals, mostly base metals. Copper mining, for example, is responsible for 28% of the silver mined in 2007. Lead/Zinc mining yielded 32% of the silver mined in 2007. Finally, gold mining brought about 10% of the silver mined, again in 2007. All data is from GFMS World Silver Survey 2008, page 31." With the dramatic decline in base metal prices, it stands to reason that silver production will be sharply reduced.

According to the BLS, total compensation costs for civilian workers increased 0.7 percent, seasonally adjusted, from June to September 2008, the same as the increase in the previous two quarters. For the year ended September 2008, compensation costs rose 2.9 percent. The 12-month increase for September 2007 was 3.3 percent.

The Dow Jones Industrial Average gained 144.32 points to finish at 9,325.01, down 14.1% for the month, but up 11.3% for the week. The S&P 500 rose 14.67 points to 968.76, a monthly decline of 16.9% and weekly gain of 10.5%. The Nasdaq Composite climbed 22.43 points to 1,720.95, off 17.7% for October, but a gain of 10.9% from last Friday's close.

December crude finished at $67.81 per barrel, up $1.85, or 2.8%, after spending nearly all of the session trading lower. It finished 32.6% lower for the month, the biggest monthly loss on record. Gold closed down $13.20 an ounce at $725.30.

Platinum fell almost 6 percent as the largest automakers slash full-year profit targets. More than 60 percent of global platinum goes to autocatalysts to clean exhaust fumes. Platinum fell as low as $770.00 an ounce from $817.00 at New York's notional close.

Bradenton, Fla.-based Freedom Bank was closed Friday, marking the 17th bank failure so far this year amid the ongoing credit crisis.

Japanese electronics maker Panasonic Corp plans to begin talks to take control of smaller rival Sanyo Electric Co , the Nikkei business daily reported on Saturday.

Citigroup Inc lost $1.4 billion from packaging credit card loans into bonds in the third quarter, a regulatory filing showed on Friday.

The loss reflects in part the worsening performance of credit card loans as the U.S. economy deteriorates. In the third quarter of 2007, Citigroup earned $169 million from packing credit card loans into bonds.

Ethanol producer VeraSun has told lenders and bondholders it is preparing to file for bankruptcy protection.

Investors withdrew a record $70.7 billion from U.S. stock mutual funds in October, according to data compiled by TrimTabs Investment Research, raising questions about how long they will stay out of the market.

Guggenheim Structured Real Estate Advisors LLC, the manager of commercial-mortgage funds set up five years ago by Ed Shugrue, asked investors in its second fund for about $300 million of new equity to meet margin calls and reduce debt, a person with knowledge of the firm's fund-raising said.

JPMorgan Chase has moved to ease the burden of struggling US homeowners and avoid taking over thousands of houses, revealing plans to renegotiate $70bn of mortgages and freeze foreclosures for up to three months.

Volatility Continues

10/31/08 Volatility Continues

Rob Hanna: "If you left 10 minutes early on Wednesday you missed a lot. The S&P lost over 3% from 3:50 to 4pm and was down over 4% before bouncing in the last minute. I looked back over the last 25 years to find other times the market dropped 3% or more in the last 10 minutes of the day. This was the 1st. Lowering the requirement to 2% unveiled 3 instances. They are listed below along with the next day’s performance:

10/19/87 – S&P rose 5.23% the next day.
9/29/08 – S&P rose 5.27% the next day.
10/27/08 – S&P rose 10.79% the next day.
This is too small a sample size to use for analysis, but a nice illustration of a simple adage. An overly strong reaction is often an overreaction."

The revenue shortfall in California's five-week-old budget has grown beyond the $3 billion projected by state officials earlier this month. Schwarzenegger said the deficit is "at least $5 billion more than anticipated, and that number can even be higher."

Japan's government unveiled a new economic stimulus package including $51.45 billion in fresh spending.

Marathon Oil on Thursday said third-quarter net income rose to $2.06 billion, or $2.90 a share, from $1.02 billion, or $1.49 a share in the year-ago period. Adjusted net income rose to $2.76 a share from $1.48 a share. Analysts expected the Houston energy firm to post earnings of $2.23 a share, according to a survey by FactSet Research. If there is a company with a better risk/reward, I'd like to know it.

Exxon Mobil Corp.reported income Thursday that shattered its own record for the biggest profit from operations by a U.S. corporation, earning $14.83 billion in the third quarter.

Bolstered by this summer's record crude prices, the Irving, Texas-based company said net income jumped nearly 58 percent to $2.86 a share in the July-September period. That compares with $9.41 billion, or $1.70 a share, a year ago.

The previous record for U.S. corporate profit was set in the last quarter, when Exxon Mobil earned $11.68 billion.

David Broder: " McCain was handed a terrible political environment by the outgoing Bush administration -- a legacy of war, debt and scandal that would have defeated any of the other aspirants for the nomination. But because McCain could not create a coherent philosophy or vision of his own, he allowed Obama and the Democrats to convince voters of a falsehood: that electing McCain would in effect reward Bush with a third term."

George Will: "From the invasion of Iraq to the selection of Sarah Palin, carelessness has characterized recent episodes of faux conservatism. Tuesday's probable repudiation of the Republican Party will punish characteristics displayed in the campaign's closing days.

Some polls show that Palin has become an even heavier weight in John McCain's saddle than his association with George W. Bush. Did McCain, who seems to think that Palin's never having attended a "Georgetown cocktail party" is sufficient qualification for the vice presidency, lift an eyebrow when she said that vice presidents "are in charge of the United States Senate"?

She may have been tailoring her narrative to her audience of third-graders, who do not know that vice presidents have no constitutional function in the Senate other than to cast tie-breaking votes. But does she know that when Lyndon Johnson, transformed by the 1960 election from Senate majority leader into vice president, ventured to the Capitol to attend the Democratic senators' weekly policy luncheon, the new majority leader, Montana's Mike Mansfield, supported by his caucus, barred him because his presence would be a derogation of the Senate's autonomy?"

Robert McHugh: "The Fed cut the Federal Funds Interest Rate by half a percent to 1.00 percent. It was 5.25 percent a year ago. Think about that. It means they can only lower interest rates 100 basis points more, to zero. That's it. Running out of the conventional monetary policy bullets. What this means is what is left is to print and distribute money. Question is, distributed to who? Who is getting that money? Are you okay with it going to Wall Street firms and money center banks, and not to you? Don't get me wrong, the banking system is the delivery system for credit, so it had to be attended to, however the core source of the economic crisis is the devastating condition of the American Household's finances. This disease lurks deep in the microscopic cells of this economy, and will not be cured until money is placed directly in the hands of consumers to get rid of their debts. If consumers get rid of their debts through repayment (and not bankruptcy), then bank and corporate bad assets will become good assets. Shouldn't you be allowed to borrow from the Fed at 1 percent? Think about this. Hyperinflation is coming as this money hits the economy, and you didn't get any of it. None. Yet, your cost of living will go up once again, after this printed money flows through. That concept may sound crazy in such deflationary times, however this will be the future with this course of action. The American Household is being sold a bill of goods that says, hey, be happy, your bank didn't fold up. Keep your debt. Keep your unemployment. You get nothing. You can't pay your bills? You get bankruptcy. This Master Planner tactic will fail, because it does nothing for Households.

Government buying the bad assets of banks and insurance companies is treating the symptom, not the cause. If they took that money and gave it to the Households to pay off their debts, the bad assets would become good assets for banks and insurance companies while also cleansing household balance sheets at the same time, taxpayers getting twice the bang for the buck. Over the next 2 to 4 months markets will rally. New President, lots of hope. Buying the Fed's policy lie. But this Master Plan will fail, and when that becomes apparent next year, the final terrible phase of the Bear Market will kick in, and terrify everyone."

Apache Corp.said Thursday third-quarter net income rose 94% to $1.2 billion or $3.52 a share, from $612 million or $1.83 a share in the year-ago period. Analysts expected earnings of $3.68 a share, according to a survey by FactSet Research. Third-quarter production declined 9%. "We faced several challenges on the production side during the third quarter; we also had strong earnings, continued progress on our pipeline of development projects, and drilling success in several areas," said G. Steven Farris, Apache's president and chief executive officer.

The US economy contracted at a 0.3% annualized rate in the third quarter, as consumer spending declined at the fastest rate in 28 years, the Commerce Department estimated Thursday. Bloomberg reported that the 6.4% rate of decline in spending on non-durable goods, like clothing and food, was the biggest since 1950.

Delta and Northwest merge to become world's biggest airline.

Barack Obama is poised to win California by the biggest landslide in the history of modern elections - outweighing even Ronald Reagan's huge wins in his home state - thanks to a crushing margin of support from young voters, independents and Latinos, a new Field Poll shows.

Obama and his vice presidential running mate, Sen. Joe Biden, now lead Republican presidential candidate John McCain and Alaska Gov. Sarah Palin by a whopping 55-33 percent in the nation's most populous state, according to the Field Poll of 966 likely voters conducted Oct. 18-28.

Business and consumer confidence in the 15 nations that share the euro fell to a 15-year low in October, the European Commission said Thursday, as a credit crunch hits consumer spending and forces companies to shed jobs.

The nations with the world's three biggest reserves of natural gas – Russia, Iran, and Qatar – are quietly moving ahead to form a "gas OPEC," an organization modeled after the oil cartel.

In Tehran last week, representatives of the Russian natural-gas monopoly Gazprom met with counterparts from Iran and Qatar and agreed to create "a big gas troika." The group will meet quarterly to discuss pricing and supplies. Between them, these three countries hold an estimated 55 percent of known global gas reserves.The next meeting is Nov. 18 in Moscow.

"Low oil prices are very dangerous for the world economy," said Mohamed Bin Dhaen Al Hamli, the United Arab Emirates' energy minister, speaking Tuesday at an oil-industry conference in London. "We need an adequate and reasonable oil price that will continue to stimulate investment." With prices now languishing, he said, "a lot of projects that are in the pipeline are going to be reassessed."

Mick P. :"My majority report says that we are staring into a very deep, dark abyss that will result in a new form of capitalism, regulated and governed in ways many have yet to fathom. My minority report says we are staring into a very deep, dark abyss that will destroy capitalism as the tool used to trade assets."

American Express to cut 7,000 jobs.

Sen. Barack Obama has widened his lead over McCain in Nevada, North Carolina and Pennsylvania, according to CNN/Time/Opinion Research Corp. polls in those states released Thursday.

Obama also is holding onto his lead of 4 percentage points in Ohio, while McCain is up by 7 percentage points in his home state of Arizona, according to the polls.

The California pension system, Calpers, has lost $67 billion over the last 12 months.

Natural-gas inventories rose by 46 billion cubic feet for the week ended Oct. 24, the U.S. Energy Department said Thursday. Analysts at IHS Global Insight expected a climb of 47 billion. Total stocks now stand at 3.393 trillion cubic feet, down 97 billion cubic feet from the year-ago level but 97 billion cubic feet above the five-year average, the government data said. December natural gas was down 1.2% at $6.694 per million British thermal units on Globex.

Motorola Inc. will lay off about 3,000 workers, The Wall Street Journal reported Thursday on its Web site, citing an interview with co-Chief Executive Greg Brown. Visteon noted Thursday that it cut 1,200 hourly jobs during the quarter and plans to reduce the salaried work force by another 800. Cirrus laid off 105 people Tuesday — 75 at its Duluth plant, 30 at its plant in Grand Forks, N.D. The latest cuts amount to about 9 percent of Cirrus' workforce. Of the 132 positions in the city of Hartford, CT to be lost to layoffs, retirements and downsizing, public works is going down 34 employees, and health and human services is going down 17. Law firms are shrinking and publishing companies, which employ about 54,000 people in New York City, announced layoffs of about 880 employees this week. Other service businesses, like consulting, catering and tourism, are almost certain to follow suit, said James Brown, who analyzes the city’s job market for the New York State Department of Labor.

The Dow Jones Industrial Average gained 189.73 points, or 2.1%, to 9,180.69. The S&P 500 climbed 24 points, or 2.6%, to 954.09, while the Nasdaq Composite rose 41.31 points, or 2.5%, to 1,698.52.

December crude closed at $65.96 per barrel Thursday on the New York Mercantile Exchange, down $1.54, or 2.3%, for the session.
Gold for December delivery erased earlier gains, falling $15.50, or 2.1%, to close at $738.50 an ounce on the Comex division of the New York Mercantile Exchange.

Electronic Arts, the video game maker, said on Thursday that it was lowering its profit forecast, cutting 6 percent of its work force and moving more jobs overseas, signs that it is struggling to complete a financial turnaround.

Copper futures led a retreat in metals futures Friday, with copper shedding 6.4% to $1.77 a pound in electronic action. Gold futures dropped $10.30 to $728.20 an ounce, platinum futures fell $29.50 to $801.10 an ounce and silver futures dropped 36 cents to $9.43 an ounce.

The Bank of Japan's policy board decided Friday to cut its base lending rate by 0.2 of a percentage point, bringing its key overnight call rate to 0.3%, marking its first rate reduction in seven years. The vote was split 4-to-4, with Gov. Masaaki Shirakawa voting in favor, which carried the motion.

Toyota Motor Corp.plans to export U.S.-manufactured vehicles such as the Sequoia sports utility vehicle and the Tundra pickup truck to Latin America and the Middle East from December due to a slump in U.S. auto sales, the Kyodo news service reported Thursday.

According to AMG Data Services, including ETF activity, Equity funds report net cash outflows totaling -$2.699 billion in the week ended 10/29/08 with Domestic funds reporting net outflows of -$1.650 billion and Non-domestic funds reporting net outflows of -$1.049 billion;
Excluding ETF activity, Equity funds report net cash outflows totaling -$2.330 billion with Domestic funds reporting net outflows of -$1.131 billion and Non-domestic funds reporting net outflows totaling -$1.199 billion;
Exchange Traded (Equity) funds report net outflows of -$369 million with the largest flows:
-$2.171 Bil from the SPDR Tr Series I fund;
-$789 Mil from the iShares Russell 2000 Index fund;
$574 Mil to the ProShr Ultra S&P 500 fund;
Excluding ETF activity International funds report net outflows of -$706 million;
Excluding ETF activity Taxable Bond funds report net outflows totaling -$3.540 billion;
Money Market funds report net cash outflows totaling -$3.258 billion;
Municipal Bond funds report net cash outflows of -$134 million.

Thursday, October 30, 2008

Interest Rates

10/30/08 Interest Rates

Richard Daughty: "But whether they care or not, the fact is that last week the Federal Reserve boosted Total Fed Credit, namely the amount of fresh credit that appears on the books of the banks, by another staggering $245.4 billion! In One Freaking Week (OFW)!"

When I come to my senses, I find that I am in some dingy little bar on the other side of town, stinking drunk; and the bartender has grabbed me by the front of my shirt to haul me unceremoniously halfway across the bar, and is rudely in my face, telling me through gritted teeth that if I want to stay there, I am going to have to "Shut the hell up about the Federal Reserve creating so much money and credit in the banks, as there is nobody in this whole freaking bar who gives a rat's ass about Total Fed Credit one way or the other."

I look to my left and see a drunken woman named Shirley (I think to myself, "How do you know her name is Shirley?") winking at me and saying, "Give 'em hell, Tiger! Now, let's all have another drinkie-poo! Hic!"

Microsoft released a test version of its coming Windows 7 operating system to programmers and said it will make free Web-based versions of its Office programs.

Output from the world’s oilfields is declining faster than previously thought, the first authoritative public study of the biggest fields shows.

Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times.

One might give serious consideration to going long some USO, the oil ETF.

A Washington Post/ABC News tracking poll late last week showed that 50 percent said it was better for the White House and Congress to be controlled by a single party while 30 percent said they preferred divided government.

Some of the banks on the receiving end of the Treasury Department's bailout plan are "co-conspirators" and should be "held accountable," Republican presidential candidate John McCain said Tuesday in a television interview.
But the banks being called out are some of the biggest contributors to McCain's campaign, records show.

Soybean prices fell in erratic trading Tuesday even after the government lowered its estimate for the size of this year's harvest. Corn prices traded higher.

The U.S. Agriculture Department's forecast for planted and harvested corn and soybeans fell after the agency discovered discrepancies in a database used to compile the report. Forecasts for corn and soybean production also fell.

Soybeans for January delivery lost 9.5 cents to settle at $8.88 a bushel on the Chicago Board of Trade, after earlier rising as high as $9.59.

Michael Mandel: "In fact, there's good reason to believe that the current crisis reflects a growing realization: Long accepted patterns of cross-border technological transfer, foreign trade, and global finance are simply not sustainable."

Motorola Inc's co-chief executive, Sanjay Jha, plans to make more job cuts and simplify how it makes devices, the Wall Street Journal reported on its website on Tuesday.

Details of the plan, which could include thousands of layoffs, could be announced Thursday, when the company reports its results, the paper said.

The first big snowstorm of the season in the Northeast closed sections of major highways Tuesday and blacked out more than 100,000 utility customers.

The National Weather Service posted a winter storm warning for parts of New York state, in effect until 8 a.m. Wednesday, and issued winter storm advisories for parts of Pennsylvania, New Jersey and Vermont.

"It looked like a mini blizzard in October," said Joe Orlando, spokesman for the New Jersey Turnpike Authority. "We're salting the roads and we haven't even gone trick-or-treating yet."

The FTSE 100 index of leading British shares was 149.47 points, or 3.8 percent, higher at 4,075.85 and France's CAC-40 was up 184.53 points, or 5.9 percent, at 3,299.45.

Germany's DAX index though was sharply lower as shares in Volkswagen AG, which have risen fivefold since Friday, dropped back by over 40 percent after the car maker's biggest shareholder Porsche AG said it will offer some stock to ease liquidity constraints.

Earlier, Japan's Nikkei index closed 589.98 points, or 7.7 percent, higher at 8,211.90 in the wake of the Dow Jones' 889 point, or 11 percent, rally Tuesday. The Dow's percentage rise Tuesday was its second biggest ever.

Qwest plans 1,200 job cuts as profit declines.

Kraft raised its expectations for its 2008 earnings, saying it will be at least $1.96 a share from $1.54 previously, partly reflecting an increase of 52 cents a share related to the exit of the Post cereals business. "Based on our strong operating momentum, I'm confident that at least $2.00 GAAP [earnings per share] in 2009 remains a realistic and achievable target," said CEO Irene Rosenfeld.

For the full year of 2008 Garmin sees revenue of $3.6 billion and earnings per share of $3.78.

Procter & Gamble said it remains confident it'll deliver targeted growth over the long term, "even in a challenging economic environment."

According to the NY Times, lenders wrote off an estimated $21 billion in bad credit card loans in the first half of 2008 as more borrowers defaulted on their payments. With companies laying off tens of thousands of workers, the industry stands to lose at least another $55 billion over the next year and a half, analysts say. Currently, the total losses amount to 5.5 percent of credit card debt outstanding, and could surpass the 7.9 percent level reached after the technology bubble burst in 2001.
“If unemployment continues to increase, credit card net charge-offs could exceed historical norms,” Gary L. Crittenden, Citigroup’s chief financial officer, said.

U.S. drug sales this year are expected to rise just 1% to 2%, to as much as $297 billion, according to IMS Health Inc. The consulting firm forecasts U.S. sales to rise another 1% to 2% next year. IMS a year ago forecast 4% to 5% sales growth for this year.

Senator John McCain’s tax and spending proposals would create larger annual budget deficits than those of Senator Barack Obama, analysts say.

China trimmed the rate on a one-year loan by 0.27 percentage points to 6.66 percent, adding to official efforts to revive slowing economic growth and help struggling exporters.

The country's central bank also said in a statement that it had lowered the rate on one-year fixed deposits to 3.60 percent from 3.87 percent. Both cuts are effective from Thursday.

Since 1900, the Dow Jones Industrial Average rose 9.8 percent in the 12 months after the Democratic Party captured the White House, based on the median change following the election of seven Democrats from Woodrow Wilson to Bill Clinton. Among newly elected Republicans, five -- including Herbert Hoover, Richard Nixon and George W. Bush -- preceded stock-market declines, with a median retreat of 2.5 percent for all 10, data compiled by Bloomberg show.

According to Bloomberg, suppliers of oil, coal, grains and consumer products from Chicago to Mumbai are losing sales as the credit crisis spreads beyond financial institutions, and banks refuse financing or increase the fees for buyers. Coupled with declining demand, the credit squeeze is threatening international trade, one of the lone bright spots in the global economy.

``It's like standing on a beach watching a tsunami, knowing that it's coming,'' said Scott Stevenson, manager of the International Finance Corp.'s Global Trade Finance Program. IFC is the World Bank's private lending arm.

Orders for U.S. durable goods excluding transportation equipment fell in September for a second month as the credit freeze deepened and sales fell.

The 1.1 percent drop in bookings of goods meant to last several years was less than forecast and followed a revised 4.1 percent decrease in August that was larger than previously reported. A rebound in aircraft orders, a volatile category, and an increase in defense bookings unexpectedly pushed total orders up 0.8 percent. Defense new orders for capital goods in September increased $1.9 billion or 19.6 percent to $11.8 billion.

Foreclosures soared 71 percent in the third quarter, to an average of more than 8,500 homes a day. More than three million homes are now expected to be in foreclosure by year’s end, a million more than even the most dire predictions.

On top of that, lenders are taking possession of delinquent properties at twice the normal rate, according to RealtyTrac, which has one of the industry’s most comprehensive databases.

General Motors Corp.said Wednesday it sold slightly above 2.1 million vehicles globally during the third quarter, an 11.4% drop from the same period a year earlier. The drop in sales was due to "continuing economic pressures in the U.S. market, which pushed North America sales down 18.9%, and growing pressure in Europe, where sales were down 12.3%," GM said.

Williams Sonoma: Net revenues are expected to be in the range of $3.274 to $3.344 billion vs. prior guidance of $3.572 to $3.638 billion. Diluted EPS is expected to be in the range of $0.25 to $0.47 vs. prior guidance of $1.03 to $1.15. Non-GAAP diluted EPS is expected to be in the range of $0.11 to $0.33 vs. prior guidance of $0.89 to $1.01.

Robert McHugh: "Nearly a quarter of all stocks on the NYSE hit new 52 week lows as the Industrials staged the second highest daily rally ever. Conditions remain terrible."

Norway's Central Bank Cuts Rates 50bp to 4.75%

Nouriel Roubini Says US Needs $400 Billion Stimulus Package.

Tenneco Inc. says it is cutting 1,100 jobs worldwide and closing five facilities in a broad restructuring of operations as the company grapples with an industry downturn.

The American Petroleum Institute reported Wednesday a rise of 1.4 million barrels in crude supplies for the week ended Oct. 24. The Energy Department had reported a climb of 500,000 barrels for the latest week. Motor gasoline supplies were down 817,000 barrels, the API said. The government had reported that supplies fell by 1.5 million barrels. Distillate supplies were up 2.6 million barrels, the API said. They climbed 2.3 million barrels for the week, according to the Energy Department.

McCain is statistically tied with Obama in Arizona, 46 percent to 44 percent, according to a poll done for the Arizona Republic, after having comfortable leads for months.

Gold for December delivery rose $13.50 to close at $754 an ounce on the Comex division of the New York Mercantile Exchange. December crude jumped 9.5%, or $5.96, to $68.69 per barrel Wednesday on Globex. Nov. reformulated gas climbed 5.5% to $1.535/gal on Globex.

Suncor, a leader in the oil sands play, said operating costs per barrel for the third quarter reached $34.00, compared with $25.10 for the same period a year ago.

FOMC vote to cut rates to 1.00% is unanimous. Fed lowers discount rate by half point to 1.25%. FOMC says economy has slowed markedly. FOMC says downside risks to growth remain.

U.S. stocks staged another last-ditch turnaround to end mostly lower and leave the Dow Jones Industrial Average back under the 9,000 level. Up more than 200 points, stocks tossed off most of their gains in the final 10 minutes of trade. The Dow Jones Industrial Average fell 74.16 points, or 0.8%, to end at 8,990.96. The S&P 500 dropped 10.42 points to 930.09. The Nasdaq Composite gained 7.74 points to 1,657.21.

The dollar fell against the other major currencies Wednesday as the Federal Reserve cut its benchmark interest rate to 1 percent, as expected, with the Canadian dollar posting its biggest one-day jump in nearly 30 years.

The 15-nation euro rose to $1.2852 in late Wednesday trading in New York from $1.2597 late Tuesday.

The British pound, meanwhile, which hit a six-year low against the dollar last Friday at $1.5264, was up to $1.6314 in late trading Wednesday from $1.5775 late Tuesday.

A new state poll suggests that Sen. Barack Obama has doubled his lead over John McCain in Colorado.

In a CNN/Time/Opinion Research Corporation survey released Wednesday, 53 percent of likely voters questioned say Obama is their choice for president, with 45 percent backing Sen. John McCain. That 8 point lead for Obama is double the 4-point advantage he held in a similar poll two weeks ago.

Obama now has 286 electoral votes, McCain with 163, CNN map shows. My map shows Obama with 360.

Mortgage rates bounded higher this week, with the average 30-year fixed mortgage rate soaring from 6.32% to 6.77%, according to a weekly national survey.

Nikon Corp.cut its net income outlook for the fiscal year ending March 31 by 40%, citing weaker camera sales to consumers, a higher yen, and declines in sales of specialized equipment to industrial customers.

BJ Services forecast first-quarter earnings of 48-51 cents a share, compared to the Wall Street target of 56 cents a share.

TRW Automotive also projected sales of $3.1 billion for the fourth quarter and about $15.3 billion for 2008 as a whole. The outlook for next year isn't any better. "At this point, we are planning for a difficult 2009 year with vehicle sales below 2008 levels in both Europe and North America," said John Plant, president and CEO.

The U.S. government's efforts "to stabilize the housing market across the country" don't appear to have had "any meaningful impact," Standard Pacific's Chairman, President and Chief Executive Jeffrey V. Peterson said in a statement.

U.K. house prices fell 1.4% in October, bringing the annual rate to decline to 14.6%, according to data compiled by Nationwide.

Japanese stocks shot skyward Thursday, with the Nikkei 225 Average notching double-digit gains after the U.S. Federal Reserve cut interest rates by a half-point and on hopes the Bank of Japan might itself lower rates for the first time since 2001. The Nikkei reclaimed the 9,000-point level, ending at 9,029.76, up 10%, while the broader Topix index climbed 8.3% to 899.37.

The Taiwanese central bank cut its benchmark interest rate Thursday by a quarter point -- its third interest rate reduction in five weeks -- a day after China and the U.S. lowered their interest rates. The Central Bank of the Republic of China (Taiwan) lowered its discount rate by a quarter-point to 3%. The central bank had reduced the discount rate by one-eighth of a percentage point on Sept. 26 and followed it up with a quarter-point cut on Oct. 9.

Tuesday, October 28, 2008

The Sizzling Rally

10/29/08 The Sizzling Rally

Barry Goldwater: "Most Americans have no real understanding of the operation of the international money lenders. The accounts of the Federal Reserve System have never been audited. It operates outside of the control of Congress and manipulates the credit of the United States."

More than $12 trillion has been erased from global equity values this month. That's not chicken feed. All the media BS can't massage those losses.
Banks' mark-to-market losses on financial products like asset-backed debt doubled to a whopping $2.8 trillion since forecasts made in April, because of deteriorating market conditions, the Bank of England estimated in a report published Tuesday.

Andrew Jackson: "Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves."

The Conference Board said the consumer confidence index fell to 38, down from a revised 61.4 in September and significantly below analysts' expectations of 52.
That's the lowest level for the index since the Conference Board began tracking consumer sentiment in 1967, and the third-steepest drop.
"Consumers are extremely pessimistic," said Lynn Franco, director of the Conference Board's Consumer Research Center. "This news does not bode well for retailers who are already bracing for what is shaping up to be a very challenging holiday season."
A year ago, the index stood at 95.2.

Bo Diddley: "Don't let your mouth write no check that your tail can't cash."

M1 money supply (the narrowest measure) surged more than 19% on a seasonally adjusted annualized basis for the three months through September 2008, the Fed reports.

Prices of U.S. single-family homes plunged a record 16.6 percent in August from a year earlier and plummeted more than 30 percent in Las Vegas and Phoenix, Standard & Poor's said on Tuesday.
Home prices in 20 major metropolitan areas fell 1.0 percent in August from July, according to the Standard & Poor's/Case-Shiller Home Price Indices.
S&P said in a statement its composite index of 10 metropolitan areas declined 1.1 percent in August from July for a 17.7 percent year-over-year drop, also a record.

Valero Energy earned $1.86 EPS from continuing operations in the quarter. The company said it was reducing capital spending by another $800 million, citing the uncertain economic environment and volatility in the refining sector. The company has now reduced capital spending by $1.5 billion from the $4.5 billion that was originally budgeted. At $15+ the stock is down from $73. In my view, the shares offer a good risk/reward.

BP posted an 83 percent increase in third- quarter profit on higher crude and natural-gas prices.

A survey released by Prince and Associates, shows that 75% of voters worth $1 million to $10 million are favoring John McCain, but of those voters worth more than $30 million, two-thirds support Obama.

According to the WSJ, the U.S. is considering talks with elements of the Taliban in a bid to help reverse a downward spiral in Afghanistan and Pakistan.

According to the NY Times, Mr. Obama led Mr. McCain among groups that voted for President Bush four years ago: those with incomes greater than $50,000 a year; married women; suburbanites and white Catholics. He is also competitive among white men, a group that has not voted for a Democrat over a Republican since 1972, when pollsters began surveying people after they voted.

The pending merger between chemical giants Huntsman Corp. and Hexion Specialty Chemicals that was to close as early as today is now on hold after moves by two funding banks have clouded the picture.

L.A. has been suffering the second-hottest October since 1877.

A recent Montana State University-Billings poll showed the race within the margin of error, with Obama at 44 percent and McCain at 40 percent among likely voters, and 10 percent undecided.
Obama's rise may be less about his appeal and more about dissatisfaction with McCain among independent-minded voters.
The Democratic presidential hopeful was the beneficiary of support for Constitution Party candidate Ron Paul. Paul is not campaigning — he even asked to be taken off the ballot — but some supporters still say they will support him over McCain. President Bush won the state by about 20 points in both 2000 and 2004, and only two Democrats — Lyndon B. Johnson in 1964 and Bill Clinton in 1992 — have carried the state since 1948.

Russia and China signed a long-awaited deal Tuesday to build a new Siberian oil pipeline to boost energy exports to China during a visit to Moscow by Chinese Prime Minister Wen Jiabao.

Boeing Co. machinists will vote Nov. 1 on a contract proposal to end an eight-week strike that's shuttered the second-largest planemaker's factories and pushed the 787 Dreamliner further behind schedule.
Workers could be back

Rep. Ron Paul: "The deficit of the United States is now spiraling out of control, and the recent bailout package has only made it worse. Our crushing federal debt is one key reason behind our current economic turbulence.
As Congress begins to consider the third "stimulus package" of the year, we need to realize it is time to start setting priorities. Priority number one should be cutting spending in foreign countries. This does not simply mean Iraq, but everywhere."

John Adams: "All the perplexities, confusion and distress in America arise not from defects in their Constitution or Confederation, nor from want of honor or virtue, so much as downright ignorance of the nature of coin, credit, and circulation."

Iran opened a naval base on the Strait of Hormuz that's capable of keeping foreign forces out of the Persian Gulf, the chief of the Iranian navy said.
``With this naval base, a new line of defense was created in the Persian Gulf,'' Admiral Habibollah Sayyari was cited today as saying by state-run Fars News. ``If necessary, we can prevent any enemy from entering the Persian Gulf's strategic area.''

Gold for December delivery fell $2.40, or 0.3%, to end at $740.50 an ounce on the Comex division of the New York Mercantile Exchange. December crude closed at $62.73 per barrel Tuesday on the New York Mercantile Exchange, down 49 cents.

Florida Gov. Charlie Crist ordered elections supervisors to extend hours at early voting sites in response to historic turnout at the polls, invoking a state of emergency to issue an executive order demanding the extra hours.
Effective immediately, early voting sites will be open from 7 a.m. to 7 p.m. and for a total of 12 hours between 7 a.m. Saturday and 7 p.m. Sunday.
That's four hours more each day and an extra four hours over the weekend than what Florida law currently allows.

Gannett to lay off 10% of its workforce. Time to layoff 600 workers.
Fidelity Investments may cut as many as 4,000 jobs, or 9% of its workforce.
Credit Suisse Group AG, Switzerland's second-biggest bank, plans to eliminate 500 jobs in its securities unit and some support functions, adding to 1,565 cuts announced over the past year.
We're building to 9% or more unemployment.

Thomas Carlyle: "A man willing to work, and unable to find work, is perhaps the saddest sight that fortune's inequality exhibits under this sun."

"The home-building industry continues to grapple with unprecedented economic conditions," said Centex Chief Executive Tim Eller in a statement.

The Dow Jones Industrial Average gained 889.59 points, or 10.9%, to finish at 9,065.36. The S&P 500 added 91.34 points, or 10.8%, to end at 940.24, while the Nasdaq Composite climbed 143.57 points, or 9.5%, to 1,649.47. Some moves were gigantic like the 8+ point gain for Exxon and the 5 1/2 point pop for Wal-Mart--both stocks in the Dow.

Less than 8% of Wal-Mart's sales are now via credit cards. Why? The company observed consumers are maxed out on their credit cards. Think about that tidbit for the holiday shopping season.

Shares of Warren Buffett's Berkshire Hathaway fell just over six percent today to a 20-month closing low of $105,126. When they raid the whorehouse, they take all the girls.

Monday's Rally Fizzles

10/28/08 Monday's Rally Fizzles

Bloomberg reported global production of wheat, the most-consumed food crop, may drop 4.4 percent next year, said Dan Basse, president of AgResource Co. in Chicago, who has advised farmers, food companies and investors for 29 years. Harvests of corn and soybeans also are likely to fall, Basse said.
Smaller crops risk reviving prices of farm commodities that sank from records in 2008 after a six-year rally that spurred inflation and sparked riots from Asia to the Caribbean. Futures contracts on the Chicago Board of Trade show wheat will jump 16 percent by the end of 2009, corn will rise 15 percent and soybeans will gain 3 percent.

The wave of stock selloffs sweeping world markets may be partially caused by the fact that many governments increased guarantees for bank deposits, making them a much safer investment, Marc Faber, author of the "Gloom, Doom and Boom Report," told CNBC Monday. "Now that deposits are guaranteed, basically I as an investor have no incentive to hold equities so I sell them and put my money in bank deposits," Faber told "Squawk Box Europe" by telephone.

The other measures taken by various governments to try and prop up ailing markets have had the opposite effect, he added.

"The interventions, they actually have increased volatility. It’s impossible to forecast market movements when you have interventions," Faber said.

Verizon's profit rose in the third quarter to an adjusted 66 cents per share, in line with expectations and higher than 63 cents per share in the same period last year, on strong sales, the company said Monday. Diluted earnings per share were 59 cents, higher than 44 cents a year ago, while quarterly revenues rose by 5.4 percent to $24.8 billion.

Less than two hours before the start of trading, Dow Jones Industrial Average futures were 154 points lower at 8107. The S&P 500 futures slipped 20 to 845, and Nasdaq 100 futures lost 20.5 to 1171.

“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon.

Contacted in Madrid on Friday, Nouriel Roubini said the world economy was “at a breaking point”. He believes the stock markets are now “essentially in free fall” and “we are reaching the point of sheer panic” and "fears the worst is yet to come."

SunTrust Banks Inc. received preliminary approval to sell $3.5 billion in preferred stock and related warrants to the Treasury Department under a program designed to provide capital support to financial institutions. The Atlanta-based bank also announced a 30% reduction in the quarterly dividend to 54 cents a share.

Fox-Pitt Kelton housing analyst Robert Stevenson on Monday increased his forecast for home-price declines, saying foreclosures are driving down pricing faster than he had expected. "Our original expectation that home prices had another 15% to fall appears far too conservative," Stevenson wrote in a report to clients. His base-case assumption is now an additional decline in range of 20% to 25%. "In a bear-case scenario where unemployment exceeds 9%, we believe prices could instead drop 30% to 35%," he added. Home prices are already off about 20% nationally from the peak, so the bearish forecast represents a 44% to 48% peak-to-trough drop, Stevenson said.

Crude for December delivery fell $2.16, or 3.4%, to $62.99 a barrel in early electronic trading in New York. Gold for December delivery fell $6.50, or 0.9%, to $723.80 an ounce in early electronic trading in New York.

Lending rates among banks in the U.S. and Europe have edged barely lower Monday, suggesting concerns over global economic growth are keeping credit conditions tight.

Wings for the 787 Dreamliner are built in Japan. Its doors are made in France. Fuselage? South Carolina. Workers in Everett, Wash., have had it.

In early trading on Monday, the major equity markets declined 2%. After falling to a low of 8,204, the Dow Jones Industrial Average traded up 14 points, or 0.1%, to 8,391. The S&P 500 index gained 2 points, or 0.2%, to 879, while the Nasdaq Composite remained in the red, down 2 points, or 0.2%, at 1,549.

Sales of new homes rose an estimated 2.7% in September to a seasonally adjusted annual rate of 464,000 in September, the Commerce Department reported Monday, close to the 460,000 pace expected by economists surveyed by MarketWatch. Nationally, sales in September were down 33% compared with September 2007. The inventory of unsold homes fell a record 7.3% in September to 394,000, the lowest in four years. In the past year, inventories have fallen 25.4%, the biggest drop since the government began tracking the data in 1963. The median sales price fell to $218,400, down 9.1% in the past year.

Trichet says ECB rate cut possible at next meeting on Nov. 6.

“Brown bagging is back in,” says Campbell Soup's spokesperson Anthony Sanzio. “It’s a badge of honor in some places these days.”

French Finance Minister Christine Lagarde said the Group of Seven doesn't plan to intervene to weaken the yen after the G-7 said excessive yen movements may threaten financial stability and Japan's Finance Minister Shoichi Nakagawa said his country is ready to act. The pound slid against the dollar, euro and yen after a report showed U.K. house prices slumped.
``These moves are due to extreme risk aversion and have further legs,'' said Lee Hardman, a currency strategist in London at Bank of Tokyo-Mitsubishi Ltd. ``The credit bubble has truly burst, and we're seeing panic selling of risky assets that were bought with yen.''

Arch Coal said it now expects profit of $2.30 to $2.55 for 2008, down from its forecast of $2.50 to $2.85 per share in July. "We do think the anxiety of the global slowdown is creating or causing our customers to be cautious," prompting Arch to lower its earnings outlook for the year to reflect an expected fourth-quarter drop in demand because of milder weather and the threat of a global economic recession, Leer said.

The average price for a gallon of regular unleaded gasoline fell 3 cents to $2.67 in the past day, $1 lower than the $3.67 level a month ago, and below the average price of $2.85 a year ago, according to the Daily Fuel Gauge report from AAA.

The Dow Jones Industrial Average shed 203.18 points, or 2.4%, to 8,175.77. The S&P 500 dropped 27.85 points, or 3.2%, to 848.92, while the Nasdaq Composite gave up 46.13 points, or 3%, to end at 1,505.9.

Crude for December delivery fell 93 cents, or 1.4%, to end at $63.22 a barrel on the New York Mercantile Exchange. Gold for December delivery ended up $12.60 at $742.90 an ounce on the Comex division of the New York Mercantile Exchange.

In early Tuesday trading, the Nikkei 225 Average fell 1.3% to 7,069.07, while the broader Topix index fell 2.6% to 727.10. Neither benchmark could hold on to gains. South Korea's Kospi tumbled 3.2% to 915.81, after ending 0.8% higher in the previous session. Australia's S&P/ASX 200 fell 0.8% to 3,778.70 and New Zealand's NZX 50 index slid 2.7% to 2,703.28, as trading resumed after a holiday. By the end of the day, a sharp reversal had taken place. Hong Kong was up 14.4% and the Nikkei had risen 6.4% and this would lead to a strong opening on Tuesday for Wall Street.

Car rental company Avis Budget Group Inc cut 700 jobs in the third-quarter and recorded a loss, before taxes, of more than $1 billion after writing down the value of certain assets, it said on Monday.

The company, which has been hit hard by slowing travel amid a weakening economy, also said 2008 revenue and profit would be "significantly lower" than previous estimates due to a drop in vehicle rentals.

Japan's largest bank, Mitsubishi UFJ, is seeking $10.7 billion in new capital.

Boeing Co. and its largest labor union reached a tentative agreement that could end the costly strike that has idled the company's jetliner plants for seven weeks. According to people familiar with the situation, the two sides hammered out a new contract that improves job security for union members.

On Monday, the National Bank of Denmark and the European Central Bank cemented the latest in a string of global currency swap agreements, emergency measures aimed at replacing a currency market that has seized up. The European Central Bank in Frankfurt will provide Denmark 12 billion euros “as long as needed,” the two central banks said in a statement. Denmark already has a swap line worth $15 billion with the Federal Reserve.

U.S. Steel Corp. posted a higher quarterly profit on Tuesday as revenue leaped 68%, surpassing most expectations and reflecting its ability to pass higher prices on to its customers. The company also cautioned, without giving specific estimates, that fourth-quarter earnings will fall as demand softens. U.S. Steel said it earned $919 million, or $7.79 a share, in the third quarter vs. $269 million, or $2.67 a share, in the year-ago period. Sales surged to $7.3 billion vs. $4.3 billion.

For October, ICSC pruned its sales forecast to a range of down 0.5% to up 1%, on a year-over-year basis, as retailers faced a considerable pullback in consumer spending earlier in the month, ICSC said. Its prior forecast was for a gain of 1% to 2%.

Whirlpool announced it was cutting 5,000 jobs as it closes a plant in Jackson, Tenn., cuts 500 salaried jobs in North America, and cuts 1,900 international jobs that are mostly in Europe.

Iceland's central bank on Tuesday said it hiked its benchmark interest rate by six percentage points to 18%.

Monday, October 27, 2008

The Global Bloodbath

10/27/08 The Global Bloodbath

Robert McHugh: "A most astonishing event that occurred Friday morning: The market opened closed (selling halts were imposed), futures hitting their limit before the open. It opened down 500 points, and scared the (pick your noun) out of anyone paying attention. The Plunge Protection Team then came in and - to quote King Henry, "The Treasury is monitoring markets," which is code for "bought the living tar out of markets." The stock market then rose slowly throughout the day until a late day plunge drove prices down to a sharp 3.5 percent loss.

Further in the "can you believe it" category, Friday, October 24th was the 79th anniversary of the day the stock market crashed in 1929. Now get this, back then, selling began on Thursday, October 24th, 1929, then continued with a vengeance, accelerating the following Monday and Tuesday, known as Black Monday and Black Tuesday, 1929."

Germany's finance minister said in comments published Sunday that global financial markets could still collapse and that the situation remains dangerous despite government efforts to bailout lending institutions.

"The danger of a collapse is far from over. Any `all clear' would be wrong," Finance Minister Peer Steinbrueck told the Bild am Sonntag weekly. "We are still dealing with a very dangerous situation."

Rock the Vote, which focuses on young voters, has registered more than 2.3 million voters this year, compared with more than 1.4 million voters in 2004, already a standout year for youth turnout. An AP-Yahoo News Poll conducted earlier this month found that, among 18- to 29-year-old likely voters, 60 percent supported Obama, 33 percent John McCain and 5 percent Ralph Nader. The poll had a margin of error of 9 percentage points.

When October's job losses are announced Nov. 7, three days after the presidential election, many economists expect the number to exceed 200,000. The current unemployment rate of 6.1 percent is likely to rise, perhaps significantly.

"My view is that it will be near 8 or 8.5 percent by the end of next year," said Nigel Gault, chief domestic economist at Global Insight, offering a forecast others share. That would be the highest unemployment rate since the deep recession of the early 1980s.

Mike Burk: "The number of new lows has been large enough that any rally is likely to be followed by a retest. I have no means of projecting the ultimate bottom...Recent rallies have been impressive 1 day affairs, but the market has not had 3 consecutive up days since September 12. I expect the major indices to be Lower on Friday October 31 than they were on Friday October 24."

Gross domestic product contracted at a 0.5 percent annual rate from July to September, the biggest drop since the 2001 recession, according to the median estimate in a Bloomberg News survey ahead of Commerce Department figures due Oct. 30.

Consumer spending, the biggest part of the economy, probably dropped by the most in almost two decades as job losses mounted, stock prices sank and property values plummeted.

``I don't see how the consumer can do anything but retrench,'' Robert McTeer, former president of the Fed Bank of Dallas, said in an Oct. 24 Bloomberg Television interview. ``If they all do it at the same time, it will really tank the economy.''

The Anchorage Daily News, Alaska's largest newspaper, endorsed Democratic presidential candidate Barack Obama Sunday after declaring Gov. Sarah Palin "too risky" to be one step away from the Oval Office.

"Like picking (Republican presidential candidate John) McCain for president, putting her one 72-year-old heartbeat from the leadership of the free world is just too risky at this time," The Daily News said.

The newspaper said Obama "brings far more promise to the office. In a time of grave economic crisis, he displays thoughtful analysis, enlists wise counsel and operates with a cool, steady hand."

The Daily News said since the economic crisis has emerged, McCain has "stumbled and fumbled badly" in dealing with it.

The Nikkei index in Japan closing at its lowest in 26 years as the financial crisis drove up the yen, piling the pressure on the country's exporters. Hong Kong shares plunged Monday, with the Hang Seng Index plummeting more than 1,500 points to end 12.2% down provisionally at 11,082.26. The Philippine Stock Exchange Monday halted trading for 15 minutes after the main stock index tumbled 10% on heavy selling, according to reports. Taiwan shares plummeted 4.65 percent on Monday after the government ended a temporary measure that halved the daily decline limit for stocks.

The South Korean central bank cut its benchmark interest rate by 0.75 percentage points to 4.25% after an emergency board meeting Monday, according to wire service reports.

Toyota Motor Corp. said Monday its global sales in the July-September quarter fell for the first time in seven years due to faltering demand in the U.S.Japan's top automaker sold 2.24 million vehicles worldwide during the quarter, down 4 percent from the same period last year.

CenturyTel said Embarq agreed to a merger offer of $40.42 a share in stock for a value of $11.6 billion, including $5.8 billion of Embarq debt. CenturyTel will pay 1.37 shares of stock for each share of Embarq, valuing the telecommunications firm at a premium of 36% over its closing price on Friday. Upon closing of the transaction, Embarq shareholders are expected to own approximately 66% and CenturyTel shareholders are expected to own approximately 34% of the combined company. CenturyTel CEO Glen Post will lead the combined firm.

The Ifo Institute's closely-watched German business sentiment index declined to 90.2 in October from 92.9 the previous month.

John Hussman:"Though I continue to view stocks as reasonably undervalued, I'm a bit concerned that so many investors appear to be looking for a bottom. The S&P 500 currently reflects the best valuations since the 1990 bear market low. Even in the event of a continued bear market, stocks are increasingly likely to experience a powerful bear market advance, perhaps on the order of 20-25% toward the 1100 area on the S&P 500. However, we've observed little follow-through from the early price/volume improvements of a week ago, suggesting that even while traders are attempting to catch a potential rally, they are demonstrating little commitment to whatever purchases they are making in this area.
We aren't trying to catch a rally – we are gradually building an investment exposure based on valuations. Our investment response to undervaluation is straightforward: we establish investment exposure in proportion to the return/risk profile that we can expect from prevailing conditions, on average."

Sunday, October 26, 2008

Liquidity Problems

10/26/08 Liquidity Problems

Doug Noland: "Wall Street simply no longer has the wherewithal to apportion ample finance for securities speculation. Without speculative demand for high-yielding loans and securities, Bubble economies are starved of sufficient finance. And with asset markets bursting everywhere, this has quickly evolved into History’s Biggest Margin Call. Scores of derivative structures used to speculate in the asset Bubbles have collapsed - because of counterparty issues, illiquidity, or the structures just didn’t make any sense to begin with. Moreover, the whole notion that derivatives would provide an effective hedging mechanism is proving a fallacy. Again, counterparty issues and illiquidity are the culprits. Markets can’t hedge themselves, as there is no one with the wherewithal to take the other side of the trade (especially during devastating bear markets). In particular, the Credit default swap structure is proving an unmitigated disaster - for bond, equities and currency markets. Hopefully this period of liquidation and deleveraging is over very soon."

The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday.

The front-page commentary in the overseas edition of the People's Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies.

The cost of insuring against investment-grade corporate bond defaults briefly hit a record level early Friday, according to broker Phoenix Partners Group, citing the Markit CDX North America Investment Grade Index. That indicates that the fear that highly-rated companies won't be able to pay back their debt reached an all-time high.

Investors' flight to Treasury bills and a 312-point drop in the Dow Jones industrial average also suggested the modest improvements in the credit markets seen over the past several days might be hitting a plateau.

The federal agency charged with backstopping pension benefits for 44 million Americans lost almost $5 billion from investments in stocks in the budget year that ended Sept. 30, the agency head acknowledged Friday.

The Georgia Department of Banking and Finance closed the two branches of Alpha Bank and Trust in Alpharetta on Friday. The Federal Deposit Insurance Corporation has transferred all accounts to Stearns Bank based in St. Cloud, Minn.

The Obama campaign alone has recruited some 17,000 volunteers in North Carolina, along with hundreds of paid staff in 45 offices around the state.

So-called prime brokers, who provide a range of services to hedge funds, are imposing tougher conditions on their clients and charging more for financing following the collapse of Lehman Brothers (NYSE:LEH) in mid-September, raising fears that more funds face collapse.

The more conservative terms mean that a hedge fund would have to put up additional collateral against financing if markets fall further or sell down its holdings.

What a week for currencies: The dollar index jumped 4.9% to 86.44. For the week on the upside, the Japanese yen jumped 7.8% to a 13-year high. On the downside, the South African rand declined 10.4%, the Australian dollar 9.7%, the New Zealand dollar 9.1%, the Brazilian real 8.2%, the British pound 8.0%, the Canadian dollar 7.5%, the Swedish krona 6.5%, the South Korean won 6.2%, the Norwegian krone 5.9%, and Euro 5.9%, and the Swiss franc 2.7%. In the emerging currencies, the Polish zloty sank 12.1%, the Turkish lira 11.8%, the Chilean peso 8.0%, the Hungarian forint 7.8%, and the Iceland krona 6.4%.India’s rupee fell through 50 against the dollar to a record low.

Hedge fund redemptions could reach as much as $330 billion over the next three to six months as panicked investors continue to cash out, people involved in the sector told Dow Jones Newswires. Even the best-performing managers expect withdrawals of up to 15% of their fund value, while several more of the weaker funds will be forced to close.

Robert Prechter: "In a deflation," the Elliott Wave Financial Forecast has stated, "Rule No. 1 is to unload everything that isn't nailed down. Rule No. 2 is to sell whatever everything remaining is nailed to." The banking system is surely deflating, because, echoing Elliott Wave Financial Forecast's wording again, "Desperate American Banks Are Selling Everything That Isn't Nailed Down." SunTrust is selling its stock in Coca-Cola, an asset the bank held for 90 years. Merrill Lynch sold its founding stake in Bloomberg as well as various other subsidiaries.

Meanwhile, "Americans are selling prized possessions online and at flea markets at alarming rates." Pawnshops and auction sites are booming. At, the number of for-sale listings soared 70% in eight months. This fits with our review of Craigslist's prospects when it was getting started in 2005: "This is just the set-up phase. Once the global garage sale really gets rolling, truly astounding volumes of dirt-cheap goods will be available on-line and elsewhere." The global garage sale is on. The chart of the U.S. savings rate shows that the bull market in cash has come to life."

Gold has had a rough ride of late; however, suppose gold remains at $735 an ounce and the Dow should drop to 735. Then it would take only one ounce of gold to buy the Dow. That would be the first time ever this has taken place. In sum, in this bear market gold has outperformed the Dow by a wide margin.

Suncor Energy Inc. said Thursday it would delay a key expansion project, the first confirmation of cutbacks in Canada's oil sands due to financial market stresses and plummeting crude-oil prices.

Canada's second-biggest oil-sands producer said it would push back by one year the startup of a facility, known as an upgrader, that would turn tar-like bitumen into high-quality crude oil. The delay to the C$20.6 billion ($16.5 billion) Voyageur expansion project potentially may result in slower-than-planned oil output growth.

Cheesecake Factory said high commodity and utility costs led to a 36 percent profit decline in the period. The results widely missed Wall Street analysts' expectations.

Same-store sales, or sales at locations open at least a year, slid 4.8 percent.

At next week's Federal Reserve meeting, the market is actually pricing in a 100% chance of a 50bp cut.

With the S&P 500 at 876, close to 50% of the S&P’s price move from 1980 to the present has been wiped out.

Barron's reports the S&P 500 was trading Friday at about 25% below its 50-day moving average. Since 1928, there have been only five such instances, including the aftermath of the 1987 market crash. Each instance was followed by a rally in the next 50 days, according to Bespoke Investment Group.

With more residents trying to increase their income, the city of Weymouth, Mass., limited yard sales to just three a year per address.

OPEC President Chakib Kehlil : "We’re prepared to meet more often to stabilise the market. If a further decision has to be made, it will be made and we will not necessarily wait for the Oran (December) meeting."

Obama's Campaign for Change now boasts 49 offices in Virginia, with an additional 23 Virginia Coordinated Campaign party offices. 40 additional GOTV offices, not including the myriad GOTV staging locations clustered out from those offices.Virginia saw 438,000 newly registered voters this cycle.This effort will prove victorious and Virginia will go blue for the first time in 44 years at the presidential level.

The Morgan Stanley technology index is down 45% this year. The Dow now is down 37% so far this year while the S&P 500 has lost 40% and the Nasdaq 41%.

California Public Employees Retirement System, the largest U.S. pension fund, is selling stocks to ensure it has enough cash to meet obligations to private-equity firms and real-estate partners, The Wall Street Journal reported on Saturday. Calpers had $188.8 billion under management as of Wednesday; it normally keeps less than 2% of its assets in cash but has had to raise that level, the Journal reported.