Thursday, December 31, 2009

Joseph Stiglitz

12/31/09 Joseph Stiglitz

The Labor Department said the number of Americans claiming first-time unemployment benefits fell 22,000 to 432,000 in the latest week, though analysts noted holiday and weather tend to cause big swings this time of year. Yields on 10-year notes, which move inversely to prices, rose 4 basis points to 3.83%, near the highest since August. Bond markets are expected to close at 2 p.m. Eastern time.
The four-week average of initial claims dropped 5,500 to 460,250. Meanwhile, the number of continuing claims in the week ended Dec. 19 declined 57,000 to 4.98 million. The four-week average of continuing claims fell 122,500 to 5.1 million. The gradual decline in continuing claims over the past few months suggest companies are no longer getting rid of workers, and may even be hiring. Yet year-end data tends to be especially volatile because of holidays, bad weather and other one-time factors, economists say.

The Dow Jones Industrial Average finished down 120.46 points, or 1.1%, to 10,428.05 on Thursday. The blue chip average still sported a 0.8% gain for December and a strong 18.8% advance for the year. The S&P 500 index fell 11.32 points, or 1%, to 1,115.10 Thursday. It rose 1.8% for the month, and is up 23.5% for 2009. The Nasdaq Composite fell 22.13 points, or 1%, to 2,269.15 Thursday. It gained 5.8% in December and is up 43.9% for the year. The decade, however, was a lost one for the major benchmarks. The Dow fell 9.3%, its second worst decade on record after the 1930s. The S&P slumped 24.1%, and the Nasdaq slumped 44.2% over the past 10 years.

The Chicago Institute for Supply Management revised lower its December business activity index to take into account seasonal factors, only a day after issuing its initial assessment. The December index was revised to 58.7 from Wednesday's reported 60.0. Readings from September to November were also revised lower.

Holiday shoppers, perhaps thwarted by snowstorms in the Northeast, went on an online spree this holiday, spending $27.1 billion between Nov. 1 and Christmas Eve, according to a report released today from ComScore.

The amount is a 5% uptick from 2008, when buyers spent $26.8 billion online during the same time period. Of course, last year represented a low bar, with sales down 3% from 2007.

This year's increase should not be taken as a sign of broader economic revival, cautioned ComScore Chairman Gian Fulgoni. For one thing, online sales continue to be less than 10% of overall retail spending.

Joseph Stiglitz: “The best that can be said for 2009 is that it could have been worse, that we pulled back from the precipice on which we seemed to be perched in late 2008, and that 2010 will almost surely be better for most countries around the world. The world has also learned some valuable lessons, though at great cost both to current and future prosperity – costs that were unnecessarily high given that we should already have learned them.”

What were those 6 “harsh” lessons?

1. Markets are not self-correcting, and without adequate regulation, they are prone to excess.

2. There are many reasons for market failures. Too-big-to-fail financial institutions had perverse incentives: Privatized gains, socialized losses. .

3. When information is imperfect, markets often do not work well – and information imperfections are central in finance.

4. Keynesian policies do work. Countries, like Australia, that implemented large, well-designed stimulus programs early emerged from the crisis faster

5. There is more to monetary policy than just fighting inflation. Excessive focus on inflation meant that some central banks ignored what was happening to their financial markets. The costs of mild inflation are miniscule compared to the costs imposed on economies when central banks allow asset bubbles to grow unchecked.

6. Not all innovation leads to a more efficient and productive economy – let alone a better society. Private incentives matter, and if they are not properly aligned, the result can be excessive risk taking, excessively shortsighted behavior, and distorted innovation."

Dec. 26 was the holiday season's second-biggest shopping day, with $7.9B spent, ShopperTrak said. "Although traffic was slightly off for the week compared to last year, consumers purchased more with fewer trips driving sales and assuredly pushing retailers into the black this holiday season."

A whopping 82 percent are optimistic about what the new year will bring for their families, according to the latest AP-GfK poll. That sunny outlook seems at odds with other findings.

Nearly two-thirds think their family finances will worsen or stay about the same next year. And fewer than half think the nation's economy will improve in 2010, even though Americans rated 2009 as a huge downer.

Fidelity Owns a Whopping 27.7% of UNG..#1 Institutional Holder.

Weekly gas-storage reports have fueled market price moves in recent weeks. The U.S. Energy Information Administration is expected to report that 147 billion cubic feet of gas were withdrawn from storage during the week ended Dec. 25, according to the average prediction of 16 analysts and traders in a Dow Jones Newswires survey. The storage estimate is slightly greater than last year's 144-bcf pull from storage and is well above the five-year-average draw of 120 bcf.
The National Weather Service is predicting colder-than-normal temperatures for much of the country from Jan. 4 through Jan. 8. In addition, colder temperatures are expected for Jan. 6-12 in the Southeast U.S. and much of the Midwest and Mid-Atlantic regions.

Fog on Thursday halted vessel traffic on the Houston Ship Channel, a key U.S. oil industry corridor, the Coast Guard said. Pilots decided to halt boarding ships inbound and outbound shortly after midnight CST (0600 GMT), and 10 vessels were waiting inbound and eight outbound at 7 a.m., a spokesman said. Weather forecasters expected the fog to lift by late morning, the Coast Guard spokesman said. Winter brings bouts of fog to the Texas Gulf of Mexico coast, often halting ships on the 53-mile (88-km) channel lined by a major complex of refineries and petrochemical plants.

RUSAL, the world's largest aluminum maker, plans to offer 1.6 billion shares at a range of HK$9.10 to HK$12.50 each, the announcement said, with a listing date of Jan. 27.

The IPO is a major achievement for the Russian company, which is trying to raise cash to repay $14.9 billion in debt, and a big step for Hong Kong, which is trying to attract more publicly listed companies from beyond Asia. claims to have received confirmation from a "source inside Apple" that the company will in fact be holding a media event on January 26th in San Francisco. According to the source, the "big" event will focus on the "mobility space", suggesting an iPhone, iPod touch, or, as many people expect, tablet announcement. Earlier this week, Cloned in China pointed to a Chinese-language article [Google translation] about a blog post apparently from former Google China president Kai-Fu Lee claiming that device will in fact be introduced in January at a price point of under $1000 and will carry a 10.1" multi-touch screen and offer an "amazing user interface", video conferencing capabilities, and e-book offerings in a package described as a "large iPhone". Lee also claims that Apple is expecting first-year sales of 10 million units, far above most observers' expectations at this time.

Crude oil at $80.00.

Freddie Mac: 30-yr mortgage rate edges up to 5.14%.

Commtrendz Commodities: "We expect the multi year low of sub $2.45/MMBtu reached in September of 2009 to be a significant low which is not likely to breach in the coming years. Even with the persistent bearish news of Natural Gas coming from North America, we expect Natural Gas to stay firm in 2010.
"We expect this current rally to target $6.90/MMBtu – $7.10MMBtu levels which are 38.2 % retracement of the multi year low reached in 2009.The MACD on monthly chart too seem to indicate a bottoming process. We expect Natural Gas to trade between $4.22/MMBtu – $4.50/MMBtu on the lower side to $9.20/MMBtu – $9.50/MMBtu (61.8 % of the low made in 2009) on the higher side in 2010."

U.S. natural gas inventories fall 124 bcf: EIA.versus five-year-average draw of 120 bcf.

The Dow Jones Industrial Average finished down 120.46 points, or 1.1%, to 10,428.05 on Thursday. The blue chip average still sported a 0.8% gain for December and a strong 18.8% advance for the year. The S&P 500 index fell 11.32 points, or 1%, to 1,115.10 Thursday. It rose 1.8% for the month, and is up 23.5% for 2009. The Nasdaq Composite fell 22.13 points, or 1%, to 2,269.15 Thursday. It gained 5.8% in December and is up 43.9% for the year. The decade, however, was a lost one for the major benchmarks. The Dow fell 9.3%, its second worst decade on record after the 1930s. The S&P slumped 24.1%, and the Nasdaq slumped 44.2% over the past 10 years.

Wednesday, December 30, 2009


12/30/09 Petroleum

The American Petroleum Institute reported an increase of 1.725 million barrels in U.S. inventories, while analysts expected a drop.Analysts polled by Platts expected a drop of 2.2 million barrels in commercial crude stocks. The API also reported that gasoline stocks fell 1.395 million barrels while distillate stocks fell 3.46 million barrels. Analysts surveyed by Platts expected gasoline stocks to increase by 900,000 barrels, and distillate fuels, which include diesel and heating oil, to fall 2.1 million barrels. The Energy Information Administration will release its more closely watched report on Wednesday.

Cliff Wachtel: "Fifty-seven percent of employers expect to see higher salaries for existing employees in 2010, down from 65 percent in 2009. Also, 29 percent plan to increase salaries in offers to new employees, down from 33 percent in 2009.

As to bonuses, medical coverage and matching 401k contributions, the survey found 37 percent of employers plan to cut benefits in 2010, up from 32 percent who trimmed in 2009.

OK, still, a lot better to have the job than not, right? Then came the stunner:

Many employers — 37 percent — said they plan to take advantage of the large labor pool and replace low-performing employees in 2010.

Now wait a minute! If 20% are planning to hire, mostly for lower compensation, and 37% plan on just replacing workers, more often than not at lower compensation packages, then what does that mean? I’m no statistician, but seems like we’ve got two possibilities here:

Sucks: If the 20% hiring are part of the 37% that are replacing, then we’ve got a net zero gain in jobs, and a drop in incomes and benefits – leaving less spending power than before. Remember that US GDP is about 70% consumer spending – so where does that leave GDP?

Really Sucks: If the 20% hiring are somehow distinct from the 37% replacing, then isn’t that somehow a 17% net decrease in jobs? With many of those still employed at lower wages? We assume those who have held on are not pressing for raises at this time.

Bad for growth, bad for the dollar, which has rallied recently on improved stimulus exit and interest rate expectations. That’s bad for Treasury Bond prices. That’s really bad, because when they drop, interest rates go up – the same rates that determine mortgage rates – which are about to be reset (higher) en masse in 2010 and 2011.

Guess what that does to housing and banking, the very industries which led us into the current crisis and up the current rally?"

The U.K.'s Takeover Panel said Wednesday that it has extended a deadline under which chocolate maker Cadbury can release material new information related to the takeover bid from Kraft. The Panel said the deadline has been extended to Jan. 15 from Jan. 12 to allow the release of Cadbury's detailed estimated trading results for 2009. The deadlines for the last day to send a revised offer and the date by which any offer must be declared unconditional remain unchanged at Jan. 19 and Feb. 2 respectively.

GMAC Financial might receive more government aid. General Motors has extended a December 31 deadline for bids for its Swedish car brand Saab, which will restart some production lines in January after a shutdown, Saab said on Wednesday.

Low prices are good news for homeowners, who can expect to pay 11% less on average for gas heat this winter than last and who have also seen electricity prices fall. But producers have been forced to slash budgets and sell assets as their revenues have dropped.

On Dec. 31st, the Blue Moon will dip into Earth's shadow for a partial lunar eclipse. The event is visible from Europe, Africa and Asia: map. At maximum eclipse, around 19:24 Universal Time, approximately 8% of the Moon will be darkly shadowed.

U.S. government securities have fallen 3.6 percent this year, according to Bank of America Merrill Lynch indexes, the worst annual performance since at least 1978, when Merrill began collecting the data. “Supply is a challenge and will continue to be a challenge next year,” said David Schnautz, an interest-rate strategist in Frankfurt at Commerzbank AG.

Bill Bonner: "We reported that the US government would need to roll over $2.5 trillion worth of debt next year. We probably erred. The number was right, but it was meant to be over the next two years. During the next two years also, worldwide, banks need to roll over $7 trillion. Whether it is over one year or two years, we’re talking big money."

The weeks after Christmas are very important for retailers, with the week after Christmas alone accounting for 15 percent of holiday season sales.

Weather forecast and natural gas: "In fact the combination of last week and the next 3 on our current weather-derived storage forecasts produce the greatest 4-week pull in the 15 years that either AGA or EIA has been reporting weekly storage changes. And this is not inclusive of shift in supply/demand as insinuated by the 64 draw we saw on Thursday, so the risk is higher. Additionally, this would tie 2000 for the largest DEC draw in the same since-1994 time frame."

On Nov 19, the terrorist bomber's father met with the CIA at the embassy in Nigeria and warned them about the potential dangers of his son's behavior. This reminds me of the CIA being warned in advance of 9/11.

Most recently the foreign minister of Yemen said that there are likely 200 to 300 terrorists in Yemen plotting future attacks.

More businesses in the Chicago region were expanding in December than at any time in the past 16 months, based on the latest data from the Chicago purchasing managers index. The business activity index rose to 60.0% from 56.1% in November, according to media reports.

EIA Petroleum Inventories: Crude -1.5M vs. consensus of -1.7M. Gasoline -0.4M vs. +0.4M. Distillate -2.1M vs. -2.1M. Utilization 80.3% vs. 80.1%.

Richard Russell: "I’m thinking that we’re on the path for fireworks in 2010. The reason I say that is because the federal deficits are running into the trillions of dollars. The roll-over of debt coming up in the next two years defies comprehension. For instance, in the next two years the U.S. must roll over $2.5 trillion. Worldwide, banks during the coming two years will have to roll over $7 trillion. On top of that commercial real estate in the U.S. has $750 billion to roll over.

Whether all this debt can be successfully rolled over is doubtful, but one thing is clear - interest rates will go up. This will have an immediate impact on housing. Nobody can negotiate a mortgage now - and worse, nobody has the money to buy a house for cash."

Art Cashin, director of floor operations at UBS Financial Services, shared his stock-market insights.

“Six out of the last 10 Januarys have been down and there is some feeling that people are taking more notice of tax strategies,” Cashin told CNBC.

“There wasn’t an awful lot of tax selling this year, although we had a very significant rally from March.”

Cashin said the markets are reminiscent of the rally in 2003.

“[The rally] ran from late February into year-end and it lasted a bit into January or so, and then we had a pullback after that,” he said. “So we’re still waiting to see. I’m stubbornly concerned that they are overvalued—there is a feeling that it’s 'Nasdaq 4,000.'”

In the last bond sale of the year, the Treasury Department sold $32 billion in 7-year notes at a yield of 3.345%.

The Treasury Department sold $5 billion in 36-day bills on Wednesday at a rate of 0%, the first time its sold the short-term securities under its cash management bill program with no yield at all since at least 2005.

The Dow Jones Industrial Average gained 3.1 points to close at 10,548.51, led by a 1.7% gain in shares of Alcoa Inc. (AA). The S&P 500 index rose 0.23 points to 1,126.42, lifted by a 0.5% gain in the information technology sector as semiconductor stocks rebounded from the previous session. The Nasdaq Composite rose 2.88 points, or 0.1%, to 2,291.28.

Tuesday, December 29, 2009

Eric Sprott

12/29/09 Eric Sprott

The Standard & Poor’s 500 Index will collapse below its March lows as an expected rebound in economic growth fails to materialize, according to hedge fund manager Eric Sprott.

The Toronto-based money manager, whose Sprott Hedge Fund returned 496 percent over the past nine years while the S&P 500 lost 32 percent, said the index’s 67 percent rally since March reflects investors misinterpreting economic data. He’s predicting the gauge will fall 40 percent to below 676.53, the 12-year low reached on March 9.

“We’re in a bear market that will last 15 or 20 years, and we’ve had nine of them,” Sprott, chief executive officer of Sprott Asset Management LP, which oversees C$4.3 billion ($4.09 billion), said in an interview Dec. 18.

Brick-and-mortar retailers did just fine in online holiday sales, according to comScore. Wal-Mart (WMT) led online department stores with 81M uniques in November, up 62%. Target (TGT) pulled in 39M visitors (+43%), and 19M shoppers visited (+36%). Aggregate online spending rose 10% to $12.3B.

John Hussman: "Stocks remain overvalued, overbought, overbullish and face rising yield pressures - a combination that has typically been associated with increased risk of abrupt market losses."

Russia’s gas monopoly Gazprom and China National Petroleum Corporation (CNPC) signed an agreement on the supplies of Russian natural gas to China, an official at the Gazprom Information Department told Itar-Tass on Monday.

“On December 22-27, Gazprom’s delegation, led by Deputy CEO Alexander Medvedev, held this year’s final round of commercial talks with the CNPC relevant to arranging Russia’s gas supplies to China via the western and eastern routes,” the official said.

“Based on the results of the negotiations and in compliance with the previously reached agreements between Gazprom Export and a subsidiary of CNPC, PetroChina International, the sides signed the agreement on major terms and conditions for the supplies of natural gas from Russia to China,” the official said.

The agreement defines the basic commercial and technical parameters for Russia’s gas supplies to Chinese consumers, the official said.

The parties also agreed to promote their intensive cooperation in January-March 2010 in order to reach an understanding on other terms and conditions, which would subsequently lay the foundation for entering into contracts on gas supplies from Russia to China, the Information Department’ s official said.

Case-Shiller: U.S. home prices flat in October. Case-Shiller: Housing Recovery Still Weak, October Decline Of 7.3% Slightly Worse Than Forecast.

"The turnaround in home prices seen in the spring and summer has faded, with only seven of the 20 cities seeing month-to-month gains, although all 20 continue to show improvements on a year-over-year basis," said David Blitzer, chairman of the Index Committee at Standard & Poor's, in a statement.

The Oil Drum: "A small Chinese power generator on Tuesday rejected demands from a Goldman Sachs unit to pay for nearly $80 million lost on two oil hedging contracts, part of a long-running dispute over how China deals with derivatives losses.

Goldman Sachs was one of the foreign banks, along with Citigroup, Merrill Lynch and Morgan Stanley, blamed by the state assets watchdog for providing "extremely complicated" and difficult to understand derivatives products.

...The State Assets Supervision and Administration Commission said in September that it would back state-owned companies in any legal action against the foreign banks that sold them oil derivatives, which resulted in losses when oil prices dived late last year."

Royal Dutch Shell Plc, Europe's largest oil company, expects the pressure on refining margins and costs to persist next year amid a challenging economic situation.

Dan Amoss: "With valuations high, long-term interest rates heading up, and credit stress still an issue, the environment for short selling is growing more favorable."

The consumer confidence index climbed to 52.9 in December from a revised 50.6 in November. Confidence had been expected to rise to 54.0 compared to November's original reading of 49.5, according to a MarketWatch survey of economists.

UK and Canadian 10 yr bond yields are rising to 13 month highs, and Australia and the US are back to 5 month highs. Mortgage rates today are at a 4 1/2 month high according to

Credit card charge-offs rose by about one-half percentage point in November to 10.56 percent, and is likely to continue to rise to a peak of between 12 percent and 13 percent in mid-2010, Moody's said in a statement.

Delinquencies, which measure the proportion of accounts for which a monthly payment is more than 30 days late, also increased to 6.2 percent in November, though early-stage delinquencies fell to 1.6 percent for the month, Moody's said.

As interest rates are set to rise, investors should position themselves away from bonds to avoid being caught in a severe fall in prices, Dan Deighan, founder of Deighan Financial Advisors, told CNBC Tuesday. There is going to be a meltdown in the bond market," Deighan said.

"It's time to get out of bonds," he added.

Trading for Jan natural gas contracts end at close today.

India's state-owned Oil and Natural Gas Corp. and Gas Authority of India Ltd. could take a 12.5-percent stake in a Chinese gas pipeline in the Bay of Bengal.

Government officials are said to be considering a $251 million investment for GAIL and ONGC Videsh, the overseas division of ONGC, for the 540-mile gas pipeline planned by the China Petroleum Corp.

CNCP is considering the pipeline in Myanmar to supply natural gas from offshore blocks in the Bay of Bengal, The Economic Times of India reported.

Daewoo recently doled out a $1.4 billion contract to develop pipelines and onshore infrastructure at the Myanmar fields.

CNPC is offering a 49.9 percent stake in the pipeline to developers of two gas fields in the region, the Times said.

The Treasury Department sold $42 billion in 5-year notes on Tuesday at a yield of 2.665%, the highest since July. Bidders offered $2.59 for each $1 of debt being sold, matching the average at the last four monthly sales. Indirect bidders, a class of investors that includes foreign central banks, bought 44% of the sale, compared to a recent average of 48.2%. Direct bidders, which include investors bidding for their own accounts, purchased another 13%, the highest since October 2008 and compared to an average of 4.6% in the last four sales. After the auction, yields on 10-year notes fell 1 basis point to 3.84%, hovering near a four-month high.

Feb. gold ends down 0.9% at $1,098.10 an ounce.

Jim Bianco submits: "The Federal Reserve owns 80% of AIG. With each passing day it looks like the Federal Reserve is adopting AIG Financial Product’s business practices. That is, when faced with a financial problem, they create complicated tools (like CDS). When critics says these new products will not work, tell them they do not know what they are talking about and create even more complicated tools to dazzle everyone. Once the tools are so complicated that no one understands them, you will be hailed as an expert with no peer. You might even be named TIME’s Person of the Year."

Bloomberg: "A link between the Northwest Airlines plane attack and Yemen is “extremely significant,” said Rohan Gunaratna, head of the Singapore-based International Center for Political Violence and Terrorism Research. “This demonstrates that Yemen could be used as a forward operating base to strike al-Qaeda’s most important enemy, the U.S.”

Yemen is struggling to subdue an insurgency by northern Shiite rebels that has drawn in its neighbor Saudi Arabia, a key U.S. ally, as well as a secessionist threat in the south where the government has little control outside major cities.

U.S. National Security Adviser James Jones told CNN on Dec. 5 that al-Qaeda is relocating to Yemen and Somalia in the face of pressure from U.S. and Pakistani forces on the Pakistan- Afghan border, posing “a threat to our national security.”

“Yemen is second only to Afghanistan and Pakistan in counterterrorism importance,” said Christopher Boucek, a Yemen expert at the Washington-based Carnegie Endowment for International Peace. “Potentially we are talking about a failed state right on the border of the world’s largest oil exporter.”

Tom Petruno:“But whatever additional federal money flows into Fannie and Freddie would almost certainly come at the expense of shareholders’ remaining stake. The government now owns 80% of both firms."

The Oil Drum: "It is quite possible that in the next decade, the increase in price (or the decreasing availability) of oil and financing, will offset the benefits of many types of trade. The pursuit of economic efficiency, through increasingly diverse and extensive global trade has glossed over two important facts which this post will examine: 1) higher oil prices in long distance transport must at some point exceed (economically or otherwise) the benefits achieved from some trade and 2) a complex global trade system is gradually but pervasively decreasing the ability for localities, regions and nations to be self sufficient – so many of our supply chain inputs are imported that continued increase in oil price/affordability will resurrect import substitution policies, not only for less developed countries, but for the US and rich nations as well."

Jim Dalrymple: "Gene Munster, senior research analyst at Piper Jaffray, said in a research note to clients on Monday that initial tablet successes will come from the confidence consumers have with Apple's mobile platform. It is widely expected that Apple will use an iPhone-like operating system on the tablet, enabling consumers to utilize existing apps."

The Dow ended down 1.67, the S&P off 1.58, and the Nasdaq down 2.68.

Monday, December 28, 2009


12/28/09 Israel

WSJ: Many investors realize that stocks have been among the worst investments of the past decade. But they may not realize quite how bad the decade was, because most people forget about the effects of inflation. Despite its 2009 rebound, the Dow Jones Industrial Average today stands at just 10520.10, no higher than in 1999. And that is without counting consumer-price inflation. In 1999 dollars, the Dow is only at about 8200 and would have to rise another 28% or so to return to 1999 levels.

A late boost from procrastinating consumers and an extra day of shopping between Thanksgiving and Christmas increased total retail sales, excluding automobiles and gas, 3.6% over the year-earlier period through Christmas Eve, according to MasterCard Inc.'s SpendingPulse unit.

Still, excluding the extra shopping day, the sales increase would have been closer to 1%, MasterCard said.

This is the first time a conference for all of Israel's heads of missions has been held.The country's 140 ambassadors and consul-generals are participating Is Israel close to invading Iran?

The number of oil and gas rigs fell to 1,178, down 15 rigs from the previous week, according to data from oil-field services company Baker Hughes Inc. The number of gas rigs was 751, a decrease of 22 rigs from last week, while the oil rig count was 416, an increase of 7 rigs. The number of miscellaneous rigs was unchanged at 11 rigs.
The number of gas rigs in use peaked at 1,606 in September 2008.

Joe Bastardi with Accuweather has been good on the weather. Here's his latest:
What is facing the major population centers of the Northern Hemisphere is unlike anything that we have seen since the global warming debate got to the absurd level it is now, which essentially has been there is no doubt about all this. For cold of a variety not seen in over 25 years in a large scale is about to engulf the major energy consuming areas of the northern Hemisphere. The first 15 days of the opening of the new year will be the coldest, population weighted, north of 30 north world wide in over 25 years in my opinion.

Bloomberg: “A 26-mile-long line of idled oil tankers, enough to blockade the English Channel, may signal a 25 percent slump in freight rates next year.

Traders booked a record number of ships for storage this year, seeking to profit from longer-dated energy futures trading at a premium to contracts for immediate delivery, according to SSY Consultancy & Research Ltd., a unit of the world’s second- largest shipbroker. Ships taken out of that trade would return to compete for cargoes just as deliveries from shipyards’ largest-ever order book swell the global fleet.”

10-year Treasury bonds yield 3.83% and 30-year at 4.69%. Mortgage rates on the rise.

Only one sunspot. The cold weather continues. Natural gas up 30 cents and approaching $6.
“The sun is in the pits of the deepest solar minimum in almost 100 years,’’ said Madhulika Guhathakurta, lead program scientist for NASA’s Living With A Star program, whose focus is solar variability and its effects on the earth. Because of slightly decreased solar irradiance during the ongoing minimum cycle, the sun may be acting as a counterweight to the warming effects of greenhouse gases, according to recent research by Judith Lean of the Naval Research Lab and David Rindof NASA’s Goddard Institute for Space Studies.

Spain's budget deficit for the first 11 months of the year has ballooned to 6.79 percent of gross domestic product -- five times last year's figure -- due to dipping tax revenues and the mounting costs of combating the economic crisis, the government said Monday.

China will start building storage facilities across the country for natural gas to avoid a reoccurrence of this winter's supply shortages at Chinese cities, Xinhua cited a top energy official as saying.

The Chicago Federal Reserve Bank said on Monday its Midwest manufacturing index rose in November to the highest in nearly a year in a broad-based expansion that covered all of the major industry sectors.

The index climbed 1.2 percent to a seasonally adjusted 84.2 -- the highest since December 2008 -- from an upwardly revised 83.2 in October. The October reading was originally reported at 82.9.

The Treasury sold $44 billion of 2-year notes at a high yield of 1.089 percent. The bid-to-cover ratio was 2.91, well above the recent average of 2.8. Still to come: A $42 billion 5-year auction on Tuesday and a $32 billion 7-year auction on Thursday.

The Dow Jones Industrial Average gained 26.98 points, or 0.3%, to finish at 10,547.08, its highest closing level since October of 2008. The S&P 500 index rose 1.30 points, or 0.1%, to 1,127.78, also its highest close since October of last year. The Nasdaq Composite gained 5.39 points, or 0.2%, to 2,291.08, its highest close since September 2008.

Sunday, December 27, 2009

Property Values

12/27/09 Property Values

BusinessWeek: China's premier on Sunday rejected foreign pressure to let its currency rise and complained that trade protectionism by other governments was holding back the country's development.

The complaint by Premier Wen Jiabao, China's top economic official, came as the plunge in consumer demand caused by the global crisis is aggravating disputes between China and trading partners including the United States and Europe over access to markets for tires, shoes and other goods.

A key irritant is Beijing's currency controls, which Washington and other governments say keep its yuan undervalued, giving China's exporters an unfair price advantage and swelling its politically volatile trade surplus.

"The basic stability of the renminbi is conducive to international society," Wen told the official Xinhua News Agency in an interview. "We absolutely reject all pressure on us to raise its value."

“Property prices have risen too quickly in some areas and we should use taxes and loan interest rates to stabilize” them, Wen said today in an online interview with the official Xinhua News Agency. China will “absolutely not yield” to pressure on the yuan, he said.

Mike Burk: "The market is overbought, but, at this time of the year, that is irrelevant.

Since 1886 the Dow Jones Industrial Average (DJIA) has had an average gain of slightly over 1% during the last 4 trading days of the year accounting for a little over one seventh of its average annual gain of 6.9%."

Stephen Roach, chairman of Morgan Stanley Asia, forecasts a "multiyear retrenchment" on the part of the American consumer. And why Larry Fink, CEO of BlackRock Inc., believes "the economy will take three to four to five years to get back to normal."

Freddie Mac whispers that 30-year rates could climb to 6% in 2010.

Earthfiles: "NASA Reports Earth Close to
Unexpected Interstellar Cloud, a “Local Fluff.”
“The Voyagers (spacecraft launched in 1975) are not actually
inside the Local Fluff. But they are getting close and can sense what
the cloud is like as they approach it. ...There could be interesting
times ahead!” - Merav Opher, Ph.D., NASA Heliophysicist

NASA reports “the Fluff is held at bay just beyond the edge of the solar system by the sun's magnetic field, which is inflated by solar wind into a magnetic bubble more than 10 billion kilometers wide. Called the heliosphere, this bubble acts as a shield that helps protect the inner solar system from galactic cosmic rays and interstellar clouds. The two Voyagers are located in the outermost layer of the heliosphere, or heliosheath, where the solar wind is slowed by the pressure of interstellar gas. The fact that the Fluff is strongly magnetized means that other clouds in the galactic neighborhood could be, too. Eventually, the solar system will run into some of the Fluff, and its strong magnetic fields could compress the heliosphere even more than it is compressed now. Additional compression could allow more cosmic rays to reach the inner solar system, possibly affecting terrestrial climate and the ability of astronauts to travel safely through space.”

Bruised by the health care debate and worried about what 2010 will bring, moderate Senate Democrats are urging the White House to give up now on any effort to pass a cap-and-trade bill next year.

“I am communicating that in every way I know how,” says Sen. Mary Landrieu (D-La.), one of at least half a dozen Democrats who've told the White House or their own leaders that it's time to jettison the centerpiece of their party's plan to curb global warming.

Tom Armistead: "Property values would never have become so inflated if the spending power fueled by the ability to secure mortgages by fraud had not propelled them upwards. Nor would they have plunged so rapidly if the inevitable foreclosures had not glutted the market with distress sales.

Synthetic securities exacerbated the problem. Not content with creating toxic waste, the investment banks went on to duplicate it, as if by using a photocopy machine to create bogus bonds. Briefly, CDS referencing subprime RMBS were bundled together in synthetic CDOs. CDS are in point of fact insurance transactions, and should be regulated as such, with a requirement of insurable interest on the part of the buyer. Otherwise, problems arise with moral hazard, similar to permitting an arsonist to buy fire insurance on his neighbors house.

Synthetic CDOs in effect were collections of insurance policies that were not backed by insurable interest, and were instead designed and contrived to duplicate losses for the benefit of those who held the CDS protection."

Saturday, December 26, 2009

Unintended Consequences

12/26/09 Unintended Consequences

ZeroHedge: "Here is the only math you need to know as we all look at 2010: in 2009 US Dollar denominated fixed income supply, net of the Fed's Quantitative Easing operations, was $190 billion. In 2010 it will be $2,060 billion, an eleven fold increase. The Fed has three choices: 1) a QE 2 announcement soon, causing a plunge in already low Democrat popularity ahead of the mid-term elections; 2) interest rates skyrocketing, throwing the economy into a true tailspin; 3) the mother of all engineered equity crashes to return capital flow to risk-free assets. None of the three is a pleasant choice, however the Fed could only delay the inevitable hangover from the biggest private-to-public risk transfer in history for so long....Out of the $2.22 trillion in expected 2010 issuance, $200 billion will be absorbed by the Fed while QE continues through March. Then the US is on its own: $2.06 trillion will have to find non-Fed originating demand. To sum up: $200 billion in 2009; $2.1 trillion in 2010. "

The benchmark 10-year note’s yield rose 26 basis points on the week, or 0.26 percentage point, to 3.80 percent, according to BGCantor Market Data. That’s the highest level since Aug. 10. The 3.375 percent security due in November 2019 fell 2 5/32 or $21.56 per $1,000 face amount to 96 16/32.

Two-year note yields rose 18 basis points on the week to 0.97, the highest level since Oct. 30. The note to be sold on Dec. 28 in a record-tying $44 billion offering traded at 1.02 percent in pre-auction trading. The debt drew a yield of 0.802 percent, the lowest ever, at the last auction, a $44 billion offering on Nov. 23.

Andrew Bary: "Burlington Northern warned of a weak economy and tepid recovery ahead of its merger with Berkshire Hathaway. Wall Street, take note."

Permits to spew carbon-dioxide into the atmosphere fell by $3.30 between the first day of the Copenhagen climate summit and the day after its disappointing conclusion. The decline suggests that despite years of diplomatic efforts, the real world still operates as if people can spew carbon more or less at will.

TARP Repayments Reach $164 Billion.

Bill Bonner: "A new law will take effect in February. Like every new law, it disrupts the old laws by which people organized their lives. This one decrees that credit card companies shall henceforth cease the practice known as “universal default.”

If a fellow defaults on one credit card, the other credit card companies rightly figure he’s likely to do the same to them. So they take precautions, cutting him off from future credit.

But the authorities want people to spend – apparently, even people who can’t pay their bills. So, they are outlawing the practice of “universal default.”
The term “unintended consequences” was invented for these occasions."

Calculated Risk: "Regulators did deliver some not so good Christmas gifts this week as formal actions were issued to three institutions including Midwest Bank and Trust Company, Elmwood, IL ($3.5 billion); Centrue Bank, Streator, IL ($1.3 billion); and Bayside Savings Bank, Port Saint Joe, FL ($86 million).
With these changes, the Unofficial Problem Bank List includes 545 institutions with aggregate assets of $295.6 billion."

Thursday, December 24, 2009

More Market Gains

12/24/09 More Market Gains

A big drop in volatile aircraft orders masked a broad-based increase in demand for other U.S.-made durable goods in November, the Commerce Department estimated Thursday. Orders for durable goods rose a seasonally adjusted 0.2% in November, held back by a massive 32.6% drop in aircraft bookings. Excluding transportation goods, orders rose 2%. Orders were stronger in every major industrial category outside of transportation. Orders for core capital equipment goods - a gauge of business capital investment - jumped 2.9%. Total orders were weaker than the 0.6% increase expected by economists surveyed by MarketWatch. Orders are up in two of the past three months and are up 3.8% since June.

First-time claims for state unemployment benefits fell a seasonally adjusted 28,000 to 452,000 in the week ended Dec. 19, hitting the lowest level since September 2008, the Labor Department reported Thursday. Economists polled by MarketWatch were looking for an initial claims level of 470,000. The four-week average of new claims fell 2,750 to 465,250, which also the lowest level since September 2008. In the week ended Dec. 12, the number of people who continued to collect benefits fell 127,000 to 5.08 million, the lowest level since February. The four-week average of continuing claims fell 90,000 to 5.23 million, the lowest level since March. The insured unemployment rate remained at 3.9%.

Reports say Arrow Trucking based in Tulsa, Oklahoma unexpectedly shut down, leaving around 1,400 drivers without a job.
Arrow trucking has a station in Laredo. No trucks, no personnel, nothing, just an empty space.
Just three days before Christmas, Arrow Trucking told their drivers where to leave their trucks in the nearest arrow station without any answers.
Drivers were confused not knowing what just happened.

The fact that the Federal Reserve and US Treasury cannot identify the second largest buyer of treasury securities this year proves that the traditional buyers are not keeping pace with the US government’s deficit spending. It makes us wonder if it’s all just a Ponzi scheme." Eric Sprott

Mortgage rates rose for a third straight week as the 30-year loan climbed back above the 5% level for the first time since Oct. 29, Freddie Mac said Thursday.

Karl Rove: "Taxes start going up now, Medicare cuts begin after next fall's election, and spending for subsidies commences in five years. The price tag is not the first decade's announced $871 billion cost: It is $2.4 trillion. That's the cost of the tax credits in insurance exchanges, and the additional Medicaid costs the reform generates, over the first 10 years it's fully up and running, according to Congressional Budget Office numbers compiled by Republicans on the Senate Finance Committee."

Working gas in storage was 3,400 Bcf as of Friday, December 18, 2009, according to EIA estimates. This represents a net decline of 166 Bcf from the previous week. Stocks were 359 Bcf higher than last year at this time and 395 Bcf above the 5-year average of 3,005 Bcf. In the East Region, stocks were 162 Bcf above the 5-year average following net withdrawals of 99 Bcf. Stocks in the Producing Region were 174 Bcf above the 5-year average of 893 Bcf after a net withdrawal of 53 Bcf. Stocks in the West Region were 60 Bcf above the 5-year average after a net drawdown of 14 Bcf. At 3,400 Bcf, total working gas is above the 5-year historical range.
Natural-gas futures erased their earlier gains Thursday, heading lower as the Energy Information Administration data showed a smaller-than-expected drop in U.S. inventories last week. Natural gas stockpiles fell 166 billion cubic feet in the week ended Dec. 18, the EIA said. Analysts surveyed by Dow Jones had expected a drop of more than 170 billion cubic feet. After the data, January natural gas futures lost 0.7% to $5.78 per million British thermal units. It was up more than 1% before the data.

Warren Buffett’s Berkshire Hathaway Inc. reported 21,000 fewer employees than it had at the end of 2008 amid a slump at the firm’s manufacturing and retail units.

Berkshire and its subsidiaries have about 225,000 workers, the Omaha, Nebraska-based company said this week in regulatory filings. That’s 8.6 percent lower than the 246,083 disclosed in the 2008 annual report. Berkshire provided the jobs information in a document tied to its planned $26 billion takeover of railroad Burlington Northern Santa Fe Corp. Buffett didn’t reply to a request, left with an assistant, for comment on the cuts.

Shares of natural gas producers touched fresh highs for 2009 on Thursday, ahead of a major winter storm expected in the Midwest.

Bill Bonner: "Under the influence of unprecedented stimulus from the feds, the US economy did not go into a Japan-like slump; it went into a bubble.

But now the bubble has popped…and it appears that the US is finally entering the Japanese trap. And there’s nothing much the feds can do about it. Government spending keeps the GDP from collapsing. But it is phony GDP…government giveaways, boondoggles and payoffs to the financial industry.

“It is a depression,” we told a small group of Dear Readers in Paris on Friday night. “It has nothing in common with the typical post-war recession. And it won’t end until it has done its work.”

Barry Ritholtz: "Over the past week, relatively good economic news (headlines, anyway) have some people discussing a recovery in 2010.

That got me thinking: If the market bottomed in March 09, how often does that anticipate an economic recovery ?

Ron Griess (of The Chart Store) had the answer. Typically, the markets bottom 3, 4 or 5 months in advance of th recession’s end. However, it has been as much as 7 months (1954) and in 2001, the market did not bottom until 12 months after the recession’s end ."

The S&P 500 ended the day with a 0.5% gain and the trading week with a 2.18% advance. The Dow Jones Industrial Average gained 0.5% for the day and 1.85% for the week. The Nasdaq Composite gained 0.7% for the day and 3.35% for the week.

Wednesday, December 23, 2009

Weak New Home Sales

12/23/09 Weak New Home Sales

The American Petroleum Institute reported a drop of 3.707 million barrels in U.S. crude inventories last week, more than analysts expected. The API also reported that gasoline stocks fell 1.1 million barrels while distillate stocks fell 745,000 barrels.

Microsoft Word is now scheduled to be prohibited from sale beginning January 11, 2010. That's less than three weeks away.

If you don't understand, you might have simply missed this story, or dismissed it as something that Microsoft would ultimately use its considerable clout to have pushed under a legal rug.

But it's no joke. In August of this year, a court sided with a small Canadian company called i4i that holds a 1998 patent on the way the XML language is implemented, finding that Microsoft was in violation of that patent. The result: Microsoft was told to license the code in question from i4i or reprogram it, or else Microsoft Word would have to be removed from sale in the market. The original ruling gave Microsoft until October to get its legal affairs in order, but appeals pushed that out a bit.

Now a federal court has upheld that original ruling -- plus a fat, $290 million judgment against the company -- imposing the new January 11 D-Day on the matter. Microsoft Word and Microsoft Office will both be barred from sale as of that date -- though naturally you'll still be able to use copies of Word and Office that you already own, and Microsoft will be allowed to keep supporting those copies.

Consumer spending rose 0.5% in November, compared to economists' expectations for a 0.7% increase. Personal income also rose less than anticipated. After inflation, after-tax disposable incomes rose 0.2% for the third straight month. Inflation-adjusted real spending increased 0.2% in November after a 0.4% gain in October. The personal savings rate was steady at 4.7%.

The People's Bank of China said Wednesday that the economy recovery is still insufficient and that correcting structural problems for the nation's growth is urgent. "Our nation's economic situation is generally improving, but the internal strength of the economic recovery is still not enough, and structural contradictions still exist, [making] a change to the path of economic development ever more urgent," it said in a statement on its Web site, citing its fourth-quarter Monetary Policy Committee. The PBOC added it will seek to keep policy flexible and will focus on decreasing economic volatility and manage the pace of loan growth.

Wal-Mart Stores Inc will continue its holiday discounts and deals into the week after Christmas, the world's largest retailer said on Wednesday, as it introduces new deals and extends some old ones.

Rob Hanna: "Due primarily to some massive trading in index calls in the last ½ hour of the day on Tuesday, the CBOE index put/call ratio actually finished lower than the CBOE equity put/call ratio. This has only ever happened 4 other times since they began tracking the data in 2003."

U.S. property and casualty insurance sales plunged 5 percent in the third quarter, the biggest drop since at least 1986, on lower prices and reduced demand.

Yesterday there were only two sunspots and colder weather is still forecast.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 7.4 percent to a seasonally adjusted annual rate1 of 6.54 million units in November from 6.09 million in October, and are 44.1 percent higher than the 4.54 million-unit pace in November 2008. Current sales remain at the highest level since February 2007 when they hit 6.55 million.

In November, employers took 1,797 mass layoff actions involving
165,346 workers. Mass layoff events and associated initial claims both
decreased over the month to their lowest levels since July 2008. The
number of manufacturing events, at 481, decreased by 138 over the
month, and associated initial claims, at 56,243, decreased by 14,329.

Lawrence Yun, NAR chief economist, said the rise was expected. “This clearly is a rush of first-time buyers not wanting to miss out on the tax credit, but there are many more potential buyers who can enter the market in the months ahead,” he said. “We expect a temporary sales drop while buying activity ramps up for another surge in the spring when buyers take advantage of the expanded tax credit, which hopefully will take us into a self-sustaining market in the second half of 2010. In all, 4.4 million households are expected to claim the tax credit before it expires and balance should be restored to the housing sector with inventories continuing to decline.”

The Treasury Department soon will ask Congress for legislation to provide some relief from its Troubled Asset Relief Program rules to improve lending to small businesses, CNBC reported Wednesday, citing unidentified officials. Treasury is seeking to have between $30 billion and $40 billion of TARP funds available for small businesses.

Demand for U.S. home loans fell last week to the lowest level in almost two months even though mortgage rates held steady below 5 percent, the Mortgage Bankers Association said on Wednesday.

Nov. New Home Sales: -11.3% to 355K vs. 425K expected, 430K prior. Months' supply 7.9 vs. 6.7 prior. New home sales are based on contracts signed, so these numbers are what the market looks like post stimulus credit.

Dec. Reuters/UofM Consumer Sentiment: 72.5 vs. 73.5 expected, 73.4 preliminary, 67.4 in Nov. Expectations 68.9 vs. 66.5 prior. "Consumers' evaluations of their personal finances improved slightly in December, but the gains still left their overall assessments at quite negative levels."

November single family portfolio delinquecies rose to 3.72%.

Argentina government delays prepayment plan for 2010 debt.

WSJ: The National Weather Service forecasts colder-than-normal temperatures from Dec. 30 to Jan 5 for the Southeast, Texas and parts of the Midwest, while much of the Northeast will see seasonal temperatures. MDA EarthSat, a Rockville, Md., private forecaster, predicts colder-than-normal temperatures at the start of January in the Southeast, Midwest and parts of the Northeast, followed by more-seasonal temperatures in the Midwest and Northeast.

Traders are looking ahead to weekly data on natural gas storage. Storage levels have been at record highs amid increased production from unconventional gas sources and weak industrial demand amid the recession. Last week the report showed a surprisingly large draw from storage, although gas inventories remain high. Total gas in U.S. storage as of Dec. 11 was 3.566 trillion cubic feet, 14% above the five-year average and 12% above last year's level.

Another large draw in production could support the idea among some analysts that a sharp decline in the number of rigs in operation is starting to curb production levels and tighten supply.

Crude inventories fell 4.9 million barrels, the EIA said. Analysts polled by Platts had expected a drop of 2 million barrels. Gasoline inventories fell 900,000 barrels, and distillate stockpiles, which include diesel and heating oil, fell by 3.1 million barrels. After the data, February crude rose 2.5% to $76.27 a barrel. It was up less than 2% before the data.

The Standard & Poor's 500 index needs to gain 31% by the end of the year to break-even for the decade, or 8.7% including dividends, said Standard & Poor's index services unit late Wednesday. It's got even more to go before it returns to high points reached during the past 10 years. After closing at an all-time high of 1,565 on Oct. 9, 2007, the benchmark index tumbled 57% to its close of 676.5 on March 9, 2009. Wednesday's finish at 1,121 means the index has climbed halfway between the March 2009 low and the Oct. 2007 high. But it still needs to gain nearly 40% to get back to that October peak, said analyst Howard Silverblatt.

The Dow Jones Industrial Average gained 1.51 points to 10,466.44. The S&P 500 added 2.57 points to 1,120.59. The Nasdaq Composite rose 16.97 points to 2,269.64.

Tuesday, December 22, 2009

Interest Rates

12/22/09 Interest Rates

The U.S. economy grew at the fastest pace in two years during the third quarter, but the revised annual growth rate of 2.2% was much slower than initially reported, the Commerce Department estimated Tuesday. U.S. real gross domestic product increased for the first time since the spring of 2008, boosted by higher consumer spending, a rebound in investments in homes, a slower pace of inventory reduction, more exports, and robust government spending. Economists surveyed by MarketWatch were expecting only a minor revision to 2.7% in the third estimate. The revisions to third-quarter GDP were in three major areas: Business investment, consumer spending, and inventories.

The yield on the 10-year increases to 3.74% and 30-year rises to 4.61%.

ICSC Retail Store Sales: +0.6% W/W, up from +0.4% last week. +0.4% Y/Y, down from +2.4%. The week-on-week gain, a result of increased holiday shopping, is overshadowed by the huge year-on-year dip.

New measurements from a NASA satellite show a dramatic cooling in the upper atmosphere that correlates with the declining phase of the current solar cycle. For the first time, researchers can show a timely link between the Sun and the climate of Earth's thermosphere, the region above 100 km, an essential step in making accurate predictions of climate change in the high atmosphere. "American civil liberties were gutted last week, and the media failed to report it.
Anyone who is arbitrarily declared a "suspected enemy combatant" by the president or his designated minions is no longer a "person."
The development? If the president or one of his subordinates declares someone to be an "enemy combatant" (the 21st century version of "enemy of the state") he is denied any protection of the law. So any trouble-maker (which means anyone) can be whisked away, incarcerated, tortured, "disappeared," you name it. Floyd's commentary:
After hearing passionate arguments from the Obama Administration, the Supreme Court acquiesced to the president's fervent request and, in a one-line ruling, let stand a lower court decision that declared torture an ordinary, expected consequence of military detention, while introducing a shocking new precedent for all future courts to follow: anyone who is arbitrarily declared a "suspected enemy combatant" by the president or his designated minions is no longer a "person." They will simply cease to exist as a legal entity. They will have no inherent rights, no human rights, no legal standing whatsoever - save whatever modicum of process the government arbitrarily deigns to grant them from time to time, with its ever-shifting tribunals and show trials. "

Since the end of 1999, stocks traded on the New York Stock Exchange have lost an average of 0.5%.

Washington Post: "The recession's jobless toll is draining unemployment-compensation funds so fast that according to federal projections, 40 state programs will go broke within two years and need $90 billion in loans to keep issuing the benefit checks. "

John Hussman: "Last week, the dividend yield on the S&P 500 dropped below 2%, versus a historical average closer to double that level. While part of the reason for the paucity of yield in the current market can be explained by the 20% plunge in dividend payouts over the past year, as financial companies have cut or halted dividends to conserve cash, the fact is that current payouts are not at all out of line with their historical relationship to revenues, and even a full recovery of the past year's dividend cuts would still leave the yield at a paltry 2.5%. The October 1987 crash occurred from a yield of 2.65%, which was, at the time, the lowest yield observed in history, matched only by the 1972 peak prior to the brutal 1973-74 bear market. "

Home buyers rushed to qualify for an expiring federal tax credit, boosting resales of U.S. homes by 7.4% to a 6.54 million seasonally adjusted annual rate, the National Association of Realtors reported Tuesday. The sales pace was the highest since February 2007 and was the third straight large increase. Sales are up 28% since August. Buyers were rushing in November to finalize sales ahead of the Nov. 30 expiration for the tax credit, said Lawrence Yun, chief economist for the real estate lobbying group. The tax credit was subsequently extended and expanded to include repeat buyers.

Marc Faber: Avoid the U.S. Disaster, Buy Wheat, Sugar, Natural Gas, and Japan in 2010.

ComScore reports the storm spurred a 13% rise in digital purchases, resulting in "the heaviest online spending week on record at $4.8 billion."

The benchmark index for U.S. stock options slipped below 20 for the first time since August 2008 as equities rallied on higher-than-estimated existing home sales and stock-market swings fell to a two-year low.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, retreated 3 percent to 19.87 at 12:30 p.m. in New York and dropped as low as 19.76. It measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index, which added 0.3 percent and moved in a 0.52 percent range, the narrowest this year and about a quarter of its 2.04 percent average for 2009. One-month historic volatility for the S&P 500 fell to 12.41, the lowest since October 2007.

On the Comex division of the New York Mercantile Exchange, gold for December delivery lost $9.40, or 0.9%, to $1,086 an ounce, the lowest settlement since Nov. 3. Oil turned higher in afternoon trading, with the February delivery rising 68 cents, or 0.9%, to end at $74.40 a barrel on the New York Mercantile Exchange. The new front-month contract, February crude had fallen as low as $72.72 earlier.

A final vote on the Senate's health-care reform bill has been scheduled for Thursday morning at 8 a.m., Senate Majority Whip Dick Durbin's office said Tuesday, averting an extremely rare Christmas Eve vote. Senators will vote on both the health-care overhaul and a short-term extension of the U.S. debt ceiling, Durbin's office said. The health bill cleared two procedural hurdles early Tuesday morning.

The Dow Jones industrial average gained 48.37 points, or 0.46 percent, to 10,462.51. The Standard & Poor's 500 Index advance 4.15 points, or 0.37 percent, to 1,118.20. The Nasdaq Composite Index rose 13.51 points, or 0.60 percent, to 2,251.17.
Earlier in the session, the S&P 500 hit a technical milestone, surging to an intraday high of 1,120.27 -- its highest in 14 months.

Monday, December 21, 2009


12/21/09 Trends

Mike Burk: "The trends that can be identified are modestly positive.

I expect the major indices to be higher on Thursday December 24 than they were on Friday December 18."

Spyker, the Dutch carmaker that wants to buy Saab from General Motors, submitted a revised offer after a previous deal had fallen through and prompted GM to say that it would close the Swedish brand.

Joel Bowman: “It has been reported that prices for commercially built new residential units in Beijing, Shanghai and Shenzhen have jumped above 50 percent so far this year, outpacing the growth of local economies by more than 5 times,” the paper continues.

On Friday, Zhang Xin, chief executive officer of property developer SOHO China Ltd, warned that prices in the red hot real estate market may already be overheated.

“The government needs to realize how serious the asset bubble is,” Zhang told newswire, Reuters. “It cannot control the asset bubble by just saying a few words. The most fundamental solution is to tighten credit.”

“There is a bubble in every city,” Zhang added.

That’s the problem with central governments’ stimulus spending, of course: one never knows when enough is enough.

According to Forbes, “More than 1.6 trillion yuan, or about one-sixth of China’s new loans, went to the property sector in the first 11 months, including mortgage loans to home buyers and lending to developers.”

Alcoa said it'll team up with Ma'aden, the Saudi Arabian Mining Company, to invest about $10.8 billion to develop an integrated aluminum industry in the Kingdom of Saudi Arabia. Alcoa and its partners will own 40% of the project and Saudi Arabia will own 60%. "The joint venture will become the world's preeminent and lowest-cost supplier of primary aluminum, alumina and aluminum products, with access to the growing markets of the Middle East and beyond," the companies said. The venture will develop a fully integrated industrial complex, including a bauxite mine, a refinery, an aluminum smelter, a rolling mill and other facilities.

Drugmaker Sanofi-Aventis has agreed to buy U.S. consumer healthcare group Chattem Inc for around $1.9 billion, in a deal which will give Sanofi over-the-counter presence in the United States.

Sanofi said it would start a tender offer for all of Chattem's shares at $93.50 per share in cash. The French group said the offer represented a 34 percent premium above the Chattem's closing share price on December 18.

Gulf Arab nations put into force a monetary pact Tuesday, moving a step closer toward the elusive goal of a single regional currency and greater integration between the mainly oil-rich states.

The announcement by Kuwait's finance minister came as leaders from the six-member Gulf Cooperation Council nations were wrapping up a two-day summit in which they launched a regional electricity project and discussed, among other issues, Iran's nuclear program and the war in Yemen.

Mustafa al-Shimali told Kuwait's official KUNA news agency that the launching of the monetary pact would now allow the governors of the central banks of the six GCC nations to set up "a timetable for the establishment of a regional central bank, with the aim of launching a unified Gulf currency."

The GCC, which groups Kuwait, Saudi Arabia, Qatar, the United Arab Emirates, Oman and Bahrain, has been trying for years to develop a unified currency as part of a push for broader economic integration between their predominantly oil-rich nations.

Rob Hanna: "Option expiration on Friday saw the market rise on exceptionally high volume. Over the last 13 years high volume rises on an up op-ex day have often led to a selloff."

The Oil Drum: "An unlikely source of energy has emerged to meet international demands that the United States do more to fight global warming: It's cleaner than coal, cheaper than oil and a 90-year supply is under our feet.

It's natural gas, the same fossil fuel that was in such short supply a decade ago that it was deemed unreliable. It's now being uncovered at such a rapid pace that its price is near a seven-year low. Long used to heat half the nation's homes, it's becoming the fuel of choice when building new power plants. Someday, it may win wider acceptance as a replacement for gasoline in our cars and trucks."

Citadel Broadcasting the No. 3 U.S. radio broadcaster, files for bankruptcy protection, hoping to convert a $2.1B credit facility into a new term loan of $762.5M, and extinguish $1.4B in debt. Senior lenders would receive a portion of the new loan and 90% of the new common stock in reorganized Citadel.

Nobel Prize-winning economist Joseph Stiglitz warned there's a "significant" chance the U.S. economy will contract in the second half of next year, and urged the government to prepare a second stimulus package to spur job creation.

The holiday shipping rush is expected to peak for UPS today, when the world's largest shipping carrier projects it will deliver about 22 million small packages. For the entire holiday season, UPS plans to deliver roughly 400 million packages worldwide, up slightly from the 2008 holiday season.

There is no syrupy Christmas music blaring inside the massive UPS Worldport hub in Louisville, Ky., only the roar of conveyor belts. Still, workers say they get caught up in the holiday spirit.

UPS, based in Atlanta, hired about 50,000 seasonal workers to keep pace with the extra volume this holiday season, including about 700 extra staff at Worldport. The Louisville facility employs about 10,000 people and sorts up to 350,000 packages hourly. On average, about 1.2 million packages pass through every day. Volume reaches 2.5 million packages at the holiday peak. UPS has other domestic air hubs in Philadelphia, Dallas, Hartford, Conn., Ontario, Calif., Rockford, Ill., and Columbia, S.C., plus a network of international hubs.

Gold for December delivery fell $15.40, or 1.4%, to end at $1,095.40 an ounce on the Comex division of the New York Mercantile Exchange, ending below the $1,100 level for the first time since Nov. 6.
Crude for January delivery, the front-month contract that expires at the end of Monday's trading, ended down 89 cents, or 1.2%, at $72.47 a barrel on the New York Mercantile Exchange.

The Dow Jones Industrial Average rose 85.25 points to 10,414.14. The S&P 500 Index added 11.58 points to 1,114.05. The Nasdaq Composite Index gained 25.97 points to 2,237.66.

Saturday, December 19, 2009

Muni Bonds

12/19/09 Muni Bonds

The Oil Drum: "In February this year, global oil production / demand hit an interim low of 84.0 million barrels per day (mmbpd) and the average price of West Texas Intermediate (WTI) that month was $39.16 / bbl. Since then, demand has recovered to 85.9 mmbpd in November and the average price was $78.08 / bbl. A rise in demand of 2.3% has led to an oil price rise of 99.4%."

While the Senate focused attention Thursday on the defense spending bill until the wee hours of the morning, Senate Republicans began to put pressure on another area to stop the healthcare reform bill. A current GOP governor and four GOP senators, who were once governors (from New Hampshire, Idaho, Nebraska, and Tennessee), said they oppose the "unfunded mandate" of Medicaid expansion included in the bill. In Washington, Mississippi Gov. Haley Barbour said the current proposal in the Senate bill to permit individuals making less than 133% of the federal poverty level [it's 150% in the House bill] to receive Medicaid could lead to big tax increases—especially in those states required to balance their budgets every year. Under the bill provisions, the federal government would pay the states three years to fund the new Medicaid population; the states would then pick up the tab after that.

South Carolina and Florida saw joblessness reach its highest point in 25 years. And economists say most states' unemployment rates will rise as the stimulus programs wind down and seasonal jobs taper off.

Seven new bank failures brings 2009's tally to 140.

The dollar index surged 1.5% this week to close at 77.73.

Jan Hatzius, chief U.S. economist at Goldman Sachs… forecasts that the jobless rate will rise to 10.75% by the middle of 2011 from 10% now.

ZeroHedge: "Wait, wasn't RMBS supposed to be safe now that it is all on the taxpayer's balance sheet? Moody's just said no, and put 4474 jumbo RMBS tranches on downgrade review. Furthermore, the firm raised its loss estimates as follows: 3.8% for 2005 securitizations, 8.0% for 2006 securitizations, 10.9% for 2007 securitizations and 12.3% for 2008 securitizations."

According to Bloomberg, “The largest U.S. transit agency had its credit outlook on about $11.5 billion of debt reduced on concern New York state may cut more funding from a system already resorting to service cuts to balance its budget.”

"In a world in which nearly all paper money has problems, and in which the sheer supply of paper money is expanding far faster than global GDP, gold has its best claim as a constituent of foreign exchange reserves since Bretton Woods booted it out sixty-five years ago." - Don Coxe

Senate Democratic leaders secured the 60 votes needed to ensure passage of health overhaul legislation after reaching agreement with Sen. Ben Nelson to address his concerns with the bill's handling of abortion.

GM set to close Saab and it would mean 3400 lost jobs at a plant in Sweden.

Tim W. Wood: "The Dow theory bullish trend confirmation that occurred earlier this year remains intact. Cyclically, the higher degree low that began at the March low also still remains intact. Longer term, I maintain, based on my data, that this is nonetheless a bear market rally. Once this rally has run its course the big surprise will be the Phase II decline and history shows us that Phase II declines are the most destructive. One reason for this is because with everyone believing that the bear market has ended, the Phase II decline takes everyone by surprise and as the realization begins to set in so does the panic."

Bill Bonner: "The more we think about it, the more our jaw drops. In Copenhagen this week, a large group of apparatchiks and hacks got together to discuss a ‘climate deal.’ There, Hillary Clinton pledged US support to a plan to spend $1 trillion to try to influence the earth’s climate. Governments can do many things, but can they really improve the weather? There is no evidence for it. Not even a respectable theory.

In Washington, meanwhile, Ben Bernanke is spending trillions to try to improve the economy. Can he really do that? Again, there’s no evidence for it."

Closures of U.S. car dealership this year will be the worst on record going back to at least the 1950s, spurred by the shutdowns at General Motors Co. and Chrysler Group L.L.C., consulting firm Urban Science said Dec. 16.

Through October, 1,467 U.S. auto dealerships have closed, according to the firm, which advises auto manufacturers about their retail networks. That leaves 18,617 stores, but another 200 or so are likely to shut down before the year is over, John Frith, vice president of retail channel solutions, said Dec. 16.

Robert Prechter: "The muni bond market is heading for disaster. Municipalities have borrowed more than they can repay, they have pension liabilities that they cannot meet (up to a trillion dollars' worth, according to Moody's), and tax receipts are falling. The only reason that states haven't failed yet is the so-called "stimulus package," which took money from savers, investors and taxpayers -- thereby impoverishing the people who live in the various states -- and gave it to state governments to spend so they would not have to cease their profligate spending. But political pressures will eventually cut off this gravy train. In the 2010-2017 period, the muni bond market will become awash in defaults. The leap in optimism since March, which has shown up in every financial market, has fueled a retreat in muni bond yields to their lowest level since 1967 and narrowed the spread between muni bond yields and Treasuries.
This rush to buy municipal bonds is occurring right on the cusp of a dramatic decline in their values. While many individuals are loading up right at the peak so they can participate in the next major market disaster, smarter investors, such as insurance companies Allstate and Guardian Life, are getting out."

This is the last weekend before Christmas. Traditionally, the last Saturday before the holiday has been a major shopping day. The heavy snowfall in many parts of the country will cut into those retail sales. It will mean bigger discounts after Christmas and falling margins.

Friday, December 18, 2009


12/18/09 Ports

George Ure: "Long Beach: Year to date cargo is down 18.7% compared with last year. Let's hear it for the stimulus package!

Port of Los Angeles: Loaded inbound was down 11.84% for November and overall for the calendar year is down 15.13%.

Port of Oakland: Down 9.9% YTD but November say a 3.4% gain.

Port of Seattle: Up 15.1% in November, but still down 9.7% overall year-to-date (YTD). International inbound was up 34.4% in November, but is still down 10.7% YTD - way I figure it is replacement parts for things that are breaking.

Port of Tacoma: Down 19.8% YTD."

ZeroHedge: "Pimco's flagship Total Return Fund released its November data: the fund continues liquidating its MBS holdings, selling another $7 billion in November (after dumping $10 billion in October), and bringing the total to the lowest it has held of this security, at $23.9 billion. Keep in mind TRF held just under $120 billion of Mortgage Securities in February: a nearly $100 billion reduction. Thank you Ben Bernanke Bid. Mortgages are not the only class getting cleansed by Gross: the world's biggest bond fund also sold $20 billion of Treasuries, bringing its govvy holdings to $101.7 billion, down from $121.3 billion in November. The biggest beneficiary: cash, which increased from a net short position of -$13.5 billion to $14 billion. And in the meantime, the fund still made a boatload: total AUM in TRF increased from $192.6 billion to $199.4 Gross is sticking to his pessimistic view and liquidating. Who is buying?"

A supply of 1.7 million homes headed for sale because of foreclosure or delinquency looms over the nation's housing market, which could dampen progress toward recovery should the Obama administration fail in its efforts to aid struggling homeowners, researchers said.

A variety of measures to keep discounted bank-owned properties off the market -- including moratoriums on foreclosures by major lenders and federal initiatives aimed at keeping people in their homes with mortgage payments they can afford -- has helped increase a backlog of so-called shadow inventory 55% in the year ended Sept. 30, according to a report released Thursday by First American CoreLogic, a Santa Ana-based real estate research firm.
Shadow inventory properties are homes that have not been tallied into official inventory numbers tracked by Realtors and other real estate professionals. They include homes taken back by lenders through foreclosures and similar actions, as well as homes whose owners are at least 90 days delinquent on their mortgage payments.
A year earlier, the pending supply of homes not yet up for sale totaled 1.1 million.

Jim Nelson: " The second wave of ARM resets and foreclosures might come sooner than you think. According to Whitney Tilson and Glenn Tongue of T2 Partners, the experts on this subject, about 80% of option ARMs are negatively amortizing. Meaning these so-called top-tier borrowers are heading further into the hole. Once their rates reset, they could be in serious trouble."

Zale, the second-largest U.S. jewelry retailer, has cancelled some orders with suppliers as it struggles under the weight of mounting debt and sales declines, The Wall Street Journal reported.

The dollar index rose as high as 78.105, the highest on a closing basis since Sept. 4.

Crude oil for February delivery finished with a gain of 38 cents, or 0.4%, at $74.42 a barrel. The less actively traded January contract rose 71 cents to $73.36 a barrel. Gold for February delivery finished with a gain of $4.10, or 0.4%, at $1,111.50 an ounce.

The Dow Jones Industrial Average gained 20.63 points, or 0.2%, to 10,328.89, leaving it down 1.4% from last Friday's close. The S&P 500 Index added 6.32 points, or 0.6%, to 1,102.39, giving it a 0.4% drop for the week. The Nasdaq Composite Index climbed 31.64 points, or 1.5%, to 2,211.69, leaving it up 1% from the week-ago close.

Thursday, December 17, 2009

China, Japan, and UK

12/17/09 China, Japan, and UK

First-time claims for state unemployment benefits rose unexpectedly in the latest week, the Labor Department reported Thursday. The number of initial claims in the week ending Dec. 12 rose 7,000 to 480,000. The consensus forecast of Wall Street economists was for claims to fall to 465,000. Claims in the prior week were revised to 473,000 from the intial estimate of 474,000. The four-week average fell for the 15th straight week. Ian Pollick, economist at TD Securities, said the rise in jobless claims was unsettling, but said he was comforted by the fact that claims remain below 500,000.

Whitney cut her fourth-quarter earnings forecast for Goldman to $6 a share from $6.38, while her full-year view was dropped to $19.57 from $19.95 a share. Goldman's 2010 estimate went to $19.65 from $21.73 a share, and the 2011 outlook was lowered to $20.60 a share from $24.04. Meanwhile, Whitney cut her 2010 estimate for Morgan Stanley to $2.60 from $2.63 a share, and dropped the 2011 forecast to $2.75 a share from $3.28.

Shipping company FedEx reported quarterly earnings in line with earlier guidance Thursday, but its projections for profit in the current quarter was well below Wall Street expectations.

China, Japan, and UK were, for the first time in 2009, net sellers of Treasury, with a $74 billion decline MoM, to $29.5 billion in October.

Lehman had sought approval from US Judge James Peck last month to pay bonuses to about 230 employees, noting their efforts had recovered $8bn in cash and “the preservation of significant additional value for the benefit of creditors”.

“However, only 17 per cent of the derivatives contracts are considered to be final settled,” the bank wrote in a Nov. 25 filing. “Additionally, 39 per cent of the derivatives contracts have not yet been reconciled, and valuation must be completed for 50 per cent.”

The index of leading economic indicators rose for the eight straight month, pointing to an improved economy in 2010, the private Conference Board said Thursday. The index increased 0.9% in November after a 0.3% gain in October, the research group said. Six of the 10 leading indicators were positive. For the first time since December 2007, employment did not make a negative contribution to the index, potentially a good sign for future job growth, the board said.

The Philly Fed diffusion index rose to 20.4 in December from 16.7 in November.

The average Prius owner makes $84,000 a year and half of them earn more than $100,000 annually.

Chris Puplava: "The current secular bear market is the fourth one since the early 1900s and has so far been comparable in terms of magnitude, though not duration. The prior three secular bear markets lasted on average 191 months, or nearly 16 years, and witnessed an average decline of 68.60%. The current secular bear market is 108 months old, just over half the average life a secular bear market, though it witnessed a 65.54% decline from the 2000 top to the March 2009 low."

Working gas in storage was 3,566 Bcf as of Friday, December 11, 2009, according to EIA estimates. This represents a net decline of 207 Bcf from the previous week. Stocks were 381 Bcf higher than last year at this time and 433 Bcf above the 5-year average of 3,133 Bcf. In the East Region, stocks were 179 Bcf above the 5-year average following net withdrawals of 93 Bcf. Stocks in the Producing Region were 197 Bcf above the 5-year average of 923 Bcf after a net withdrawal of 75 Bcf. Stocks in the West Region were 57 Bcf above the 5-year average after a net drawdown of 39 Bcf. At 3,566 Bcf, total working gas is above the 5-year historical range. Natural gas for January delivery was recently up 40 cents, or 7.3%, at $5.86 per million British thermal units.

Americans are the most pessimistic they've been since the beginning of this year, when the US was mired in a deep recession, while confidence in President Obama and Congress is at the lowest level of 2009, according to the latest NBC/Wall Street Journal poll. Of those surveyed by telephone during the past weekend, 55 percent feel the nation is headed in the wrong direction, compared with 33 percent who felt the US was headed in the right direction. That's the worst showing since January.

Officially, Detroit's unemployment rate is just under 30 percent. But the city's mayor and local leaders are suggesting a far more disturbing figure -- the actual jobless rate, they say, is closer to 50 percent.

This week's AAII survey of investor sentiment showed that 42.1% of respondents were bullish while only 28.4% were bearish (lowest since May 2008). The bull to bear ratio of 1.48:1 is the highest since July.

Sen. Richard Shelby, R-Ala., the ranking minority member of the Senate Banking Committee announced Thursday that he will vote against Federal Reserve board chairman Ben Bernanke's nomination for a second four-year term. While Bernanke is still expected to win the support from the entire panel, Shelby's opposition means the Fed won't be able to count on Republican support to fend off sweeping changes to the Fed's regulatory powers put forward by Sen. Christopher Dodd, D.-Conn., the chairman of the panel. Dodd has said that the Fed's oversight of the biggest banks prior to the financial crisis was an "abysmal failure." Dodd has proposed stripping the oversight power from the Fed and giving it to a new single banking regulator to oversee the financial sector.

Fifty percent of Americans in this ABC News/Washington Post poll approve of the president's work overall, down 6 points in the last month; nearly as many, 46 percent, now disapprove. On the economy, 52 percent disapprove, a majority for the first time. On the deficit, his worst score, 56 percent disapprove.

The Energy Information Administration said the country's supply of natural gas dropped by 207 billion cubic feet last week, the most ever for this time of year, according to analyst Stephen Schork.

"It was brutally cold," Schork said. "People have been saying for so long that natural gas is due for a rally and they've been wrong all year long. But with a big draw, I expect prices to move higher."

Morgan Stanley, the securities firm that spent more than $8 billion on commercial property in 2007, plans to relinquish five San Francisco office buildings to its lender two years after purchasing them from Blackstone Group LP near the top of the market.

The bank has been negotiating an “orderly transfer” of the towers since earlier this year, Alyson Barnes, a Morgan Stanley spokeswoman, said yesterday in a telephone interview. AREA Property Partners will take over the buildings. Barnes declined to say when the transfer will occur.

“This isn’t a default or foreclosure situation,” Barnes said. “We are going to give them the properties to get out of the loan obligation.”

The San Francisco transfer would mark the second real estate deal to unravel this year for Morgan Stanley, which bet big on the property markets as prices were rising. The firm last month agreed to surrender 17 million square feet of office buildings to Barclays Capital after acquiring them for $6.5 billion in 2007 from Crescent Real Estate Equities. U.S. commercial real estate prices have dropped 43 percent from October 2007’s peak, Moody’s Investors Service said last month.

“It’s not surprising this deal ran into trouble,” Michael Knott, senior analyst at Green Street Advisors in Newport Beach, California, said in an interview. “It was eye-opening among a group of eye-opening deals. There was almost no price too high in 2007 for office space in top gateway markets.”

Venezuela, site of the biggest refinery complex in the Americas, may process less oil as a drought reduces power generation, said the chief executive officer of Curim Capital Advisors LLC.

“We could lose about 200,000 barrels a day in the global market, which would most likely affect heating oil, and China in particular,” Curim CEO Colin Fenton said today in an interview on Bloomberg Television. “It would affect products.”

The Dow Jones Industrial Average dropped 132.86 points, or 1.3%, to 10,308.26. The S&P 500 Index declined 13.06 points, or 1.2%, to 1,096.12. The Nasdaq Composite Index was off 26.86 points, or 1.2%, to 2,180.05.

Wednesday, December 16, 2009


12/16/09 Time

The API estimated crude inventories rose by 924,000 barrels last week. Analysts polled by Platts forecast crude-oil inventories fell by 2 million barrels in the week ended Friday. The Energy Information Administration will release its more closely followed report Wednesday morning.

General Electric Co. Chairman and CEO Jeff Immelt told investors on Tuesday that earnings in 2012 "will be a lot higher" than the 99 cents a share Wall Street currently expects the conglomerate to report for 2009. "We plan to generate a lot of cash and to be very thoughtful about how we allocate that capital," he said.

The Austrian government has nationalized the insolvent bank Hypo Group Alpe Adria (HGAA). The financial institution, which has 40 billion Euros in assets, is the country’s sixth largest bank. David Smick: “To put things in perspective, Austrian banks have emerging-market financial exposure exceeding $290 billion. Austria’s GDP is only $370 billion.”

Bernanke: "The ratio of government debt to GDP does not have a direct bearing on the appropriate stance of monetary policy. Rather, the stance of monetary policy is appropriately set in light of the outlook for real activity and inflation and the relationship of that outlook to the Federal Reserve’s statutory objectives of maximum employment and price stability. Of course, government indebtedness may exert an indirect influence on monetary policy through its potential implications for the level of interest rates consistent with full employment and low inflation. But in that respect, fiscal policy is just one of the many factors that influence interest rates and the economic outlook."

The Illusion of Prosperity: "JPMorgan, now holds 200 million ounces net short in COMEX silver futures, fully 40% of the entire net short position on the COMEX (minus spreads). As I have previously written, JPMorgan accounted for 100% of all new short selling in COMEX silver futures for September and October, some 50 million additional ounces. As extreme as JPMorgan’s position is, there is a total true net short position of 500 million ounces (100,000 contracts) in COMEX silver futures. Try to put that 500 million ounce short position in perspective. It equals 75% of world annual mine production, much higher than seen in any other commodity."

In a poll on Fox News, with over 163 thousand people voting, the vast, vast majority, or 99% of poll respondents are against raising the debt ceiling, claiming "This out-of-control spending is outrageous and irresponsible."

Norway's central bank decided Wednesday to increase its key policy rate by 0.25 percentage point to 1.75%, surprising the market.

The Czech central bank lowered its benchmark two-week repo rate by 25 basis points to 1% on Wednesday.

Greece has sold 2 billion euros ($2.9 billion) of floating-rate notes to five banks as the country attempts to shore up its finances, Bloomberg reported Wednesday citing two bankers familiar with the deal.

Australia's gross-domestic-product growth slowed to a seasonally adjusted 0.2% in the September quarter from growth of 0.6% the June quarter on the heels of a fall in private investment and a hefty decline in net exports, the Australian Bureau of Statistics reported Wednesday.

The U.S. current account deficit widened to $108 billion in the third quarter, or 3.0% of gross domestic product, the Commerce Department reported Wednesday.

U.S. consumer prices rose a seasonally adjusted 0.4% in November, as energy prices surged in the month, the Labor Department reported Wednesday. Taking out volatile food and energy prices, consumer prices were flat in November. In the past year, the consumer price index has risen 1.8%, while the core CPI has climbed 1.7%.

FDIC in 2010 plans to add more than 1,600 staffers, mostly to handle bank failures.

New construction of U.S. houses rebounded in November from a sharp drop in the prior month, the Commerce Department estimated Wednesday. Starts rose 8.9% in November to a seasonally adjusted 574,000 annualized units stronger than the 563,000 pace expected by economists surveyed by MarketWatch. This is the biggest percentage increase in starts since May. It comes after a sharp 10.1% decline in October. Starts of new single-family homes rose by 2.1% to 482,000 in November, while starts of large apartment units jumped 67.3% to 92,000. Building permits, a leading indicator of housing construction, rose 6.0% to a seasonally adjusted annual rate of 584,000. This is the highest level of permits in the past year.

Real average hourly earnings fell 0.5 percent from October to November 2009.

My trade for 2010: The yield curve to flatten.

The recession hit the Port of Houston this year, washing ashore in a wave of sobering statistics that port commissioners reviewed Tuesday before passing next year's budget.

On the docks, 25,000 fewer cars rolled ashore in 2009. Steel imports fell 57 percent. Empty cargo containers are flooding back to Houston, while loaded container traffic has dropped. Fewer ships are sailing in — 2,948 so far this year, a 10 percent drop from 2008.

“All in all, this has been a very difficult year,” said the Port Authority's new executive director, Alec Dreyer, who took the helm earlier this fall. While cargo volumes are starting to pick up, 2010 will be another tough year, he added, because volumes of steel and machinery are expected to stay low.

It is most fitting that Bernanke is Time's Man of the Year. He won't provide an accounting of the bailout funds and he is fighting a audit of the Fed. He is my loser of the year.

Crude oil futures jumped 3% to trade near $73 a barrel on Wednesday, after the Energy Information Administration reported crude inventories fell by 3.7 million barrels last week. Analysts polled by Platts expected a decline of 2 million barrels. Crude oil for January delivery was last up $2.22, or 3%, at $72.91 a barrel, after briefly rising as high as $73.13 in electronic trade.

The governments of Brazil and Bolivia will sign an addendum to their natural gas supply deal on Friday that will pay Bolivia about $1.2 billion through 2019, the local Estado news agency reported.

The two countries had haggled over a deal on so-called "net fractions" of propane, butane and natural gas as called for in a renegotiated supply agreement reached in 2007.

Bolivia is in dire need of additional revenue from its primary export, which has suffered with the economic slowdown that sapped natural gas demand in Brazil. Before the crisis, Brazil imported 31 million cubic meters of natural gas a day from Bolivia. In 2009, the average will be 22.5 million cubic meters a day.

Brazil is bound by its "take-or-pay" supply agreement with Bolivia to pay for at least 21 million cubic meters of natural gas a day.

The addendum will pay Bolivia a minimum of $100 million a year for net fractions retroactive to 2007. Future payments will depend on a complicated formula, but will likely be about $100 million, Estado said.

Bolivia also exports natural gas to Argentina, which has agreed to purchase a minimum of 27.7 million cubic meters a day through 2010.

Russia's Gazprom rejected requests from European costumers to change the pay-or-take clauses in natural gas contracts, The Moscow Times reports.

First Solar Inc. said late Wednesday that it sees earnings of $6.05 to $6.85 a share for fiscal 2010. The solar panel maker said it also estimates 2010 sales of $2.7 billion to $2.9 billion.

By a vote of 218-214, the House approved a $290 billion increase in the U.S. debt ceiling, bumping the debt limit up to $12.4 trillion. The debt increase now goes to the Senate for a vote.

The Dow Jones Industrial Average fell 10.88 points to 10,441.12. The S&P 500 Index gained 1.26 points to 1,109.19, and the Nasdaq Composite Index rose 5.86 points to 2,206.91.

Tuesday, December 15, 2009

John Williams

12/15/09 John Williams

"The intensifying economic and solvency crises, and the responses to both by the U.S. government and the Federal Reserve in the last two years, have exacerbated the government's solvency issues and moved forward my timing estimation for the hyperinflation to the next five years, from the 2010 to 2018 timing range estimated in the prior report. The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, gross mismanagement, and a deliberate and ongoing effort to debase the U.S. currency. Accordingly, risks are particularly high of the hyperinflation crisis breaking within the next year." - John Williams, ShadowStats

The dollar index, which measures the greenback against a basket of currencies, rose to 77.
Yields on 10-year notes rose 5 basis points to 3.60%.

Wholesale prices rose a larger-than-expected 1.8% in November after seasonable adjustments, with energy prices accounting for about three-fourths of the increase, the Labor Department reported Tuesday. The producer price index has risen 2.4% in the past year, the government said. This is the first rise since November 2008. The core PPI - which excludes food and energy prices - rose 0.5% in November, more than expected. Leading the advance were higher truck and cigarette prices. Core prices are up 1.2% in the past year. Economists surveyed by MarketWatch expected a 1.0% rise in the November headline PPI and a 0.3% gain in the core rate. The PPI had risen 0.3% in October, while the core rate was down 0.6%.In November, at the earlier stages of processing, prices received by manufacturers of intermediate goods climbed 1.4 percent, and the crude goods index rose 5.7 percent.

Best Buy raised its full-year profit forecast excluding items to $3 to $3.15 a share. It had projected $2.70 to $3 a share previously but said gross margins in the current holiday quarter would be lower than it had expected.

The world's airlines are facing another tough year in 2010 with rising fuel costs and declining average ticket prices, the International Air Transport Association said Tuesday. The trade group widened its projected 2010 industry loss to $5.6 billion from $3.8 billion, despite expected revenue, passenger and cargo volume growth.

For December, ICSC projects retail sales to rise about 2%.

The Japanese government's primary budget deficit is set to hit a record 34.204 trillion ($384.92 billion) in the current fiscal year ending March, Parliamentary Secretary of Finance Hiroshi Ogushi was quoted as saying Tuesday by Dow Jones Newswires. That exceeds the 13.1 trillion-yen deficit initially estimated during last year's budget-making process.

Oct. International Capital Flow: Net foreign purchases of long-term securities $20.7B vs. $37.1B expected and $40.7B in Sept. Foreign demand for long-term U.S. financial assets slowed in October and China's holdings of U.S. Treasury securities were unchanged.

Continued strong demand for U.S. debt is critical to financing America's soaring budget deficits and keeping domestic interest rates low enough to support a broad economic recovery.

Foreigners purchased $20.7 billion more in assets than they sold in October, down from a $40.7 billion increase in September, the Treasury Department said Tuesday.

China, the largest holder of U.S. Treasury securities, maintained its holdings at $798.9 billion in October.

China's foreign holdings of Treasury securities are a direct result of the huge trade deficits the U.S. runs with China. The Chinese take the dollars Americans pay for Chinese products and invest them in Treasury securities and other dollar-denominated assets.

Japan, the second largest holder of Treasury securities, had a total of $746.5 billion in October, down slightly from September's $751.5 billion.

The Treasury securities held by the United Kingdom dropped to $230.7 billion, from $249.3 billion, while the holdings of Hong Kong rose to $142 billion, from $132.2 billion.

Treasury securities held by oil exporting countries totaled $188.4 billion, up slightly from $185.3 billion in September. Russia's holdings totaled $122.5 billion, little changed from September's $121.8 billion.

Sales growth at discount stores continued to be strongest in basic consumables, food, toys and electronics. Online shopping remained strong.

Output at factories, mines and utilities climbed 0.8 percent, after no change in October, the Federal Reserve said today in Washington. Manufacturing and mining rose, while warmer weather restrained utility demand. Capacity utilization, which measures the proportion of plants in use, increased.

Improving global sales and leaner inventories are prompting companies such as Ford Motor Co. to rev up assembly lines, giving the expansion a lift. The pickup has yet to boost hiring, one reason why Fed policy makers tomorrow may reiterate a pledge to keep lending rates near zero for “an extended period.”

“We’re seeing rising production to meet consumer demand and increased business spending,” said John Herrmann, chief economist at Herrmann Forecasting in Summit, New Jersey. “Businesses are beginning to incrementally increase their inventories, and that means ramping up production.”

At 99.4 percent of its 2002 average, total industrial production was 5.1 percent below its level of a year earlier. Capacity utilization for total industry moved up 0.7 percentage point to 71.3 percent, a rate 9.6 percentage points below its average for the period from 1972 through 2008.

Refining margins, or the profit from turning oil into fuels such as gasoline and diesel, will remain weak in 2010 as demand stays subdued and new capacity starts, according to the Organization of Petroleum Exporting Countries.

Tiernan Ray: "Moody’s has created a “misery index” of how countries are doing with respect to deficits and unemployment. The U.S. ranks eighth worst, behind Iceland, the U.K., Greece, Ireland, Lithuania, Latvia, and Spain. Moody’s analysts write that in 2010, states will not have the luxury of a leisurely exit from their public investments as they try to unwind public debts."

Factories in the New York region unexpectedly expanded at the slowest pace in five months in December, indicating manufacturing may provide less of a thrust for the economy in coming months. The Federal Reserve Bank of New York’s general economic index fell to 2.6 from 23.5 in November, the bank said today.

According to Bloomberg, the City of Johannesburg, South Africa’s biggest metropolitan district, had its long-term national credit scale rating lowered to from by Moody’s Investors Service because of increasing debt levels.

“The rating action reflects the impact of the deteriorating liquidity position of Johannesburg and its already high level of gearing,” Moody’s said in a statement today. “Higher expenditures have eroded the city’s cash position.”

The ratings company maintained a ‘stable’ outlook on Johannesburg’s rating, saying the city “will be able to deal with the fiscal challenges” it faces, according to the statement. The city of four million reported revenue of 23 billion rand ($3.1 billion) in the 2009 fiscal year, Moody’s said.

A 36 percent increase in Johannesburg’s infrastructure investment to 5.7 billion rand in 2009 has eroded the city’s cash position, according to Moody’s. Johannesburg has a long- term debt burden of 53 percent of operating revenue excluding one-off earnings, the highest of all the metropolitan districts monitored by Moody’s, the statement added.

“The downgrade simply reflects adverse market conditions rather than any lack of fiscal discipline and does not reflect a sudden deterioration in the City of Johannesburg’s credit strength,” Simon Howie, a credit portfolio manager at Investec Asset Management in Cape Town, said in an e-mail. Johannesburg still has “an exceptionally strong rating,” said Howie.

Venezuela has overtaken Ukraine as the country with the world's riskiest debt, and the chance either economy will default on its debt is above 50 percent, credit default swap monitor CMA DataVision said on Tuesday.

Most U.S. credit card companies reported charge-offs rose in November after two months of declines in a sign that consumers remain under stress, sending shares down industrywide.

Exxon expects the demand for natural gas, which emits half as much carbon dioxide as coal when burned, will rise as the United States looks to pare its global warming emissions and the world seeks greener sources of energy.

"This is not a near-term decision; this is about the next 10, 20, 30 years," Rex W. Tillerson, the chairman and chief executive of Exxon, said in a conference call on Monday. "We think there will be significant demand for natural gas in the future."

The National Association of Home Builder's sentiment index declined to 16 this month from 17 in November.

The Dow Jones Industrial Average fell 49.05 points, or 0.5%, to 10,452.00. The S&P 500 Index shed 6.18 points, or 0.6%, to 1,107.93. The Nasdaq Composite Index declined 11.05 points, or 0.5%, to 2,201.05.

Crude for January delivery gained $1.18, or 1.7%, to close at $70.69 a barrel in floor trading on the New York Mercantile Exchange.