Friday, February 20, 2009

Life Support

2/20/09 Life Support

Hewlett-Packard Co. Chief Executive Officer Mark Hurd spent three years cutting costs to lift profit. Now he’s targeting employee pay to ride out an economic slump he says will last the rest of the year.
After reporting a 13 percent drop in first-quarter profit, the world’s largest personal-computer maker said it will reduce Hurd’s base salary by 20 percent, executives’ pay by 10 percent to 15 percent, and most employees’ salaries by 5 percent.
“In an environment like this, there’s no margin for error and no tolerance for inaction,” Hurd wrote yesterday in a memo to employees that was obtained by Bloomberg News. “My goal is to keep the muscle of this organization intact, but we do have to do something because the numbers just don’t add up.”

Lowe's Cos, the No. 2 U.S. home-improvement retailer, said Friday its fourth-quarter profit fell to $162 million, or 11 cents a share, from $408 million, or 28 cents, a year earlier. Sales dropped 3.8% to $9.98 billion. Comparable-store sales dropped 9.9%. First-quarter sales are expected to range from a decline of 3% to an increase of 1% with comparable-store sales estimated to decline as much as 10%. Per-share profit is forecast to be 23 cents to 27 cents a share, Lowe's said.

Trading as high as $988.40 an ounce, gold futures at 6:30 a.m. Eastern were up $10.90 to $987.40 an ounce.

Light, sweet crude for March delivery fell 63 cents to $38.85 a barrel by midday in Singapore on the New York Mercantile Exchange. The contract on Thursday surged $4.86, or 14 percent, to settle at $39.48.
Most trading volume was with the April contract, which fell 68 cents to $39.50 after jumping $2.77 to settle at $40.18.

Months after soaring fuel prices spurred many to cut back on their driving, demand for gasoline is slowly coming back, helping to push up oil prices.

South Korea's Kospi Composite fell 3.8% to 1,065.18, rebounding after trading more than 4% lower at one point. Japan's Nikkei 225 was down 1.9% at 7,415.34, its lowest intraday level since the 6,994.90 low on Oct. 28, 2008. Hong Kong's Hang Seng Index was down 2.5% at 12,701.87 and Shanghai's Composite was up 0.3% at 2,233.86. Australia's S&P/ASX 200 was off 1.4% at 3,402.40. Japan's Topix hits lowest finish since Jan 1984, falls 1.6 pct. HSBC drops to 10-yr low in global bank sell-down.

According to The Wall Street Journal, “Auto maker Saab filed for bankruptcy protection Friday and has applied to be spun off from its parent company General Motors Corp.”
The company was turned down when it asked the Swedish government for help.

According to AMG Data Services,including ETF activity, Equity funds report net cash outflows totaling -$6.223 billion in the week ended 2/18/09 with Domestic funds reporting net outflows of -$5.623 billion and Non-domestic funds reporting net outflows of -$600 million;
Excluding ETF activity, Equity funds report net cash outflows totaling -$758 million with Domestic funds reporting net outflows of -$444 million and Non-domestic funds reporting net outflows totaling -$314 million;
Exchange Traded (Equity) funds report net outflows of -$5.465 billion with the largest flows:
-$6.842 Bil from the SPDR Tr Series I fund;
$1.858 Bil to the SPDR Gold Shr fund;
-$542 Mil from the iShares Russell 2000 Index fund.

Toyota Motor Corp. is already shutting down output for 14 days at its 11 domestic plants during the first three months of this year.
But facing sluggish sales and rising inventories, Toyota spokesman Yuta Kaga said the company has decided to halt production again in April for three days at the 11 factories.
"We are responding to demand in the global market, and also need to reduce our inventories," Kaga said. Toyota's domestic output in the January-March period in 2009 is seen at 520,000, down 54 percent from the same period last year.

Mining company Anglo American PLC said Friday it will cut 19,000 jobs this year and suspend dividend payments after reporting a 29 percent drop in 2008 profits.
The company said it hoped to cut the jobs — 10 percent of its managed work force — through layoffs, natural attrition and scaling back contractor arrangements.

Robert Prechter: "If investors begin to fear the government's ability to pay interest and principal, they will move out of Treasuries the way they moved out of mortgages. The American financial system is too soaked with bad debt for a government bailout to work, and the market won't let politicians get away with assuming all the bad debts. It may take some time for the market to figure out what to do about it, but as always, there is no such thing as a free lunch. The only question is who pays for it.
The Fed is nearly out of the picture, so the consortium of last resort, the federal government, is assuming the job of propping up the debt bubble. It is multiples bigger than any such entity that went before, because it can draw on the liquidity of American taxpayers and clandestinely steal value from American savers. So the question comes down to this: Will the public put up with more financial exploitation? To date, that's exactly what it has done, but social mood has entered wave c of a Supercycle-degree decline, and voters are likely to become far less complacent, and more belligerent, than they have been for the past 76 years."

Luxury homeowners are falling behind on mortgage payments at the fastest pace in more than 15 years, a sign the U.S. financial crisis that began with the poorest Americans has reached the wealthiest.
About 2.57 percent of prime borrowers who took out jumbo loans last year were at least 60 days delinquent, a percentage reached within 10 months and the fastest since at least 1992, according to
LPS Applied Analytics, a mortgage data service in Jacksonville, Florida. That’s almost twice as quickly as 2007 and a level 2006 owners haven’t attained after almost three years.

With credit markets still shaky, about $171 billion in loans backed by offices, shopping centers, hotels and other commercial buildings are coming due this year.
Experts increasingly wonder whether there's enough credit capacity in the system to refinance them.

Robert McHugh: "We got the Dow Theory Bear Market Primary Trend reconfirmation Thursday we have been expecting. Not good. The Industrials closed below their previous closing low for the Bear Market from October 2007, the November 20th closing low of 7,552.29 Thursday, February 19th, 2009, with a close of 7,465.95. This confirms the lower closing low by the Transports. Dow Theory considers this a primary trend Bear Market reconfirmation, warning we are very likely going to see stock prices fall much much lower before this Bear Market finishes. This is what happened during the Great Depression stock market collapse of 1929 into the late 1930's, a second crash worse than the first. This Bear market will not be over until PE's are around 5x, and dividend ratios are over 7 percent. They currently sit around 18x and 3 percent."

Penney's net sales fell nearly 10 percent to $5.76 billion, hurt by deep discounts and consumers shunning discretionary purchases in a recession.
The company forecast a loss of 20 cents to 30 cents per share in the current first quarter on sales expected to fall 10 percent to 13 percent.

U.S. Jan. consumer price index up 0.3% as expected. The core CPI - which strips out food and energy prices to get a better handle on underlying inflation trends - rose 0.2% seasonally adjusted in January compared with the 0.1% gain expected by economists surveyed by MarketWatch.Over the past 12 months, the core CPI is up 1.7%, the lowest inflation since mid-2004. Real average weekly earnings fell 0.1% in January.

Nouriel Roubini: "The global economy is now literally in free fall as the contraction of consumption, capital spending, residential investment, production, employment, exports and imports is accelerating rather than decelerating."

About 220,000 stores may close this year in America, says retail consultant Howard Davidowitz of Davidowitz & Associates.

Gold futures topped the key $1,000 mark for the first time in nearly a year on Friday.

Rob Hanna: "Short-term oversold at intermediate-term lows can be a powerful combination. Let’s look at the current situation. The 2-day RSI of the SPX closed basically right at 2. The SPX also closed at a 50-day low....The edge is very short-term though as it begins to dissipate after just 2 days."

China has invested $41 billion in oil projects around the world in just this week alone.

Demand at food banks across the country increased by 30 percent in 2008 from the previous year, according to a survey by Feeding America, which distributes more than two billion pounds of food every year. And instead of their usual drop in customers after the holidays, many pantries in upscale suburbs this year are seeing the opposite.

Boeing Co. and Airbus have some 1,000 commercial aircraft deliveries scheduled for this year, but about half may be deferred as buyers wrestle with falling capacity demand and weaker credit markets, according to one industry spokesperson.
Speaking at an event in New York City on Thursday, Giovanni Bisignani, director general and chief executive of Geneva-based International Air Transport Association, said his prediction was based on the rapid deterioration of cargo and passenger demand, conversations with airline CEOs and the turmoil in the financial markets.

At $3.20 Bank of America traded at levels last seen in 1991. At US Bancorp the shares traded down to $9.85, a 12-year low. At Wells Fargo, the shares at $9.60 are trading at
a 12-year low. In Feb. 1995 GE traded at $9.16, and that's where it traded on Friday. I cannot even see on a chart where GM ever traded a t $1.65, its price on Friday.
This is part of Wall Street's reaction to the stimulus package, the bank bailout plan, the handout to the autos, and the mortgage revamping plan.

TRW Automotive Holdings Corp posted a quarterly loss on Friday, slammed by sharp production cuts by automakers, and the parts manufacturer forecast a decline of at least 25 percent in 2009 revenue.

Europe’s banking system faces growing risks that may require a region-wide effort to stabilize financial markets, said New York University economist Nouriel Roubini.
“The banking problem in Europe is becoming more severe,” Roubini said in a Bloomberg Television interview.

A record number of U.S. homeowners thought their homes had depreciated in value in February, according to a Reuters/University of Michigan survey published on Friday. Among those surveyed, 64 percent reported declines in the value of their homes, sharply up from 35 percent a year earlier and just 3 percent in the February 2006 survey. Just 9 percent thought the value of their home had risen, the lowest recorded since that question was first asked nearly two decades ago.

Genentech Inc., fighting a $42.1 billion takeover by major shareholder Roche Holding AG, said the Swiss drugmaker may exercise ownership rights and seize more board seats as the hostile bid advances.
Roche “may seek to influence our business in a manner that is adverse to us,” Genentech said in a filing today with the U.S. Securities and Exchange Commission. The South San Francisco, California-based company hasn’t answered Roche’s hostile bid of $86.50 a share after rejecting an earlier $89-a-share approach, made in August, as too low. Roche gets about 40 percent of its revenue from Genentech’s medicines and would gain complete control of cancer drug Avastin in a buyout. A takeover would also strengthen Roche’s U.S. business and ensure access to Genentech research after an existing agreement ends in 2015.
Genentech’s review and response to Roche’s offers “requires the expenditure of significant time and resources by us and may be a significant distraction for our management and employees,” Genentech said in today’s filing.
Roche now has three of Genentech’s seven board seats. It plans to add a fourth director to gain control after purchasing shares tendered in the takeover, Roche said in a regulatory filing on Feb. 10.

At $76,700, Berkshire Hathaway A shares have plummeted from their high of $151,650 in December 2007. Given the recent prices for some of their largest holdings, I would not be surprised to see the shares drop further.

Crude oil for March delivery fell 54 cents to end at $38.94 a barrel on the New York Mercantile Exchange. The March contract, which hit an intraday low of $36.91 a barrel on Globex, expired at the end of trading today.

Shares of aerospace-giant Boeing Co hit a six-year low of $35.32, as did the builder of earth-moving machinery Caterpillar Inc. at $26.02. 3M hit an eight-year low at $46.44, while aluminum-maker Alcoa struck a 15-year low at $5.99 after plunging 82% over the last 52 weeks.

Gold for April delivery finished at $1,002.20 an ounce, up $25.70, or 2.6%, on the day.

Sen. Christopher Dodd, chairman of the Senate Banking Committee, said the Obama administration is seeking to avoid nationalizing banks, but that banks may have to be nationalized for "a short time," Bloomberg reported Friday. "I don't welcome that at all, but I could see how it's possible it may happen," Dodd told Bloomberg. "I'm concerned that we may end up having to do that, at least for a short time."

During Friday trading, the Dow Jones Industrial Average and the Standard Poor's 500 Index had fallen to levels last seen in 1997.The Dow had been down as much as 216 points to 7,249 at 1:15 p.m. ET. Had that level held to the close, that would have been the lowest close since May 19, 1997.At the close the Dow was down 100 points to 7365 and closed down 6.1% on the week.The
S&P 500 Index fell 8.89 points to 770.05 and was down 6.9% on the week. The Nasdaq only dropped 1.59 points on the day to 1441 but that was stilldown 6.1% for the week.

Renowned investor George Soros said on Friday the world financial system has effectively disintegrated, adding that there is yet no prospect of a near-term resolution to the crisis.
Soros said the turbulence is actually more severe than during the
Great Depression, comparing the current situation to the demise of the Soviet Union.
He said the bankruptcy of Lehman Brothers in September marked a turning point in the functioning of the market system.
"We witnessed the collapse of the financial system," Soros said at a Columbia University dinner. "It was placed on
life support, and it's still on life support. There's no sign that we are anywhere near a bottom."

Silver Falls Bank, of Silverton, Ore., was closed Friday by state regulators and the Federal Deposit Insurance Corporation. It was the 14th bank to fail so far this year and the 39th since the beginning of the current credit crisis.

Mexico’s peso has weakened to a record 14.89 to the U.S. dollar after the central bank cut interest rates less than expected.
The bank today lowered its benchmark rate by 25 basis points to 7.50. It was the second time since January that the bank slashed rates to boost Mexico’s sagging economy.
The peso has lost about 30 percent of its value against the dollar since August, boosting the costs of imports.
Mexico sends 80 percent of its exports to the United States and it has been pummeled by the U.S. downturn. Officials say the economy could be headed for a recession.

Thursday, February 19, 2009

Grim Surveys

2/19/09 Grim Surveys

The Fed expects GDP to contract by up to 1.3% this year. Bernanke pledged to do "everything possible" to restore stability and get the U.S. out of recession.

First time claims for state unemployment benefits were unchanged at 627,000 for the week ending Feb. 14, the Labor Department reported on Thursday. The four-week average of initial claims, which measures the underlying trend, rose by 10,500 to 619,000. The number of people remaining on the benefits rolls after drawing an initial week of aid surged 170,000 to 4.99 million in the week ended Feb 7, the most recent week for which the data is available, the Labor Department said.
That was the highest reading on records dating back to 1967. The four-week average of continuing claims climbed by 92,500, to 4.83 million, also a 27-year high.
The three straight weeks of seasonally adjusted claims above 600,000 also is the longest stretch in more than 26 years.

"The labor market is in disarray," said Mark Zandi, chief economist at Moody's "We are seeing job losses across nearly every industry and every region of the country."

Based on current trends, net job losses for February could well top 700,000, Zandi said. That would surpass the 598,000 jobs lost in January, which had been the biggest total since 1974.

U.S. producer prices climbed 0.8% in January, the Labor Department reported on Thursday, marking the first rise since July. Energy prices rose by 3.7%. The core PPI, which strips out food and energy prices, rose by 0.4%.

Sprint Nextel Corp , the No. 3 U.S. mobile service, posted a quarterly loss on Thursday and said a total of 1.3 million wireless customers had left its service during the quarter.

As the economy continues to struggle, the public is growing increasingly concerned about losing jobs, not having enough money to pay the bills and seeing their retirement accounts shrink, according to an Associated Press-GfK poll.

Nearly half of those surveyed said they worry about becoming unemployed — almost double the percentage at this time last year.

Nearly half of those questioned, 47 percent, worry at least somewhat about losing a job, up from 28 percent in February 2008. Nearly three-fourths, or 71 percent, say they know someone — a friend or a relative — who has lost a job in the past six months because of the economy.

Fear of being thrown out of work is so widespread that equal percentages of higher- and lower-income workers, 47 percent, worry about losing their jobs. Last year, only 20 percent of those earning $50,000 or more annually worried about joblessness, as did 35 percent of those earning less than that.

Nearly two-thirds of people, 65 percent, are at least somewhat worried about paying their bills, up from 46 percent last year.

More than two-thirds, 69 percent, worry that the value of their stocks and retirement investments will drop, up from 59 percent a year ago.

More than half, 53 percent, aren't confident they'll have enough money to live comfortably in retirement, up from a third, 34 percent, in February 2005.

Japan cuts its outlook for the fifth straight month, saying its economy "is worsening rapidly while in a severe situation." The language of its monthly report is the most pessimistic since January 1975.

The outlook for consumer spending over the next 90 days looks “grim,”
according to ChangeWave Research.

The firm said a survey of 2,701 U.S. consumers taken in the February 2-9 period found “the worst spending outlook ever recorded in a ChangeWave survey.”

According to the survey, 61% of the respondents expect to spend less money over the next 90 days compared to the same period last year. That compares with 12% who say they will spend more.

Of the survey group, 64% say the direction fo the U.S. economy will worsen over the net 90 days; only 8% expect the economy to improve. Asked about their feelings on the stock market, 42% say they are less confident than they were 90 days ago, compared to 14% who said they are more confident.

According to Reuters, when Chinese businessman Roger Zhang needed a bridging loan for his steel company, he went to a pawn shop to get a cash flow injection to keep his business afloat.

Turned away by banks caught in the credit crunch, Roger, like many Chinese businessmen, borrows from pawn shops instead. In this case, he paid off the loan a few days later when a customer made payment on a big steel purchase.

Marc Faber Says Germany, France May Have to Bail Out Nations.

The Dow Jones U.S. Financial Index has plunged an additional 35% in 2009, after dropping 50% in 2008. This resembles the tech drop in 2000 and beyond.

U.S. unemployment will top 9 percent before the recession is over, according to a Reuters poll of economists that points to a significantly bleaker economic outlook than just one month ago.

Chris Puplava: "While the stock market bottomed in 1978, gold failed to correct sizably as it did during the 1974 stock market advance, with the run in gold far surpassing the improvement in the stock market, driving the gold to S&P 500 ratio up to a peak of 7.58 on January 21st, 1980. The blow off top in gold was followed by the beginning of a secular bull market in stocks and a secular bear market in commodities that lasted roughly two decades. The ratio plummeted to a depth of 0.179 by July of 1999, roughly coinciding with the top in the stock market.

Since 1999 the ratio of gold to the S&P 500 has advanced in a stair step fashion where it rises for a period and then moves sideways. The ratio moved up significantly after the October 2007 stock market peak, with gold breaking above parity with the S&P 500 on January 20th of this year, marking the third such occurrence in nearly 80 years.

What is interesting to note is that the first occurrence of gold breaking parity with the S&P 500 came during the deflationary Great Depression, while the second occurrence came during the inflationary 1970s. This proves that gold can perform well under either a deflationary or inflationary scenario. Both prior occurrences of the strength in gold were associated with presidential decisions. Gold spiked 27% in one day when FDR devalued the currency after he took office in 1933 and confiscated privately held gold under
Executive Order 6102, with gold remaining illegal for Americans to own until 1974. In 1971, President Richard Nixon removed the gold standard and ushered in an inflationary decade and a fiat monetary system that has been with us ever since...So, once parity is broken the action is typically not a whip saw event, where gold falls back below the value of the S&P 500, but the start of a significant outperformance of gold relative to the stock market....what I found was that large positive deviations of the gold to S&P 500 ratio from the 200d MA were often associated with significant peaks in gold, or at least marked the beginning of lengthy sideways consolidation in gold as it worked off its overbought condition....The recent surge in gold as it approaches its 2008 highs has pushed the ratio of gold to the S&P 500 nearly 60% above its 200d MA, the most overbought condition since the peak in gold in 1980, more than 18 years ago. Clearly at this juncture gold’s outperformance relative to the S&P 500 is reaching extreme territory."

CSX Corp. made a new 52-week low on Thursday and the three other major rail stocks are closing in on new lows too. Caterpillar made another new low. These are some of the companies that are suppose to benefit from the stimulus package.

GE made a new 52-week low as it traded at $10.05, the lowest price in 14 years for the stock.This company should benefit from a stimulus program.

At $2.50 Citigroup made a new 52-week low. The bank bailout program is suppose to help this bank. At $12.74 American Express made a new 52-week low. The assistance program should help this outfit.

A report published in the journal Nature focuses on new research at Genentech Inc.which is challenging conventional thinking about Alzheimer's disease, providing a provocative theory about its cause and suggesting potential new targets for therapies to treat it.

The researchers propose that a normal process in which excess nerve cells and nerve fibers are pruned from the brain during prenatal development is somehow reactivated in the adult brain and "hijacked" to cause the death of such cells in Alzheimer's patients.

The dominant view of Alzheimer's disease today is that it is caused by deposits called beta amyloid that accumulate in the brain because of bad luck or other unknown reasons, degrading and destroying nerve cells and robbing victims of their memory.

The new findings offer evidence that "Alzheimer's is not just bad luck, but rather it is the activation of a pathway that is there for development purposes," says Marc Tessier-Lavigne, executive vice president, research drug discovery, at Genentech. "It suggests a different way of looking at Alzheimer's disease."

Factories in the Philadelphia region reported declining business in February for the 14th month in the past 15, the Federal Reserve Bank of Philadelphia reported Thuesday. The Philly Fed index dropped to negative 41.3 in February from negative 24.3 in January. It's the lowest since October 1990. Readings below zero show that more manufacturing firms reported worsening conditions than reported improvements. The new orders index fell to negative 30.3 in February from negative 22.3 in January. The shipments index fell to an all-time low of negative 32.4.

For the second consecutive month, the index of leading economic indicators rose, gaining 0.4% in January, following a downwardly revised 0.2% in December. The recent gains are due, in part, to the Federal Reserve's huge injections of cash into the money supply. Despite the rise in January, widespread weakness remains as the troubled job and housing markets continue to take their toll. "The second half of 2009 may see a period of anemic growth," said Ken Goldstein, economist at the Conference Board. "In fact, a return to robust growth may not occur until well into 2010, even if the long climb starts a few months from now."

“I think wealth loss is the defining quality of this recession,” says veteran economist Ram Bhagavatula, who’s managing director at the hedge fund Combinatorics Capital. That’s evident in the stunning decline in household wealth, which according to Federal Reserve data, fell from a peak of $64 trillion in the third quarter of 2007 to $56 trillion in the third quarter of 2008. “And the real damage was done in fourth quarter of 2008,” adds Bhagavatula. The median price of a single-family home went from $219,000 in 2007 to $180,000 in the fourth quarter of 2008, a 13.7 percent decline. “There are no buyers because people can't get credit,” says Bhagavatula. “The credit crunch is forcing people to de-leverage.”
As a result, consumer spending has declined for seven straight months and is expected to do so for three straight quarters, for the first time since the 1950s. And that slowdown also applies to credit demand. Consumers are in no mood or condition to borrow.

The head of the International Monetary Fund says the world economy may perform even worse than his forecasters predicted only three weeks ago.
The IMF said Jan. 28 the global economy will grow by only 0.5 percent this year. That would be the slowest pace since World War II and is a sharp reduction from the IMF's projection of 2.2 percent growth in November.
"The information that has since been published doesn't go in the right direction," Dominique Strauss-Kahn said Thursday at a forum on competition in Paris.
"We can't totally rule out" that the next forecast "will be less happy," he said.
He warned of a "difficult" 2009 which in poor countries could be "a question of survival" for many.
"You shouldn't just look at the economic figures, you should look at the men and women who are suffering because jobs are disappearing and wages and weaker," he said.

U.S. natural gas inventories fell by 24 billion cubic feet in the week ended Feb. 13, the Energy Information Administration reported. The API had expected a withdrawal of 87 billion cubic feet. UNG made a new 52-week low at $16.52 and has fallen from about $64. At $4 for natural gas, drilling and capital expenditures will be cut dramatically.

U.S. crude oil stockpiles rose 1.6 million barrels last week to 345.8 million barrels, despite an acceleration in refinery runs, the API said. Gasoline stocks rose while distillate supplies fell, it said.
Crude oil inventories excluding those in the Strategic Petroleum Reserve fell by 200,000 million barrels in the week ended Feb. 13, the Energy Information Administration reported. Most analysts had expected a buildup of about 2 million to 4 million barrels. After the data, crude for March delivery jumped $2, or 5.8%, to $36.62 a barrel on the New York Mercantile Exchange. It was up less than 3% before the data. Gasoline inventories rose by 1.1 million arrels and distillate stockpiles fell by 800,000 barrels, the EIA reported.

Nouriel Roubini, the New York University professor who predicted the global credit crisis, said a government-backed bank “may crack” as officials try to bail out their financial systems.
“The process of socializing the private losses from this crisis has already moved many of the liabilities of the private sector onto the books of the sovereign,” Roubini wrote on his Web site today. “At some point a sovereign bank may crack, in which case the ability of the governments to credibly commit to act as a backstop for the financial system -- including deposit guarantees -- could come unglued.”

Canada is planning to pull its 2,500 combat troops out of Afghanistan's volatile south in 2011, following the loss of more than 100 troops killed in the country since 2001.

The Dow Jones industrial average tumbled to its lowest close in more than six years on Thursday as sharp declines in key financial shares led the market lower.
The Dow Jones Transportation Index hit its lowest level since 2003.
The Dow Jones Industrial Average shed 89.68 points, or 1.2%, to end at 7,465.95. The S&P 500 Index fell 9.48 points, or 1.2%, to 778.94, and the Nasdaq Composite dropped 25.15 points, or 1.7%, to end at 1,442.82.

Mylan Inc. sees adjusted earnings of 90 cents to $1.10 a share for 2009, compared with the Street's estimate of $1 a share.

New York Times Co.'s board on Thursday suspended the quarterly dividend on the company's Class A and Class B common stock.

Crude oil for March delivery rose $4.86 to end at $39.48 a barrel on the New York Mercantile Exchange. Gold for February delivery ended down $1.60, or 0.2%, at $976.10 an ounce on the Comex division of the New York Mercantile Exchange.

Pepsi agreed to become the exclusive distributor of Rockstar energy drinks across the bulk of the U.S. and Canadian market. This deal gives Pepsi some much needed muscle in the energy drink category and has the potential to shift the dynamics among the leading energy drink brands.

At $12, Wells Fargo traded at a 12-year low.

According to research group NPD, Apple's January computer sales through U.S. retail outlets fell 6 percent on a unit basis from a year ago as the dollar value dropped 11 percent. Its unit market share fell to 13.7 percent from 16.4 percent, NPD said.

Brazil's state-run oil giant Petroleo Brasileiro SA is in advanced negotiations with China Development Bank for as much as $10 billion in financing to explore recently discovered deep-water oil reserves, the company said Thursday.
The discussions signal China's widening effort to use its $2 trillion in foreign exchange reserves to secure access to natural resources amidst depressed international commodity prices. Petrobras needs the funding to pay for exploration of immense oil and gas discoveries off Brazil's coast, which could turn Brazil into a major oil exporter.

Iran has now built up a stockpile of enough enriched uranium for one nuclear bomb, United Nations officials acknowledged on Thursday.
However, UN officials emphasise that in order to produce fissile material Iran would have to reconfigure its Natanz plant to produce high enriched uranium rather than low enriched uranium – a highly visible step that would take months – or to shift its stockpile to another clandestine site.
No such sites have been proved to exist

Three patients taking a Genentech drug are believed to have died of a rare brain infection, a known risk with the skin-clearing treatment, according to federal health officials.
The Food and Drug Administration on Thursday confirmed three cases and a possible fourth of progressive multifocal leukoencephalopathy, or PML, which causes swelling of the brain and is usually fatal. All the cases were reported in the last six months.
The FDA announcement came the same day that European Union regulators recommended a ban on marketing the drug. The European Medicines Agency stated "the benefits of Raptiva no longer outweigh its risks, because of safety concerns."
The drug is marketed in Europe by Swiss drugmaker Merck Serono.
The FDA said two U.S. patients who were diagnosed with the disease died, as did the additional patient who was believed to have the disease, but was never diagnosed.
Genentech previously notified physicians and investors of the cases.
"We take the risk of PML very seriously and are working diligently with the FDA to put the right plans in place that will help protect patient safety," said company spokeswoman Tara Cooper.
First approved in 2003, Raptiva is a once-a-week injection used to treat red, scaly skin caused by psoriasis.
The FDA in October added its most serious warning to Raptiva, after a 70-year-old patient caught PML and died after taking the drug for four years.

Fourth-quarter 2008 PC shipments posted their worst growth rate since 2002, according to research group Gartner.

New Dow Low

2/18/09 New Dow Low

Brett Steenbarger: " Supply for Tuesday closed at a very elevated figure of 234. Since late 2002, when I began assembling these data, we've only had 21 occasions in which Supply has exceeded 200. Naturally, since this is an unusual event, I wanted to see if there was any edge going forward.
Interestingly, after such a weak day, the S&P 500 Index (SPY) opened higher 16 times and lower only 5 times for an average gain of .43%. Holding the weak market overnight in anticipation of further losses has not been a winning strategy.
When we look four days out, however, the average change in SPY following a very weak momentum day has been -.38% (8 up, 13 down). In other words, on average, the market lost all of its early bounce and then some.
What this suggests is that markets often will not bottom on very weak momentum. Rather, price will tend to move lower, even as a decline loses its momentum and eventually reverses."

In early Wednesday trading, Brent crude is at a $5 barrel premium to WTI crude.

Goodyear plans to cut another 5,000 jobs and impose salary freezes after swinging to a fourth-quarter loss and posting a sharp decline in sales.

Housing starts fell 16.8% in January from a month ago to 466K/year. Permits dropped 4.8% from December to 521K/year. Completions declined 24.2% to 776K/year. From a year ago, the trio are down 56.2%, 50.5% and 41.7% respectively.

Import prices are down 12.5% from a year ago. Price indexes for consumer goods, capital goods, and foods, feeds, and beverages were unchanged. Prices of imported petroleum fell 2.4% in January, the sixth consecutive decline. Prices of nonfuel imports fell 0.7% in January and are down 0.3% in the past year. Meanwhile, prices of exports rose 0.5%, the first increase since July.

Monsanto Co. is reconfirming its profit target of $4.40 to $4.50 a share for fiscal 2009, an increase over the $3.64 a share it reported in fiscal 2008.

Gold demand rose 26 percent in the fourth quarter as investors bought the precious metal as a store of value amid a worsening global economy, the producer-funded World Gold Council said. Demand rose to 1,036.5 metric tons from 821.8 tons a year earlier.

GM Seeks Up to $16.6 Billion in New Aid, Plans 47,000 Job Cuts. I thought the bailout plan would assist in job creation.

According to the FT, nationalization is gaining rapid acceptance among Washington opinion-formers – and not just with Alan Greenspan, former Federal Reserve chairman. Perhaps stranger still, many of those talking about nationalizing banks are Republicans.
The next step will be to nationalize our liberties.

Honda Motor Co., confronting the first quarterly loss in at least 15 years, will scale back plans to make business jets and may offer voluntary retirements in the U.S. for the first time as it slashes costs.

The company will produce 70 to 80 jets a year for delivery from the end of 2010, compared with an earlier plan to make 100 planes a year, Chief Executive Officer
Takeo Fukui said in an interview on Feb. 16.

Deere, the world's largest maker of farm equipment, reported a sharper-than-expected drop in quarterly profit Wednesday and slashed its forecast for full-year earnings, blaming the deepening global recession and volatile foreign exchange rates.

The company said profit fell 45 percent to $203.9 million, or 48 cents a share, in the first quarter ended on Jan. 31 from $369.1 million, or 83 cents a share, a year earlier.

Analysts on average expected earnings of 62 cents a share, according to Reuters.

Estimates. "Every market was down twice as much as they thought it would be," Longbow Research analyst Eli Lustgarten said.

In addition, profit fell more than 50 percent at the company's financial services unit on increased provisions for loan losses.

Moline, Illinois-based Deere cut its full-year earnings outlook by more than 20 percent, to $1.5 billion.

Just three months ago, it had forecast $1.9 billion.

But the company warned of "more risk on the downside" for its fiscal-year outlook.

"The coming year remains unusually uncertain," it said in a statement.

Sales fell 1 percent to $5.15 billion. Deere said '09 sales to Russia, Central Europe down sharply.

The Port of Tacoma is the seventh largest container port in North America. Port of Tacoma reporting Year-On-Year container volumes down 15.9%.
Port of Seattle was down 27.6% in December '08 versus December '07.

The output of the nation's factories, mines and utilities plunged 1.8% in January, the Federal Reserve said Tuesday. Output has fallen in five of the last six months. Capacity utilization - a gauge of inflationary pressures -- fell to 72.0%. This is the lowest level since February 1983. For factories alone, capacity in use fell to a new record post-war low of 68.0%.
Do you really believe factories will hire with such low capacity utilization?

Altria Group Inc.still expects 2009 adjusted full-year diluted earnings per share from continuing operations to be in a range of $1.70 to $1.75. This would represent a 3% to 6% growth rate from an adjusted base of $1.65 a share in 2008.

More than 2 million American homeowners faced foreclosure proceedings last year, and that number could soar as high as 10 million in the coming years depending on the severity of the recession, according to a report last month by Credit Suisse.

Earthfiles: "The huge Antarctic Wilkins ice shelf is near collapse, held together by a 25-mile-wide ice strip that is rapidly melting away. The Wilkins once covered 6,000 square miles (16,000 square kilometers) and has now lost one-third of that ice to global warming. According to the National Snow and Ice Data Center, the western Antarctic peninsula, where the Wilkins shelf is located, has warmed more than any other place on Earth during the last 50 years, rising by 0.9 degrees Fahrenheit each decade.

Nine other ice shelves on the Antarctic peninsula have receded or collapsed in the past five decades. Since Antarctic Peninsula ice floats on the ocean, its collapse won't raise sea levels much. But it's the ice beyond on land in Antarctica that will then be more vulnerable to melt and can cause sea level rise. The U. N. Panel On Climate Change projects conservatively that Earth seas will rise about two feet by the end of the 21st century."

Technology consultant BearingPoint Inc. filed for bankruptcy on Wednesday, saying it had negotiated a "prearranged" bankruptcy plan with lenders that could help reduce its debt load.

NRG Energy said on Wednesday it has expended an enormous amount of time and resources considering Exelon Corp's unsolicited takeover offer and it continues to view it as inadequate.

"We would support a deal with Exelon at a fair price but, at this point, we have no reason to believe they are willing to offer a fair price," said NRG, in an open letter to its shareholders.

Los Angeles nears water rationing.

In the first 45 minutes of trading on Wednesday, the Dow broke below 7500.

A year and a half after introducing its MoneyCard, Wal-Mart Stores Inc is slashing the price of the reloadable, prepaid Visa debit card to $3 from almost $9, aiming to attract shoppers who may have grown wary of the pitfalls of credit card use.

The discount retailer is also lowering the card's monthly fee to $3 from almost $5, and cutting the fee customers pay to reload the card to $3 from $4.64.

John Hussman: "Geithner's willingness to rescue badly managed financial institutions with an open checkbook of taxpayer funds, coupled with “Helicopter” Ben Bernanke's willingness to run the printing press, strikes me as an unholy alliance. The pair made their first illegal foray into powers reserved for Congress during the Bear Stearns bailout, when the Fed took on a $30 billion book of risky securities and provided a “non-recourse” loan to J.P. Morgan. This was not monetary policy, but fiscal policy. I continue to believe that the sole function of that transaction was to defend the bondholders of Bear Stearns. The customers and counterparties of Bear Stearns were never at risk – only the bondholders were, and that's who got bailed out....Financials that are insolvent and are likely to survive only with large and sustained infusions of taxpayer funds should be allowed to fail in pre-packaged bankruptcies that wipe out both the shareholders and the bondholders of those institutions. Customers and depositors will not be hurt, and it won't cost taxpayers a penny. As Stiglitz notes, “you should not chase good money after bad."...The government should continue to provide capital directly to large, diversified financial institutions which remain solvent but have some impairment to capital....The government should continue to provide capital directly to large, diversified financial institutions which remain solvent but have some impairment to capital....The most direct method of intervening is at the point of foreclosure through the courts. One way of doing this would be to give judges the ability to write down principal, and to assign the balance as a deferred “property appreciation right” (PAR) to the lender...Our leaders, particularly those in charge of the financial and monetary policy of the U.S., have not learned anything. Our grandchildren will read in history and economics textbooks what our policy-makers should have done. They will read how the U.S. went on a binge of excessive debt creation in the belief that home prices, stock valuations, and profit margins could do nothing but increase indefinitely. They will read how “securitization” allowed loans to be cut into a million pieces and sold off as soon as they were made, removing all incentive for lenders to make sound loans. They will read how this securitization prevented anybody but the government or the courts from restructuring the debt, because government action was the only way to solve the “coordination failure” and put Humpty Dumpty back together. They will read how our policy makers focused nearly all of their efforts on protecting the bondholders of failing corporations, rather than focusing their efforts on restructuring debt and assisting distressed homeowners. They will read how the lessons of the Great Depression eluded us because we didn't recognize that restructuring debt was the only way we could have avoided a long and difficult economic slump."

Heinz estimates 2009 earnings of $2.87 to $2.91 a share on organic sales growth of 6%. The shares traded at $32.90, a new 5-year low. Considering the outlook and the generous dividend yield, I would consider purchasing shares at $30 and below.

Several Goldman Sachs partners have leveraged their Goldman Sachs stock to buy alternative investments such as hedge funds & private equity, and they have done so through their Goldman Sachs brokerage accounts.

But Goldman stock has declined in value by more than 50 percent since last spring, meaning that Goldman Sachs is in the awkward position of making margin calls on its own partners, who can't meet those calls because their alternative investments are underwater and they don't have enough cash on hand.

Now those partners are being forced to borrow money—millions of dollars—to meet Goldman Sachs' own margin calls.

Hewlett-Packard Co cut its full-year profit outlook after quarterly revenue missed expectations on weak sales of printers, personal computers and servers, sending its shares down 3 percent.

Whole Foods posted a fiscal first-quarter profit of $32.3 million, or 20 cents a share, down from $39.1 million, or 28 cents a share, last year. Inc. sees adjusted earnings of 85 cents to 95 cents a share for the first quarter. Analysts expect 58 cents a share.

The Dow Jones Industrial Average gained 3.03 points to end at 7,555.63. The S&P 500 fell nearly 1 point to 788.42, while the Nasdaq Composite dropped 2.69 points to 1,467.97.

Crude for March delivery was last up 17 cents, or 0.2%, at $35.10 a barrel on the New York Mercantile Exchange. Gold for February delivery was last up $2.70, or 0.3%, at $980.40 an ounce in electronic trading.

"In tough economic times, we're generating substantial cash and reducing costs to ensure we remain financially sound. We already have the cash on hand to be able to meet our debt service requirements at least through the end of 2010," said Dan Hesse, Sprint Nextel chief executive.

Wednesday, February 18, 2009

Survival Mode

2/17/09 Survival Mode

There's no question the American consumer is hurting in the face of a burst housing bubble, financial market meltdown and rising unemployment.
But "the worst is yet to come," according to
Howard Davidowitz, chairman of Davidowitz & Associates, who believes American's standard of living is undergoing a "permanent change" - and not for the better as a result of:
An $8 trillion negative wealth effect from declining home values. A $10 trillion negative wealth effect from weakened capital markets. A $14 trillion consumer debt load amid "exploding unemployment", leading to "exploding bankruptcies."
"The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car," Davidowitz says. "A lot of that is gone."
Going forward, the veteran retail industry consultant foresees higher savings rate and people trading down in both the goods and services they buy - as well as their aspirations.
The end of rampant consumerism is ultimately a good thing, he says, but the unraveling of an economy built on debt-fueled spending will be painful for years to come.

Smithfield Foods say it plans to cut 1,800 jobs and close six factories as part of a restructuring.

Barry Diller recently said that the display advertising at the sites his company controls was down 50% in January.

Rob Hanna: "I’d be wary of the sustainability of a bull market that saw continued contraction in the total issues traded on the NYSE."

Barry Ritholtz: "In investing, Hope is a four letter word. It reflects wishful thinking, not sober analysis. It is a function of your book, not an objective read of reality.

And its killing many investors."

The Oil Drum: "In January 2009 world production of total liquids decreased by 520,000 barrels per day from December according to the latest figures of the International Energy Agency (IEA), resulting in total world liquids production of 85.17 million b/d.

Average global production in 2008 was 86.59 million b/d according to the IEA. In 2007 an average of 85.41 million b/d was produced. The US EIA in their International Petroleum Monthly puts average global 2007 production at 84.43 million b/d and average liquids production from January to November 2008 at 85.57 million b/d."

According to Bloomberg, shipping costs have more than doubled this year, so it may be time to buy kroner, Aussies and loonies.

The 147 percent jump in
ocean-transport prices is evidence that China’s $580 billion stimulus plan will lift raw materials, said Ihab Salib, who oversees $3 billion at Federated Investments Inc. in Pittsburgh. That would benefit countries exporting them, so Salib is “actively trading” Norway’s krone and Australian and Canadian dollars, nicknamed Aussies and loonies.

Crude oil for March delivery fell 71 cents, or 2%, to $36.80 a barrel in electronic trading on Globex. Meanwhile, Brent crude was $6 a barrel higher.

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers deteriorated significantly in February. The general business conditions index fell to a new low of -34.7. The new orders index also fell to a new low, the unfilled orders index stayed close to its recent record low, and the shipments index—despite a slight improvement—remained negative. The indexes for both prices paid and prices received held below zero, with the latter dropping sharply. Employment indexes remained deep in negative territory; the average workweek index slipped to a record low. The future general business conditions index was negative for a second consecutive month as many of the forward-looking indexes remained close to recent lows. The future index for number of employees fell particularly sharply, eclipsing last month’s record low.

Russia's Ministry for Economic Development says it now expects the economy
to contract by 2.2% this year, substantially worse than its earlier forecast of a 0.2% contraction.

The New York Post is reporting that “John Malone’s Liberty Media is offering Sirius XM a bridge loan of several hundred million dollars to help pay off debt that matures Tuesday.” The article also mentions that Liberty and Sirius XM are working together on a plan to deal with Sirius XM’s other debt obligations due in May and December. Liberty will end up owning close to 50% of Sirius.

Gold for immediate delivery rose as much as $25.40, or 2.7 percent, to $967.15 an ounce, the highest since July 22, and traded at $962.02 by 1:15 p.m. in London. April futures gained $22.10, or 2.4 percent, to $964.40 in electronic trading on the Comex division of the New York Mercantile Exchange. Silver is trading over $14 an ounce.

Bill Bonner: "Remember our dictum: the force of a correction is equal and opposite to the deception that preceded it. As we looked out over the absurd hallucinations, delusions and lies of the Bubble Years – oh, those happy days! – we warned that the coming correction “would be a doozy.”

And a doozy it is.

‘Doozy’ is a technical term we feral economists use. “Depression” is what most people call it.

“Slump worst for 50 years,” is the big headline in the Financial Times over the weekend.

“Data reveal recession worst than feared.”

The total traffic at the Port of Long Beach was down 23.4% in January 2009 compared with January 2008.

Yuri Orlov: "Food. Shelter. Transportation. Security. Security is very important. Maintaining order and public safety requires discipline, and maintaining discipline, for a lot of people, requires the threat of force. This means that people must be ready to come to each other’s defense, take responsibility for each other, and do what’s right. Right now, security is provided by a number of bloated, bureaucratic, ineffectual institutions, which inspire more anger and despondency than discipline, and dispense not so much violence as ill treatment. That is why we have the world’s highest prison population. They are supposedly there to protect people from each other, but in reality their mission is not even to provide security; it is to safeguard property, and those who own it. Once these institutions run out of resources, there will be a period of upheaval, but in the end people will be forced to learn to deal with each other face to face, and Justice will once again become a personal virtue rather than a federal department."

Income tax refunds and Kansas state employee paychecks could be late after Republican leaders and the Democratic governor clashed Monday over how to solve a cash-flow problem.

Payments to Medicaid providers and schools also could be delayed.

"We are out of cash, in essence," state budget director Duane Goossen said.

The move places state taxpayers, workers and schoolchildren in the middle of a political battle over budget cuts.

The Liscio Report: "
The consumer retrenchment in this recession will be deep and long, and will probably continue into any recovery. The American consumer is no longer the world consumer of last resort, and that's an enormous change for both this country and the rest of the world to get used to."

Russia and China signed a $25 billion energy deal in Beijing on Tuesday that will see the Asian country secure oil supplies from Moscow for the next 20 years in return for loans, Russia's state pipeline monopoly Transneft said.

"There is over-capacity in everything," from "retail to manufacturing to housing," said Richard Yamarone, chief economist at Argus Research. "If capacity is too large, you don't need that many people employed, which is another reason we're seeing such high job losses."
As long as capacity far outstrips demand, businesses have little reason to expand, buy new equipment or hire workers. Even if the government funds bridge repairs and banks step up lending, many industries still have to go through massive restructuring before growth can resume.

As the secretary of State arrives in Tokyo, North Korea threatens to test a missile capable of reaching the U.S.

The Treasury plans to use $50 billion of the remaining $350 billion in a bank-bailout fund for a program to help troubled homeowners avoid defaulting on their loans by subsidizing mortgage payments. The cost of the subsidies would be paid for by the government and mortgage servicers. Watch the price of gold. That's an indication of how the global community reacts to the Obama financial machinations.

In the first few minutes of the Tuesday trading session the Dow is just below 7600, the S&P has broken below 800, and the Nasdaq is about 1460 or so. In sum, the technicals have broken below support levels. he one Dow standout is Wal-Mart, which is up over 1 1/2 points.

Investors should prepare for the worst as stocks risk pushing to new lows with sellers taking control of the market, Geoff Wilkinson, head of investment research at Mint Equities, told CNBC. “Once you start printing new lows, then everybody who’s bought at the previous dips starts to lose money -- there’s a very different mentality,” Wilkinson said.

“That could precipitate some quite heavy stop-loss selling here,” he added.

On Friday, Moody's Investors Service cut its credit ratings on several mortgage insurers on higher expected mortgage losses because of the recession and continued downturn in the housing market. In the broad financial sector.

Dennis Gartman sees gold as "the world's second reserve currency." If he believes in the dollar as the fundamental world reserve currency, then we have a difference in thinking. Only if you believe in losing your purchasing value, would you buy dollars or fool's gold.

Martin Hutchinson: "In December 1929, as what we now know to have been the Great Depression loomed, Mellon outlined his formula for fighting recession, which had worked well in the previous episode of 1920-21. “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. … It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.’’ Mellon then foolishly remained at Treasury until 1932, a powerless spectator of the opposite approach taken by President Hoover, tarnishing his reputation for the rest of his lifetime and beyond.

There are a couple of points in Mellon’s prognosis that have resonance today. “Purging the rottenness out of the system” is precisely what’s required to sort out the banking mess, while “leading a more moral life” is fairly clearly also required after the over-consumption and excess of the bubble period. “High costs of living and high living will come down” is, however, directly contrary to the Keynesian majority view, which holds that deflation is the most serious possibility to fear, and that restoring consumption through government spending is a prime objective....Without Mellon, we will have a budget deficit of 10% of GDP in both fiscal years 2009 and 2010, borrowing by the federal government that crowds out the private sector, rapidly increasing inflation as a result of Fed money printing, a housing market that remains artificially supported at excessive prices, state and local governments that remain profligate, a CDS system that remains a danger to the global economy and several huge value-destroying banks. It is also doubtful whether our moral values will have been adjusted, or less competent people weeded out of high positions.

The Mellon approach would have given us a pretty terrifying fourth quarter of 2008, but in the long run it would have been worth it."

Corn, wheat, and soybeans are trading sharply lower. Copper is sharply lower.The Dollar Index is rallying to near 3-month highs.

According to the WSJ, under financial pressure, securities firms are dividing their hedge-fund clients into lists of those they consider best able to weather the financial turmoil and those they're less sure of. The result is that more funds may have to merge, find other financing at higher cost or close.

Iraq needs almost three years to prepare its security forces for a sustained fight against insurgents, according to a senior US general in the country. Pentagon planners have provided Mr Obama with withdrawal options, including the 16-month plan and a pullout over 23 months. The US and Iraq last year signed a security deal that requires all US troops to leave the country by the end of 2011.

The VIX has jumped up sharply to the area around 50. Caterpillar traded at a new 52-week low. That is hardly a harbinger of a good effect from the stimulus package.

Tim Middleton: The S&P/Case-Shiller index of home values nationwide has plunged 19.1% in the past year and 26.6% from its peak in June 2006, as of data for November that were released late last month.

Futures contracts that trade on the Chicago Mercantile Exchange forecast a further decline of 14.5% by November 2010, after which home prices likely will begin to revive.

"Homebuyers have access to these (futures') prices -- they're publicly available -- and if you see the market is going to go down another 15%, you bet I'll be guided by that," says Fritz Siebel, a trader in property derivative securities for Tradition Financial Services. "I'm going to fulfill the prophecy of the index by not buying. It will be self-fulfilling."

Teva Pharmaceutical sees adjusted 2009 EPS of $3.20 to $3.40.

Russian stocks tumbled Tuesday, prompting the RTS and the Micex stock exchanges to suspend trading for one hour at 4:05 p.m. Moscow time. The dollar-denominated RTS stock index plunged 9.4%, while the ruble-denominated Micex stock index fell 9.6%.

The value of Gates' investments fell by $3 billion, or almost 20 percent, in the fourth quarter as the worst financial crisis in decades and a deepening recession hammered stock prices.

"The U.S. may have trouble funding" its deficit, certainly at yields anywhere close to today's rock-bottom levels,

"The U.S. may have trouble funding" its deficit, certainly at yields anywhere close to today's rock-bottom levels, John Ryding says. Notably, he is concerned that foreigners - who've bought as much as two-thirds of our debt in recent years - will be doing "much less purchasing of U.S. Treasuries."

The issue is not so much foreigners' desire to punish America for its profligate ways or to exert geopolitical influence, but simply because they won't have the funds to do it. This is specifically a problem for petro-states as oil has collapsed and major Asian economies that previously relied on the U.S. export market to build surpluses, which they previously "recycled" back into the U.S. via purchases of Treasuries and government agency debt.

"Is there a domestic buyer [ready] to step forward?", the economist asks. "Only at higher yields."

"Fears are mounting that Ireland could default on its soaring national debt pile, amid continuing worries about its troubled banking sector," Britain’s Sunday Times reported.

In the credit-default-swap market, the cost to insure $10 million in Irish sovereign debt against default jumped to $377,000 on Friday, up from $262,000 at the end of January and just $24,000 a year ago, reported.

Gold for February delivery rose $25.50, or 2.7%, to end at $967 an ounce on the Comex division of the New York Mercantile Exchange, the loftiest closing level for a front-month contract since July.

The home builders' sentiment index improved for the first time since September, rising one point to 9 from a historic low of 8 in January. The index measuring traffic of prospective buyers improved to 11 from 7 in January. However, the index of expected sales over the next six months fell to a record low of 15 in February from 17 in January. Current sales rose to 7 from a record-low of 6.

Capital One said the annual net charge-off rate— a measure of credit default — for U.S. credit cards rose to 7.82 percent in January from 7.71 percent in December, while the rate for loans at least 30 days delinquent increased to 5.02 percent from 4.78 percent.

The McLean, Virginia-based company said it expects loan losses from U.S. cards to increase to 8.1 percent in the first quarter.

In auto loans, Capital One's charge-off rate rose to 6.09 percent in January from 5.93 percent in December.The shares traded below $10 and made a new 52-week low.

The Dow Jones industrial average fell 297.81 points, or 3.79 percent, to close unofficially at 7,552.60. The Standard & Poor's 500 Index slid 37.67 points, or 4.56 percent, to 789.17. The Nasdaq Composite Index tumbled 63.70 points, or 4.15 percent, to 1,470.66.

Excluding certain items, Agilent earned 20 cents a share, down 44% from a year ago. "We don't know where, or when, this recession will bottom. But, we will remain proactive in addressing the economic challenges we face, and we are committed to delivering performance consistent with Agilent's operating model," said Chief Executive Bill Sullivan in a statement. Revenue decreased to $1.17 billion from $1.39 billion a year earlier.

Crude oil for March delivery dropped $2.58, or 7%, to end at $34.93 a barrel on the New York Mercantile Exchange. The March contract, which will expire on Friday, earlier hit an intraday low of $34.45 a barrel on Globex. April crude, which will soon become the new front-month contract and is registering more volume, fell $3.43, or 8%, to end at $38.54 a barrel on Nymex.

Gross domestic product across the 30 nations that make up the Organization for Economic Cooperation and Development fell 1.5% in the fourth quarter of 2008, the largest decline since OECD records began in 1960, the Paris-based group said Wednesday. Compared to the same quarter the previous year, GDP declined by 1.1%.

The Taiwanese central bank cut its key interest rate by a quarter-point to 1.25% Wednesday in a surprise move, after data showed earlier in the day that the economy declined more than expected. The unscheduled rate decision came after official data showed Taiwan's gross domestic product slumped a larger-than-expected 8.36% in the fourth quarter from a year-earlier. Taiwan also cut its 2009 GDP forecast to a decline of 2.97%, from its previous projection of a growth of 2.12%.

Japan's crude steel output in January fell 37.8% from a year earlier, the biggest decline in a data stream that dates to 1949, according to figures released Wednesday by the Japan Iron and Steel Federation.

Tuesday, February 17, 2009

The Oil Outlook

2/16/09 The Oil Outlook

According to the FT, the world will never be able to produce more than 89m barrels a day of oil, the head of Europe’s third largest energy group has warned, citing high costs in areas such as Canada and political restrictions in countries like Iran and Iraq.

Christophe de Margerie, chief executive of Total, the French oil and gas company, said he had revised his forecast for 2015 oil production downward by at least 4m barrels a day because of the current economic crisis and the collapse in oil prices.

Wal-Mart said it expects full-year profit of between $3.45 and $3.60.

Wall St. is estimating that Microsoft will make $.40 a share in the current quarter and $1.77 for its fiscal year which ends in June. The company’s CEO is sending a signal that the firm won’t make those numbers.

China's foreign direct investment fell 33% in January from a year earlier, marking the fourth straight month of decline, according to data released Monday by the Ministry of Commerce. Foreign investment totaled $7.54 billion, following December's $5.98 billion, which was down 5.7% from a year earlier.

Illinois Tool Works sees FY 2009 earnings per share $1.84 to $2.48 from continuing operations and says full year forecast assumes a total co revenue range of -12 percent to -6 percent.

Samsung launched five new phones on Monday including a model made from recycled plastic with a solar panel on the back for charging.

"We need to take over the banks," said Joshua Rosner, a managing director of the research firm Graham-Fisher.

"When I talk to experts, after about two minutes they say, 'We should just nationalize,"' said Simon Johnson, a banking expert at the Sloan School of Business at the Massachusetts Institute of Technology. "That tells me that the consensus is moving in this direction, and we are all just afraid to say it."

Frank Borman: "Capitalism without bankruptcy is like Christianity without hell."

Vladimir Lenin: “The best way to destroy the capitalist system is to debauch the currency”

Prices for milk now are about half what it costs farmers to produce the staple, and consumer prices are falling. Unless the market can be bolstered, industry officials project that more than 1.5 million of the nation's 9.3 million milking cows could be slaughtered this year as dairy operators look to cut costs and generate cash. "This could destroy our dairy infrastructure," said Mike Marsh, CEO of the United Western Dairymen trade association.

Aesop: " We hang the petty thieves and appoint the great ones to public office."

Russia's industrial production shrank by 16 percent in January compared to the same month a year ago, the government statistics agency said Monday.

Industrial output was down even more sharply — by 20 percent — compared to December, the Federal Statistics Agency said in a monthly report.

China's official Xinhua news agency slammed the "Buy American" requirement of the U.S. economic stimulus package, saying in a commentary that trade protectionism is a "poison" that will harm poor countries. "History and economic theory show that in facing a financial crisis, trade protectionism is not a way out, but rather could become just the poison that worsens global economic hardships," Xinhua said in the overnight commentary, issued in response to the passing of the U.S. plan.

The International Energy Agency (IEA) said on Monday there could be an oil market supply crunch from next year once global oil demand begins to recover.

The IEA's executive director, Nobuo Tanaka, told reporters on the sidelines of a conference in London that he expected world oil demand to resume growth from next year, rising by about 1 million barrels per day (bpd) in 2010.

A group of farmers and ranchers are urging close scrutiny of Pfizer Inc's plan to buy rival Wyeth, worried the $63 billion merger would mean higher prices for animal vaccines, pharmaceuticals and medicines to control parasites.

Two genes that help the body get rid of excess sodium may be important causes of high blood pressure, U.S. scientists reported on Sunday.

They found that people with two particular variants of the genes were at higher risk for high blood pressure.

Dr. Christopher Newton-Cheh of Massachusetts General Hospital in Boston and colleagues used genetic data on about 30,000 people from the United States, Sweden and Finland to detect the roles of two genes called NPPA and NPPB.

Those with two copies of one of the "bad" variants were 18 percent more likely to have high blood pressure than people with one or no copies, they wrote in the journal Nature Genetics. People with two copies of the other bad variant had an 11 percent higher risk.

"It does not explain all of high blood pressure," Newton-Cheh said in a telephone interview.

"It does not explain all of the fact that it runs in families, only a portion of it. And it's very likely that there are other common genetic differences that contribute to the population variation in hypertension," Newton-Cheh added.

Federal Reserve Governor Elizabeth Duke said Monday the crisis in housing highlights the need for vigorous enforcement of bank rules and questioned the wisdom of letting banks affiliate with commercial firms.

In prepared remarks for delivery to the American Bankers Association, Duke said bankers "have a responsibility to act in a safe and sound manner" and urged them to do more to help slow the pace of home foreclosures.

She said that letting banks and commercial firms affiliate "threatens the ability of banks to continue to serve as effective and objective intermediaries of credit" by exposing them to risks that commercial affiliates take.

"Many US banks are insolvent, even the major ones," argues Roubini, professor of economics and international business at NYU Stern, New York University's business school, without naming names. "Call it nationalisation, or if you don't like the dirty N-word, use 'receivership' or whatever is palatable."

Call it what you want, says Roubini, but without nationalisation of some of the major banks in both the US and the UK, the banking crisis will get worse and the current recession deepen.

Nearly 800 jobs are being eliminated at the steering division of Delphi near Saginaw, Mich.

The cuts are hitting 425 hourly workers and 350 employees who are on salary. The layoffs were announced Monday at the Delphi complex in Buena Vista Township and will kick in March 1.

Chinese banks extended a record 1.62 trillion yuan ($237 billion) in loans in January, more than double the year before, as lenders heeded government calls to loosen credit controls to help revive the economy.

The Nikkei dropped 0.8% to 7,686.29 and the broader Topix fell 0.8% to 764.03. Australia's S&P/ASX 200 slipped 0.1% to 3,513.40 after moving in both directions, while New Zealand's NZX 50 gave up 0.2% to 2,674.64.

The U.S. government will release $4 billion in additional aid to General Motors Corp on Tuesday as planned, a White House aide said on Monday, ahead of the deadline for the automaker to submit a new survival plan.

California is poised to begin layoff proceedings Tuesday for 20,000 government workers.

In addition to the layoffs, the state also plans to halt all remaining public works projects, potentially putting thousands of construction workers out of jobs.

On an adjusted basis, Medtronic earned 71 cents versus 63 cents a year ago.

Trump Entertainment Resorts Inc., the Atlantic City casino firm that's 28% owned by real-estate investor Donald Trump, has filed for Chapter 11 bankruptcy protection, according to a Reuters report citing documents filed with the U.S. Bankruptcy Court for the District of New Jersey.

Sunday, February 15, 2009

The Greatest Depression

2/15/09 The Greatest Depression

Gerald Celente's Top Trend for 2009 is that this year will become the Greatest Depression.
“In 2007, we predicted the Panic of 2008 and that was mostly in the financial areas. Now we're going to see it in the Collapse of 2009 spread beyond financials throughout society. It's underway. It's happening before our eyes. This is a collapse of monumental proportions. Every day the news is filled with one disaster after another. There's nothing, nothing, they can do to stop this - other than a productive capacity and maybe an alternative energy, something along the lines of the discovery of fire or the invention of the wheel! (laughs) But it has to be really monumental. We can't do it by printing money....We are calling this the Great Collapse because you are going to start seeing two factors take place very shortly. One is going to be collapse in the retail sector. It's already estimated that about 150,000 stores, retail shops, are going to close - both chain stores and smaller stores are going to close in 2009.... If you thought the sub-prime problem was bad, wait until you see this one. Commercial real estate is much more heavily leveraged than even in the sub-prime sector.

And then we look at the collapse already in the financial sector. We saw Wachovia, we saw IndyMac and Washington Mutual, Bear Stearns, Merill Lynch, Lehman Brothers - either get gobbled up or go under. And all the bond companies - names people don't know. The point being: Who is going to take up all that commercial space and business parks they have emptied?

The answer in both retail and the office space - the people who are going to take over that vacant space is nobody! You're going to see a glut of real estate that we have never seen before - ghost malls are going to be spreading around the country. So now, that's where the collapse really happens because how are these people who leveraged all this commercial real estate going to service these loans? The answer is: they are not! We're going to be moving into the Greatest Depression."

A top Qatari energy official says OPEC is watching the market closely and is prepared to cut output further to halt the slide of oil prices when it meets next month.

Mohammed Saleh al-Sada, Qatar's minister of state for energy and industry affairs, says the Organization of Petroleum Exporting Countries "will respond appropriately" to the rapid drop in oil prices.

Speaking to reporters Sunday on the sidelines of a conference in Doha, al-Sada said "if there is a need, actually, to go down, they will not be hesitant to reduce it further."

Jim Rogers: “(Geithner) … has been dead wrong about everything for 15 years in a row … This (the rescue plan) is not going to solve the problem, it’s going to make it worse.”

The Oil Drum: "While panic is not the prescription, experts are warning that the time to begin taking Peak Oil seriously is past.

"It's not about believing. It's about facts," said Gord Miller, Ontario's environmental commissioner. Miller has been warning about Peak Oil for years. He thinks we hit peak around early 2007.

"If we're not there, we're awful close," said Dave Hughes, a geoscientist who once ran Canada's national coal inventory.

Peak Oil doesn't mean we have run out of the stuff. It means that we have crested the top of a bell curve of supply. Then it's a roller-coaster ride down. Depending on who you ask, that ride will either be slow and uncomfortable or teeth-rattling and destructive.

"Depletion is taking somewhere between 5 and 6 per cent of (existing) world oil production per year," said Hughes. "The reason that oil price is where it is today is that the economy has reduced demand."

According to the WSJ, GM plans to offer the U.S. a choice to commit billions more in bailout money or provide financial backing as part of a bankruptcy filing.

Worldwide job losses from the recession that started in the United States in December 2007 could hit a staggering 50 million by the end of 2009, according to the International Labor Organization, a United Nations agency. The slowdown has already claimed 3.6 million American jobs.

Gretchen Morgenson: "To be sure, Mr. Geithner is in something of a box. If he were to lay out precisely how he plans to save the financial system, he might actually telegraph to the public that the problem is more dire than they suspect. Being vague might be less scary. Unfortunately, market participants have lost their patience with vague. Uncertainty, for investors anyway, can be worse than simply acknowledging genuinely grim circumstances."

Mike Burk: "So far the market has been following the February seasonal average for the 1st year of the Presidential Cycle very closely and seasonally next week has been weak.

I expect the major indices to be lower on Friday February 20 than they were on Friday February 13."

John Mauldin: "World Merchandise Export Values and World Industrial Production falling off a cliff. This is the worst such period since the end of World War II. And as the data we will examine next indicates, it is likely to get worse. Consumers all over the developed world are in shock, as assets such as stocks and houses, real estate, and commodities fall in value. Unemployment is rising.

We think that almost 2,000,000 lost jobs in the last three months in the US is a catastrophe. China lost a reported 20,000,000 jobs in the last quarter, and migrant workers came back to the cities after Chinese New Year to find factories and jobs simply gone. Unemployment is rising rapidly in Europe, as the demand for goods has clearly been falling since last October....This means that inventories are too high, not just in the US but in factories all over the world, and that production is slowing down. Look at the recent US trade deficit. Many market analysts rejoiced that it dropped to a six-year low, just below $40 billion. But the internal numbers were not as positive. Exports are dropping faster than imports...China has seen its year-over-year exports drop by 17.5% and imports by 43%. These are not signs of a healthy economy. That being said, China is massively increasing bank loans and other stimulus-type spending to try and offset the effects of the global downturn. But putting 20 million people back to work in a short time is a daunting task.

Japanese GDP was down by 9% (!) last quarter. Many of the largest corporations are seeing exports drop by 20-30% and are engaged in massive layoffs, larger proportionally than in the US. The euro area economy dropped by 6% in the 4th quarter, led by an 8.2% contraction in Germany (JP Morgan). I could go on and on, but the news is the same. The global economy is in a deep and worsening recession....40% of the earnings for the S&P 500 are from outside the US. It is hard to see how those earnings are not going to be deeply affected. Let me reiterate my continued warning: this is not a market you want to buy and hold from today's level. This is just far too precarious an economic and earnings environment.

The dollar cost of the Iraq war has now exceeded $660 billion. By the time we withdraw our troops, it will at least equal Obam's so-called stimulus package.

Something is wrong with this picture.

Zman: "Oil and natural gas directed rig counts are now off 36% and 34% respectively since their Fall peaks with the majority of the decline occuring since the beginning of the year. Day rates are dropping dramatically now with many rigs that ran in the $20 to $22,000 per day range at New Year’s looking for work now in the $8 to $10,000 range."

"For those that bought a home in the last couple of years, it's a difficult time to refinance," says Jon Paukovich, Vice President of Mortgage Lending at Ent Federal Credit Union in Colorado Springs, Colorado. "We have seen borrowers who have not been able to finance because of how far property values have declined."

The printing presses may be busy at work and they can deflate the value of the dollar but they cannot inflate demand. In addition, capital will flee the falling dollar. Who will be left holding the bag? Not the Treasury, the Fed, the Congress, and the executive branch. They are the looters. The American public --- they are the looted. The homeless, the unemployed, the bankrupt, those living paycheck to paycheck, -- they are left holding the bag.

Japan's GDP drops at annualized 12.7% in fourth quarter.

Happy Valentine's Day

2/14/09 Happy Valentine's Day

Doug Noland: "Today, things are a bloody mess. The Credit system, economy and conventional economic doctrine are all a mess. Washington is a mess. Fiscal and monetary policymaking are messes. A CNBC commentator likened the process to watching sausage being made. I would counter that at least you have a decent idea what the end product is going to look and taste like. And following the theme that the greatest policy blunders were committed during the inflationary Bubble period, I’ll suggest to readers that there is essentially no possibility of “good” policymaking in this especially unsettled post-Bubble period. Today’s policymakers - of all stripes and persuasions - are poised to become forever tarred and feathered. As much as booms create genius, busts are an absolute cinch for breeding contagious boneheadedness....There is no simple solution, and there’s no palatable comprehensive plan. Put the two parties in a big chamber and there won’t be any agreement on what to do. Place one party’s leadership around a large table and there’ll be no consensus. And, quite likely, have the Administration’s top economic policy team gather comfortably around a small table in the Oval Office and there will be similar - and perhaps even more heated - disagreement. We’re in store for a messy and protracted adjustment period."

Steve Ballmer: “We’re certainly in the midst of a once-in-a-lifetime set of economic conditions. The perspective I would bring is not one of recession. Rather, the economy is resetting to a lower level of business and consumer spending based largely on the reduced leverage in the economy.”

According to the BLS, In the fourth quarter 2008, 3,140 extended mass layoff events resulted in 508,859 separations. Both figures reached their highest levels in program history. Separations due to slack work/insufficient demand more than tripled from a year earlier. The construction and manufacturing industries hadrecord highs in both layoff events and separations.

Jerome Corsi: "As the Obama administration pushes through Congress its $800 billion deficit-spending economic stimulus plan, the American public is largely unaware that the true deficit of the federal government already is measured in trillions of dollars, and in fact its $65.5 trillion in total obligations exceeds the gross domestic product of the world.

The total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, effectively have placed the U.S. government in bankruptcy, even before new continuing social welfare obligation embedded in the massive spending plan are taken into account.

The real 2008 federal budget deficit was $5.1 trillion, not the $455 billion previously reported by the Congressional Budget Office, according to the "2008 Financial Report of the United States Government" as released by the U.S. Department of Treasury.

The difference between the $455 billion "official" budget deficit numbers and the $5.1 trillion budget deficit cited by "2008 Financial Report of the United States Government" is that the official budget deficit is calculated on a cash basis, where all tax receipts, including Social Security tax receipts, are used to pay government liabilities as they occur."

Robert W. Baird: "The U.S. Department of Agriculture's initial 2009 farm-income forecast incorporates declines from (record) 2008 levels (and five-year averages).

Crop receipts are also expected to decline, another negative indicator for machinery demand (and manufacturers' production schedules). North American farm-equipment retail-sales comparisons generally improved in January (a seasonally weak month) from (soft) December levels; inventories remained tight for large equipment but have continued to increase on a days-sales basis for smaller tractors.
The USDA forecasts net farm income of $71 billion, down 20%."

WSJ: "Recent budget blueprints excluded from deficit projections the long-term costs of wars in Iraq and Afghanistan. Those budgets also didn't include the cost of preventing the alternative minimum tax -- instituted in 1969 to ensure the rich didn't escape taxation -- from hitting the middle class."

Mark Sanford, South Carolina's Governor: "The U.S. is in jeopardy of creating a "savior-based economy," with the federal government careening from "one ad-hoc decision to the next."

In the Senate, the vote on the Stimulus package, 60 to 38, was partisan. Only 3 centrist Republicans joined 55 Democrats and 2 independents in favor.

Financially strapped Sirius XM Radio said Friday that it could file for bankruptcy as early as Tuesday if it cannot successfully negotiate with the holders of its debt.

While the satellite radio company said it has exchanged $172.5 million of debt maturing in December for new debt due in 2011, it still has about $175 million coming due this Sunday.

Young Broadcasting Inc., owner of 10 TV stations affiliated with the CBS and ABC networks, said Friday it has filed for Chapter 11 protection in U.S. bankruptcy court in the Southern District of New York.

We've seen bankruptcy filings in newspapers, cable, radio, TV, etc. The list goes on and on.

Texas' population is expected to double to over 46 million by 2060, boosting the water demand by about 27 percent, the report states. More than 95 percent of the state is in some stage of drought, according to the most recent U.S. Drought Monitor's map.

Because Texas does not have enough sources of water to meet its future needs, the report said new management and strategies will need to be crafted.

The Texas Water Development Board, which oversees the state's water resources, estimates that groundwater accounts for about 60 percent of all available fresh water. Surface water amounts to about 40 percent.

Both sources are decreasing: groundwater is being pumped from the state's numerous aquifers faster than they can be recharged and sediment accumulations is robbing reservoirs of surface water capacity.

Other threats to Texas' water supplies also loom, the report found. For example, a drought would leave about 85 percent of the state's population 2060 without enough water.

Investor's Business Daily: "The entire mess will eventually cost not $789 billion but $3.27 trillion. The Congressional Budget Office calculated that figure by including $744 billion in debt service and $2.527 trillion in spending over the next 10 years if the bill's 20 most popular programs are permanently extended, which seems likely. There's nothing in the history of government programs that indicates that won't happen.

History, though, is the most ignored subject in Washington. Not just American history, but history abroad.

How else could lawmakers rush into this effort? Right in front of them is the lesson of Japan, which made a series of unsuccessful attempts to stimulate its stagnant economy. It spent $6.3 trillion on infrastructure in the 1990s and into this decade, and in doing so amassed the largest debt ever known in the developed world.

Yet all that spending failed to pull Japan from its slump."

Samuel Brittan: "A multiplier effect arises when workers who lose their jobs, or fear they will do so, slash their spending and an “accelerator” comes into effect when businesses start canceling investment projects because of the depressed outlook. The whole process generates endless pessimistic news."

Mikka Pineda: "A growing portion of the oil in Cushing storage is not WTI. Cushing has become a way station for oil from Canada, particularly those unconventional sources, tar sands, that produce heavy crude. So WTI prices no longer represent just the very best quality crude to which lesser crudes are discounted. Moreover, Cushing oil stocks only amount to about 35 million barrels out of the c.300 million total U.S. stocks as of November 2008. In terms of quality and quantity, WTI no longer faithfully depicts the world oil market. It doesn’t even faithfully depict the U.S. market: There are other kinds of light, sweet crudes used in other parts of the country, but NYMEX chose to focus on WTI oil stored at Cushing, Oklahoma and sent to the American Midwest market. WTI most accurately portrays local supply and demand conditions in the Midwest. Is it time to stop obsessing over WTI and move on to Brent as a proxy for the world oil market? Brent is the second most transparent market, with high derivatives trade volume. 2/3 of the world’s traded oil is benchmarked to Brent prices. Historically, Brent has traded at an average discount of $1.48 per barrel to WTI between 1987 and 2009, but the tables have turned: Brent is more and more often finding itself at the top of the oil market totem pole. Between May 1986 and February 2009, 73% of the days that Brent fetched a higher price than WTI occurred after 2000, 40% in just the past two years. The standard deviation in the WTI-Brent price spread has increased in the past 8 years from $1.45 in 1986-2009 to $2.06 in 2000-2009. On February 12, 2009, Brent saw its highest premium ever of $10.58/barrel (closing price) over WTI, though it did hit an intraday high of $11.56/barrel on January 15, 2009.... Brent production has fallen to a few hundred thousand barrels a day. The strength of Brent prices may be reflecting its increasing scarcity, not necessarily the global supply and demand balance. Diesel is, after all, becoming the fuel of choice for the world outside the U.S.. However, Brent doesn't have a monopoly on diesel compounds - refiners are increasing capacity to refine sour crude.

If it weren't for their inefficient price discovery, sour crudes destined for Asia would be a more accurate indicator of world oil market dynamics. China is the second largest oil importer behind the USA and accounts for nearly 10% of global oil consumption. China - and emerging markets in general - drive most of world oil demand growth and what kind of crude do they buy most? Sour crude. Asia just opened complex refineries that can process those hard-to-crack crudes (pun intended) and plans to build more. The rise in demand for sour crude, along with OPEC production cuts, pushed Dubai crude prices higher than Brent for the first time ever on January 6, 2009. Not only is sour crude seeing more demand growth, it also outstrips light, sweet crude in production growth. Most of the world's remaining oil supply is sour or heavy, so its share in world oil production is likely to increase as light, sweet crudes go extinct. Until we can cast a wide, real-time net on sour crude prices however, we'll have to settle for WTI as a shortcut to world oil market conditions."

Brian Pretti: "From our perspective, equities have not yet fully priced in the ramifications of actual household debt contraction. Remember, the reality of prior half year auto sales, retail sales and residential property activity all occurred during a period characterized by slowing in household debt assumption, not net debt contraction....The dramatic drop in debt assumption is occurring now. The markets know this and we believe have priced this in. What remains to be discounted is once again magnitude and duration of net debt contraction that we believe lies dead appears households and the non-financial corporate sector are either in or will enter the process of net leverage contraction (deleveraging) very soon. Consumption, production and price deflation trends in a number of asset classes (primarily residential real estate and equities) has occurred up to this point against a backdrop of only slowing household and corporate debt growth. Just what will happen if/when household and non-financial corporate leverage begins to actually contract in nominal terms? THAT’s the key question for us as investors over the quarters directly ahead. The markets have priced in sector implosion (financial sector) and the potential for a recession of a mid-1970’s/early 1980’s magnitude. But, the broad deleveraging process has really just begun. We have a very hard time seeing this process truncated in the quarters ahead. The potential clearly exists for a multi-year reconciliation process. Have the markets already priced in a multi-year deleveraging process, with specific emphasis and implications as per consumers? That we do not believe has happened, except maybe in the Treasury market. You already know we will be monitoring and discussing these very issues as we move forward. Deleveraging is not done. As you can see, it has barely begun."

Bill Bonner: "So you see, dear reader, how deliciously the plot turns? In the bubble years, the bankers ripped off the public…pretending to make them rich, of course…while the regulators looked the other way. Now, the politicians create a distraction, pretending to punish the bankers, while together they pick the public’s pocket for $3 or $4 trillion more. The bankers are judged guilty; but the audience hangs."

Trump Entertainment Resorts Inc., the Atlantic City casino group partly held by the real estate investor Donald Trump, may become the subject of an involuntary-bankruptcy filing by the company's bondholders, people familiar with the matter told The Wall Street Journal.