Friday, May 15, 2009

Economic Fascism

5/15/09 Economic Fascism

Consumer prices held flat in April but fell 0.7% in the last 12 months, the biggest drop in 54 years. Overall, U.S. consumer prices were unchanged in April after seasonal adjustments and have fallen 0.7% in the past 12 months, the largest decline in 54 years. Core inflation - which excludes volatile food and energy prices - rose 0.3%, boosted by a 9.3% increase in tobacco prices. Over the past year, the core CPI is up 1.9%.

The output of the nation's factories, mines and utilities fell 0.5% in April, the Federal Reserve said Friday. Output has fallen in six straight months and 15 out of the last 16 months. The output of most major market groups fell in April. Output in March was also slightly weaker than previously estimated. Output fell a revised 1.7% in March, compared with the initial estimate of a 1.5% drop. Capacity utilization - a gauge of slack in the economy -- fell to a record low 69.1%.

Manufacturing activity in the New York area contracted at the slowest pace since last August, the New York Federal Reserve Bank said Friday. The bank's Empire State Manufacturing index rose to negative 4.6 in May. The index had improved significantly in April to negative 14.7 from negative 38.2 in March. While 28% of respondents said conditions had worsened, 23% said that they had improved. The new orders fell several points and remained below zero, while the shipments index inched into positive territory. The prices received index fell to a record low.

J.C.Penney raised its full-year profit projection to 50 cents to 65 cents a share.

"The first quarter was clearly a difficult one for us," said Abercrombie and Fitch's Chief Executive Mike Jeffries. "With a challenging economic environment, the consumer continues to show a reluctance to spend on premium brands; a price consciousness dictating shopping habits unlike anything I have ever seen."

The euro-zone economy contracted at a record quarterly rate of 2.5% in the first three months of the year, statistics agency Eurostat reported Friday.

Hong Kong sank further into recession during the first quarter of the year, as gross domestic product fell 7.8% from the year before and a seasonally adjusted 4.3% from the fourth quarter, the city's government said Friday.

Swedish fashion retailer Hennes & Mauritz said Friday that its same-store sales rose 8% in April, while sales in local currencies rose 19% from a year earlier. The group said it had 1,804 stores, compared to 1,560 a year earlier.

German gross domestic product plunged 6.9% on a calendar-adjusted basis in the first quarter of 2009, against a year ago, which was the largest drop since records began in 1970, the Federal Statistical Office said Friday.

The Treasury is prepared to inject up to $22 billion into the insurers under the rescue plan launched last fall as the Troubled Asset Relief Program, said a person familiar with the matter. It's all about controlling another industry. Economic fascism is spreading throughout the U.S.

According to AMG Data, for the week ending May 13,
Equity Fund Inflows $7.1 Bil; Taxable Bond Fund Inflows $4.8 Bil
xETFs - Equity Fund Inflows $2.3 Bil; Taxable Bond Fund Inflows $3.1 Bil.

economic output plummeted 23 percent in the first quarter from the previous three months as industrial production plunged and the government’s 3 trillion- ruble ($93.5 billion) stimulus package failed to boost lending.
Gross domestic product declined an annual 9.5 percent in the period, the Federal Statistics Service said on its Web site today, citing preliminary data. It was the biggest year-on-year slump since the first three months of 1995, according to Bloomberg data. The annual decline was forecast by Deputy Economy Minister Andrei Klepach on April 23.

China's natural gas industry is developing rapidly, and market demand is estimated to reach 110 billion cubic meters in 2010, growing from 80 billion cubic meters in 2008, according to Wang Tianxi, general director of China City Gas Society.
However, natural gas supply in 2010 is expected to mark 90 billion cubic meters, falling short of market demand.

Net foreign purchases of long-term securities were $55.8B in March, more than the $35B economists were looking for, and more than double February's $22B. Private investors were net buyers of $30B, and foreign institutions bought $26.4B.

Mike Shedlock: "All things considered, oil prices are due for a pullback and gasoline prices at the pump are likely to follow. Moreover, with the possible exception of food, consumer prices in general will remain under pressure, if not indeed negative on a year over year comparison basis for quite some time as well as falling producer prices pass up the chain."

Emulex Corp. on Friday said its board of directors has unanimously voted to reject semiconductor equipment maker Broadcom Corp.'s unsolicited $764 million cash tender offer for a second time. Emulex called the bid, at $9.25 per share, "grossly inadequate" and says it "significantly undervalues" Emulex's long-term prospects. The company went on to say that Broadcom's bid fails to compensate Emulex shareholders for initiatives that will start to "meaningfully impact" Emulex's earnings during the next 12 months and beyond. Further, Emulex said, the bid was "clearly timed to take advantage" of its depressed stock price, which has been impacted by the worldwide economic recession.

UMichigan consumer sentiment up to 67.9 in May.

The last filly to win the Preakness was 85 years ago. Rachel Alexandra, a filly, is the favorite to win the race. If the condition of the track is in decent shape, I pick her to win.

Despite having the best operating performance in the retail sector over the past 12 months, Wal-Mart shares remain only 2 1/2 points above their 52-week low.

The Mexican central bank on Friday cut its key interest rate by 75 basis points to 5.25%, in line with the expectations of economists surveyed by Dow Jones Newswires. The bank said in an statement that economic contraction has intensified. Rate policymakers have cut the key rate by 300 basis points since January. The finance ministry earlier this month said it expects the economy to contract by 4.1%, with 0.3% of that pullback to come from the impact of the H1N1, or swine flu, outbreak.

The dollar index fell 0.4% to 82.295.

A sustainable recovery will occur only when the corporate system will be cleaned of losses and capitalism risks collapsing if this does not happen, Marc Faber, the author of "The Gloom, Boom & Doom Report," told CNBC Friday. The central banks will continue to print money at full speed, but long-term this strategy will lead to a fall in purchasing power and living standards, especially in developed countries, Faber said.

American Express Co. said on Friday that its write-off rate for bad credit card debt passed 10% in April, up from less than 9% in March and February. The company said its net writeoff rate on an owned basis, the loans that it includes in its own balance sheet, rose to 10.4%, while managed net writeoffs, which include loans it has securitized, rose to 10.1%.

U.S. credit card defaults rose in April to record highs, with Citigroup and Wells Fargo posting double digit loss rates, as the recession slashed more than 2 million jobs since the beginning of the year.

"U.S. card credit quality continues to struggle," John Williams, an analyst at Macquarie Research, said in a note to clients.

Crude dropped $2 to $56.55 a barrel. Gold rose $1.70 to $930. Copper dropped to $2 to end at $200.

The Dow Jones Industrial Averageshed 62.68 points, or 0.8%, to 8,268.64, leaving the blue chips 3.6% off for the week. The S&P 500 declined 10.19 points, or 1.1%, to 882.88, off 5% from the week-ago close, while the Nasdaq Composite dropped 9.07 points, or 0.5%, to end at 1,680.14, with the technology-laden index snapping a nine-week winning streak.

Thursday, May 14, 2009

First-Time Claims

5/14/09 First-Time Claims

George Will: "For the first time, neither sales nor property nor income taxes are the largest source of money for state and local governments. The federal government is....The Obama administration is bold. It also is careless regarding constitutional values and is acquiring a tincture of lawlessness....The Obama administration's agenda of maximizing dependency involves political favoritism cloaked in the raiment of "economic planning" and "social justice" that somehow produce results superior to what markets produce when freedom allows merit to manifest itself, and incompetence to fail.
The administration's central activity — the political allocation of wealth and opportunity — is not merely susceptible to corruption, it is corruption."

General Motors Corp and Chrysler aim to drop as many as 3,000 U.S. dealers and are expected to begin sending notifications as early as Thursday, three people briefed on the still developing plans said.
GM, facing a U.S. government-imposed deadline of June 1 to restructure or file for bankruptcy, is expected to send termination notices to up to 2,000 dealers -- a third of its roughly 6,000 U.S. dealers, the sources told Reuters.
Chrysler, which filed for bankruptcy on April 30, will also tell up to 1,000 of its 3,189 U.S. dealers it is terminating their franchise agreements, according to the sources who asked not to be identified because the controversial closure plans have not been yet announced.

First-time claims for state unemployment benefits rose due to layoffs in the auto sector, the Labor Department reported Thursday. The number of initial claims in the week ending May 9 rose 32,000 to 637,000. It's the highest level since mid-April. Economists had been expecting claims to rise. They estimated that about 27,000 Chrysler employees are eligible to file claims in the wake of the company's bankruptcy filing. Claims in the previous week were revised to a decrease of 30,000 to 605,000 compared with the initial estimate of a drop of 34,000 to 601,000. The four-week average of initial claims rose 6,000 to 630.500. Meanwhile, the number of Americans receiving state jobless benefits rose to/a record 6.56 million in the week ending May 2. The four-week moving average of continuing claims rose 128,750 to 6.34 million. The insured unemployment rate rose to 4.9%, the highest level in this cycle.

At Osterville Fish Market in Cape Cod, lobster fell as low as $5 a pound around Christmas, down 50% from the $10 it sold for in recent years. Though, they’ve started to creep back up, selling between $7 to $9 a pound, depending on the size of the lobster.

Wholesale prices rose 0.3% in April after seasonable adjustments, with higher food prices offsetting a drop in energy prices, the Labor Department reported Thursday. The producer price index has fallen 3.7% in the past year, the biggest year-over-year fall since January 1950, the government said. The core PPI - which excludes food and energy prices - rose 0.1% in April. Core prices are up 3.4% in the past year. The PPI had fallen 1.2% in March.

At the earlier stages of processing, prices received by producers of intermediate goods moved down 0.5 percent following a 1.5-percent decrease a month earlier, and the crude goods index advanced 3.0 percent after declining 0.3 percent in March. Crude goods pricing had been down for 8 consecutive months.

The International Energy Agency lowered this year's global oil demand forecast. Demand is projected to fall 2.6 million barrels a day comparing with 2008, 200,000 barrels more than the IEA had projected a month ago, according to a IEA monthly report released Thursday. "Continued oil demand weakness is premised on strong economic recovery later this year remaining elusive," the IEA said in the report.

Wal-Mart Stores Inc. said that its first-quarter profit from continuing operations rose slightly to $3.03 billion, or 77 cents a share, from $3.029 billion, or 76 cents, in the year-earlier period. Revenue including membership income in the quarter ended April 30 fell to $94.2 billion from $94.9 billion, hurt by a stronger dollar. The company forecast second-quarter profit of 83 cents to 88 cents a share with Wal-Mart U.S. and Sam's Club each expecting their comparable store sales to be between flat and up 3%.

According to the WSJ, Obama is weighing plans to detain terror suspects on U.S. soil -- indefinitely and without trial -- as part of a plan to retool trials held for Guantanamo prisoners.

BT Group PLC Thursday slashed its dividend and said it plans to cut as many as 15,000 jobs next year after write-downs at its troubled global services division pushed the U.K. telecommunications company to a fiscal fourth-quarter net loss.

California officials who face a staggering new budget deficit that could reach $21.3 billion are up against an unexpected problem - the potential loss of billions of dollars in federal economic stimulus money if education and health care spending is cut too deeply. The Obama administration has told California that unless the $74 million in cuts are rescinded, it will deny the state $6.8 billion in stimulus money.

George Ure: "With Social Security and Medicare THERE IS NO SAVINGS FUND!! All there is to back up the Bonds is an "ASSUMPTION" that the US Government is going to raise the Income Tax Rates quite dramatically in the future when it comes time to pay off those bonds (which is never going to happen).

ANY increase in the Social Security or Medicare taxes so as to "Save the system" is really no such thing, it is just a Back Door Income Tax Increase on the lower income WORKERS in the country (remember these taxes do NOT apply to non-workers income, ie: interest, dividends, capital gains etc.) since the money being collected is being immediately spent for general government expenses. "

Nouriel Roubini: "THE 19th century was dominated by the British Empire, the 20th century by the United States. We may now be entering the Asian century, dominated by a rising China and its currency. While the dollar’s status as the major reserve currency will not vanish overnight, we can no longer take it for granted. Sooner than we think, the dollar may be challenged by other currencies, most likely the Chinese renminbi. This would have serious costs for America, as our ability to finance our budget and trade deficits cheaply would disappear."

Yesterday AIG's CEO admitted that the failed insurance company will not be able to pay back the federal government's massive bailout for three to five years, a much longer period than the public was told initially. Even that may be too optimistic since it is contingent on a global economic recovery.

French textile workers were recently made an offer that most, undoubtedly, refused: relocate to India and work for local wages or lose their job. The Times of London reported May 12 that the Carreman company gave its employees the unenviable choice in part to comply with French labor laws.
Carreman told workers they could keep their jobs if they moved to Bangalore at a 96% pay cut, according to the Times. They were not offered airline tickets. A recent online search put the cost of a one-way ticket from Charles De Gaulle airport in Paris to Bangalore airport at about $628, with a plane change.

POSCO, the world's No.4 steelmaker, unexpectedly cut its domestic product prices by up to 20 percent on Thursday, its biggest ever reduction, as a rebound in the Korean won threatened to open the door to cheaper imports.
Despite swift price cuts this year by many Asian rivals, the South Korean mill had resisted making its first reductions since January 2006 until it had finished talks on annual iron ore contract prices. But protracted negotiations and more aggressive action by foreign competitors appear to have forced its hand.

Carlisle Cos. Inc. said Thursday it will temporarily close heavy truck trailer production operations in North Dakota and Pennsylvania.

U.S. natural gas inventories rose 95 billion cubic feet in the week ended May 8, the Energy Information Administration reported Thursday. At 2,013 billion cubic feet, stocks were 497 billion cubic feet higher than last year at this time and 374 billion cubic feet above the five-year average, the EIA reported.

Pelosi says she was informed that senior lawmakers had been briefed on the use of the method in 2003. But she says the CIA misled her earlier about the techniques.
In a 2002 briefing, officials said they had legal opinions saying that harsh interrogation techniques could be used. Pelosi said the only mention of waterboarding at that meeting was that it was not being employed.

Joe Picerno: "Nonetheless, we're still in a period of erratic economic behavior and it remains to be seen if we're merely in a temporary lull that precedes another round of pain vs. a true cyclical bottom. Hope springs eternal, but we still need more data to make a stronger declaration that the worst has passed. And even if it has, patience is still required.
The official end of the recession isn't likely to bring a material change in the discouraging economic news. The technical end of recessions still bring plenty of pain for Joe Sixpack in the ensuing quarters. The fact that this recession is the deepest since the Great Depression suggests that the recovery period, whenever it commences, will be unusually slow and sluggish. And that's the optimistic outlook!"

Blockbuster's U.S. same store sales declined 11% in the quarter. The company reiterated its forecast for 2009 adjusted earnings before interest, taxes, depreciation and amortization in a range of $305 million to $325 million.

Nike Inc. plans to cut 1,750 jobs, or about 5% of its global workforce, The Associated Press reported late Thursday.

Nordstrom said it expects to report a 2009 profit of $1.25 to $1.50 a share, up from a range of $1.10 to $1.40 a share.

The Dow Jones industrial average added 46.43 points to 8,331.32, the S&P rose 9 points, and the Nasdaq climbed 25 points.

President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.

“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”

Holders of U.S. debt will eventually “get tired” of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. “It will have a dampening effect on our economy.”

The president pledged to work with Congress to shore up entitlement programs such as Social Security and Medicare and said he was confident that the House and Senate would pass health-care overhaul bills by August.

Wednesday, May 13, 2009

The Continuing Collapse

5/13/09 The Continuing Collapse

David Walker: "Long before the current financial crisis, nearly two years ago, a little-noticed cloud darkened the horizon for the US government. It was ignored. But now that shadow, in the form of a warning from a top credit rating agency that the nation risked losing its triple A rating if it did not start putting its finances in order, is coming back to haunt us.
That warning from Moody’s focused on the exploding healthcare and Social Security costs that threaten to engulf the federal government in debt over coming decades. The facts show we’re in even worse shape now, and there are signs that confidence in America’s ability to control its finances is eroding."

China will increase imports of commodities including oil and boost inventories of strategic raw materials to take advantage of weak prices, the nation’s economic planner said in March. The country is also buying commodities as it attempts to diversify investments away from Treasuries. Copper imports by China, the world’s largest consumer, rose to a record for a third month in April, according to the customs office. Aluminum purchases also jumped to a record.

The number of U.S. households faced with
losing their homes to foreclosure jumped 32 percent in April compared with the same month last year, with Nevada, Florida and California showing the highest rates, according to data released Wednesday.
More than 342,000 households received at least one foreclosure-related notice in April, RealtyTrac Inc. said. That means one in every 374 U.S. housing units received a foreclosure filing last month, the highest monthly rate since the Irvine, Calif.-based foreclosure listing firm began its report in January 2005.
April was the second straight month with more than 300,000 households receiving a foreclosure filing, as the number of borrowers with mortgage troubles failed to abate.

The Bank of England in its quarterly inflation report said its view on 2009 economic output is worse than in its February report, due to lower-than-expected activity in the first quarter and a judgement it is likely to take longer for bank lending to return to normal than previously assumed. It also increased its estimate on inflation in the medium term, though it still sees CPI below its 2% target.

Euro-zone industrial production slumped 20% in March from year-earlier levels, Eurostat said Wednesday. On a monthly basis, production slipped 2%.

China's retail sales continued to expand at a rapid pace, data showed Wednesday, with April's sales totaling 934.32 billion yuan ($136.5 billion), up 14.8% from a year earlier and in line with March's 14.7% rise, according to data released by the National Bureau of Statistics.

China's industrial production in April rose 7.3% from a year earlier, easing from an 8.3% expansion in March, according to data released Wednesday from the National Bureau of Statistics. Production had been expected to rise to rise 8.0% according to the median forecast of analysts polled by Dow Jones Newswires.

Chrysler's bankruptcy may take as long as two years, instead of the two months that President Barack Obama suggested as a target, Bloomberg said, citing an administration official.
The 60 days projected by Obama at an April 30 press conference announcing Chrysler's bankruptcy only applies to a sale of the automaker's best assets to a new entity, the official told the news agency.

Oil supplies fell by 3.13 million barrels to 370.7 million last week, the American Petroleum Institute said late yesterday. Crude inventories fell by 4.7 million barrels in the week ended May 8, the Energy Information Administration reported. The EIA also reported a 4.1 million barrels decrease in gasoline inventories and a 1 million barrels gain in distillates, which include diesel and heating oil.

Kuwait’s central bank reduced its benchmark interest rate by half a percentage point to 3 percent, the fifth cut since October 2008, the state news agency
KUNA reported, citing the central bank governor.

The Organization of Petroleum Exporting Countries boosting oil production last month for the first time since July, exceeding its quota by 967,000 barrels a day and backtracking its implementation of supply cuts intended to stem falling prices.
The 11 OPEC members bound by targets implemented 77 percent of planned output cuts of 4.2 million barrels a day, compared to a revised 82 percent for March, the Vienna-based organization said in a monthly report today.
Those 11 nations, which excludes Iraq, pumped 25.812 million barrels a day in April, the report said, citing secondary sources, which include estimates from analysts and news organizations. That compares with 25.587 million a day in March. Those 11 nations have a target of 24.845 million barrels a day that took effect from Jan. 1.

World oil demand is still shrinking as the global economy contracts, OPEC said on Wednesday, adding a recent rise in oil prices reflects sentiment rather than fundamentals, which are far from balanced.

The Organization of the Petroleum Exporting Countries said in its Monthly Oil Market Report demand would drop by 1.57 million barrels per day (bpd) in 2009 to average 84.03 million bpd. Its previous forecast was for demand to fall by 1.37 million bpd.

Liz Claiborne Q1 EPS of -$0.37 misses by $0.14. Revenue of $780M (-28.8%) vs. $884M.

Retail Sales -0.4% in April from a month ago, well short of economist consensus of +0.1%. Sales are 10.1% lower than a year ago. Ex-auto, sales were -0.5% vs. consensus of +0.2%. Electronics sales fell 2.8% in April, leading decliners. Auto sales were up 0.2%, while building materials were up 0.3%. Motor vehicle and parts sales were 20.7% lower than April 2008.April's sales decline was the eight drop in the last 10 months. With 2/3 of the economy dependent on the consumer, this puts the green shoot theory in the toilet.

Import prices +1.6% in April, after rising 0.2% (revised) in March, vs. consensus of +0.6%. Most of the increase came from a rise in petroleum prices. Prices are -16.3% from a year ago. Export prices were +0.5% M/M and -6.8% Y/Y. The exports index is down 6.8% over 12 months - a drop that matches March's 12-month change as the largest decline since the data was first published in September 1983.

Toyota Motor Corp. said Wednesday it will cut vehicle production 28 percent this year to its lowest level in seven years.
The world's largest automaker, struggling as sales fall across the globe, says it aims to produce 6.68 million vehicles in 2009, down from 9.24 million in 2008.
"We expect the severe conditions to continue this year," said Toyota spokeswoman Ryoko Nishinohara.

Mark Papa, CEO of EOG Resources, Inc., said he expects the impact from the decline in gas-oriented drilling will result in natural gas production falling by 4.5 billion cubic feet per day (Bcf/d) by the end of the year. He believes the resulting North American natural gas production declines could be reversed by early in 2010 if $7 per Mcf gas prices return or the gas-directed rig count falls below 650. This view compares with that of the Petroleum Industry Research Association (PIRA) that believes gas production will be 3 Bcf/d lower at year end.

Seagate to cut 1,100 jobs, or about 2.5% workforce.

Macy's posted a loss of $88 million, or 21 cents per share, for the period ended May 2. That compares with a loss of $59 million, or 14 cents per share, a year earlier.
The results included restructuring charges of $138 million, or 5 cents per share related to the consolidation of divisions and initiatives to tailor merchandise to local markets. Excluding those charges, the company lost 16 cents.
Revenues fell to $5.12 billion from $5.74 billion a year ago. Analysts surveyed by Thomson Reuters, who generally exclude one-time items, were expecting a loss of 20 cents per share on sales of $5.2 billion.

Reggie Middleton: "Mortgage foreclosure rate stood at 8.86% as of March 31, 2009 with US home foreclosure filings increasing 46% to 341,180 as of March 31, 2009 over last year. This number is significantly understated due to the fact that many, if not most, of the largest lenders were either under or just exiting a moratorium on foreclosures in the US. This moratorium, or more accurately, the lack thereof, will cause an extreme spike in foreclosure fillings in the upcoming months. As U.S housing prices continue to decline (with S&P Case Shiller Index declining 5% in 2009 in the first two months) mortgage forecloses and delinquencies are expected to reach additional historical peaks resulting in higher loan losses for banks on real estate loans. The Fed's 2 year cumulative loan loss rate for Alt A loans (7.5%-9.5%) appear overly optimistic and is even lower than current delinquency as of December 31, 2008 (9.69%). Based on the Fed's data (that's right, this data is sourced directly from the Fed itself, which explicitly contradicts the data that the Fed released for its stress tests) for Loan losses for Alt -A loans as of March, 2009 (for loans past due and current foreclosures) adjusted for recovery based on LTV taking into consideration price decline and original LTV, 2 yr cumulative losses for Alt A is expected to reach 19.98% which is significantly higher than Fed's adverse case of 9.5-13% - nearly twice as much! The Alt-A category is probably one of the most dangerous for the banks, for this is expected to literally explode over the next 24 months (and is in part masked by moratoriums), as is confirmed through our independent research and, ironically, through the Fed's data itself!"

Bill Bonner: "But if America really wanted to protect its wealth, its power, and its position in the world, it should fight the depression in an entirely different way. Instead of bailing out failed businesses it should let them go bust. Instead of coddling the executives who mismanaged their companies, it should turn them loose. Instead of shoring up reckless banks, it should help knock them down.
And instead of spending money on stimulus programs…it should give money back to the taxpayers so they can stimulate the economy, or not, as they choose. Taxes should be cut in line with government spending. This would boost savings, reduce debt, and… gradually…increase investment and consumer spending too."

Verizon agreed to sell 4.8 million access lines in 14 states to Frontier Communications for $5.25 billion in stock, tripling that company's size.

Delinquencies are snowballing on construction loans and mortgages for office buildings, malls and apartments. The trend is particularly worrisome in Southern California.

Continental Airlines Inc said Wednesday it intends to close its Tampa, Fla., reservation center and eliminate about 500 jobs as more customers purchase their tickets online.

According to MarketWatch, U.S. businesses pared their inventories in March, but sales fell even faster and companies made no progress in bringing bloated inventories back into line with demand, according to Commerce Department data released Wednesday. Inventories fell 1% in March, the seventh consecutive decline. Meanwhile, business sales dropped 1.6%. With the benefit of some favorable rounding, the inventory-to-sales ratio remained at an elevated 1.44 for all businesses in March. The ratio was at 1.28 a year ago. The inventory-to-sales ratio rose a tenth in manufacturing, retail and wholesaling, meaning all three major business sectors dug themselves deeper into the hole.

Investors are the most bearish on Treasuries since June amid concern the record pace of U.S. debt sales will erode demand, a survey of Bloomberg users showed.
Participants forecast higher Treasury yields over the next six months as the U.S. government finances bank bailouts, economic stimulus plans and fund a record budget deficit, according to 1,361 respondents from New York to Tokyo to London in the Bloomberg Professional Global Confidence Index.
Treasuries are suffering their biggest losses since 1994 this year as issuance increases and investors turn to higher- yielding assets on signs the worst of the recession is over. U.S. government debt has lost 3.3 percent since December, after posting a gain of 14 percent in 2008 as investors sought a refuge from losses on securities tied to subprime mortgages, according to Merrill Lynch & Co.’s U.S. Treasury Master index.

With the arrival of Spring, it is timely for some green shoots to appear in the forest; however, successful investors will be able to discern that the few green shoots are but a blip in the overall appearance of the forest. In this case, can you distinguish the forest from the green shoots? Isn't much of a stretch.

U.S. mortgage application demand slid to the lowest level since mid-March, driven by a drop in requests to refinance loans even as borrowing costs dipped toward record lows last week, the Mortgage Bankers Association said on Wednesday.

Richard Rahn: "If a U.S. business operating globally has to pay a 35 percent (U.S.) corporate tax rate (the second-highest in the world) plus state corporate taxes while its international competitors pay much lower rates, the U.S. company will be at a competitive disadvantage. Rather than provide necessary tax relief, the new Treasury proposals, if enacted, will give American multinational companies two basic choices for the long run - move the company outside the United States to a more tax-friendly jurisdiction, or go out of business and fire the workers."

GM shares at $1 and market cap below $1 billion.

Chris Clugston: "Most Americans believe that we are “exceptional”—both as a society and as a species. We believe that America was ordained through divine providence to be the societal role model for the world. And we believe that through our superior intellect, we can harness and even conquer Nature in our continuous quest to improve the material living standards associated with our ever-increasing population.
The truth is that our pioneering predecessors drifted, quite by accident, upon a veritable treasure trove of natural resources and natural habitats, which they wrested by force from the native inhabitants, and which we have persistently overexploited in order to create and perpetuate our American way of life. The truth is that through our “divine ordination” and “superior intellect”, we have been persistently and systematically eliminating the very resources upon which our way of life and our existence depend.
We now find ourselves in a “predicament”. We are irreparably overextended—living hopelessly beyond our means ecologically and economically—at a time when the supplies of many critical resources upon which we depend will soon be insufficient to enable our American way of life. We are about to discover that we are simply another unsustainable society subject to the inescapable consequence of our unsustainable resource utilization behavior—societal collapse."

The Bank of England has warned that Britain's economic recovery is likely to be "slow and protracted," tempering positive sentiment from a flurry of economic data that suggested the recession had hit bottom.

The New York Times reported Wednesday that less than 6% of the stimulus money has been paid out.

Stuart Varney: "The government wants to control the banks, just as it now controls GM and Chrysler, and will surely control the health industry in the not-too-distant future. Keeping them TARP-stuffed is the key to control. And for this intensely political president, mere influence is not enough. The White House wants to tell 'em what to do. Control. Direct. Command." The TARP funds had warrants attached, and Uncle Sam wants to exercise the warrants as part of any repayment.
Douglas Leech, the founder and chief executive of Centra Bank, a small West Virginia bank that participated in the capital assistance program but returned the money after the government imposed new conditions, said he complained strongly about the Treasury Department’s decision to demand repayment of the warrants. That effectively raised the interest rate he paid on a $15 million loan to an annual rate of about 60 percent, he said.
“What they did is wrong and fundamentally un-American,” he said. “Even though the government told us to take this money to increase our lending, the extra charge meant we had less money to lend. It was the equivalent of a penalty for early withdrawal.”

Crude ends down 83 cents, or 1.4%, at $58.02.

AK Steel said Wednesday that it will likely idle most of its operations in Ashland, Ky. beginning late in July or early August. The move will affect about 750 hourly and salaried employees and was prompted by GM and Chrysler's production cuts as well as the global recession, the company said. The plant is expected to remain idle until through the end of 2009.

The S&P 500 goes negative for the year again. The S&P drops 24+ points, the Dow 184, and the Nasdaq about 52.

The vast majority of complex and opaque over-the-counter derivatives must be traded on centralized clearinghouses, the Treasury Department reported on Wednesday as part of its regulatory reform effort for exotic financial products. As part of the plan, derivatives traders would be required to report trades and improve their record-keeping.

Jack in the Box Inc. expects adjusted earnings of $2.08 to $2.20 a share in fiscal 2009.

Whole Foods Market late Wednesday reported net income fell 32% to $27.3 million, or 19 cents a share, for its fiscal second quarter. A year ago, Whole Foods posted net income of $40 million, or 29 cents a share. Sales were flat at $1.9 billion. As expected, store traffic slowed at existing stores due to weaker consumer spending. Comparable store sales - a key measure of grocer health -- was negative 4.8% vs. a gain of 6.7% a year earlier.

Tuesday, May 12, 2009

Income Tax Receipts Plummet

5/12/09 Income Tax Receipts Plummet

With the recession undermining income-tax receipts, the U.S. government recorded a $20.9 billion deficit last month, the first April deficit in 26 years, the Treasury Department reported Tuesday. Through the first seven months of the fiscal year, the federal deficit has mounted up to a record $802.3 billion, compared with $153.5 billion at the same time last year. Income-tax receipts are down nearly 31% for the fiscal year so far. Total receipts are down 19% to $1.26 trillion. Spending for the first seven months rose 20% to $2.06 trillion.

The U.S. trade gap with the rest of the world increased in March for the first time in eight months as exports declined faster than imports, the Commerce Department reported Tuesday. Led by a big decline in capital goods sales, exports of goods and services fell 2.4% to a seasonally adjusted $123.6 billion in March, the lowest level since August 2006. Meanwhile, imports of goods and services fell 1% to $151.2 billion, the lowest level since September 2004. The trade deficit - the difference between exports and imports - increased by 5.5% to $27.6 billion in March from $26.1 billion in February.
The U.S. trade deficit with China widened to $15.6 billion in March, the most with any country. For the first three months of the year, the deficit with China has shrunk by about 8% compared with the same period last year.

China's April exports contracted 22.6% from a year earlier, accelerating from a 17.1% slide March, while imports were down 23% on year, compared to a 25.1% decline in March, according to data released Tuesday by the National Bureau of Statistics.

Sony has forecast its first net loss in 14 years for the fiscal year ended March 31. Among major Japanese exporters, the Tokyo-based maker of the Walkman player and PlayStation 3 game machine is no exception in being battered by the global slowdown. The soaring yen, which reduces the value of overseas earnings, and the dropping prices of gadgets have added to the damage. The fiscal year ended March would mark the first time Sony has slid into red ink from troubles in its electronics business. Last time it sank into a net loss, for the fiscal year ending March 1995, its movie division, marred by box office flops and lax cost controls, was to blame.

China, the world's second-largest oil consumer, increased its imports by 13.6% in April to 16.17 million metric tons, or 3.9 million barrels a day, according to the country's customs department.

Banks are overvalued and the government enabled them to have better first quarter earnings than they should, well-known analyst Meredith Whitney told CNBC.


"At a core basis, I would not own these stocks," Whitney said in a live interview. "Their business models are not going to come back."

For fiscal year 2009, Fossil projected profit of $1.50 to $1.70 a share.

Alpha Natural Resources Inc.and Foundation Coal Holdings Inc. have agreed to merge in a stock-swap deal, valued at about $2 billion, that will give rise to the No. 3 U.S. producer of coal, the companies said. Terms call for Foundation Coal to receive stock in the new entity valued at $32.73 a share, based on the May 8 closing price of Alpha Natural shares. This represents about a 37% premium over the average closing price for Foundation Coal shares in the five days through May 8. Shareholders of Abingdon, Va.-based Alpha Natural shareholders will own about 59% of the new company on a fully diluted basis. The parties said they expect to close on the transaction later this year.

Hayes Lemmerz International Inc., the Northville, Mich., producer of aluminum and steel wheels for cars and trucks, filed to reorganize under Chapter 11 of U.S. bankruptcy law. In a statement late on Monday, the company said it made the filing to facilitate a debt restructuring agreed to by holders of a majority of its secured debt.

Andy Kessler: "The stock market still has big hurdles to clear. You can have a jobless recovery, but you can’t have a profitless recovery. "

Rob Hanna: "
1) Don’t be sucked in to believing that up volume on up days and down volume on down days is necessarily a bullish pattern. Also down volume on up days and up volume on down days aren’t necessarily bearish. There’s a lot of misinformation out there and the real answer may be much more complex.

2) This doesn’t mean volume isn’t a useful tool. I’ve found it especially useful at extremes. "

The Oil Drum: "The present contango in oil prices bears all the hallmarks of an oil market where supplies are well above present fundamental physical consumption.
The recent large inventory build of petroleum, under a steep contango which now is flattening, within the big oil consumers (like the OECD countries and China) have left some with the expectation that major economies soon will begin to grow again, and that the contango now signals increased oil demand and higher oil prices in the future.
My analysis indicates that in recent months, as much as 2 -3 Mb/d of global petroleum supply has been used to build inventories. This is about to come to an end, because available storage is getting closer and closer to full and contango has begun to flatten. When additions to storage cease, the resulting drop in demand can be expected to lead to substantial downward pressure on oil prices."

According to Bloomberg, India’s industrial production fell the most in 16 years in March as the worst global recession since World War II damped demand for the nation’s exports.
Output at factories, utilities and mines declined 2.3 percent from a year earlier after a revised 0.7 percent drop in February, the statistics agency said in New Delhi today. That was more than three times analysts’ estimates and the worst performance since January 1993, according to Bloomberg data.

Niels Jensen: "The US financial sector debt load (as a % of GDP) is now 117%. In the early days of the great bull market in 1982, the same number was 22%. Households are not much better off with total household debt now at 96% of GDP vs. 47% in 1982.... Delinquencies are now on the rise on all mortgage products; however, whereas sub-prime started to deteriorate as early as 2007, it is only recently that delinquencies related to Alt-A and adjustable rate mortgages have taken off, and prime and jumbo loans are only now starting to suffer....governments inevitably underestimate the ultimate cost of a banking crisis, because the indirect costs (such as falling tax revenue in subsequent years) end up much higher than predicted."

Crude for June delivery gained $1.39, or 2.3%, to $59.89 a barrel in early North American electronic trading. It rose to $60.08 earlier. Front-month oil contracts haven't ended above $59 a barrel since Nov. 11.

“It looks to me now as if the markets are now pricing in a rapid recovery, that they’re pricing in a V-shaped recession, which I consider extremely unlikely,” Paul Krugman, 56, said at a forum in Shanghai today. “The market seems to be looking as if this is going to be an average recession, but it’s not."

Chuck Butler: “Many institutional investors use the dollar index as their means of trading the dollar. And to see it fall through its 200-day moving average was enough proof for them that the dollar is heading south.
“The 200-day moving average, for those of you unfamiliar with this term, is a long-term moving average that helps determine the overall health of the asset, which, in this case, we’re talking about the dollar. It is, for all practical purposes, a dividing line, if you will, between as asset being healthy and one that is not.”

The state of Washington settled on a budget two weeks ago that will mean 1,000 layoffs at public colleges and several times that many in elementary and high schools.
The governor of Massachusetts, who cut 1,000 positions late last year, just announced 250 layoffs, with more likely to come soon.
Arizona has already laid off 800 social service workers this year and is facing the likelihood of deeper cuts over the next two. The state no longer investigates all complaints of child or elder abuse.

The nonpartisan Congressional Budget Office (CBO) predicts a gross domestic product decline of 3 percent this year but 2.9 percent growth next year, while the April consensus of 50 blue-chip private economists sees a 2.6 percent decline in 2009 and 1.8 percent growth next year. I predict both growth forecasts will get reduced.

Dallas-based White Energy said a Chapter 11 filing became necessary after high raw material costs coupled with low ethanol prices led to “minimal or nonexistent profit margins.” It also blamed significant debt payments and an inability to raise capital from frozen equity markets.

The move comes just three years after the privately held firm entered the business and on the heels of bankruptcy filings by ethanol powerhouse VeraSun Energy Corp. and Dallas-based Panda Energy, which in January placed its plant near Amarillo in Chapter 11.

Fewer people working means less being paid into the trust funds for Social Security and Medicare.
The Congressional Budget Office recently projected that Social Security will collect just $3 billion more in 2010 than it will pay out in benefits. A year ago, the CBO had projected that Social Security would have a much higher $86 billion cash surplus for the 2010 budget year, which begins Oct. 1. The difference in the two estimates is the result of the recession. I predict SS will show a deficit some time in 2010 and not a surplus.

Last week, Nordstrom said its preliminary reading showed first-quarter sales declined 9.2 percent to $1.71 billion.
Analysts polled by Thomson Reuters expect earnings of 26 cents per share and sales of $1.68 billion.

General Motors Corp. shares dropped as much as 24% to hit a 76-year low of $1.09 on Tuesday, after CEO Fritz Henderson a day earlier said a bankruptcy is "more probable."

Randall Forsyth: "Boomers' last resort is to go back to work and scrimp and save. And hoping to die before they get old no longer sounds so romantic now that we are old."

As the housing market slowly recovers from the biggest collapse since the Great Depression, homeowners are still finding it hard to unload their current residence without suffering a big loss. As a result, they're deciding to hold onto the house but renting it out in hopes of selling later when the market improves.

"With a glut of housing inventory, renting is a common option" says Jessie Keenan, an adjunct professor at the University of Miami who teaches classes on housing.

The median U.S. home price dropped 14 percent in the first quarter from a year earlier as banks sold repossessed homes.
Prices fell in 134 of 152 metropolitan areas, the Chicago- based National Association of Realtors said today in a news release. The national median existing home price declined to $169,000 and distressed properties typically sold for 20 percent less than other homes on the market.

The Energy Information Administration Tuesday revised lower its world oil demand forecast, saying the global economic downturn will continue to dampen petroleum consumption. World oil consumption is now projected to fall by 1.8 million barrels per day in 2009, a decline that is 400,000 barrels larger than the EIA had projected last month. Oil prices will remain flat for the remainder of the year, averaging about $55 a barrel, the EIA said.

Deloitte's index of consumer spending dropped to 1.46% in April following March's 1.95% gain. Growth factors include tax credits and subsidies for first-time home buyers. Negative factors include home price deflation and rising unemployment.

Naveen Salvaraj: "The Cisco results do not indicate that things will be better in the next 2-3 quarters, barring a dramatic turnaround. Till then, the Cisco sales team has one hell of a task to do!"

According to Bloomberg, soybean prices fell for the first time in three sessions on speculation that China, the world’s biggest buyer, will slow imports as profits drop from making animal feed and cooking oil from the oilseed.
Chinese buyers have asked overseas suppliers to delay loading of 500,000 metric tons of soybeans until June, two company executives said last week. Some importers may have canceled purchases of 300,000 tons, two other executives said. Before today, prices surged 32 percent since March 2 on Chinese purchases, reaching a seven-month high on May 7.

Martin Hutchinson: "Economically, it is currently spring with "green shoots" apparently indicating recovery, burgeoning in the most unexpected places. The economic climate, however, is that of early February rather than mid-April. True recovery is nowhere near imminent, and economic conditions should get considerably worse before it arrives."

Gold for June delivery rose $10.40, or 1.1%, to $923.90 an ounce on the Comex division of the New York Mercantile Exchange.

Since the start of 2008, 5.7 million payroll tax jobs have disappeared. And another 4.3 million jobs are being filled on a part-time basis.
In the nearer term, the trustees estimate that Social Security will take in fewer taxes than the benefits that will be paid out by 2016. Last year, they estimated the near-term shortfall would occur in 2017.
Those who describe Social Security's situation as a crisis point to the 2016 date as the most important, because that's when the government has to start paying the system back with interest.
"When Social Security needs to draw down the 'surplus,' the Treasury will have to borrow money, raise taxes or cut other spending in order to redeem the IOUs," said Charles Konigsberg, a federal budget expert at deficit watchdog group the Concord Coalition.
I think the SS crisis will occur several years before 2016.

The world's largest chip equipment maker Applied Materials Inc posted a quarterly loss as cost cuts failed to fully offset a steep drop in revenue.
Excluding certain items, but including stock-based compensation expenses, the loss was 12 cents a share compared with analysts' average forecast of a loss of 10 cents a share, according to Reuters Estimates.
Revenue tumbled more than 50 percent to $1.02 billion, but was higher than the average Wall Street estimate of $905.3 million.

Intel's Chief Executive Paul Otellini said the chip giant's business in the second quarter was "a little better than expected." Intel did not offer a formal outlook for the second quarter, but said it expects revenue to be roughly flat to the first quarter.

The Dow Jones Industrial Average was up 50 points, or 0.6%, at 8,469. The S&P 500 index fell 0.9 points, or 0.1%, to 908, while the Nasdaq Composite lost 15 points, or 0.9%, to 1,715.

Medicare's trustees warned today that the program's biggest fund would run out of money in just eight years.

Social Security and Medicare are financed primarily by taxes evenly divided between workers and employers that amount to 15.3% of wages.

Thousands of Tully's shareholders will finally get a payday on May 20, when the company distributes $1.03 a share -- for a total of $5.7 million -- to shareholders of record on April 30.
It's not a great return for Tully's roughly 6,000 shareholders, many of whom paid $1 a share in the 1990s to get a piece of the Seattle coffee chain that sought to rival Starbucks.
The money comes from the $40.3 million sale in March of Tully's wholesale business to Green Mountain Coffee Roasters of Vermont, which wants to relocate Tully's roasting machines to a location with more space.
Tully's used about $26 million to pay off debt, and another chunk -- if my math is right, roughly $8 million -- will go toward stabilizing and building its retail business.
That leaves $5.7 million for shareholders, including founder and chairman Tom O'Keefe, who owns about 12 percent of the company.

The dollar index, a measure of the greenback against a trade-weighted basket of six major currencies, hit a four-month low at 82.00, according to FactSet Research, and was at 82.267 in recent trading.

Overall, the industry is going to fare less better as retailers focusing on discretionary merchandise still aren't seeing much of a recovery in consumer spending. While analysts have trimmed their first-quarter forecast to an average profit decline of 19% from a 25% decline expected at the end of March, the drop was still limited in part by Wal-Mart, said Ken Perkins of Retail Metrics. Excluding Wal-Mart, analysts projected the industry to see a profit decline of 27%, Perkins said.

Monday, May 11, 2009

The Federal Budget

5/11/09 The Federal Budget

Will Rodgers: "The budget is like a mythical bean bag. Congress votes mythical beans into it, then reaches in and tries to pull real ones out."

The government will have to borrow nearly 50 cents for every dollar it spends this year, exploding the record federal deficit past $1.8 trillion under new
White House estimates. Budget office figures released Monday would add $89 billion to the 2009 red ink — increasing it to more than four times last year's all-time high as the government hands out billions more than expected for people who have lost jobs and takes in less tax revenue from people and companies making less money.
A fresh estimate of the deficit showed it coming in at $1.84 trillion -- representing a massive 12.9 percent of gross domestic product -- in the current 2009 fiscal year that ends on September 30. A prior White House forecast released in February projected a deficit of $1.75 trillion, or 12.3 percent of GDP.

Agrium Inc. increased its offer to buy smaller fertilizer rival CF Industries Holdings Inc. by $5 a share to $40 a share, plus one Agrium share. The deal values CF Industries at $85.20 a share, or about $4.12 billion based on 48.8 million shares outstanding.

The benchmark KBW Bank Index, which tracks 24 of the nation's largest banks, jumped 12.1 percent Friday.

George Soros told the Frankfurter Allgemeine Zeitung daily that Asia would be the first region to pull out of the financial crisis and China was set to overtake the United States as the engine of world growth.

"The financial safety net, especially those parts that were more implicit and perceived than explicit and written into the laws, played a significant role in the accumulation of risks that ultimately led to the turmoil we are still experiencing," said Richmond Federal Reserve President Jeffrey Lacker. "While deployment of the financial safety net is often viewed as an essential response to the financial crisis, I believe we need to give serious thought to the extent to which the safety net was actually a significant cause of the crisis," he said in remarks prepared for delivery to a banking conference in Beijing.

Scott Burns: "Government obligations for Social Security and Medicare may soon exceed the combined net worth of every household and nonprofit organization in the country...Last year's Social Security trustee report
estimates that OASDI (Social Security retirement and disability) and HI (hospital insurance), excluding book entry interest for the trust funds, will have more revenue than expenses until 2015. If higher cost assumptions prevail, however, the last year of positive flow will be 2010.
That's next year."

William Greider: " At work, at home and in the public sphere, most people lack the right to exercise much of a voice in the decisions governing their daily lives. Most people (not all) are subject to a system of command and control over their destinies. They know the risks of ignoring the orders from above. Not surprisingly, many citizens are resigned to this condition and accept subservience as "the way things are," and their lives are smaller as a result. Many find it hard to imagine that these confinements could be lessened, even substantially removed, if economic organizations were informed by democratic principles."

Marcus Tullius Cicero: I Like this quote I dislike this quote“The budget should be balanced. Public debt should be reduced. The arrogance of officialdom should be tempered, and assistance to foreign lands should be curtailed, lest Rome become bankrupt.”

Baker Hughes announced that the international rig count for April 2009 was 986, down 26 from the 1,012 counted in March 2009, and down 88 from the 1,074 counted in April 2008. The international offshore rig count for April 2009 was 273, down 8 from the 281 counted in March 2009 and down 24 from the 297 counted in April 2008.
The US rig count for April 2009 was 995, down 110 from the 1,105 counted in March 2009 and down 834 from the 1,829 counted in April 2008. The Canadian rig count for April 2009 was 74, down 122 from the 196 counted in March 2009 and down 32 from the 106 counted in April 2008.
The worldwide rig count for April 2009 was 2,055, down 258 from the 2,313 counted in March 2009 and down 1,004 from the 3,009 counted in April 2008

China's 6 billion euro ($8 billion) luxury market accounts for just 3 percent of global sales, compared with 38 percent in Europe, 33 percent in South and North America and 12 percent in Japan, according to Bain & Co. But China and Brazil are projected to be the two fastest-growing luxury markets through 2012, according to consulting firm Bain & Co.
And sales of designer clothing, jewelry and other luxury goods in China will climb 7 percent this year, while worldwide luxury revenue could fall 10 percent, Bain & Co. forecast. Last year, luxury sales surged 25 percent in China while they were flat worldwide.

After years of resisting shareholder demands to add debt, Microsoft is borrowing to help fund a $40 billion share repurchase program. The Redmond, Washington-based company is also spending billions of dollars on datacenters that run Internet applications to help compete against Google Inc.
The software maker became the first company in a decade to receive the top AAA rating from Standard & Poor’s when it initially filed in September to tap debt markets. Moody’s Investors Service also assigned its highest rating to Microsoft’s debt.

General Motors Corp.CEO Fritz Henderson said in a restructuring update Monday that the automaker has an "urgent" need for funding in its European business while it plans to start notifying North America dealers of closures later this week. Henderson said that bankruptcy is still "probable" as GM approaches the June 1 deadline to prove its viability to the U.S. government.

During the Bush administration, the Justice Department did not file a single case against a dominant firm for violating the antimonopoly law.

Many smaller companies complaining of abusive practices by their larger rivals were so frustrated by the Bush administration’s antitrust policy that they went to the European Commission and to Asian authorities.

Ms. Varney’s new policy more closely aligns American antitrust policy on monopolies and predatory practices with the views of antitrust regulators at the European Commission.

David Rosenberg: "The risk in the market, in our view, is much higher than it was the last time we were close to current market prices back in early January, for the simple reason that we believe professional investors have covered their shorts, lifted their hedges and lowered their cash positions in favor of being long the market. "

Crude for June delivery ended down 13 cents, or 0.2%, to end at $58.50 a barrel on the New York Mercantile Exchange.
Obama's budget would tax income from “day-to-day” dealer activities at “ordinary rates,” ending their ability to pay a lower rate on most of their income. That would raise $4.2 billion along with proposals to change tax accounting rules for sales of corporate stock and for convertible debt.

“There is no reason to treat dealers in commodities, commodities derivatives dealers, dealers in securities and dealers in equity options differently than dealers in other types of property,” an explanation of the proposal said. “Dealers earn their income from their day-to-day dealing activities and should be taxed at ordinary rates.”
The life insurance provisions would modify tax rules on the sale of insurance contracts and reduce a deduction that life insurers claim when they manage assets in separate accounts. Those proposals would raise $12.7 billion through 2019.
The document gives details on proposals to keep corporations and individuals from avoiding about $210 billion in taxes from 2011 through 2019 by shifting income to offshore tax havens.

Ford Motor Co. said Monday it is launching a public offering of 300 million shares of common stock, which it will use in part to help fund its retiree health care trust.

Fluor cut its 2009 earnings outlook to a range of $3.80 to $4.10 a share from $3.90 to $4.20 a share.

The Dow Jones Industrial Average fell 155.88 points, or 1.8%, to 8,418.77. The S&P 500 Indexshed 19.97 points, or 2.2%, to 909.26, while the Nasdaq Composite stumbled 7.76 points, or 0.5%, to 1,731.24. Declining issues outnumbered advancers by 4-to-1 in the S&P 500.

Jackie Mason: "I have enough money to last me the rest of my life, unless I buy something."

Mounting Credit Card Losses

5/10/09 Mounting Credit Card Losses

GMAC, the troubled automobile lender, may receive a $7.5 billion infusion from the U.S. government as early as next week, the Washington Post reported in its Saturday edition, citing unnamed sources.

The Centers for Disease Control said Saturday afternoon that the number of confirmed cases of the H1N1 flu in the U.S. has risen to 2,254. The cases, which were confirmed using a special viral test, are spread across 43 states and the District of Columbia, according to the agency's website. So far, only two people have died from the disease, both in Texas. During the agency's daily update with reporters on Saturday morning, officials said they had tabulated about 3,000 suspected and confirmed cases of the new flu virus in 45 states.

Bob Bronson: “Unemployment data that leads indicates the stock market will make new lows."

The Oil Drum: "Without moisture this wheat is going to continue to die," he said.
Add in the high costs of planting last fall -- the spike in oil prices drove up the price of petroleum-based fertilizers, fuel and chemicals -- and the chances of making a profit this year look bleak.
"Four or five years ago, we were buying $350 to $400 a ton fertilizer. This wheat crop here, when we fertilized last August or September, fertilizer was $1,100," Sellard says.
"Even if we had a decent crop, even if we cut it decently, this wheat crop will be in the red."

It now takes an average of over 21 weeks to find a new job, a new record.

Mike Burk: "From the March 9 low, the SPX has been up at an annualized rate of 547%, the OTC 539%, the Dow Jones Industrial Average a mere 389% and the Russell 2000 949%. Something has to give.
I expect the major indices to be lower on Friday May 15 than they were on Friday May 8."

The White House said it is unlikely to see positive employment growth until 2010 even if economic activity begins to pick up later this year, according to a report Sunday.
Christina Romer, chairman of the White House Council of Economic Advisers, said while speaking on C-SPAN that she expected unemployment to rise even if gross domestic product begins to grow in the fourth quarter of 2009, the New York Times reported. The projection was similar to the one made last week by Federal Reserve Chairman Ben Bernanke.
GDP has to grow at a rate of about 2.5% before unemployment will fall, said Romer, and it is "unfortunately pretty realistic" that the unemployment rate could hit 9.5%.
Meanwhile, Robert Reich, former labor secretary under President Bill Clinton and an adviser for the Obama campaign, said on ABC's "This Week" program that the rate of growth would have to be 4.5% before unemployment levels begin to reverse, reported the Times.

John Hussman: "To a great extent, the optimism of investors is based primarily on economic “flow” data (spending, job losses, confidence measures) that remain poor, but have been “less bad” than expected. What concerns me far more, however, is that there is a second and almost equivalent mountain of mortgage resets and probable defaults that will begin later this year and extend into 2012. While our unelected bureaucrats have spent over a trillion dollars to make reckless lenders whole, they have done nothing to materially ease foreclosures or avert the oncoming second wave. "

Eric Dash and Andrew Martin: "But if unemployment breaches 10 percent, as many economists predict, the rate of uncollectible balances at some banks could far exceed that level. At American Express and Capital One Financial, around 20 percent of the credit card balances are expected to go bad over this year and next, according to stress test results. At Bank of America, Citigroup and JPMorgan Chase, about 23 percent of card loans are expected to sour.
Even the government’s grim projections may vastly understate the size of the banks’ credit card troubles. According to estimates by Oliver Wyman, a management consulting firm, card losses at the nation’s biggest banks could reach $141.5 billion by 2010 if the regulators’ loss rate was applied to their entire credit card business. It could top $186 billion for the entire credit card industry.
In the official stress test results, regulators published losses only on credit cards held on bank balance sheets. The $82.4 billion figure did not reflect another element in their analysis: tens of billions of dollars in losses tied to credit card loans that the banks packaged into bonds and held off their balance sheets. A portion of those losses, however, will be absorbed by outside investors."